Top 5 Reasons for Clinical Denials and How to Address Them
Claim denials are more than just an administrative headache—they’re a direct hit to your bottom line. According to the American Hospital Association, U.S. hospitals lose an estimated $262 billion annually due to denied claims, and up to 65% of these denials are never resubmitted. For providers already stretched thin, each denied claim represents wasted time, delayed payments, and unnecessary stress.
I. Introduction to Clinical Denials
Clinical denials occur when payers determine that a service, procedure, or admission doesn’t meet their clinical coverage criteria. Unlike technical denials, which often stem from billing errors or missing information, clinical denials are tied directly to the medical reasoning and documentation behind care provided. These denials are generally more complex to appeal because they challenge the clinical decision-making itself.
While claim denials generally fall into two categories—technical and clinical—this article focuses on clinical denials. Why? Because they’re often more complex, time-consuming, and costly to appeal. Yet here’s the good news: most clinical denials are highly preventable when you have the right documentation, workflows, and training in place.
“An ounce of prevention in denial management is worth a pound of appeal.”
II. The Big 5: Top Clinical Denial Reasons
1. Lack of Medical Necessity
Explanation: From a payer’s perspective, “medical necessity” means the service was essential to diagnose, treat, or prevent a patient’s condition—and the documentation must support it. A denial occurs when the record doesn’t clearly justify the care provided. This is the #1 cause of clinical denials, representing over 40% of inpatient denial cases according to Change Healthcare’s 2023 Revenue Cycle Denials Index.
Solution:
Document like you’re telling a story—paint a detailed picture of the patient’s condition, symptoms, and why the service was required.
Use Clinical Documentation Improvement (CDI) specialists to perform concurrent reviews.
Reference payer-specific clinical guidelines to ensure compliance.
“If it’s not documented, it didn’t happen—at least in the eyes of the payer.”
2. Documentation Deficiencies
Explanation: Missing information, illegible handwriting, vague terminology, or incomplete notes can derail the coding process and result in denials. Even a single missing lab value or date can be enough for a payer to reject the claim.
Solution:
Implement standardized templates and checklists to ensure completeness.
Provide ongoing provider education on documentation best practices.
Use EHR prompts and AI tools to flag missing or unclear information before the claim is submitted.
A Journal of AHIMA study found that documentation errors account for up to 32% of all claim denials—a loss that’s largely avoidable with better processes.
3. Prior Authorization Issues
Explanation: Prior authorization (PA) is required for many services, especially high-cost or elective procedures. Denials happen when PA is missing, expired, or does not match the services rendered.
Solution:
Maintain a dedicated pre-service authorization team.
Use automation to track authorization requests and approvals.
Create clear communication channels between clinical and administrative teams to verify requirements before treatment.
of physicians say prior authorization delays patient care.
report that PAs have led to serious adverse events.
4. Inconsistent or Conflicting Documentation
Explanation: When different parts of a patient’s record conflict—for example, a physician’s note says one diagnosis while lab results suggest another—payers often deny the claim for lack of clarity or accuracy.
Solution:
Strive for a unified patient record across all touchpoints.
Conduct regular internal audits to identify discrepancies.
Encourage collaboration between CDI specialists, coders, and providers to reconcile differences before claims go out.
5. Unbundling of Codes
Explanation: Unbundling means billing separately for services that should be billed together under a single comprehensive code. This can trigger compliance red flags and lead to recoupment requests.
Solution:
Train coding staff and providers on CPT, ICD-10, and ICD-11 guidelines.
Schedule routine coding audits to catch errors early.
Use coding software with National Correct Coding Initiative (NCCI) edits enabled.
According to the Office of Inspector General (OIG), improper coding, including unbundling, accounts for $4.1 billion in Medicare overpayments annually.
III. Conclusion
Preventing clinical denials isn’t just about avoiding lost revenue—it’s about keeping the revenue cycle healthy, efficient, and compliant. By addressing the top five denial reasons—lack of medical necessity, documentation deficiencies, prior authorization issues, inconsistent documentation, and unbundling of codes—healthcare organizations can significantly reduce denial rates and accelerate payment timelines.
Key takeaway: A proactive denial management strategy that combines technology, staff education, and strong collaboration can turn denial prevention into a competitive advantage.
“The best denial is the one that never happens.”
Ready to strengthen your denial management process? MBW RCM specializes in helping healthcare organizations eliminate preventable denials, streamline workflows, and protect revenue. Contact us today for a free consultation and learn how we can help you keep more of what you earn.
