Clinical denials are a growing challenge for healthcare providers, with industry-wide denial rates increasing by 20-30% over the past two years. Medicare Advantage plans alone have seen a staggering 55% rise in denials, according to a recent American Hospital Association study. These trends represent a growing administrative burden, financial strain on patients, and operational challenges for healthcare organizations.
The rise in denials is fueled by stricter payer policies and administrative complexities. To understand how to respond, healthcare leaders first need to recognize what is driving the increase in denials:
- Stricter prior authorization requirements: Payers are demanding more detailed documentation upfront.
- Automated medical necessity denials: These denials often occur without requesting medical records, relying instead on automated systems to flag certain codes or diagnoses.
- Vague or shifting criteria: Payers state a case "does not meet criteria" without specifying which criteria were unmet, creating confusion and delays.
- Third-party reviews: Subcontractors and third-party administrators introduce inconsistencies and delays in the authorization and approval process.
Prevention Strategies: Timing Matters
Denials for medical necessity or level of care often hinge on how well documentation supports the inpatient admission decision. If clinical severity and intensity of service are clearly documented up front, the case is far more defensible later. Waiting until discharge or worse, after a denial has been issued, means healthcare organizations must be reactive.
Preventing denials starts with early intervention and ensuring all admissions are reviewed promptly. How hospitals engage utilization review (UR) teams and physician advisors (PA) in the first 24- to 48-hour window often determines whether a case will be reimbursed without dispute or face lengthy appeals.
Key responsibilities include:
- Admission status determination: Ensuring patients are correctly classified as inpatient or observation.
- Medical necessity documentation: Providing evidence of the severity of illness and the intensity of treatment.
- Identifying red flags: Paying extra attention to high-cost procedures, extended stays, and diagnoses prone to scrutiny, such as sepsis and malnutrition.
PAs also play a critical role in strengthening appropriate documentation and helping frontline providers anticipate payer or administrative obstacles.
The First 48 Hours: Best Practices
Investing in proactive review, collaborative documentation support, and structured appeal strategy can move denials from being an inevitability into an opportunity. The first 48 hours are critical.
Best practices in the first 48 hours include:
- Ensure proper authorization. Elective cases should be double-checked to confirm that the authorization matches the planned level of care. A mismatch between outpatient authorization and inpatient admission is a preventable denial trigger.
- Embed UR support in the emergency department. Emergency and attending physicians are not trained to think like payers. Having UR nurses available (including remotely) at the point of admission helps ensure the right status is assigned from the start.
- Close documentation gaps early. UR nurses and physician advisors can identify missing elements, such as risk factors or monitoring requirements, to strengthen the medical necessity narrative. Even simple clarifying questions can guide providers to more robust documentation.
- Escalate borderline cases to physician advisors. Peer-to-peer dialogue can prevent inappropriate upgrades or downgrades and prepare providers for payer disputes. Physician advisors are uniquely positioned to bridge clinical judgment with payer expectations.
To learn more about practical strategies to stay ahead of payer tactics and reduce clinical denials, watch the on-demand webinar, Make Your Case and Win: Strategies for Reducing Clinical Denials and Increasing Appeal Success. In our next update, we’ll examine how documentation and structured appeals can turn denials into recoveries.
