Top 20 reasons claims are denied and how denial management fix them

Claim denials are one of the most regular challenges in medical billing. Whether it's a missing modifier, incorrect code, or expired insurance, every denial delay revenue and creates extra work for providers and billing teams. In fact, the American Medical Association reports that nearly 10% of all claims submitted to payers are denied upon first submission.

At MedSole RCM, we’ve learned that most denials are avoidable with a proactive approach. This blog breaks down the top 20 reasons claims are denied and shows how effective denial management can turn those rejections into recoverable revenue.

Understanding the Real Cost of Claim Denials in Healthcare

Each denied claim adds labor hours, delays payments, and risks never being reimbursed. On average, it costs $25–$100 to rework a denied claim, and up to 65% of practices simply write them off due to lack of resources. That’s why a denial isn’t just a rejection it’s a red flag that must be addressed immediately.

Denial management is not just about fixing rejected claims but it's about preventing them in the first place. It involves tracking denial trends, analyzing root causes, and applying real-time corrections throughout the billing cycle.

Identifying and Correcting the Most Common Denial Triggers

Hospitals and health systems have been challenged by lower collection rates and high denials from insured patients, which created financial headwinds. Below are the top 20 reasons claims are denied along with how denial management processes can resolve and prevent them.

1. Incorrect Patient Demographics

• Why It Happens: Typos in name, date of birth, or insurance ID
• How Denial Management Helps: Verifies demographic data at registration and cross-checks with payer eligibility systems

2. Insurance Not Active on Date of Service

• Why It Happens: Patient’s coverage expired or changed
• How Denial Management Helps: Uses real-time eligibility tools before the visit and flags outdated plans

3. Incorrect or Missing Authorization

• Why It Happens: Authorization not obtained or expired
• How Denial Management Helps: Tracks pre-authorization requirements per payer and ensures documentation is stored and submitted

4. Medical Necessity Not Met

• Why It Happens: the services that are billing not match to code of diagnosis.
• How Denial Management Helps: Aligns diagnosis codes with payer-specific coverage guidelines and reviews Local Coverage Determinations (LCDs)

5. Duplicate Claims

• Why It Happens: Same claim submitted twice due to lack of confirmation
• How Denial Management Helps: Tracks claim status before submission and audits for double entries

6. Missing or Incorrect Modifiers

• Why It Happens: Services billed together need specific modifiers
• How Denial Management Helps: Uses coding software to apply accurate modifiers and audits all procedure combinations

7. Non-Covered Services

• Why It Happens: Service is not included in patient’s plan
• How Denial Management Helps: Reviews payer policies and provides upfront benefit checks to alert staff and patients

8. Coordination of Benefits (COB) Issues

• Why It Happens: Primary and secondary insurance not correctly reported
• How Denial Management Helps: Verifies payer hierarchy and updates COB records with insurers

9. Invalid or Expired CPT/ICD-10 Codes

• Why It Happens: Codes that are used are outdated, may not be recognized by insurances
• How Denial Management Helps: Updates coding libraries monthly and flags obsolete codes before claim submission

10. Untimely Filing

• Why It Happens: it happens if claim is submitted after the deadline given by insurances.
• How Denial Management Helps: Keep track of each payer's deadline for submitting claims and quickly detect any delays in recording patient visits.

11. Provider Not Credentialed or Enrolled with Payer

• Why It Happens: Claim submitted under a provider not yet approved
• How Denial Management Helps: Ensures provider enrollment and credentialing are completed before billing

12. Incorrect Place of Service Code

• Why It Happens: POS code does not match service setting
• How Denial Management Helps: Cross-checks the service location with coding rules at the point of charge entry

13. Services Billed Not Documented

• Why It Happens: No supporting chart notes or EHR gaps
• How Denial Management Helps: Reviews documentation prior to claim submission and ensures medical records support the codes

14. Procedure Not Allowed with Diagnosis

• Why It Happens: Invalid code combination or mismatched pair
• How Denial Management Helps: Applies payer-specific edits and runs coding validation checks pre-submission

15. Coverage Terminated Retroactively

• Why It Happens: Patient lost coverage after service date but before billing
• How Denial Management Helps: Verifies coverage immediately post-visit and follows up with patients on lapsed plans

16. Exceeded Frequency Limits

• Why It Happens: Service already billed within restricted timeframe
• How Denial Management Helps: Monitors frequency restrictions and sets alerts for high-frequency CPTs

17. Claim Billed to Wrong Insurance

• Why It Happens: Payer data entry error or system mismatch
• How Denial Management Helps: Verifies payer IDs at the claim level and corrects the route before submission

18. Unbundling of Procedures

• Why It Happens: Billing separately for services that should be grouped
• How Denial Management Helps: Audits NCCI edits and ensures code bundling rules are followed

19. Incomplete Claim Information

• Why It Happens: Missing NPI, tax ID, service dates, or referring provider
• How Denial Management Helps: Uses claim scrubbers to flag incomplete data before submission

20. High-Risk Specialty Flags

• Why It Happens: Some specialties like pain management or DME are flagged by payers
• How Denial Management Helps: Prepares supporting documentation and ensures additional forms are submitted where needed

How MedSole RCM Handles Denials

At MedSole RCM, we follow a structured denial management workflow:

• Daily denial tracking from payer responses
• Root cause analysis for recurring issues
• Resubmission of corrected claims
• Appeal preparation and follow-up
• Monthly denial trend reporting
• Training for billing teams and front-office staff

Final Thoughts

Claim denials not only impact your practice cash flow, but they also give you a chance to improve how your billing works. When you and your team understand the reasons behind denied claims, you will fix those issues and use strategies to stop them from happening again. By the help of good denial management system, you not only avoid future mistakes but also recover lost revenue.

The Expert at MedSole RCM use the right tools, knowledge, and continuous efforts to turn denied claims into approved payments. With our approach you can improve your overall billing process and we keep your revenue cycle moving smoothly.

Frequently Asked Questions (FAQs)

Q. What is a claim denial in medical billing?
A claim denial happens if an insurance company decide that they will not pay for a service because of mistakes, missing details, or problems with the patient’s insurance policy.

Q. How is a denial different from a rejection?
Rejections occur before the claim is accepted into the payer’s system, while denials happen after the claim has been processed and evaluated.

Q. What is denial management?
Denial management means finding out the reason, why claims were denied, then fixing the issues, sending them again if required, and use strategies to improve the process to avoid future denials.

Q. Can denied claims be corrected and resubmitted?
Yes, most denied claims can be corrected and resubmitted if done within the payer’s time limits.

Q. What is the time limit to appeal a denial?
Each insurance panel has different timeframes, varies in between 30 to 180 days from the date of denial.

Q. How often should denial trends be reviewed?
Monthly trend analysis is recommended to catch recurring issues early.

Q. What are common preventable denials?
Examples include incorrect patient info, authorization issues, and coding mismatches.

Q. How does MedSole RCM reduce denial rates?
Our Experts will keep an eye on every claim, fix the mistakes right away, appeal the denied claims, and teaching staff how to handle common problems.