Denials are the new normal: How hospitals can stop playing defense
Payer denials are increasing in frequency and complexity, costing healthcare organizations billions.
During a recent session at Becker’s Health IT + Digital Health + RCM Meeting in Chicago leaders from CorroHealth explored how GenAI, data analytics and a strategic mindset can help providers fight back more effectively.
Jerilyn Morrissey, MD, CMO of CorroHealth, and Annabelle Seippel, senior vice president of denial management at the company, discussed how payer behavior is shifting, why traditional approaches are no longer effective and what providers can do to regain control over reimbursement.
Here are four key takeaways from the discussion.
1. Denials are increasing
Denials are no longer just coding issues. Seippel noted that in the post-COVID era, payers have intensified their use of denials as a cost-containment strategy. Diagnosis-related group (DRG) downgrades have evolved from coding disputes into clinical validation challenges.
She highlighted that DRG downgrades increased by 57% between 2022 and 2023, adding that denials related to 30-day readmissions and authorization lapses are also surging. Crucially, many of these denials occur even when clinical documentation is strong.
“We see so many denials that are inappropriate where I would say there’s nothing the hospital could have done differently,” said Ms. Seippel. “Even when you do get that denial overturned, a successful appeal can take 30 to 90 days. Payers are constantly evolving and coming up with new tactics to deny and to keep you on your toes.”
2. No guarantee for fewer denials
Some hospitals are changing internal protocols to match payer standards in an effort to reduce denials. But this often backfires. Dr. Morrissey shared the story of a large health system that considered moving from Sepsis-2 to Sepsis-3 criteria. Upon review, nearly all of the system’s downgraded sepsis cases already met both definitions. The issue wasn’t the criteria, it was payer inconsistency.
Seippel offered another example where a hospital implemented Sepsis-3 in early 2024 to align with payer expectations. While the hope was to decrease denials, denial rates increased from 9.3% to 9.6% and average reimbursement per inpatient case decreased.
“When we talk about preventable denials, it’s like fingernails down a chalkboard for me because it breeds that culture of mistake and error,” Dr. Morrissey said. “There are technologies and tools in places ahead of the denial and hence the appeal where we can improve what we’re doing.”
3. GenAI’s role for the future
While AI has potential to streamline documentation and generate appeal letters, it should be used strategically.
GenAI is most effective when used upstream to improve documentation quality, not just to automate appeals. Providers should assess whether using AI can help generate a higher volume of effective letters and whether the return justifies the investment.
“When it comes to using AI to generate letters, it shouldn’t be your only strategy,” Dr. Morrissey said. “You want to look at the cases you are going to appeal from a data and analytics perspective. There are payers out there that you don’t want to focus on. There’s not enough volume there. They’re not part of your strategy right now.”
4. A moving target
Payers are constantly evolving their tactics and operations. Ms. Seippel pointed to Aetna’s new “One-Plus Midnight” policy, which claims to approve inpatient stays but pays at observation rates based on undisclosed algorithms. This practice can lead to denials disguised as payments.
According to Seippel, health systems need robust denial analytics to track such trends and respond accordingly.
Dr. Morrissey emphasized that hospitals must move beyond case-by-case appeals and adopt a broader strategy. Providers should also prepare for the expanded role of Quality Improvement Organizations (QIOs) under CMS’s forthcoming 42 CFR 422.208 rule, which allows real-time appeals.
However, policies like Aetna’s sidestep these protections, making it even more critical for hospitals to build internal playbooks and escalate to arbitration or litigation when necessary. “You need to be strategic, not tactical,” Dr. Morrissey said. “If you are deciding what cases you are appealing based on the emotions of the person looking at it or the value of that individual case, you’re leaving a lot of money on the table.”
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