Claims Workflow: 8 Best Practices To Limit Denials And Underpayments

What if the secret to unlocking millions in lost revenue isn’t a new payer contract or a bigger billing team—but a handful of overlooked tweaks in your claims workflow? 

Revenue cycle managers have learned that glitches in the claims workflow lead to revenue-draining underpayments and denials. These revenue leaks aren’t just frustrating—they’re costly, persistent, and often preventable. Yet, while most organizations focus on the obvious fixes, it’s the subtle, often-missed aspects of claims management that can make the biggest difference. 

Ready to discover the eight best practices in the claims workflows that can transform your denial rates and boost your bottom line? Let’s dive in.

What is the claims workflow? 

The claims workflow is the process by which healthcare providers submit requests for payment to insurance payers for medical services rendered to patients, monitor reimbursements, and then document them. An optimized claims workflow is important because it has the potential to reduce billing and coding errors, accelerate claims processing for faster reimbursement, and ensure compliance with industry regulations—all of which lead to greater operational efficiency, cost savings, and improved financial performance for healthcare organizations. The following steps constitute the claims workflow. 

8 steps in the claims workflow

1. Patient receives care: Medical services are provided to the patient by the healthcare provider.
2. Data collection and documentation: Patient demographics, insurance information, diagnosis codes, procedure codes, and supporting clinical documentation are gathered and recorded.
3. Claim creation: The billing department compiles all necessary information into a claim document, ensuring accuracy and completeness.
4. Claim submission: The claim is submitted electronically to the insurance payer, often via a clearinghouse that checks for formatting errors and compliance.
5. Payer receipt and adjudication: The insurance payer receives the claim and begins the adjudication process, which includes:
   
   • Verifying patient eligibility and coverage
   • Checking claim accuracy and completeness
     Assessing medical necessity and coverage policies
   • Applying contracted rates and coverage limitations
6. Claim approval or denial: If the claim meets all requirements, it is approved for payment. However, if errors or issues are found, the claim may be denied or returned for correction and resubmission.
7. Payment and explanation of benefits (EOB): Approved claims result in payment to the provider. An EOB is sent to both the provider and the patient, detailing what was covered, paid, and any patient responsibility.
   
   
8. Follow-up and appeals (as needed): Denied or underpaid claims are reviewed, corrected, and resubmitted or appealed as necessary to secure appropriate reimbursement.

Most likely you’ve learned by now that a misstep at any of these points can lead to an underpayment or a denial. It follows then that optimizing your claims workflow reduces both types of revenue leakage. 

8 best practices for an optimized claims workflow

Claim workflow optimization requires a comprehensive approach that addresses communication, data management, analytics, customization, compliance, and customer service. By embracing these broader strategies, healthcare organizations can create a more resilient, accurate, and patient-centered revenue cycle.

1. Standardization 

Why it’s important: Claims workflow standardization ensures that each claim follows a consistent, predictable path, reducing confusion, errors, and processing times. 

Action Steps:

• Patient receives care: Use standardized intake forms and protocols for patient registration and service documentation.
• Data collection and documentation: Implement uniform templates and checklists for collecting patient demographics, insurance details, and clinical documentation.
• Claim creation: Those using claims management software can utilize automated claim generation tools with built-in validation rules to ensure completeness and accuracy. Manual users can also have templates that they photocopy. 
• Claim submission:  Adopt electronic submission processes through a centralized clearinghouse with standardized formatting and compliance checks. Nearly all healthcare organizations now submit claims electronically according to the CAQH Index. 
• Payer receipt and adjudication: Establish clear communication protocols with payers and use standardized tracking systems to monitor claim status and adjudication steps.
• Claim approval or denial: Set up automated notifications and standardized workflows for handling approvals, denials, and required corrections. Again, checklists and standard operating procedures will save you. 
• Payment and explanation of benefits (EOB):  Integrate payment posting and EOB reconciliation into a centralized system with standardized reporting formats.
• Follow-up and appeals (as needed): Develop standardized follow-up schedules, appeal letter templates, and tracking systems for denied or underpaid claims.

2. Centralization

Why it’s important: Integrating and centralizing information, such as recorded statements and supporting documents, streamlines access, improves accuracy, and supports compliance.

Action steps: 

Read about best practices for centralizing data in our RCM data post. Otherwise take these steps: 

• Identify and document all data sources: Catalog every system and repository where claims-related data resides, including EHRs, billing platforms, and document management systems.
• Consolidate workflows and departments: Unify claims processing steps across departments to reduce handoffs, eliminate redundancies, and ensure all data flows into a single, centralized system.
• Leverage cloud-based and interoperable technology: Adopt cloud-native solutions and API-enabled architectures to connect disparate systems, enable real-time data sharing, and support scalability.
• Implement industry data standards (e.g., FHIR, HL7): Use recognized data standards to facilitate seamless integration and interoperability between different platforms and stakeholders.
• Centralize document and data management: Use document management tools to store, organize, and retrieve all claims-related files and supporting documents in one secure, accessible location.
• Automate data integration and error checking: Employ automation to extract, validate, and synchronize data from multiple sources, reducing manual entry and minimizing errors.
• Establish data governance and security protocols: Define clear policies for data access, quality control, and security to ensure compliance and protect sensitive information.
• Train staff and engage stakeholders: Provide training on new systems and workflows, and involve all relevant teams early to ensure buy-in and smooth adoption.

By following these steps, healthcare organizations can achieve robust centralization in their claims workflow, leading to greater efficiency, accuracy, and compliance.

3. Front-End Validation and Automation

Action steps: 

• Implement claim scrubbers and automated edits: Using claim scrubbers and automated editing tools ensures claims are reviewed for errors, missing data, and compliance with payer rules before submission. This reduces preventable denials and underpayments.
• Real-time eligibility and authorization checks: Automated eligibility verification and prior authorization tools validate patient coverage and authorization requirements at registration, minimizing eligibility-related denials and rework. Read about the importance of real-time visibility into contract performance. 

4. Data-driven denial and underpayment management

Action Steps: 

• Analyze denial and underpayment trends and root causes: Once you find denials and underpayments in aggregate, you begin to recoup meaningful revenue. Deploy advanced analytics to identify patterns and root causes of denials. Use real-time dashboards and predictive analytics to forecast high-risk claims and implement corrective actions before submission.
• Standardize denial categorization and workflows: Establish uniform denial categories and workflows to ensure consistent tracking, resolution, and reporting. This enables targeted process improvements and facilitates benchmarking across departments or payers.
• Automate underpayment identification: Use AI and machine learning to analyze remittance data, compare actual payments to contracted rates, and flag underpayments for review. Automated alerts and workflows enable prompt recovery of missed revenue and support ongoing contract optimization. 

Take a quick, self-guided tour through a powerful denial and contract management system:

5. Use comprehensive clinical documentation improvement (CDI) programs

Invest in robust CDI programs to ensure documentation is precise, complete, and compliant with regulatory and payer requirements. This is critical for accurate coding and optimal reimbursement.

Action steps:

• Ongoing staff education and training: Regularly train staff on evolving coding standards, payer rules, and documentation best practices. Cross-training and continuous education help mitigate knowledge gaps and reduce preventable errors.
• Leverage EHR templates and Computer-Assisted Coding (CAC): Utilize EHR-integrated templates and CAC tools to standardize documentation and coding, reduce manual entry errors, and improve coding accuracy and compliance.

6. Collaboration and Communication

Action steps: 

• Engage with payers to resolve recurring issues: Foster open communication with payers to clarify requirements, resolve disputes, and address recurring denial patterns. Proactive payer engagement can lead to faster resolutions and fewer future denials and underpayments.
• Cross-functional collaboration: Encourage collaboration between revenue cycle, clinical, and finance teams. Regular feedback loops and shared accountability ensure alignment on claims processes, documentation standards, and financial goals.

7. Continuous Process Improvement

Action steps: 

• Monitor Key Performance Indicators (KPIs): Track metrics such as denial rates, underpayment recoveries, and days in accounts receivable (A/R) to identify bottlenecks and measure the impact of process changes
• Conduct regular audits and staff feedback sessions: Routine internal audits and feedback sessions help uncover workflow inefficiencies and training needs. Use audit findings to refine processes and reinforce a culture of continuous improvement.
  
  

8. Technology integration: Manual vs. automated claims workflows

Claims workflow can roll out via manual staff work or automated software solutions. 

Just a few years ago, healthcare leaders felt that the pandemic would finally push healthcare far enough into the digital era that it could catch up to industries like retail and travel. 

And it seemed to be going that way. 

In 2022, Experian survey data showed 62% of providers used some form of automation and AI technology in claims.  Yet, the most recent Experian State of Claims Management Report found just 31% saying they did.  That means 69% now conduct the many steps listed in this post using manual staff labor. 

What happened?

Experian admits,

“The comfort gap with new technologies plummeted…the data also shows a retreat from the broader embrace of automation and mobile enablement that accelerated during and shortly after the pandemic.” 

Still, rising operational costs, a persistent staffing shortage, and the need to maintain high-quality patient care—all while operating with thinner margins and less negotiating power–mean that, today, claims management software is essential for providers. 

Deloitte will tell you that claims management systems reduce administrative burdens, limit errors, and recoup millions in denied and underpaid claims that would have been written off.

McKinsey shares that AI-driven automation will,

 “Allow revenue cycle operators to work more efficiently by increasing the quantity and quality of claims processed, which would translate to value seen in lagging indicators such as write-off amount.

These tools let providers monitor payer performance, appeal denials, and negotiate from a position of strength with accurate, actionable insights. Claims management software also streamlines workflows, reduces administrative burden, and ensures providers are paid accurately and promptly for the care they deliver, helping to offset the inherent advantages payers hold in contract negotiations.  

The following breakdown of the tasks involved in manual staff work versus automation should make clear how much effort you save by using automation. 

Data entry

• Manual: Staff manually enter patient, billing, and coding data, increasing the risk of errors and omissions.
• Automated: Data is automatically extracted from electronic health records (EHR) and other integrated systems, reducing errors and saving time.

Claim scrubbing

• Manual: Staff review claims for errors or missing information by hand, a time-consuming and inconsistent task.
• Automated: Automated systems use built-in rules to instantly check claims for errors, missing data, or coding issues before submission.

Submission

• Manual: Claims are often submitted individually or in small batches, sometimes via paper or basic electronic means.
• Automated: Claims are submitted electronically in large batches, often in real time, directly to payers or clearinghouses.

Tracking & status updates

• Manual: Staff must manually check claim status with payers, often by phone or through payer portals, leading to delays.
  Automated: Automated workflows provide real-time tracking and status updates, alerting staff to issues or denials immediately.

Denial management

• Manual: Denied claims are identified and reworked manually, which can be slow and prone to oversight.
• Automated: Automated systems flag denials, categorize reasons, and can even auto-correct and resubmit claims based on predefined rules.

Reporting & analytics

• Manual: Reporting is often ad hoc, requiring manual data compilation and analysis, limiting insight and responsiveness.
• Automated: Automated workflows generate real-time reports and analytics, enabling proactive management and continuous process improvement.

Staff workload

• Manual: High administrative burden, increased risk of burnout, and slower processing times.
• Automated: Reduced manual workload, allowing staff to focus on complex cases and higher-value tasks.

Compliance

• Manual: Greater risk of non-compliance due to manual errors and missed regulatory updates.
• Automated: Automated updates and built-in compliance checks help ensure adherence to payer and regulatory requirements.

Clearly, automated claims workflows streamline and accelerate the entire process, reducing errors, denials, and administrative burden. Manual workflows are slower, more error-prone, and resource-intensive.

What to expect from claims automation 

Should you decide to go with claims automation, it’s important to know the software landscape. 

While many leading platforms manage the full lifecycle of a claim, from initial intake through adjudication and final settlement, there is significant variation in the market. End-to-end functionality includes features like:

•  automated intake
•  eligibility verification
•  document management
•  workflow automation
• real-time tracking
•  compliance management
•  payment processing

However, other claims automation solutions focus on specific segments of the workflow, such as intake, document management, or analytics, and require integration with additional systems to achieve full coverage. 

The ability to handle the entire workflow often depends on the software’s design, the needs of the organization, and the complexity of the claims being managed. Some organizations may only need a handful of tasks covered. 

For organizations with more complex or high-volume claims, a fully integrated, end-to-end solution is typically preferred, while those with simpler needs may use more limited or modular systems. 

Once you’ve inventoried exactly what your organization is missing, compare claims management software platforms on Software Reviews or G2. 

8 ways claims management automation integrates into the claims workflow

 Claims management automation is woven throughout the entire claims workflow, transforming each step from manual and error-prone to streamlined, accurate, and efficient. 

• Claim intake and data entry: Automation platforms capture and extract data from various sources (such as electronic health records or scanned documents), automatically populating claim forms and verifying that all required fields are complete and accurate.
• Eligibility and verification: Automated systems check patient eligibility and policy coverage in real time, flagging any discrepancies before the claim moves forward.
• Claim scrubbing and validation: Automation tools review claims for errors, missing information, or coding issues, applying business rules to ensure claims are clean before submission.
• Submission and routing: Claims are submitted electronically to payers or clearinghouses, and automation ensures they are routed to the correct parties or departments based on predefined rules.
• Tracking and status updates: Automated workflows provide real-time tracking of claim status, sending alerts or notifications if issues arise, and keeping all stakeholders informed throughout the process.
• Denial management: When denials occur, automation platforms categorize the reasons, trigger workflows for rework or appeals, and can even auto-correct and resubmit claims based on established protocols.
• Payment and reconciliation: Automation matches payments to claims, flags underpayments or discrepancies, and updates financial records accordingly.
• Reporting and analytics: Throughout the workflow, automation collects data and generates real-time reports and analytics, enabling continuous process improvement and compliance monitoring.
  

Reading the above, you should feel automation’s workload lift from yourself and your staff. 

Overlap between contract management software and claims management software

Healthcare providers can become confused between claims management platforms and contract management platforms because these revenue cycle systems may share overlapping features, such as automation and analytics. 

Claims management platforms are primarily designed to handle the submission, tracking, and adjudication of insurance claims, focusing on ensuring timely and accurate reimbursement for services rendered. 

Contract management platforms come in more when payers reimburse by helping providers compare payer contract performance against other payers and benchmarks like Medicare. When providers understand their contract terms and which payer has the most value, they more easily negotiate more favorable contract terms for their organizations. Contract management platforms also ensure payments align with rates and terms agreed to initially, thereby identifying underpayments. 

Overlap in the claims management and the patient management system (PMS)

While a PMS is designed to manage:

• patient scheduling, 
• demographics
•  basic billing functions

Still, it generally lacks: 

• claim creation
•  electronic submission to payers
• real-time eligibility verification
• denial management
•  remittance tracking

However, many modern healthcare organizations integrate their patient management systems with dedicated claims management or billing software. This integration allows patient data to flow seamlessly from the PMS to the claims management platform. Overall, while a patient management system may support some aspects of claims processing, it does not fully handle claims management. 

Overlap in claims management and billing automation systems

A claims management automation platform and a billing platform also serve related but distinct roles in healthcare revenue cycle management.

Where claims management focuses on the claims lifecycle, the billing platform is broader and centers on generating, processing, and tracking invoices for both insurance payers and patients. Billing platforms manage:

• patient statements
• payments
• reminders
• self-pay and co-pay transactions

While some billing systems include features for claim submission and basic tracking, their primary focus is on the financial transactions and communication with both patients and payers. For comprehensive revenue cycle efficiency, many healthcare organizations integrate both platforms, allowing each to play to its strengths within the overall workflow. 

Let MD Clarity help strengthen your claims workflows

MD Clarity enhances claims workflows by leveraging advanced technologies such as robotic process automation (RPA), AI, OCR, and NLP to streamline and error-proof the revenue cycle. Contract management platform RevFind automates repetitive tasks like eligibility verification, contract performance benchmarking, and denial management, reducing manual errors and accelerating reimbursement. This automation strengthens claims workflows by increasing accuracy, reducing administrative burdens, and enabling providers to adapt swiftly to payer denials and underpayments.

Get a demo to see firsthand how RevFind helps you capture more of your earned revenue by identifying downcoded and underpaid claims.  

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