Claim rejections and denials both create major roadblocks in medical billing, delaying reimbursements and driving up accounts receivable—practices lose an average of 10-15% of revenue yearly from mishandled cases. 

Providers often mix them up, resubmitting rejections as appeals or ignoring simple fixes, which stretches recovery from days to months and burdens staff.

Rejections occur early at the clearinghouse or payer front-end, blocking claims before review, while denials hit post-adjudication with reasons like medical necessity. This confusion leads to unnecessary rework; spotting the difference lets you correct rejections quickly and appeal denials strategically.

In this article, we’ll break down definitions, common triggers for each, key differences in a clear comparison, step-by-step handling tips, and proven ways to cut both for smoother cash flow.

What Is a Claim Rejection in Medical Billing?

A claim rejection occurs when a medical bill fails initial automated checks at the clearinghouse or payer’s front-end system, stopping it before human review or adjudication. Think of it as a “bouncer” at the door—easy to fix and resubmit, unlike denials.

Rejections typically happen during pre-adjudication edits for technical issues, like invalid patient IDs or formatting errors. Clearinghouses (e.g., Availity, Change Healthcare) catch 60-70% of these upfront, flagging them back to providers within hours or days.

Common in high-volume practices, rejections don’t count against clean claim rates and can be reworked fast—often resolved same-day if caught early. Always check rejection reports daily to keep claims moving.

Common Reasons Claims Get Rejected

Claim rejections stem from technical glitches that automated systems flag before any payment review, making them quick fixes if addressed promptly. These happen in about 10-15% of submissions, often during high-volume periods.

Missing or Incorrect Patient Information
Demographics like name, DOB, or ID don’t match payer records—typos or unpdated details trigger most rejections. Double-check against patient intake forms every time.

Invalid Insurance Details
Wrong policy numbers, expired coverage, or mismatched member IDs send claims bouncing back. Always verify eligibility same-day via portals.

Formatting or Data Entry Errors
EDI 837 files fail payer edits: incorrect claim frequency codes, missing service lines, or CPT/HCPCS mismatches. Use scrubber software to catch these pre-submission.

Duplicate Claims
Resubmitting originals without payer approval flags as duplicates, especially after corrections. Track submission IDs to avoid this common pitfall.

Review clearinghouse reports daily—fixing rejections within 7 days keeps AR clean and revenue flowing.

What Is a Claim Denial in Medical Billing?

A claim denial happens after the payer reviews and adjudicates the claim, deciding not to pay based on policy rules, medical necessity, or coverage limits. Unlike rejections, denials reach the payer’s clinical or contract review stage, appearing on an Explanation of Benefits (EOB) or remittance advice.

These occur post-submission when systems or humans find issues like unsupported codes or non-covered services. Denials impact clean claim rates and often require appeals, making them costlier to resolve than rejections.

About 10-20% of claims face denials, with providers recovering only 40-50% through appeals—early EOB review is key.

Common Reasons Claims Get Denied

Claim denials arise from payer scrutiny after initial edits pass, often tied to clinical or contractual issues that require documentation or appeals. These affect 12-18% of claims on average, with recovery rates around 50% if handled promptly.

Incorrect or Unsupported Diagnosis or Procedure Codes
Mismatched ICD-10 and CPT/HCPCS codes fail medical necessity tests—e.g., E/M code 99213 without a matching diagnosis. Always link codes per payer guidelines.

Lack of Prior Authorization
Services like MRIs or infusions are denied without pre-approval, even if medically appropriate. Verify auth requirements upfront for high-risk procedures.

Services Not Covered by the Payer
Experimental treatments, non-essential cosmetics, or excluded benefits per policy—check patient handbooks or eligibility notes.

Credentialing or Eligibility Issues
Provider not paneled, lapsed enrollment, or patient coverage ended mid-service. Cross-check NPI and dates of service.

Claim Rejections vs. Denials: Key Differences

Rejections and denials both halt payments but differ in timing, causes, and fixes—understanding this saves practices weeks of rework.

Rejections are “not ready yet”; denials are “not payable.” Track both separately for better denial trends.

How Providers Should Handle Rejected and Denied Claims

Handle rejections and denials differently to recover revenue fast—rejections need quick resubmits, while denials demand appeals with proof.

Fix and Resubmit Rejected Claims Quickly
Review clearinghouse reports daily, correct technical errors (e.g., patient ID typos), and resubmit within 7-30 days per payer rules. Most resolve in 24-48 hours, avoiding AR buildup.

Review EOBs for Denied Claims
Decode remittance advice codes (e.g., CO-97 for bundled services) immediately. Categorize by reason—coding, auth, eligibility—to prioritize high-dollar appeals.

Appeal When Appropriate with Documentation
File formal appeals within 30-180 days (check payer guidelines), attaching charts, auths, and corrected codes. Include a cover letter explaining fixes; success jumps with the medical director’s sign-off.

Track Trends to Prevent Repeat Issues
Log denials monthly in a dashboard—spot patterns like frequent auth misses. Retrain staff and update workflows to cut future rates by 30-50%.

How MedAce Helps Reduce Claim Rejections and Denials

MedAce Healthcare eases the burden of rejections and denials by supporting clean claim submission from verification to payment. 

The team starts with thorough insurance checks and claim scrubbing, spotting technical glitches like data mismatches or formatting errors before payers see them.

Coding experts review for accuracy and medical necessity, while credentialing support ensures you’re eligible—heading off many common denial triggers like unsupported codes or auth gaps. 

When issues arise, MedAce dives into EOBs, resubmits rejections swiftly, and crafts appeals with charts and notes for better overturn rates.

Clients report fewer headaches, quicker reimbursements, and more time for patient care. MedAce provides trend reports to prevent repeats, acting as your billing partner for reliable revenue.

FAQ

1. What is the simplest way to tell a rejection apart from a denial?

Think of a rejection like an incorrectly addressed envelope that the post office sends back before it even reaches the recipient. A denial is like a letter that was delivered and read by the insurance company, but they decided not to pay the request after reviewing the details inside.

2. Can a practice get in trouble for having too many rejected claims?

Not “in trouble” with the insurance company, but it hurts your bank account. Since rejections happen before the insurance company officially processes the claim, they don’t count against your official “clean claim” score. However, they delay your payment, so you should fix them immediately to keep cash flowing.

3. Do I need to file a formal appeal for a rejected claim?

No. You don’t need to appeal a rejection because the claim was never officially “received” or judged by the payer. You simply fix the typo or the formatting error and resubmit it. Appeals are only used for denials, where the insurance company has made a final decision not to pay.

4. Why do some claims get denied even if they weren’t rejected at the start?

A claim might pass the initial “formatting” test (it looks like a valid bill) but fail the “medical rules” test. Common reasons for denials include the insurance company deciding the treatment wasn’t “medically necessary” or realizing the patient didn’t get the required pre-approval (prior authorization) before the appointment.

5. How long do I have to fix these issues?

It depends on the insurance company, but you should aim to fix rejections within 24–48 hours. For denials, most companies give you a window of 30 to 180 days to file a formal appeal. If you wait too long and miss the deadline, you lose the chance to get paid for that service forever.

6. Is there a way to stop these errors before I send the bill?

Yes. Using “claim scrubbing” software or a professional billing service can catch common mistakes—like a missing ID number or a wrong birthdate—before the claim is ever sent. This prevents rejections from happening and ensures your claims are “clean” from t