Spotlight on denials: Bringing medical necessity denials under control

Managing denials requires insight, technology and understanding of processes. In this multi-part series, I will dive into the data* and then re-surface with insight into denial issues that are frequently experienced by healthcare providers around the country. I hope to provide insight into actions you can take that will prove beneficial to your organization.

The first denial category we will investigate in depth is medical necessity. Several reasons for medical necessity bubble to the top, so we will choose one of the most common to address first. According to RelayHealth’s outpatient revenue code data from 2013-2015, operating room services consistently rank among the top reasons for medical necessity denials for all payer types.

Operating Room Services (Revenue Code 360) Rank in Top 5 Outpatient Revenue Codes Denied for Medical Necessity*

* RelayHealth transaction data; March 1, 2013 – February 28, 2015.

In our interactions with healthcare providers across the nation, we’ve seen significant improvements in denial rates and process efficiencies when applying analytical insights to better manage and even prevent denials. In relation to medical necessity, prior authorization is “job-one.” And, as ICD10 approaches, knowing how to effectively deal with medical necessity denials will become even more important because proving medical necessity is closely tied to physician documentation.

Consider the following  five action steps that can help you gain more visibility into and control over medical necessity denials in outpatient OR services and other departments.

1. Perform required prior authorizations -- Your first safety net is employing technology to alert you of required prior authorizations. This may eliminate labor intensiveness (and errancy) of manual systems such as phone calls or perusing a collage of post-it notes noting “what worked last week.” Interestingly,  commercial[i] payers, BCBS[ii], Medicaid[iii] and Medicare[iv] report very few outpatient OR Services that actually require prior authorization. 

2. Train patient access staff – If prior authorization is not required, you still need to increase awareness and training in the scheduling and registration areas to routinely validate the ordering diagnosis and procedure code against the payer requirements (for example: specific documentation or diagnostic testing) for payment -- prior to performing the service.

3. Ensure accurate claim editing – With multiple payers and multiple rules that change constantly (as often as quarterly), make sure your claim editing is as strong as it can be. An edit will alert you to an unmet requirement prior to submitting the claim. This may eliminate weeks of waiting only to have the claim denied.

4. Determine specific cause of denials – Was a required prior authorization not completed? Is a particular physician not documenting care adequately? Or is a diagnostic test routinely being missed? Determine where medical necessity denials are originating to help you understand which people in organization need to be involved and what processes need to be modified to prevent future denials.

5. Use your data to start conversations that need to happen -- Going into conversations with clear data that shows a particular group or person’s contribution to medical necessity denials can help speed change by helping you gain buy-in to the project. You can also support your Clinical Documentation Initiative (CDI) team with data to empower recommendations to department heads, registration/scheduling staff or even clinicians to engage in refresher training to mitigate your risk caused by medical necessity denials.

In the next article, we will investigate a high volume, high dollar, highly avoidable reason for medical necessity denials. 

[i] Priority Partners, Outpatient Referral and Pre-Authorization Guidelines, Jan. 2012; Accessed May 14, 2015

[ii] GA Standard Precertification Requirements BCBS, April 1, 2015; Accessed May 14, 2015

[iii] Washington State Medicaid State Plan Amendment, May 13, 2013; Accessed May 14, 2015

[iv] Centers for Medicare and Medicaid Services, Prior Authorization Initiatives, Aug. 12, 2014, Accessed May 14, 2015


Jason Williams is the Vice President of Business Analytics and Strategy at RelayHealth Financial.

Latest News

Claims Life Cycle
Thirty-three percent of the American public supports a single-payer system, up from 21 percent in 2014.
Claims Life Cycle
Senate Majority Leader abandons plan to force a vote before the July 4 recess.

Stay Up To Date!

Get the latest revenue cycle insights delivered right to your inbox.