Clinical Denials: Prevention Is The Best Medicine

Clinical DenialsClinical denials are a fact of life for hospitals. Providers must contend with a number of government audits conducted by several different organizations. On the private payer side, hospitals must comply with complex approval processes related to prior authorizations, admission status and medical necessity.

At Becker’s Hospital Review’s 10th Annual Meeting in Chicago, R1 RCM hosted a workshop focused on clinical denial prevention. Ronald Hirsch, MD, FACP, CHCQM, vice president of the Regulations and Education Group at R1 RCM, discussed how collaboration between physicians and utilization and revenue cycle leaders can minimize clinical denials and maximize payment for hospital services.

Start With The Registration Process

Accurate patient registration is the first step to preventing clinical denials. Two best practices are:

  • Using real-time insurance verification. It is essential to start the patient registration process early and verify benefits with technology.
  • Recognizing that the Emergency Medical Treatment and Active Labor Act allows reasonable registration processes. EMTALA permits hospitals to ask patients about their insurance. “Insurance verification is a patient-centric practice. If we don’t know who the payer is, we may assign people to physicians who aren’t in their network, resulting in unnecessary expense for patients,” explained Dr. Hirsch.
Medical Necessity For Services

Medicare and most private payers have published coverage guidelines for medical necessity. This doesn’t mean, however, that obtaining pre-authorization for services is easy. Hospitals must pay attention to several areas:

  • For scheduled procedures, both physicians and hospitals must participate in the pre-authorization process. Once a physician obtains authorization for a procedure, the hospital should request the patient’s medical records and confirm the authorization with the payer. This includes determining whether the status should be inpatient or outpatient, where payment rates may differ.
  • Medical necessity can vary within payers. For example, a commercial plan may not cover particular procedures for most customers. However, that insurer may be obligated to cover those procedures for Medicare Advantage customers, due to CMS requirements.
  • Hospitals must review infusion and oncology services for medical necessity. Key concerns are whether physicians are ordering the right dosages of drugs, in the right order, for the right cancers.
  • No prior authorization is available for Medicare planned procedures. Best practices are reviewing procedures for medical necessity, determining the proper admission status, getting the inpatient admit order when the procedure is scheduled and contacting the physician if medical necessity is questioned. Dr. Hirsch added, “Don’t use checklists as your only source of documentation. Auditors view them less positively than narrative descriptions.”
Medical Necessity For The Setting

Some payers mandate certain procedures be done in ambulatory surgery centers, rather than in a hospital outpatient setting. As for non-scheduled emergency room care, proof of medical necessity for hospital care is essential. Admission rules vary by payer.

“Documentation review in the emergency department is important. Hospitals must discourage ED doctors from cutting and pasting information from templates. It’s also a good idea to make ED case management services available at night and on weekends,” Dr. Hirsch said.

Medical Necessity For The Patient Status

If Medicare patients are hospitalized for two or more mid-nights, their status should be changed from observation to inpatient. Hospitals sacrifice millions of dollars by keeping patients in observation status after the second midnight.

Aiming for a “benchmark” observation rate is fraught with peril. Observation rates vary from hospital to hospital, based on the payer mix, the number of surgical patients, the formula for calculating the observation rate and more. Dr. Hirsch warned, “Don’t compare your observation rate to that of another hospital.”

For all patients, post-acute planning should start at admission. Commercial payers often withhold approvals for skilled nursing facilities, long-term acute care hospitals and inpatient rehabilitation facilities until the patient is ready to leave the hospital.


Eliminating silos and enhancing communication among clinicians and staff is essential for data transparency and for preventing clinical denials. “Staff, physician advisors and doctors can’t prevent denials if they don’t know what’s being denied. To find trends, they must have access to denial and appeals data,” Dr. Hirsch said.

There are always areas for improvement when it comes to looking at the revenue cycle, and many can benefit from utilizing technology, expert review and recommendations. The role of active and ongoing medical record review by physician advisors is crucial and developing a robust clinical denial prevention program with a revenue cycle partner can help practices focus on front-end processes, medical necessity and contract variations to appeal and prevent clinical denials.

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