Clinical denials are on the rise

May 22, 2024 / By Diana Ortiz

Since 2020, clinical denials have increased by more than 20%. This shift reflects a strategic adjustment by payers that is driven by several factors impacting large health systems on multiple fronts.

Clinical denials, which are more complex and often require detailed documentation, place an additional operational burden on health systems that can require a redirection of resources. Increased staffing and technology investments are necessary to navigate the intricacies of appealing medical necessity denials and ensuring compliance with payer requirements.

Why the shift to clinical denials? 

To control escalating healthcare costs, payers are scrutinizing claims more meticulously. Clinical denials, especially those related to medical necessity, allow payers to control services deemed unnecessary or not meeting defined medical criteria. Integrating machine learning (ML) and analytics has enabled payers to conduct more sophisticated assessments of medical necessity. This increased analytical capability allows for a more nuanced evaluation of claims, identifying potential discrepancies in real time. 

How should health systems think about preventing clinical denials?

It is expected that payers will continue to shift denial activity to clinical denials in 2024. To prepare for and respond to this payer shift, having a realistic view of your organization’s clinical denials is essential.

Assessing the state of clinical denials demands understanding definition and reporting nuances: 

1. Clarify how your organization defines denials. While the term “denial” may get a standard response among provider staff, the approach to reporting can diverge significantly. Unifying these perspectives is critical to developing a comprehensive understanding of clinical denials’ financial impact. Work to proactively define denial terms, recognizing the interchangeability that often muddles discussions. A common language ensures clarity and an aligned stakeholder approach to denial reporting. 

2. Plan for comprehensive tracking. Electronic health record (EHR) and revenue cycle service software can track financial payment transaction denials, but with payer behavior shifts, focus should extend beyond transactional denials. Questions to consider include:

• • Can my organization track the amount and frequency of accounts being denied for a clinical denial via payer correspondence?
  • Can my organization effectively identify, by payer, the incidence rate of clinical denials and report the associated average length of stay? 
  • How often does my clinical denials team resolve a denial prior to claim submission resulting in payment on the first adjudication? Should this count as an overturn? 

3. Tie clinical inputs to financial outcomes. For most health care organizations, data is siloed, making it difficult for leaders to report on the financial impact and outcomes of clinical denials, as well as the work being done to appeal to them. A complete picture of denials – and denial impact – requires unifying clinical denials data from EHR and financial outcome data. This longitudinal data set delivers a meaningful view of total payments, write-offs and cases initially billed as inpatient and thus subsequently downgraded. 

Is artificial intelligence (AI)-driven payment intelligence important?

In 2024, data-driven solutions will be critical in equipping health systems to track, understand and prevent clinical denials. Having an innovative AI-driven tool that integrates ML predictions and recommendations into clinical workflows –targeting clinical documentation integrity (CDI), coding and utilization review workflows specifically – will help health systems meet this need. By predicting reimbursement at every step of the patient’s clinical journey, health care providers are empowered to make real time, data-driven decisions to optimize payment outcomes.

As providers navigate the complexities of clinical denials, a proactive and tech-enabled approach is essential. By unifying definitions, expanding tracking capabilities and leveraging advanced AI tools and analytics, health systems can gain comprehensive insights into the prevalence and financial impact of clinical denials. 

We’ll be talking more about denials at the 2024 Healthcare Financial Management Association (HFMA) Annual Conference, so be sure to stop by and see us!

Diana Ortiz is a revenue cycle business manager at Solventum.