Let’s Speak the Same Language in Denial Management

Denise Wilson
Member, ACPA Advisory Board

Successful denial and appeal management includes placing every denial in a category that defines the overall issue at hand, such as coding, clinical validation, medical necessity, and so forth. Categorizing denials is especially important for reporting purposes because it can give providers insight into payer behaviors, root causes, opportunities for improvement, and payer and provider accountability. If we are ever going to be able to do peer-to-peer comparisons on a broad scale that provide at least as much believable data as possible, we have to speak the same language. At your organization you might refer to the denial categories as issues or as denial rationale, or some other nomenclature. In this article, I’m going to use the terminology denial categories. 

Medical necessity is a denial category that has many meanings and I think it’s time we all get on the same page as to what is meant by a medical necessity denial. Medical necessity can mean the procedure or service was not medically necessary to diagnose, treat, or maintain a patient’s health. Medical necessity denials for procedures or services, and by services, I mean drug administration, physical therapy, home oxygen, etc., can be associated with inpatient or outpatient care. But medical necessity is also very often used by payers and providers to mean the medical necessity of an inpatient admission to the hospital. This double meaning can lead to confusion over what was denied. Take the patient that was admitted as an inpatient from the Emergency Department after an episode of severe bradycardia with syncope who then has a permanent pacemaker inserted. The payer denies the claim as not medically necessary. What wasn’t medically necessary? The inpatient admission or the procedure or both? The provider is left with trying to pin the payer down on what specifically was denied or appealing both the admission and the procedure. My recommendation is that the medical necessity denial category be used for procedures or services deemed not medically necessary by the payer.

Level of care is often used as a denial category. The term, level of care, is used in different ways depending on the purpose and audience. Level of care can mean inpatient versus outpatient status when a patient is in a hospital bed. But level of care can also be used to identify denials related to the level of care within a hospital setting such as ICU or Level 3 Neonatal Care. Level of care denials are often lumped into medical necessity denials because the intensity of the medically necessary services required by the patient is one key factor in determining the appropriate level of care for the patient. 

Payers who reimburse based on a per diem rate may deny the level of care (ICU care versus general medical care) during specific inpatient days. This results in a downgrade in payment. Instead of paying the contracted rate for an ICU care, the payer reimburses the contracted rate for general medical care. The payer’s denial rationale is that the patient’s care needs on a particular day did not require the higher level of care.

Now, if we use the terminology level of care to also describe denials of inpatient status, then the meaning of level of care becomes less precise. Does the number of denials under the level of care denial category on your denials report represent both the denials for inpatient status as well as the per diem denials for the level of care? I am proposing that level of care as a denial category represent only level of care reimbursement reductions, such as from ICU care to general medical care. 

So, that leaves denials for inpatient status versus outpatient status (with or without observation services). What if we used patient status as the denial category name for these types of denials? I’ll bet you could say patient status to anyone involved in denials and appeals and that person would know immediately what you mean. I suggest that denials for inpatient status be referred to as patient status denials. Wouldn’t that be clearer than saying medical necessity or level of care?

So, for medical necessity denials, think – is it level of care, patient status, or medical necessity of procedure or service? Categorize thoughtfully so that we can all be on the same page.

Denise Wilson is Senior Vice President, Clinical Appeal Services at PayerWatch