🩺 Why Your Claims Keep Getting Rejected—And What to Do About It

📌 Introduction

In healthcare revenue cycle management (RCM), claim rejections are a top challenge for providers and billing teams. According to the American Medical Association (AMA), up to 20% of medical claims are rejected upon initial submission.¹ Even more concerning, 35% of those claims are never resubmitted, leading to massive revenue loss.

But here's the good news: most rejections are avoidable. By understanding the root causes and following best practices, clinics can boost reimbursement, reduce rework, and streamline their billing operations.

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🔍 What Is a Rejected Claim?

A rejected claim is one that fails to meet the payer’s format or data requirements and is returned before processing. This differs from a denied claim, which is processed but not paid due to clinical or policy reasons.

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🚨 Top 6 Reasons Claims Are Rejected

1. Incomplete or Incorrect Patient Information

Simple data entry mistakes—such as misspelled names, wrong insurance ID numbers, or incorrect birth dates—are leading causes of rejections.

📊 *According to CMS, demographic and eligibility errors account for up to 61% of rejections.

✅ Solution:
Use real-time eligibility verification tools and have front-desk staff double-check information before submitting claims.

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2. Expired or Invalid Insurance Coverage

Submitting claims under inactive insurance policies will trigger automatic rejection.

✅ Solution:
Always verify patient insurance coverage on the date of service, not just at booking.

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3. Incorrect or Outdated Coding (ICD-10, CPT, HCPCS)

Using the wrong medical codes or outdated modifiers leads to instant rejection or denial.

📊 *A 2022 MGMA report found that 42% of claim issues were coding-related.

✅ Solution:
Stay up to date with ICD and CPT code changes. Consider investing in AI-powered claim scrubbing software or professional coder audits.

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4. Missing Prior Authorization

Some procedures—like MRIs, surgeries, or specialty care—require prior authorization from payers.

✅ Solution:
Build a payer-specific authorization checklist and assign staff to track and document approvals before services are rendered.

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5. Duplicate Claim Submissions

Duplicate submissions (intentional or accidental) will be rejected by most clearinghouses or payers.

✅ Solution:
Use practice management software that shows real-time claim statuses to avoid resubmitting open or processed claims.

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6. Payer-Specific Billing Rules Not Followed

Insurance companies update their billing guidelines frequently, and failing to follow these rules can result in rejected or denied claims.

✅ Solution:
Subscribe to payer newsletters or online portals for billing rule updates. Review them with your billing team regularly.

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💡 Rejected vs Denied Claims: What's the Difference?

Type	Definition	Fixable?
Rejected	Not accepted due to format or missing data; never entered into system	✅ Yes
Denied	Processed but not paid due to policy or clinical issues	✅ Sometimes

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🧰 What to Do When a Claim Is Rejected

Here’s a quick checklist to help you recover rejected claims:

1. Review the rejection reason code or Explanation of Benefits (EOB)

2. Identify the error (e.g., wrong patient data, invalid code)

3. Correct the issue in your billing system

4. Resubmit the corrected claim within the payer’s time limit

5. Log the error type for trend analysis and training

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📈 Real Costs of Claim Rejections

• The average cost to rework a denied claim is between $25 and $118

• The denial rate should ideally be under 5% for most practices

• Delayed payments can increase accounts receivable (AR) days by 30% or more

💸 Unworked rejections = lost revenue.

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✅ Best Practices to Prevent Future Rejections

• ✅ Use automated claim scrubbers before submission

• ✅ Verify eligibility and benefits in real time

• ✅ Conduct regular coding audits and training

• ✅ Monitor and analyze rejection trends monthly

• ✅ Follow payer-specific rules closely

• ✅ Consider outsourcing your RCM to certified billing professionals

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🧠 Final Thoughts

In the evolving world of healthcare billing, claim rejections are not just inevitable—they're also manageable. By identifying the real causes and making data-driven improvements, your team can cut down on rejections, improve first-pass resolution rates, and protect your clinic’s revenue.

The key? Stay informed. Train your team. Automate where possible. And never ignore the details.

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📚 References

1. American Medical Association – National Health Insurer Report Card

2. Becker’s Healthcare – Revenue Cycle Denials

3. CMS – Medicare Billing Guidelines

4. MGMA DataDive – Medical Practice Operations Report 2022

5. HFMA – Reimbursement Analysis

6. AAPC – Medical Billing Benchmark Statistics

7. HIMSS – Revenue Cycle Trends 2023

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