Rejected Claim vs. Denied Claim - What's the Difference?

The terms rejected claim and denied claim are sometimes used interchangeably, but they describe two different outcomes in the medical claim lifecycle.

A rejected claim generally fails before adjudication because the submission did not satisfy required claim or processing edits. A denied claim, on the other hand, has generally been accepted for adjudication and processed by the payer, but payment was denied or otherwise adjusted based on the payer's adjudication decision.

Understanding whether a claim was rejected or denied is important because the next step can be very different. A rejection commonly requires correcting the claim and resubmitting it, while a denial may require a claim correction, additional information, reconsideration, appeal or another payer-specific action.

What Is a Rejected Medical Claim?

A rejected medical claim is a claim that fails an acceptance or validation step before adjudication is completed. The rejection means that the claim, as submitted, cannot continue through normal claim processing until the reported problem is addressed.

Depending on the claim submission workflow, validation may occur at multiple points. For example, an electronic claim may be reviewed by a clearinghouse, intermediary or payer before it is accepted into the payer's adjudication process.

A rejection may result from invalid information, missing required information, data that does not satisfy payer edits or another problem identified during claim validation.

What Is a Denied Medical Claim?

A denied medical claim has generally progressed beyond the claim acceptance process and has been adjudicated by the payer.

During adjudication, the payer evaluates the claim using applicable benefits, coverage rules, contracts, payment policies and other requirements. The payer may determine that all or part of the submitted charges should not be paid as billed.

A denial therefore represents an adjudication outcome, rather than a front-end claim acceptance problem.

Rejected Claim vs. Denied Claim

The most important difference is where the claim is in the processing lifecycle when the problem occurs.

Where Rejections and Denials Occur in the Claim Lifecycle

Looking at the basic claim lifecycle makes the distinction easier to understand.

This is why identifying the stage at which the problem occurred is often more useful than simply asking whether the claim was "not paid."

How Can You Tell Whether a Claim Was Rejected or Denied?

Start by reviewing the response received after the claim was submitted.

If the response indicates that the claim was not accepted for processing or identifies a claim validation problem that must be corrected before adjudication, you are generally dealing with a rejection.

If the payer accepted and adjudicated the claim and the response explains why payment was reduced or denied, you are generally dealing with a denial or other adjudication adjustment.

Common Reasons Medical Claims Are Rejected

Claim rejection reasons vary by payer and submission workflow, but common examples can include:

• missing required claim information
• invalid or incorrectly formatted information
• invalid provider or subscriber identifiers
• patient or subscriber information that fails validation
• invalid dates or other claim data
• claim information that does not satisfy payer-specific edits
• other data or submission errors that prevent the claim from proceeding to adjudication

The acknowledgment or rejection report should be reviewed to determine the specific reason the claim was rejected rather than assuming the cause based only on the fact that the claim was not accepted.

Common Reasons Medical Claims Are Denied

Denials occur during adjudication and can result from many different payer determinations.

Examples may include:

• the service is not covered under the patient's benefits
• required authorization or referral requirements were not satisfied
• the payer determines that coding or billing requirements were not met
• timely filing requirements were not satisfied
• the service is considered bundled with another service
• medical necessity or other medical policy requirements were not met
• coordination of benefits information affects payment
• another payer policy or benefit rule results in nonpayment or an adjustment

The appropriate response depends on the actual denial reason. A denial should not automatically be treated as a claim that simply needs to be resubmitted.

What Should You Do After a Claim Is Rejected?

When a claim is rejected, review the acknowledgment or payer report to identify the reason for the rejection.

The general workflow is:

1. Identify the rejection reason.
2. Determine which claim information caused the rejection.
3. Correct the reported problem.
4. Resubmit the claim according to payer instructions.
5. Review the subsequent acknowledgment to verify that the corrected claim was accepted.

What Should You Do After a Claim Is Denied?

A denial requires a different analysis because the payer has already adjudicated the claim.

Start by determining why the payer denied or adjusted the claim. The appropriate next action may include:

• providing requested information or documentation
• correcting inaccurate claim information
• submitting a replacement claim when required by the payer
• requesting reconsideration
• filing an appeal
• addressing coordination of benefits or authorization requirements
• taking another action specified by the payer

Does a Rejected Claim Use Claim Frequency Type Code 1, 7 or 8?

The distinction between rejection and adjudication is especially important when determining the appropriate Claim Frequency Type Code.

Note: These are general distinctions. Always follow the payer's current claim submission, correction and resubmission requirements.

A Denied Claim Does Not Automatically Mean Code 7

Because a denied claim has been adjudicated, it may be tempting to assume that the next submission should always be a Replacement Claim (7). That is not necessarily the case.

First determine why the claim was denied.

The fact that a claim was denied tells you that adjudication occurred. It does not, by itself, tell you which action should be taken next.

How the 277CA Relates to Rejected Claims

The 277CA Health Care Claim Acknowledgment is used in electronic claim processing to communicate claim acknowledgment and status information, including whether claims were accepted or rejected.

A rejected claim reported on a 277CA has not successfully moved forward into adjudication. The 277CA can provide status information that helps identify the reason the claim was rejected so the problem can be corrected.

Electronic claim workflows can contain more than one acknowledgment, and a claim may pass one validation step before being rejected at another. Review the sender and status information to understand which entity generated the acknowledgment and what happened to the claim.

How the ERA Relates to Denied Claims

After a payer adjudicates a claim, an Electronic Remittance Advice (ERA) can communicate payment and adjustment information for the claim and its service lines. In standard electronic healthcare transactions, the ERA is transmitted using the X12 835 Health Care Claim Payment/Advice transaction.

The ERA can include standardized adjustment information that explains why charges were reduced, denied or otherwise adjusted. This information helps determine why the payer reached its adjudication decision and what action, if any, may be appropriate.

Providers that receive paper remittance information or use a payer portal may obtain similar adjudication details through those channels rather than directly reviewing an electronic ERA.

Rejected vs. Denied Claim Examples

The following examples show why identifying the claim's processing stage matters before deciding what to do next.

Common Rejected vs. Denied Claim Mistakes

Where Rejected and Denied Claims Fit With Corrected Claims

Whether a claim was rejected or denied helps determine what kind of correction, if any, is needed.

A rejected claim generally needs the reported rejection problem corrected so that the claim can successfully proceed into adjudication. A denied claim has already been adjudicated, so the provider must first determine whether the problem is incorrect claim information or disagreement with the payer's decision.

Frequently Asked Questions

Important: Claim rejection, denial, correction, resubmission and appeal procedures can vary by payer and program. The information in this guide provides a general overview and should be used together with the payer's current billing, claim submission and appeal requirements.