5 Strategies for Managing Clinical Denials

By Megan N. Beasley, RHIA, CPC; Daniel G. Gautschi; and Matt Szaflarski
| 2/7/2018
Operational Strategies for Managing Clinical Denials
Healthcare organizations receive numerous denials, which can be classified into two categories: clinical and technical denials. The clinical category is based on medical necessity, length of stay, level of care determination, coding, and other clinically driven factors. These types of denials present unique challenges for organizations because they require additional medical or clinical clarification for payment and interdepartmental communication to resolve the denial. This makes clinical denials more complex than technical denials, which typically go through the traditional back-office resolution process prior to resubmission of a claim.

In addition to being more difficult to resolve than technical denials, clinical denials pose a higher risk of affecting net revenue. In fact, according to research based on the Crowe national benchmarking database, two of the top five denial categories most commonly associated with clinical denials – 1) no authorization or precertification obtained for services and 2) medical necessity – happen to be the two most significant areas of cash leakage throughout the healthcare market.1

Organizations are faced with significant resource challenges when it comes to the resolution of clinical denials. Clinical resources are required to address these denials; however, knowledge of billing and patient financial services also is necessary. These resources are scarce, and many providers choose to use outside organizations to assist with the clinical denial functions. Firms that specialize in this type of service often can bridge gaps between the clinical and patient financial services silos, can more successfully appeal denials received, and can assist with identifying proactive means of reducing the occurrence of clinical denials. Regardless of how an organization may choose to approach the management of clinical denials, the most successful organizations employ five key strategies that are detailed here:

1. Understand Payer Requirements

All payers have different rules and regulations for their authorization and appeals processes. Having a complete understanding of those differences is vital to successfully avoiding clinical denials.

It’s important for an organization’s utilization review team or case management team to keep track of when payers’ requirements change and to communicate those changes to other departments within the organization (such as the managed care and patient financial services departments). Developing a thorough reference tool and updating it with payers’ requirements for authorizations and appeals, including specific timing for both, can assist with keeping appropriate staff in the loop. This reference tool should be created as a joint effort of the managed care, utilization review, and patient financial services departments. Together, they should thoroughly examine the payer contract and payer manual and should have discussions with payer representatives. Experience has shown that the completion of a summary payer document that includes timely filing requirements, authorization requirements, length of stay minimums, and contact information is a valuable reference document for the utilization review team.

Some common types of authorization required by payers include observation authorization, labor and delivery and associated discharge rules, inpatient notification, and admission criteria used for determining patient status. The reference tool should include these types of requirements and which department is responsible for each component. This will help staff remain aware of changing guidelines and regulations set forth by each individual payer so that they have an accurate process for handling patient encounters.

Keeping track of and understanding different payers’ appeals requirements also can help create a smoother overall appeals process and possibly return cash to the organization in a timelier manner. The utilization review and patient financial services representatives should know how each payer can be contacted (for example, phone only or fax only) as well as the contact information for the payers’ appeals departments. Again, saving this information in a well-organized, easily accessible format will aid in keeping staff informed.

2. Acknowledge the Physician’s Role

Recognizing the important role of physicians in the clinical denial process is another step health systems can take to reduce the incidence of clinical denials. Having physician champions within organizations to work with payers and help navigate the complexities of clinical denials is essential. Physician champions can assist with driving change within the organization and also are more able than a nonclinical leader to fully understand the landscape within the payer and utilization management environments. Physicians bring their clinical experience to the table, which enables them to effectively communicate with both sides of the business – on the payer side with payers’ medical directors and internally with the health system’s clinicians. Organizations should consider appointing a physician adviser to build better relationships with payers, encourage more collaboration between the healthcare organization and payers, and effectively enact change internally with clinicians.

3. Pre-emptively Work Denials

When a healthcare organization anticipates a payer denial, that facility can take steps prior to the account being billed or the formal appeals process to pre-emptively manage that denial.

The pre-emptive denial process includes two components:

  • A redetermination, in which the organization requests an independent re-examination of an initial encounter denial and can send additional clinical information to support the medical necessity
  • The peer-to-peer process, in which the attending physician on the case or the appointed physician adviser communicates with the payer’s medical director to provide clinical information about the patient’s case and information about the medical necessity of the level of care provided to the patient

A strong pre-emptive process for managing clinical denials can return cash to the organization at a much quicker rate than waiting for the formal appeals process. In addition, organizations typically experience more success with a pre-emptive denial process than with an appeals process due to the proactive nature of the denials management and specific, clinical interaction for each of these accounts.

One client (a 450-bed community hospital) experienced a net improvement of more than $2 million during the first 18 months after implementing a pre-emptive denial process that includes essential peer-to-peer communication with the payers’ physicians. That is cash that might not have been collected had this process not been in place.

4. Monitor the Appeals Process

If the pre-emptive denial process is unsuccessful, the healthcare organization may proceed with a formal appeal to work toward collecting the additional net revenue. Having tight processes in place for submitting appeals and monitoring the appeals process within the organization can assist with this objective.

Organizations need to have documented processes including assignment of the ownership of specific denial types, requirements related to response speed including payer-specific timely filing limits, and appropriate escalation protocols if interdepartmental communication is delaying resolution. Incorporating payer-specific timely filing limits is especially critical because some payers’ appeal deadlines are quite strict. For example, some payers allow as few as 30 days to respond to appeals. This can create issues when these denials are mixed into the same work queue as those of other payers with more lenient timelines because patient financial services representatives may not select the most time-sensitive account to work as a priority.  

In addition, clinicians should be involved in the appeals process. Appeal letters should be written with a definitive position, tell a clear story about the patient encounter, and include clinical reasoning to support the services billed. Again, the physician adviser often plays an important role here to assess the patient at onset and throughout the patient stay. Additionally, the physician adviser can help provide feedback to address any documentation deficiencies as cases are reviewed.

5. Offer Education and Training

Providing an education and training program for staff – from billing clerks to nurses and physicians – can help prevent denials. Once the root causes of denials are identified, specific education and training can be conducted to allow for the root cause issues to be rectified; this will reduce the recurrences of those types of denials. The physician adviser, while coordinating with utilization management committee members, should facilitate the training and education programs. The physician adviser has the authority to effect change most effectively due to the cross-functional clinical and administrative role. Training information should be based on standardized reports and findings from monitoring claims and denial data. Quantifications should be calculated by the physician and shared with administration so that the financial impact of clinical denials on the organization are understood. Information shared as part of education and training should include findings from patient accounting system data, 835 (payer remittance) data, and 837 (claims) data. Organizations may not be able to obtain this information easily and often seek a reporting tool to assist in this function. 

The Bottom Line

Clinical denials have a big effect on the financial bottom line of an organization. Responsible parties in an organization should understand payer requirements, acknowledge the physician’s role, pre-emptively work denials, monitor the appeals process, and offer education and training. These five strategies should help organizations take proactive steps to address and improve operations. This can reduce occurrences of clinical denials and, consequently, collect net revenue that might otherwise be lost.

1 “Denials Are Declining Overall, But Watch Out for Some Roadblocks,” Crowe, August 2016, /insights/asset/denials-declining-roadblocks/


Contact us

Megan Beasley
Megan Beasley
Principal, Healthcare Consulting
Daniel Gautschi
Principal, Healthcare Consulting Leader
Matt Szaflarski
Matt Szaflarski
Senior Manager, Healthcare Consulting