How AI and Automation Can Support the Denial Management Process

Claim denials is a significant issue for healthcare, especially as they continue to rise: last year, 60% of medical groups reported a year-over-year increase in claim denials, and providers spend around $20 billion a year trying to overturn them. 

As denials continue to increase, a holistic denial management program can help revenue cycle management (RCM) teams both prevent and address denials. With nearly 82% of denials classified as potentially avoidable, there is a substantial need for proactive preventative strategies to reduce denials before they occur. 

Artificial intelligence (AI) and automation tools can support and enable an effective management program, helping ease the burden on RCM teams that must manage increasing denials.

A Closer Look: How to Use AI and Automation to Manage Claim Denials

Providers are increasingly turning to AI to help manage RCM. According to our 2025 Healthcare CFO Outlook Survey, 46% of healthcare organizations already leverage AI for RCM, and another 49% plan to do so in the next 12 months, signaling a broader industry shift toward AI-enabled RCM. Denial management offers an ideal first use case for RCM teams looking to leverage AI.

Let’s take a closer look at what an automated, AI-enabled denial management process looks like.

Once a provider receives a denial, AI screens for the specific denial reason while analyzing the associated patient and services information and attaches the denial to the relevant electronic health record (EHR). AI then conducts advanced analysis of the denied claim against existing medical records, payer policies, and similar cases to determine the root cause of the denial and, if necessary, notify the appropriate RCM professional for review.

If the RCM professional deems it appropriate to appeal the denial, the automated claims processing system handles the initial appeal intake and classification and prioritizes the appeal based on urgency and complexity. Then, AI performs an appeals analysis, evaluating medical necessity criteria, reviewing clinical documentation, and providing recommendations based on historical data and established provider guidelines.

Once the appeal has been reviewed and approved by RCM staff, AI can automatically generate the required documentation and update the associated EHR accordingly. AI will also continue to track the appeals process and update relevant systems and stakeholders accordingly.

Four AI Denial Prevention & Management Use Cases for RCM Teams 

There are many ways that AI can help RCM teams reduce workloads, errors, patient frustration, and denied claims. Here, we’ve highlighted four of the most valuable use cases for AI in denial management.

Use Case 1: Identify and Rectify Coding Errors

The Challenge

A claim is denied because the medical coding was incorrect during claim submission, which triggers manual work to review the coding, support documentation, and bundle rules. As a result, the cost of addressing the denial is significant.

How AI Can Offer a Solution

Upon receipt of the denial, based on the denial reason, AI automatically evaluates the documentation and coding to provide justification for how the claim was originally billed. If the claim can be justified, the system automates the creation and submission of the appeal letter. Tasks that can be automated are, leaving only those requiring human intervention or judgement to be handled by staff.

Use Case 2: Automating Prior Authorization Processes

The Challenge

Prior authorization is typically required to obtain reimbursement from a payer. However, if a provider doesn’t understand the payer rules around prior authorization for specific procedures, they may fail to obtain prior authorization, which could result in lost revenue.

How AI Can Offer a Solution

AI automatically identifies prior authorization requirements based on payer policies and prior procedures. From there, AI automates tasks within the prior authorization process, such as providing supporting documentation from the chart, creating the prior authorization request, and submitting documents according to payer policies.

Use Case 3: Identify and Appeal an Incorrect Denial

The Challenge

A claim is denied based on a lack of prior authorization. However, the provider did, in fact, obtain prior authorization. As a result, the RCM staff has to manually respond with supporting documentation, taking time away from other higher priority tasks.

How AI Can Offer a Solution

AI confirms the existence of the prior authorization and supporting documentation, then automatically generates the appeal letter, sends it to the payer, and tracks the appeal status. AI can then leverage pattern recognition capabilities to learn from this incorrect denial and proactively flag similar cases in the future to further streamline the handling of similar denials.

Use Case 4: Manage a High Volume of Denials

The Challenge

A provider sees a 20% increase in denied claims over the course of a few months, adding to the workload of their RCM team, which is already at capacity. To make matters worse, the RCM team does not have additional staff who can help address the denial surge. 

How AI Can Offer a Solution

AI automatically categorizes denials by type, matches them to their required documentation, prioritizes them, and flags complex cases to RCM professionals as needed. AI then generates custom appeal letters and submits them to the payers. AI tracks the status of each appeal, updates the relevant EHRs, and notifies RCM team members when a response to the appeal is received, while suggesting an appropriate next step.

How BDO Can Help

Implementing AI and automation to support RCM can be an overwhelming process, especially for teams overburdened by high-volume manual tasks. But as claim denials continue to increase, leveraging these tools will become crucial to freeing up resources and allowing RCM teams to focus on strategic priorities. 

At BDO, we help providers like you achieve AI success. Our skilled professionals can help your organization first establish a strong data foundation so you can make the most of your AI solutions and mitigate risk. From there, we provide support across the full AI journey, from solution selection to post-implementation change management, to help you streamline your AI processes and focus on your business goals.

We also have deep industry experience and can help address needs specific to healthcare organizations, such as integrating AI solutions into existing EHR systems and maintaining compliance with key regulations like HIPAA.