Fall 2025 Issue

Documentation Dilemmas: Documentation Disconnect
By Amanda Dean, RN, BSN
For The Record
Vol. 37 No. 4 P. 6

The Role Documentation Plays in Clinical Denials

Already grappling with staffing shortages and clinical personnel burnout, provider organizations are now facing rising clinical denial rates as payers focus on medical necessity and prior authorization issues stemming from insufficient clinical documentation. These denials have risen sharply over the past few years for reasons ranging from increased audits and deeper integration of AI and automation into the claim review process to increasingly stringent denial practices. As a result, hospitals’ already strained budgets and operational capacity are being stretched to the breaking point.

Health care providers are finding that reimbursement is contingent on precise documentation and payer alignment, a trend that shows no signs of slowing down. To meet this challenge, health care organizations must think of denial management as more than back-end recovery. They must adopt a proactive, technology-forward strategy that combines advanced automation with human expertise—these methods will drive compliance and accuracy from the start, while simultaneously accelerating the appeals process.

The keys to implementing this strategy successfully are robust clinical documentation integrity (CDI) supported by real-time utilization review (UR) and comprehensive physician advisory (PA) services. When these roles work together, they can form an effective and sustainable denial mitigation ecosystem that safeguards revenue while strengthening clinical documentation and compliance integrity.

The Denial Surge
Ongoing and evolving denial rates and methods are reshaping the economics of care delivery. Medical necessity denials are increasing significantly, with insurers using automated decision engines to flag documentation gaps and trigger denials without clinician review. The financial impact is substantial:

• Outpatient claims experienced a 75% rise in denials in 2024.

• Inpatient claims saw a 140% increase in denials in 2024.

• Hospitals now spend an average of $57 per claim on appeals.

• Organizations lost eight cents on every dollar billed to bad debt, takebacks, and final denials.

• Each appeal round takes 45 to 60 days, stretching already strained finances and staff capacity.

Much of the problem is attributable to systemic misalignment among provider documentation, payer expectations, and operational workflows. Physicians and other providers focus on patient care, not on using the precise (and ever-changing) wording or details that payers demand. This gap means coders and CDI teams must often work retrospectively to piece together a defensible narrative, something that becomes much harder once a denial has been issued.

A Powerful Tool
There is a story behind every acute care denial, and it often starts and ends with documentation. Whether medical necessity, level of care, or diagnosis-related group (DRG) validation, the ability to justify the care provided depends on how clearly the medical record conveys the patient’s presentation, initial and ongoing severity of illness, and the intensity of service that is reasonable only at the inpatient level of care. This is precisely why CDI is now being recognized and utilized as far more than a support and compliance function; it has risen to the level of a strategic powerhouse. CDI bridges that crucial gap between clinical care and documentation/coding, translating complexity into precise, payer-compliant language. A proactive CDI program spanning prospective, concurrent, and retrospective reviews ensures that documentation supports reimbursement at the highest appropriate level.

Concurrent CDI reviews, in particular, help with denial prevention. By validating diagnoses and ensuring that documentation reflects both clinical severity and resource intensity at the time of care, CDI specialists help confirm DRG accuracy and medical necessity alignment before claims go out the door.

When CDI operates in silos, disconnected from UR and PA teams, results can only have a limited impact. When integrated, these departments can form a powerful and effective framework of both denial prevention and denial management. Integration means structured, frequent, and in-depth collaboration between physician advisors, UR nurses, CDI, and revenue integrity teams to ensure accurate and complete documentation that will support maximum appropriate reimbursement.

Aligning CDI With UR and PA
Denial prevention should begin within the first 24 hours of admission and no later than 48 hours after admission. During this pivotal window of time, UR and PA teams play a crucial role in validating admission status and confirming medical necessity. A strong CDI partnership, particularly during this critical interval, ensures that these decisions are grounded in clear, accurate documentation that justifies the patient’s true status.

Highlighting only a few examples, cases with a primary diagnosis of sepsis, pneumonia, or an exacerbation of a chronic condition such as COPD or heart failure—and/or with a major complication or comorbidity of malnutrition—very often draw payer scrutiny. CDI specialists, working alongside UR team members, can identify documentation gaps, make clearer diagnostic linkages, and add specific severity indicators that make a claim easier to defend. PA involvement further closes the loop by offering peer-level validation or guidance when nuanced clinical judgment or subject matter expertise is required.

Embedding CDI collaboration into UR workflows transforms denial management from a reactive, back-end correction process into a proactive prevention strategy. It ensures that documentation tells the story that payers need to see, all while maintaining compliance and clinical accuracy.

Creating CDI Intelligence
Data is the key to effective management of denials. Analytics provide the visibility that health care organizations need to adopt a proactive stance, detecting denial patterns by insurer, service, or diagnosis, and identifying documentation weaknesses that may be contributing to them. Real-time denial dashboards and predictive modeling show where CDI interventions will have the most impact. For example:

• Pattern recognition exposes recurring issues like ambiguous admission orders or insufficient documentation of comorbidities.

• Root cause analysis separates clinical from administrative denials, guiding necessary education and workflow changes.

• Predictive analytics can flag high-risk cases before they are submitted, prompting early CDI or PA engagement.

Key metrics such as denial rate, overturn rate, and average denial-to-resolution time not only measure performance but also inform continuous improvement. For CDI team leaders, these insights are invaluable, transforming data into actionable intelligence that sharpens documentation practices and organizational strategy.

Building a Framework
Preventing denials at scale requires a structured governance approach and effective collaboration among teams. Best practices for creating a proper framework include the following:

• Establish a Denial Prevention Committee that unites CDI, UR, compliance, and revenue cycle leaders to review trends, share insights, and coordinate educational programs.

• Pilot interventions in high-risk service lines, such as cardiology and neurology, to test workflows and fine-tune analytics.

• Embed UR in the emergency department to ensure appropriate status assignment at the point of admission.

• Conduct timely physician advisor reviews for prolonged or complex cases.

• Measure CDI impact using key performance indicators like clean claim rate, DRG accuracy, denial reversal rate, and retention of revenue.

These measures, underpinned by executive commitment and data transparency, make documentation everyone’s responsibility and turn denial prevention into a shared strategic goal. Denials are no longer a niche concern in revenue cycle management. They have become a barometer of documentation quality and operational alignment. The same documentation that protects reimbursement can also drive compliance, quality reporting, and patient safety. When CDI is placed at the center of a unified, data and analytics-driven denial management strategy, it changes denial fatigue into documentation excellence.

The future of clinical denial management should not be solely focused on increasingly addressing appeals. While it is vital to ensure no potential reimbursement is left on the table, it is equally vital to reduce preventable denials. This can be achieved through education, technology, and close interdepartmental and leadership collaboration. With CDI as the cornerstone, health care organizations can shift from reactive recovery to proactive prevention, which benefits both patient outcomes and the bottom line.

— Amanda Dean, RN, BSN, is the director of clinical education at AGS Health. A registered nurse with more than 13 years of experience, she specializes in case management and utilization management leadership.