What are Claims Rejections in Medical Billing and How to Prevent Them

Claim rejection in medical billing is one of the most common and costly challenges facing healthcare providers today. Unlike claim denials, which occur after a claim has been processed and reviewed, rejections happen early in the revenue cycle, often before the payer even sees the claim. 

Understanding what causes claim rejection, how it impacts revenue, and what practical steps can prevent it is essential for any medical practice aiming to maximize cash flow and minimize administrative burden. 

"Current research shows that 18–20% of claims are denied or delayed in 2024, and many practices report insurance claim rejection rates rising every year. "

What Is a Claim Rejection?

A claim rejection happens when a payer or clearinghouse refuses to accept a submitted claim because certain intake requirements weren’t met. The claim never enters adjudication—it’s stopped at the door. If you’re asking what rejection in medical billing is, the simplest explanation is this:

"A claim rejection is an avoidable interruption caused by incorrect or incomplete information that prevents the claim from being processed."

These errors must be corrected, and the claim must be resubmitted before payment can even be considered.

Claim Rejection vs. Denial: What’s the Difference?

Many people confuse the two, so here’s the clean distinction:

Rejection	Denial
Never enters the payer system	Enters payer system
Technical/data errors	Coverage/policy issues
Quick turnaround (1-2 days)	Slower turnaround (weeks)
Easy to fix and resubmit	May require an appeal
Doesn't affect timely filing	Counts toward timely filing
Caught by the clearinghouse or payer front-end	Caught during adjudication

If you want a clearer comparison of claim rejection and denial and how each one can be prevented, check out our detailed explanation that walks through both issues side-by-side.

Types of Rejection in Medical Billing

Different errors create different kinds of rejections. Here are the most common types of rejection every billing team should know:

Demographic Rejections

These occur when patient information doesn’t match what the payer has.

Examples

• Wrong name spelling

• Incorrect date of birth

• Invalid member ID

• Outdated address

Eligibility and Coverage Rejections

These happen when the patient’s plan isn’t active, or coverage doesn’t match the date of service.

Examples

• Expired insurance

• The wrong insurance plan was selected

• Missing authorization

• Coordination of benefits is not updated

Coding Rejections

Incorrect or outdated codes—CPT, HCPCS, or ICD-10—stop claims instantly.

Examples

• Deleted or invalid codes

• Diagnosis does not support the service.

• Missing modifiers

• Coding that does not meet payer policy

Technical or Formatting Rejections

These happen when claims fail structural or technical format requirements.

Examples

• Missing required fields

• Incorrect form version

• Wrong modifier placement

• Errors caught by claim scrubbers

Provider Information Rejections

These are caused by credentialing or NPI issues.

Examples

• Provider not credentialed with the payer

• Incorrect taxonomy code

• Inactive NPI

Where Rejections Originate in Your Workflow

Claim rejections can occur at multiple points in the revenue cycle. Most often, the root cause is planted at the front end of the process, but the impact is felt much later when cash flow is delayed, and staff are forced to rework claims.

Patient Scheduling and Pre-Registration

Small errors wrong date of birth, misspelled names, and incorrect insurance IDs, will bounce a claim instantly. Strong preregistration procedures and upfront verification prevent most of these headaches.

Registration and Eligibility Checks

If the patient’s insurance isn’t active or authorization wasn’t obtained, the claim gets rejected automatically. Verification shouldn’t be a one-time task. It needs to be checked before every visit since benefits and plans change more often than people realize. For a deeper look at why eligibility checks are challenging and what issues to fix, you can explore our detailed guide on improving insurance verification.

Charge Capture and Coding

Coding mistakes are another major cause of early rejections. Outdated CPT or ICD-10 codes, mismatched diagnoses, or incomplete coding will stop a claim in its tracks. Ongoing training and coding audits go a long way here.

Clearinghouse Edits and Payer Rules

Once a claim is created, it has to meet a long list of formatting and structural rules before the payer ever sees it. If the claim is missing required fields, uses the wrong claim form version, or includes invalid modifiers, the clearinghouse will reject it immediately.

How Rejected Claims Quietly Bleed Your Revenue

Rejected claims do more than delay payments—they disrupt the entire financial structure of a practice.

• Revenue Delays: Each rejection pauses cash flow, increasing A/R days.

• Increased Labor Costs: Billing teams spend extra hours correcting errors that could have been avoided.

• Escalation Into Denials: Rejections ignored for too long turn into denials, which are more costly and less likely to be overturned.

• Lost Revenue: Many rejections are never resubmitted—and that loss accumulates month after month.

A concerning 35–60% of denied or rejected claims are never resubmitted, meaning the revenue simply disappears.

This is why stopping rejections early makes a huge difference for medical practices and those using ABA billing services. For common mistakes many providers still make when submitting claims, you can check our short guide that explains these errors and how to avoid them.

How Our Team Reduces Claim Rejections in ABA Billing Services

We Verify Patient Insurance Before Every Visit

Our team starts with a basic but important step. We check eligibility, active dates, plan details, and any authorization needs before each session. This routine removes a big portion of early errors in ABA therapy billing. With automated eligibility tools, we catch expired coverage or mismatched details right away.

Double-Check Demographics

A quick confirmation saves hours later. We make sure the patient’s name, date of birth, address, and member ID match what’s on their insurance card. We also use double-check steps and automated validation tools. This keeps demographic mistakes from turning into rejections.

Dedicated Code Review

Coding changes every year, and even small mistakes can stop a claim. Our team follows the latest CPT and ICD-10 updates and reviews codes carefully before submission. Ongoing training and internal audits keep coding accurate and clean across ABA billing services.

Automated Scrubbers and Manual Cross-Checks

We use advanced scrubbing tools to catch technical, formatting, and modifier errors. After that, our team completes a final review for payer-specific rules.

Credentialing Alignment

With in-house credentialing support, our credentialing services keep NPIs, taxonomy codes, and CAQH data updated, preventing provider-related rejections.

Root-Cause Reporting

Every rejection is analyzed to identify workflow gaps. This keeps rejection rates low and improves performance across the practice.

These steps support faster payments, fewer reworks, and stronger outcomes for practices relying on ABA therapy billing and wider RCM support.

FAQ

1. What are common denials and rejections in medical billing, and how should they be handled?

Common rejections include demographic errors, eligibility issues, coding mismatches, and formatting problems. Correct the issue, update records, and resubmit promptly. Denials require appeals or additional documentation.

2. How do you handle rejection in medical billing?

Review the rejection code, identify the exact issue, correct the data, and resubmit. Monitor recurring patterns to prevent future errors.

3. Are most claim denials and rejected claims preventable?

Yes. Research suggests 60–80% of rejections and denials come from preventable front-end errors, eligibility problems, demographic mistakes, or outdated coding.

Conclusion

Understanding what is claim rejection in medical billing is the first step. Preventing the root causes is what truly protects your revenue. When patient information is accurate, eligibility is checked consistently, coding is updated, and payer rules are followed, practices see fewer rejections and faster collections. With payer scrutiny and automation rising each year, reducing rejection rates is no longer optional it’s essential for survival.