How to Reduce Claim Denials and Improve Your Healthcare Revenue Cycle 

Key Takeaways 

• Denials keep climbing. In Experian Health’s 2025 State of Claims survey, 41 percent of providers reported denial rates of 10 percent or higher, a share that has grown every year since 2022. 

• Most denials start at the front desk, not in the coding room. Half of the revenue cycle leaders surveyed named missing or inaccurate claim data as the top cause. 

• Fighting a denial costs real money. Premier’s national survey put the average administrative cost at $57.23 per claim in 2023, up from $43.84 the year before. 

• The CARC and RARC codes on every remittance explain why a claim failed. Track them by payer to find the root cause. 

• Prevention beats appeals. Eligibility checks, clean demographics, accurate codes, authorization tracking, complete documentation, and on-time filing stop most denials before they happen. 

How to reduce claim denials is the question sitting underneath most revenue cycle problems, even when a practice doesn’t describe it that way. Revenue declines. A/R report that keeps getting bigger. A billing team that never catches up. Trace the history of any of them far enough back, and you will often discover the claims were wrong from the start.  

The bad thing is that most of it could have been avoided. Insurance that expired last month. A prior authorization that had expired two days before the operation. Modifier Missing. Simple mistakes can make claims that should have been paid out in weeks into months of rework.  

This tutorial shows why healthcare claim rejections happen, how to identify root causes, and 7 adjustments to cut denial volume without adding personnel. 

Why Claim Denials Are a Major Revenue Cycle Challenge 

A time back, denials ceased being a rounding mistake. In Experian Health’s 2025 State of Claims research, 41% of the 250 revenue cycle executives surveyed said that at least one in ten of their claims were denied. More than half (54 percent) said they are seeing more claim errors, and 68 percent said it’s harder to submit clean claims than a year ago.  

The Premier nationwide assessment of hospitals and health systems’ cost side shows that nearly 15 percent of claims filed to private payers were initially denied in 2023, and the average cost to fight each claim was $57.23, mostly labor. And that’s the kicker. About 70 percent of the denials were overturned and paid, indicating staff spent hours fighting over claims that should have been authorized on day one.  

Changes in payer mix may alter the chances. Premier’s 2023 statistics showed initial rejection rates of 7.3% for traditional Medicare, 13.2% for private insurance, and 28.5% for Medicaid. 

10 Common Reasons Healthcare Claims Are Denied 

Most medical billing claim rejections are on a small, predictable list. The Claim Adjustment Reason Code (CARC) on the remittance generally leads right to which one. 

Inactive or changed coverage. The plan was called, modified, or never validated. CARC 27 – Expenses Incurred After Coverage Ends. 

Registration errors. A misspelled name, an incorrect birth date, or a transposed member ID. 

Missing information. CARC 16, often with a RARC stating what’s lacking. 

No prior authorization. Use CARC 197 when precertification was required but not provided. 

Medical necessity not supported. CARC 50 means the payer doesn’t see the service as necessary based on the diagnosis submitted. 

Coding errors. Deleted codes, incorrect CPT or ICD-10 codes, or diagnoses that do not justify the operation billed. 

Modifier problems. A missing modifier 25 on a same-day E/M visit may cause bundling (CARC 97). An inconsistent modifier can cause CARC 4. 

Duplicate claims. CARC 18 rejections are due to resubmission, not correction. 

Timely filing. If you miss that timeframe, the claim is gone (CARC 29). Generally, Medicare permits 12 months from the date of service. Many business contracts allow far less. 

Coordination of benefits. The wrong payer is billed as primary, or a second insurance on file was not reviewed (CARC 22). 

How to Identify the Root Cause of Claim Denials 

Begin with electronic remittance advice, the 835 filing. Each rejection includes a group code (CO, PR, OA, or PI), a CARC, and usually a RARC with further information. CMS conducts its own review of claims on a similar basis. Medicare audits assess coverage, coding, billing, medical necessity, and documentation. The grounds provided for rejection were to inform providers which of those failed.  

Consolidate all rejections during the previous 90 days into one log. Tag each by payer, CARC, provider, and site of origin of problem: 

Front end: Registration, scheduling, eligibility, authorization. 

Mid-cycle: Coding, documentation, charge capture 

Back end: Submission, timely filing, follow-up 

Patterns develop quickly. If one commercial payer’s CARC 197 accounts for a third of your denials, you don’t have a billing problem. You have a front-desk authorization issue.

Make a distinction between strong denials and weak denials. Soft rejections may be revised and resubmitted. Prevention is most rewarding when you have to make a formal appeal against a hard denial. 

7 Ways to Reduce Medical Claim Denials 

Verify Patient Eligibility 

Remember to check each visit, not just the first. Medicaid redeterminations, job changes, and open enrollment might modify midyear plans. A real-time eligibility check (the 270/271 transaction) checks existing coverage, cost sharing, and whether the proposed service needs approval, all in seconds. 

Check Demographic Information 

Scan insurance card at each visit and match to system. The name must match exactly (including hyphens and suffixes) the payer record, and the subscriber connection must be proper. Basic job. That’s why it gets skipped on a hectic Monday. 

Submit Accurate Codes 

Code for documentation, not for your habit. Determine E/M levels by medical decision-making or time; use modifiers correctly, and file claims through NCCI edits. ICD-10-CM is revised October 1, and CPT is revised January 1. If a code is deleted, the claim will be flat refused. 

Confirm Authorization Requirements 

Embed the authorization check in scheduling, not in charge entry. Track approval numbers, permitted units, and expiration dates. Alert if the planned procedure changes, as permission for one CPT code will not transfer to another. Starting in 2026, CMS’s Interoperability and Prior Authorization Final Rule will require Medicare Advantage, Medicaid, CHIP, and federal marketplace plans to respond to standard prior authorization requests within seven calendar days and expedited requests within 72 hours, and to provide a specific reason for any denial. 

Maintain Complete Documentation 

Medical necessity rejections are almost always about the note. The diagnosis has to justify the service. The record has to justify why it was necessary at that encounter. If CARC 50 shows up on one provider’s charts, that’s a training problem, not a billing issue. 

Submit Claims within Payer Deadlines 

Know each payer’s timely filing limit, and set internal targets well inside it. An acceptable practice is to send charges within 24-72 hours after the engagement. Quiet leak, late charge in. No one sees it until the window closes. 

Monitor Payer-Specific Denial Patterns 

Every payer has its own traditions. Telehealth claims need a specific modifier. One bundles in services the others charge separately for. Monthly evaluation of rejections by payer and convert into front-end rules or claim scrubber changes for recurring difficulties. If a payer won’t pay correctly classified claims, take the data to your provider’s representative. 

How Denial Management Improves Revenue Cycle Performance 

In health care, denial management and denial prevention are two separate tasks. “Prevention keeps mistakes from happening.” When something comes back, management gets it and sends the lesson upstream.  

The operational method will send each rejection to the right person within a day or two, based on how much money it is worth and when it needs to be done. It will also keep an eye on each appeal until it gets a final answer. For Medicare, the time frame for redetermination starts 120 days after the original finding date. For business cases, the timeframe depends on the deal. You lose money if you miss one.  

The return process is what makes it all worth it. Billing records show that permission rejections went up during the last quarter. The front desk changes how reservations are made. Instead of a monthly write-off, programmers should get a 10-minute lesson if they keep making the same modifier error from the same source. That’s when the rejection rates start to drop for real.    

Credex Healthcare is the best choice for your business if you want a complete solution for managing medical billing denials and other revenue cycle management services. 

How Technology Can Help Prevent Claim Denials 

Claim scrubbers find problems with the code, missing fields, and failed NCCI edits before the claim leaves your system. At check-in, real-time eligibility technology finds coverage that isn’t being used. Workers are warned before their permissions expire by authorization monitors. Refusal screens make everything the same by payment and cause code.   

AI is still very new. A study by Experian in 2025 found that only 14% of providers use AI in claims. However, 69% of those that did say that it led to fewer rejects or better resubmissions. Software can’t take the place of skilled billing staff. It can also catch the mistake someone makes on their 200th claim of the day when they are tired. 

Key RCM Metrics to Track Claim Denial Performance 

Numbers keep the conversation honest. These are the ones worth reviewing every month. 

Metric	What It Tells You	Commonly Used Target
Initial denial rate	Share of claims denied on first submission	Under 5 percent, with 10 percent as a warning line
Clean claim rate	Claims accepted without edits or rework	95 percent or higher
First-pass resolution rate	Claims paid on the first submission	90 percent or higher
Denial overturn rate	Appealed denials that eventually pay	Tracked by payer and reason code
Days in A/R	Average time from service to payment	Under 40 days for most outpatient practices
Denials by CARC and payer	Where the problem starts	A falling trend month over month

Targets shift with specialty and payer mix, so compare against your own trailing twelve months first. 

When Should Practice Consider Outsourcing Denial Management? 

If your team is getting too many rejections, appeals, or claims too quickly, or if no one in-house has time to look for trends instead of chasing claims, it makes sense to outsource. It also works well for practices that lost an experienced biller out of the blue or are adding doctors and locations faster than billing can keep up.   

That’s not how a good partner acts. It shows trends in denials by payer and reason, fixes basic problems on the front end, and fills in the credentialing gaps that make their own rejection category. Half the fight is won when you know how to cut down on claim rejections in your practice. The other part is to have someone responsible for it every week. This is why it’s worth the money to pay for professional healthcare RCM services and full medical billing services. 

How to Reduce Claim Denials in Practice: A Walk-Through 

About 900 claims are sent to a four-provider internal medicine group every month, and about 12% of them are turned down. A record of all payments is kept for 90 days. Three patterns stand out: clearance rejects (CARC 197) tend to be related to imaging orders from the same commercial plan, eligibility denials rise every January, and same-day wellness visits were grouped together because modifier 25 wasn’t present.   

None of the solutions involve getting a job. When planned, imaging orders cause a permission check to happen. The eligibility check is done again 48 hours before each meeting. The claim scrubber holds each wellness visit that is billed with a problem-oriented E/M code until the modifier is checked by a coder. The log is then looked at once a month. Measure, fix the mistake where it starts, and then check again. 

FAQs 

Why are medical claims denied? 

Mostly because of problems with eligibility, registration, missing permissions, coding or modification mistakes, not enough paperwork, and turning in the application late. 

How can healthcare providers reduce claim denials? 

Check for eligibility at the start of each visit and authorizations at the time of booking. Add a code to the papers and file them right away. Every month, look at rejects by payer and reason code. 

What causes the most medical claim denials? 

Claim info that is missing or wrong. It was named the most important driver by half of the revenue cycle leaders surveyed by Experian Health in 2025. 

How does denial management improve RCM? 

It recovers income from claims that were turned down and gives root-cause fixes back to registration, code, and documents. This way, the next month there will be fewer rejects. 

How can incorrect coding cause claim denials? 

A removed, wrong, or invalid code or a missing modifier could lead to a rejection or packaged, lower payment. 

What is the ideal claim denial rate? 

A low initial rejection rate of less than 5 percent is a goal for many treatments. There’s a problem with the process if it’s always over 10 percent. 

How to reduce claim denials without hiring more billing staff? 

Adding more people to do rework doesn’t always cut down on rejections as much as front-end qualifying and permission checks, claim scrubber rules, and monthly reviews of denials. 

Final Thoughts 

There isn’t a single way to get fewer claims turned down. It’s what they do. See if you are covered before the visit. Follow the code. Like dates, keep track of authorizations. Take the time to read each receipt and figure out what it means. The difference is money for organizations that see rejects as data.    

Do you have a hard time with claims being denied often and getting paid slowly?  

Credex Healthcare can help you improve your healthcare revenue cycle and rejection management. To get started, they will look at your claims for free and let you know where they are getting stuck.