Keys to Reduce Claim Denials in Healthcare
- Clear visibility into denial trends helps you more quickly identify root causes and make more effective corrections.
- Consistent workflows and staff training can reduce variations and let you proactively prevent recurring denial issues.
- Accurate front-end data collection and eligibility checks can help you prevent the majority of avoidable denials.
- Strong documentation, precise coding, and smart automation tools let you improve claim acceptance and reduce rework.
From 2022 to 2024, 75% of providers reported increased denial rates.1 And in 2025, 41% of providers reported denial rates of 10% or higher.2 That’s a larger percentage than in 2024 meaning denials are still going up. The time required to work denied claims combined with the ones that won’t be recovered — even when they’re worked — can hurt a practice’s bottom line.
This article shares best practices to reduce claim denials. It also covers the potential impact claim denials can have on your revenue stream and staff.
The Cost of Claim Denials
Reworking claims costs time and money. 90% of denied claims require manual rework.2 Patients appeal less than 1% of denied claims.3 And denied claims can result in lost money. You may have to bill the patient directly. Or you may not be able to balance bill the patient at all depending on the denial and the payer.
Say you’re a multiprovider practice. You file roughly 20,000 claims a year. And 10% of those are denied. Assuming 90% of those 2,000 claims need manual rework, that’s 1,800 claims that require manual rework for perspective or 150 claims a month.
On average, it’s thought that a denied claim can take 25 to 45 minutes to rework or 60 minutes for complex claims and 10 to 15 for simple corrections. Say that’s a 30 minute average per denial. 150 claims a month multiplied by 30 minutes is 75 hours. That’s almost 2 full workweeks. Or the equivalent of a part-time employee. That’s one employee working claim denials almost half of each month.
A typical lean three-person practice that’s not outsourcing billing may only have one billing specialist and office manager who oversees billing and many other things.
Managing denials then becomes a burden on the practice and its team. Even with two or three billers, the practice needs basically a part-time equivalent just to manage denials.
Calculate Your Potential Claims Denial Impact
To calculate financial impact at a high level, multiply your total allowed amount by your denial rate to estimate your maximum revenue that’s at risk if none of the denied claims are recovered. While this scenario is unlikely, it gives a simplified view of your potential exposure.
The allowed amount represents your true contracted revenue. Comparing actual payments received to the total allowed amount shows how much revenue may go uncollected.
Total Allowed Amount × Denial Rate = Maximum Revenue at Risk
Total Allowed Amount × (1 − Denial Rate) = Revenue if none of the denied claims are recovered
Plug the Places and Processes Where You’re Leaking Revenue
Common Reasons for Claim Denials2
Most denials track to two areas. Administrative gaps, such as data entry errors, eligibility issues, and authorization problems, account for 70% or more of denials. Clinical issues, such as medical necessity or documentation gaps, are less common but also harder to rework.
The most common causes of claim denials are:
- Missing or mismatched prior authorizations/precertification issues
- Lack of eligibility at the time of service or for the service itself
- Inaccurate coding and/or missing or invalid modifiers
- Failure to file or resubmit a claim on time
- Inaccurate patient demographics, such as date of birth, name, or insurance ID
- Documentation issues, such as missing notes, lack of support for medical necessity, or incomplete encounter notes
- Insurance coverage issues
- Lack of medical necessity or failure to meet coverage guidelines
The reality is that most of these reasons are preventable — about 90% of them.
Best Practices to Reduce Claim Denials in Healthcare
Preventing denials spans your entire patient journey — from intake to billing. Following are best practices you can implement to prevent denials and lost revenue, biller burnout, and patient dissatisfaction.
Start with Analytics to Uncover a Baseline and Quick Fixes
Before you can reduce claim denials, you need to know where you stand. Start by figuring out your denial rate. Then track it regularly over time to find trends and see improvements.
To calculate manually, divide allowed amount denied by total allowed amount.
Denial Rate = Allowed Amount Denied /Total Allowed Amount
If your EHR or clearinghouse offer analytics tools to show denial rates and other data or to analyze denial trends, use them.
Identify Common Causes for Denials
Use your analytics tool or manually pull a list of common denial reasons. Then, create a checklist for how to work (and prevent) your most common denials that staff can follow. Also create and maintain a library of successful denial responses. Think of it as a standard operating procedure (SOP) for denial prevention and the need for rework. Store these electronically in a central online location and keep them updated. And do staff training, so they use these resources every day.
In your documentation, include payer name, claim adjustment reason code (CARC) codes, description of denial, and recommended action(s) to take to address it.
For example, you may find that a certain modifier is regularly missed. That fix is fairly easy. You can simply create a pre-claim edit or alert to catch that before claims go out.
AI billing tools and some healthcare analytics tools can automatically flag missing modifiers, claim errors, and coding issues for your team too. With the right tool, a biller simply checks for flagged claims and can spot — and correct — issues easily and without wading through all claims to identify ones that need attention.
On the flip side, an AI tool, like Azalea AI Billing Assistant, can automatically identify up to 84% of claims that don’t need follow-up, so a biller can focus only on claims that do.4, 5 The result is that they can spend up to 66% less time following up on claims overall.4, 5
Revisit Your Front End Processes
One of the most effective ways to reduce denials is to verify patient eligibility and insurance details before each visit. It’s at the front desk where you can prevent ending up with incorrect patient demographic information on file.
Consider mandating a standard set of data to collect and items to check at intake and/or within your patient portal, including patient demographics, insurance verification, needed prior authorizations when possible, and eligibility and benefits.
Learn How to Master Prior Authorization
Tighten Charge Capture and Claim Submission During the Visit
Providers play a critical role in preventing denials that are harder to fix. They can do that during the encounter. Help them by making documentation easy to complete with templates and documentation that are set up correctly. Also use defined, standard protocols for documentation, procedure templates, checklists, and picklists
Set a policy where charts have to be signed within 24 to 48 hours of an encounter. And put an escalation process in place for when they aren’t. A good EHR can help here with automated reminders for unsigned charts, dashboards that show unsigned encounters, and daily reports.
To reduce coding errors, make sure you or your EHR vendor uploads codes and that expired codes are flagged. Also check codes for medical necessity, including for labs, advance beneficiary notice of noncoverage (ABN), etc. And consider an EHR with built-in coding suggestions, diagnosis procedure validation, and modifier prompts to make providers work easier and let them focus on patients and not codes.
An AI medical charting add-on, like Azalea AI Clinical Assistant can also be used to suggest codes and increase the accuracy of charting without taking control away from providers.
Set Up and Use Encounter Alerts
If your EHR has customizable claim screening or encounter edits, use it to catch potential denials before they happen.
Also regularly revisit which coding or claim errors cause denials and build new alerts to catch them before claims are filed. AI billing tools can do automatic code checks for potential coding issues as well.
Use Your EHR’s Authorization Management Workflows
Most EHRs include workflows to let practices more easily manage authorizations. If your EHR lets you, use it to track prior authorization requirements by payer, flag services that require authorization, and store authorization numbers tied to the encounter.
Use Payer Portals
Payers (aka insurance companies) often limit the number of claims they discuss on a single call and instead require a new call be placed. That means, staff could end up on hold and on multiple calls to rework denials.
Instead of waiting on the phone for a payer to pick up or calling back again and again, have billers use the payer’s portal. In the portal, they can see claim status and manage denials, resubmissions, and appeals instantly and autonomously.
Take Advantage of AI and Automation
If your EHR offers automation, use it to maximize EDI enrollments for automated claims and payment posting. If billers have fewer manual workflows for simple tasks, like posting payments and adjustments, the more time they can spend processing denials that do come through.
A good EHR and/or AI tool can flag errors, missing data, invalid codes, and payer-specific issues for billers and should integrate with clearinghouse rules too.
Consider Outsourcing
Finding knowledgeable billers can be a challenge. If you’d rather not try or would rather just have someone ready to solve your denial issues, consider outsourcing. A service, like Azalea RCM Billing Services, can help you get more than 98% of claims resolved on first submission. They’re fully trained and ready to make sure you get paid on time and more.
Bottom Line
An effective denials management approach is a key part of revenue cycle management. It can help you improve cash flow, reduce staff burnout, and save patients and staff from the appeals process. It’s not a once-and-done task, but a process that involves continuous improvement and monitoring. But done right, you can reduce claim denials and add more of the revenue you deserve to your cash flow.
Master Revenue Cycle Management
Learn how the Azalea EHR with integrated billing features and analytics or Azalea’s full-service RCM billing services can make denials management easier.
Sources
1 Healthcare Dive, Providers say claims denials are increasing: survey, Susanna Vogel, Sept. 25, 2024
2 Experian, Experian Health’s 3rd Annual State of Claims Survey Finds Denials Still on the Rise Amid Escalating Challenges, Sept. 2025
3 KFF, Claims Denials and Appeals in ACA Marketplace Plans in 2024, Michelle Long, Justin Low, and Kaye Pestaina, Mar 2026
4 Average results for Azalea Health AI Billing Assistant users.
5 Works with 84% of claims processed through supported payers.
