Clinical denials pose a significant challenge for providers regarding financial stability and patient care in complex healthcare revenue cycle management (RCM). Unfortunately, there is mounting evidence that claims denial rates are rising. That puts the onus on overturning them through successful appeals—but more importantly, learning how to prevent them from happening in the first place.
What are Clinical Denials
Clinical denials are defined as an insurer or payer’s refusal to approve a reimbursement claim to a healthcare provider for services rendered. They can stem from various factors within the complex healthcare reimbursement system.
They occur when an insurer or payer determines that a service or treatment provided to a patient does not meet the criteria they set for reimbursement—due to issues with either medical necessity, documentation, or coding errors. Unlike administrative denials that result from issues like eligibility or coverage disputes, clinical denials specifically relate to the medical necessity and appropriateness of the care provided often involving subjective decision-making.
These denials can be particularly challenging for healthcare providers because they often require substantial resources to appeal, diverting attention and finances away from patient care and operational efficiency. Moreover, clinical denials can significantly impact revenue cycles, leading to delayed or reduced payments and increased administrative burdens.
There are many signs clinical denials are on the rise.
A survey from Premier, a healthcare improvement company, found that nearly 15% of all claims submitted to private commercial payers were initially denied for reimbursement, with average denials pegged to higher-cost services totaling $14,000 or more. More than half of these claims were eventually overturned, but only after costly appeals from providers—more on that below.
In another survey from late 2023, nearly 50% of providers polled had seen an overall increase in the rate of denials from the previous year.
These denials may mean patients receive an unexpected bill long after the services took place, which may delay or prevent follow-up care.
Top Reasons for Clinical Denials
So why are so many healthcare claims being denied? Clinical denials typically fit into a pattern.
- Medical Necessity Issues: One of the most common reasons for clinical denials is when payers determine that the service provided was not medically necessary according to their criteria. Payers scrutinize whether the treatment aligns with established clinical guidelines and protocols, often requiring detailed documentation from providers to justify the necessity of the care provided.
- Coding Errors: Errors in coding and documentation—whether incorrect CPT, ICD-10, or HCPCS codes—can lead to denials if they do not accurately reflect the services rendered, are incorrectly bundled, or do not meet the specificity required by the payer. This discrepancy can result in claims being rejected or denied outright, requiring providers to resubmit corrected claims.
- Documentation Deficiencies: Insufficient or incomplete documentation of patient encounters is another frequent cause of clinical denials. Payers require detailed documentation to support the billed services, including patient history, examination findings, treatment plans, and the rationale for medical decision-making.
- Authorization Issues: Failure to obtain prior authorization for specific procedures or treatments can lead to denials, as payers may deem the services as not meeting their pre-approval requirements. This issue often arises when providers and patients are unaware of the payer’s specific authorization requirements.
- Billing Timeliness: Timeliness in submitting claims is crucial, as delayed submissions can result in automatic denials. Payers enforce strict deadlines for claim submission, and any delays that cause claims to be submitted after the window has shut can lead to automatic denials.
Implications for Healthcare Providers
The impact of clinical denials extends beyond financial repercussions to affect patient care and operational efficiency within healthcare organizations. Providers face several challenges and implications as a result of clinical denials:
Financial Impact
According to industry reports, clinical denials can result in significant revenue loss for healthcare providers. In some cases, denial rates can range from 5% to 20% of claims submitted, highlighting the substantial financial burden on healthcare organizations.
Premier’s survey found that organizations had to conduct an average of three rounds of reviews to overturn denials and spent about $19.7 billion a year collectively reviewing claim denials.
Operational Burden
Managing clinical denials requires dedicated resources, including administrative staff and technology, to navigate the appeals process effectively. This diversion of resources can strain operational efficiency and detract from patient care activities.
Patient Care Disruptions
Delays in reimbursement due to clinical denials can impact patient access to timely and necessary healthcare services. Providers may struggle to provide optimal care if unresolved denials constrain financial resources.
Compliance and Quality Improvement
Addressing the root causes of clinical denials often involves implementing quality improvement initiatives and enhancing compliance with payer requirements. This proactive approach is essential for reducing denial rates and improving overall revenue cycle management. It also produces other benefits, such as improved Consumer Assessment of Healthcare Providers & Systems (CAHPS) survey scores, improved patient satisfaction, and lower costs.
Addressing the Challenge
To mitigate the impact of clinical denials, healthcare providers are increasingly adopting strategies to enhance documentation accuracy, streamline coding processes, and improve communication with payers. Leveraging technology solutions such as electronic health records (EHRs) and RCM systems can also help minimize denial rates and optimize reimbursement processes.
Collaboration between healthcare providers, payers, and regulatory bodies is essential to establish clearer guidelines and standards for reimbursement, thereby reducing ambiguity and improving transparency in the claims adjudication process. Furthermore, ongoing education and training for healthcare professionals on documentation best practices and payer requirements can reduce the incidence of clinical denials.
Aspirion offers Best in KLAS, end-to-end clinical denials resolution, and prevention services for government and commercial payers. We offer a highly skilled team of legal, clinical, and coding experts, plus AI-powered technology that streamlines many routine tasks. Our teams work with providers to manage and appeal clinical denials, identify the root causes, and improve workflows to minimize their occurrence.
Effective management of clinical denials is vital for navigating the complexities of healthcare reimbursement and ensuring sustainable healthcare delivery for patients.
Want to boost your profit margins with AI-powered denials management? Take the first step by contacting us today.
