Resolve denials. Recover more revenue.

Denial management in healthcare is the process of finding, reviewing, and resolving claim denials, as well as implementing strategies to prevent future denials. Efforts include identifying denied claims, categorizing them (by type, cause, payer), determining root causes, working appeals or corrections, and tracking patterns to build prevention protocols. Denial management is most effective when skilled teams use AI-driven software to automate tracking, triage, appeal generation, and prevention. With 8 in 10 healthcare finance leaders saying there’s room to improve denial management, it remains a top strategic priority.

Common denial causes include authorization number error, lack of information, submission/billing error, duplicate or already paid, prior-payer adjudication, other payer covering, authorizations, non-covered charges, modifier misuse, lack of medical necessity, and time limit expired Some denials have multiple origins spanning clinical and business office functions. Research shows 86–90% of denials are preventable with the right front-end processes and technology.

Unresolved denials represent an average annual loss of $5 million for hospitals, up to 5% of net patient revenue. The cost to rework a single denied claim ranges from $25 to $118 depending on complexity. Industry-wide, claim denials cost approximately $262 billion annually, and hospitals spend nearly $20 billion per year on denial management processes. Despite these costs, an estimated 50–65% of denied claims are never reworked — meaning billions in recoverable revenue go uncollected each year.

Effective denial management follows four key stages: identification, analysis, action, and prevention. Identify: Promptly pinpoint denied claims using Claim Adjustment Reason Codes (CARCs), categorize as hard or soft denials, and aggregate into a tracking system. Analyze: Determine the root cause of each denial by a review of coding, documentation, eligibility, and payer rules. Act: Route denials for correction (soft) or formal appeal (hard) using automated tools to generate pre-populated, payer-specific appeal packages. Prevent: Analyze denial trends, identify recurring patterns, implement process improvements, train staff, and leverage technology to reduce future denial rates. Throughout the process, automation and AI should be applied when possible.

The U.S. healthcare system could save up to $16.3 billion by automating outdated processes, on top of the $122 billion already saved through existing automation. Automated denial management reduces manual rework, prioritizes high-value denials using predictive analytics, generates pre-populated appeal forms, and accelerates appeal turnaround. Waystar’s Denial + Appeal Management software identifies denials with the highest probability of successful appeal, intelligently prioritizes workflows, and uses generative AI to autonomously create appeal letters — saving clients up to 40 minutes per appeal.