Denials are more than just an administrative headache — they're a systemic issue that can erode a healthcare organization's financial health if left unchecked. But just like in medicine, early detection and prevention make all the difference.  

In oncology, we may not have a universal cure for cancer, but we’ve significantly improved outcomes by identifying high-risk patients, leveraging data, and implementing proactive screenings and lifestyle modifications. The same principle applies to denial management: Prevention is always better than a cure.  

And the most powerful tool in your fight against denials? Your Chief Medical Officer. Their leadership and expertise are key to shifting the trajectory in your favor and driving positive change.

Let's take a look at what denial management really entails, the common causes behind these claims, and how a proactive approach can help reduce denials and improve your bottom line.

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What Is Denial Management in Healthcare?

Denial management isn’t just about fixing rejected claims, it’s about eliminating the friction that disrupts revenue flow. While healthcare has embraced efficiency and optimization in many areas, denial prevention remains an underutilized opportunity, especially when it comes to clinical documentation.

Most denial management strategies focus on front-end solutions — accurate pre-authorization, timely submissions, and seamless communication between stakeholders. But one of the biggest, often-overlooked, reasons for denials and failed appeals is insufficient clinical documentation. If the documentation doesn’t fully justify the billed services, the claim is already at risk before it even reaches the payer.

This aligns with the Garbage In, Garbage Out (GIGO) principle — flawed input leads to flawed output. A reactive approach to denials only treats the symptoms, leaving the root cause unaddressed. The result: a cycle of preventable denials, wasted resources, and revenue leakage.

Take the airline industry as an example. Airlines don’t just analyze why a plane was delayed after it happens — they deploy predictive analytics and operational strategies to prevent delays in the first place. Healthcare must apply the same level of precision to denial management. Instead of chasing denials, organizations must proactively ensure that every claim is backed by solid clinical documentation.

A high-performing denial management strategy doesn’t just minimize losses, it creates a scalable, data-driven system that improves financial performance and operational efficiency. The key is shifting from a reactive approach to prevention efforts.

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Denial Management Example: The Airline Industry Comparison

The Challenge

An airline has a baggage fee policy in place, with charges based on weight, size, and other factors. However, discrepancies arise due to inconsistencies in how fees are applied across different flights and passengers.

A Reactive Response

Customer service handles baggage fee complaints on a case-by-case basis, responding to frustrated passengers online or in person — without addressing the underlying issue.  

The Root Cause

Inconsistent training and process implementation means employees at different airports may not be properly trained on baggage fee policies. This leads to manual errors, such as failing to charge certain passengers or overcharging others, especially in complex scenarios like oversized luggage or international flights.

The Outcome

Inconsistent application of baggage fees results in lost revenue, with some passengers not being charged correctly. Staff also spends excessive time handling disputes instead of focusing on a seamless customer experience.

Why the Root Cause Wasn’t Addressed

The airline lacks a standardized training program and quality control measures, leaving room for error in how fees are applied. Without a structured process, mistakes persist across multiple locations.  

A Proactive Approach

Regular training ensures employees consistently apply baggage fee policies and handle complex scenarios correctly. Implementing routine audits helps identify inconsistencies and correct errors before they impact revenue and customer satisfaction.

The Parallel to Denial Management

Similar to how inconsistent baggage fee application leads to revenue loss in airlines, inadequate clinical documentation in healthcare results in denied claims. A reactive approach to addressing denials (e.g., on a case-by-case basis) does little to fix the systemic issues causing them. Instead, healthcare organizations must implement proactive denial management strategies, such as clinician training, documentation audits, and standardized processes, to prevent revenue loss before it happens.

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Clinical Documentation Denials

Denials due to clinical documentation deficiencies are common, and they often stem from:

• Inconsistent clinical definitions — Physicians may interpret and document conditions differently, leading to variations in reporting.
• ‍Lack of standardized documentation requirements — Many healthcare organizations track which conditions are frequently denied but fail to establish clear guidelines for documenting them correctly.‍
• Variability in physician documentation practices — Without standardization, individual physician practices create inconsistencies that increase the likelihood of denials.

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Why the Current Approach Falls Short

Performance metrics like query response rates, capture rates, and case mix index (CMI) have traditionally been used to assess severity documentation performance and identify improvement opportunities. These opportunities for severity capture due to insufficient documentation, are predominantly with a reactive chart review approach, via CDI programs or "chart scanning” technologies. These reactive measures fail to tackle the root cause — which is often insufficient or inaccurate supporting clinical documentation. Without a proactive approach to this issue, healthcare organizations remain stuck in a cycle of administrative fixes that don’t solve the real problem.  

Even though physicians are trained to document accurately, current efforts to improve documentation by addressing them directly often fail due to:

• Limited physician-level performance data — Without clear metrics, it’s difficult to track and correct documentation issues at the source. ‍
• Administrative, query-based fixes — These focus on severity documentation insufficiencies after they occur rather than preventing them.
• ‍Standardization of practices — Inconsistent documentation results in inaccurate clinical profiles, leading to more denials and lost revenue.

A data-driven, predictive approach is the key to closing these gaps and preventing denials before they happen.

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Addressing The Root Cause of Insufficient Documentation

Predictive analytics provides a powerful solution by identifying the expected prevalence of clinical conditions in a given patient population. When there is a significant gap between the expected and reported diagnosis rates, it signals potential under-documentation by physicians. This under-documentation often results from:

• A lack of awareness among providers about which clinical conditions need to be documented more accurately.
• The use of nonspecific or less-severe descriptors for conditions that meet higher-severity diagnostic criteria.
• The absence of standardized, organization-approved definitions and documentation practices for key clinical conditions.

While the importance of standardized definitions is widely acknowledged in the industry, enforcement has been challenging. The key obstacle? A lack of physician-level performance data that enables healthcare leaders to hold physicians accountable and empowers physicians with actionable insights to refine their documentation practices.

Once predictive analytics reveals gaps in clinical condition reporting, it becomes clear that denials are just a symptom of a larger issue — the under-reporting of high-severity conditions in patients who truly have them.

In many cases, this suggests a pattern of under-diagnosis, which not only impacts reimbursement but also has significant clinical and operational consequences. By shifting from a reactive to a proactive, analytics-driven approach, healthcare organizations can compliantly close these clinical condition reporting gaps, reduce denials, support the current appeals process, and ensure accurate representation of patient severity.

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From Denial Management to Clinical Concern

The following diagnoses are frequently associated with denials due to insufficient or inaccurate documentation. Predictive analytics reveal that these conditions are also under-reported within the specific inpatient population, highlighting a key issue that impacts both financial outcomes and patient care.

Encephalopathy: A Case Study in Under-Reporting

Below, you’ll see the trend for the coded rate and clinically expected prevalence of encephalopathy, tracked as a secondary diagnosis. From mid-2022 through mid-2023, the group’s actual coded rate aligned closely with the expected coded rate, validating the predicted prevalence. The gap between the coded rate and clinically expected widened starting in July 2023, indicating that encephalopathy is under-reported in this patient population.

The CMO or other clinical leaders must address whether high severity conditions like encephalopathy are being under-diagnosed, and subsequently under-reported. This is only possible if clinical definitions and documentation standards are consistent across providers.

Without standardization, variations in documentation lead to:

• Inaccurate reporting
• Inconsistent reimbursement and risk adjustment
• Higher denial rates
  

By aligning on documentation practices on key high opportunity clinical conditions, organizations can reduce these gaps, improve reimbursement accuracy, and minimize denials.

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Understated Value of Addressing the Root Cause

When addressing denial issues, leaders are motivated by multiple factors, but the root cause of under-reporting clinical conditions is not solely about reducing denials. It's about improving overall clinical documentation accuracy and ensuring comprehensive patient care. By tackling the gap in documentation, we can address denials as one of the many outcomes — yet it’s just the beginning.

How to Eliminate Under-Diagnosis

To ensure accurate reporting and eliminate under-diagnosing of specific conditions, every clinician must adhere to all of the following key practices:

• Training — Becoming proficient in the approved clinical definitions and criteria for each of these conditions isn't just encouraged, it's mandatory. Understanding the precise documentation requirements when a patient meets these criteria is equally important.
• Clinical vigilance — Actively review your patients for these conditions as part of your standard examination process. When you identify a condition that meets the approved criteria, it must be documented accurately.
• For conditions that are identified:
  • Provide a precise and approved description of the condition.
  • Document your evaluation, management assessment, and plan.
  • If applicable, include the condition in the discharge summary.

The Clinical Approach to Documentation

This approach is not unreasonable and is fully aligned with clinical practice. It's essential to remember that the accuracy and completeness of documentation are secondary to first identifying these conditions in patients. Reframing documentation practices to be clinically driven, not administrative, is key.

By shifting to a clinically focused documentation strategy, you will:

• Improve the accuracy of patient records.
• Support accurate billing and risk adjustment.
• Facilitate smoother appeals processes.
• Places severity capture back into the hands of the physician.
• Most importantly, reduce denials and enhance care quality.

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Addressing Skepticism

To those who might question the effectiveness of this approach or feel burdened by the task at hand, you may want to reconsider. Continuing to handle issues on a case-by-case basis, much like responding to baggage fee complaints without addressing the root cause, simply prolongs the problem. By taking proactive, clinically-driven steps, we can address under-reporting and build a more efficient, effective healthcare system.

Looking for easy-to-follow advice and best practices to help elevate your clinical documentation approach? Check out our free eBook, Understanding the Value of Clinical Documentation Integrity 2.0.