Revenue Recovery Series Part 2: What is a Clinical Denial and How is it Different From Standard Administrative Appeals?
By: Pearl Walia
Healthcare providers routinely face claim denials from payers, but not all denials are the same. Understanding their differences is critical to effectively manage revenue cycle operations. A clinical denial occurs when a payer determines that a medical service, procedure, treatment, or admission does not meet its coverage requirements. Clinical denials differ from administrative denials, which typically result from non-clinical, technical issues such as billing errors or missing information.
Clinical denial appeals are more challenging for providers than standard administrative appeals as they are based on medical judgement and require more detailed evidence to demonstrate that the services rendered were medically necessary and consistent with the payer’s criteria.
The top 4 reasons for clinical denials include:
- Lack of Medical Necessity
From a payer’s perspective, a service is medically necessary when it is needed to help diagnose, treat, or prevent a medical condition, and this is supported by documentation. A denial for lack of medical necessity occurs when the record does not clearly reflect the care provided. This constitutes one of the most common reasons for denials.
Best Practices: Providers should thoroughly document all stages of a patient’s condition, symptoms, and reasons behind the service provided. It is also important to remain familiar with payer-specific documentation guidelines.
- Document Deficiencies
A claim denial for documentation deficiencies is simply due to missing information, vague terminology or incomplete notes. A minor error like a missing lab value or missing date can prevent a payer from verifying the necessity of the treatment, potentially leading to a denial.
Best Practices: Providers are advised to implement standardized documentation templates and continuously review their documentation procedures to ensure the records are complete and accurate, and to reduce the need for time-consuming record reconstruction during appeals.
- Prior-Authorization Issues
Many payers require prior authorization for certain services, including high-cost medications, specialized procedures, extended hospital stays, and off-label drug use. Denials may occur when authorization was not obtained, expired before treatment, or did not correspond to the services provided.
Best Practices: Providers are advised to implement clear workflows between clinical and administrative teams to verify authorization requirements before treatment is rendered.
- Experimential or Investigational Treatment
Payers often deny coverage for services they classify as experimental or investigational. These types of treatments are classified as those which are under the clinical trial or experimental stage. Payers strictly limit coverage to therapies which have proven safety and efficacy, and experimental treatments lack regulatory approval and scientific consensus. However, some experimental treatments may be permissible upon prior authorization, so it is important to inquire into payer requirements.
Best Practices: Providers are advised to review payer policies and obtain any required authorizations before offering experimental treatment to prevent denials.
When Should Providers Seek Counsel When Facing Clinical Denials?
Clinical denials can place a significant burden on a practice’s operations, and can disrupt patient access to timely healthcare services. Providers are advised to consult experienced healthcare attorneys not only after receiving a clinical denial, but also when evaluating their operational practices. Proactive legal guidance can help identify any operational vulnerabilities in the practice, develop a strong appeal strategy, and help streamline the workflows to reduce the occurrence of denials. Ongoing education, documentation, and communication among teams is only a part of the journey toward an efficiently-run practice.
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It should be noted that I am not your lawyer (unless you have presently retained my services through a retainer agreement). This post is not intended as legal advice; it is purely educational and informational, and no attorney-client relationship shall result after reading it. Please consult your own attorney for legal advice. If you do not have one and would like to retain my legal services, please get in touch with me using the contact information listed above.
All information and references to laws, rules, regulations, and advisory opinions were accurate as of this time, but laws are constantly evolving. Please get in touch with me to ensure that the law governing your business is up to date. Thank you.
