Healthcare professional analyzing claim denials

Providers have reported a surge in claim denials and reimbursement delays. According to a study by the American Hospital Association (AHA), 91% of interviewed providers indicate experiencing an increase in denials. Over half (51%) of those providers deemed the increase as “significant”. While claim denials are not a new stressor, the following 5 reasons seem to be the most frequent in recent claim denials:

Lack of Prior Authorization

Some medically necessary services require pre-approval by health insurance plans. Often, providers must make quick decisions when performing care, seeking prior authorization once the care has already begun. Health insurance plans sometimes deny reimbursement when care was administered before a prior authorization request was fully processed.

Complications with prior authorization cause an estimated 18.2% of denied claims. It is important for administrative staff to handle prior authorization requests in a timely manner. Many healthcare entities have a devoted person or a team to strictly handle prior authorizations. These employees are responsible for verifying authorization, stay up to date on payer requirements, and document all prior authorization correspondence.

Short-Stay Denials

According to Medicare’s Inpatient Prospective Payment System (IPPS), a short stay is an inpatient admission that requires care for less than two midnights. Inpatient stays lasting one-day or less accounted for 13% of the annual total recorded inpatient admissions in the Medicare program.

Hospitals and health systems have seen insurers frequently deny reimbursement for inpatient admissions although the clinical indicators and severity of the illnesses meet the requirements. Health insurers tend to downcode the services to observation status and pay a lower rate. Alternatively, they use the downcoding to deny the claims due to lack of prior authorization for observation status.


Some health plans have migrated from using the Sepsis-2 clinical criteria to Sepsis-3. The latter set of criteria excludes reimbursement for less severe cases of Sepsis. While insurers do not intend to alter the care plan for treating Sepsis, these criteria influence the declining reimbursement for early treatment of Sepsis.

The AHA states that “early treatment is critical to prevent the progression of sepsis and any reduction in early intervention could result in increased mortality”. Documentation is of utmost importance in situations such as Sepsis. Proper documentation of patients’ health conditions allows insurers to see the necessity of the medical interventions taken.

Site of Service Exclusions

Acceptable locations where care can be received are oftentimes limited based on health plans. For example, care received through the emergency department may not be covered if the payer believes that the patient could have been treated by a primary care physician. What the criteria do not consider is the reason care was sought at the emergency department in the first place. This may dissuade patients from seeking care.

The acceptable sites according to health plans often change mid-contract. Individuals select their health plan knowing certain sites are covered, just to have them change in the middle of the term. This confusion leads to unforeseen costs, causing individuals an increase in stress and providers a decrease in revenue.

Inaccurate Enrollment Files

When health plans are slow to update their files, it causes confusion, stress, and increased costs. An insurer may deny the claim stating the patient is not enrolled in their plan or does not have coverage for the services although they do. It mostly happens at the beginning of the year when the health plans have not updated their files to accurately represent which patients have coverage. Alternatively, an insurer may first pay for the services and then retract the payment when they realize the patient is no longer enrolled in their plan.

Providers have noted miscommunication between the insurers and vendors handling their claims. The insurer states that a patient does not need prior authorization. Later, the provider receives a denied claim due to a lack of prior authorization.

It is important for providers and insurers to work with vendors that have a clear understanding of the health plans. Healthtek’s Revenue Cycle Services use a combination of people, tools, and processes to ensure efficient and timely progress of claims through the cycle until reimbursement is received by the provider. Understand how to optimize your claim submission process by reading our post on minimizing healthcare claim denials.