Why Cutting Costs Alone Won’t Save Hospitals 

Budget season can put health system leaders in a difficult spot. Costs must come down and every dollar has to be justified. But with denials rising, payer demands intensifying, and patient needs growing more complex, no option feels like the right one. 

As Dr. Jerilyn Morrissey, Chief Medical Officer at CorroHealth, explained in a recent webinar, many organizations are asking the wrong question: “How can we spend less?” The better question, she argued, is “how can we manage costs strategically while protecting revenue?“ 

That shift matters more than ever. With Medicare Advantage enrollment now outpacing traditional Medicare, denial rates are climbing 26% annually, and payers continue to expand their tactics. Blunt cost-cutting won’t solve these challenges alone. To move forward, hospitals need financial models designed, not just to reduce expenses, but to sustain growth over the long term. 

When “Saving” Money Costs Millions 

What looks like savings on a spreadsheet often turns into costly setbacks in practice. Hospitals under budget pressure frequently trim staff or push vendors for discounts. The result? Temporary relief gradually gives way to new challenges, as added pressure on clinicians undermines both revenue integrity and long-term financial stability. 

Denials management offers a clear example. Many hospitals pursue a “denial avoidance” strategy by downgrading patients to observation status. On paper, it lowers denial rates. In reality, it means giving up millions in appropriate and compliant reimbursement and ceding ground to payer tactics. 

Sam Dominik, Senior Vice President at CorroHealth, described one health system that took this approach and ended up with a 25% long-stay observation rate. When they pivoted to a revenue-focused utilization management strategy—billing appropriately and contesting denials when needed—the impact was dramatic: a 10+ percentage point boost in net inpatient realization, worth roughly $28 million annually. 

The implication is clear. Real progress comes from approaches that protect margins in the moment, while preserving resilience over time. 

The ROI Hospitals Can’t Afford to Overlook  

This lesson extends directly to how hospitals invest in their clinical revenue cycle, 

specifically utilization management, clinical documentation integrity (CDI), and denials management. Too often, these areas are managed in silos with separate budgets and narrow performance metrics. In reality, they form a connected continuum that determines whether hospitals actually receive the reimbursement they’ve earned. 

Typically, about 60% of contracted payments flow in without issue. The remaining 40% depends directly on how well UM, CDI, denials management, and payer escalation are executed. Without steady, intentional investment in these functions, ​​​​many hospitals would be at risk, especially since 100% of contracted payment rates don’t fully cover the basic cost of care. With targeted, ROI-focused investments, however, that gap can be closed, bringing hospitals much closer to capturing the full value of their contracts. 

To spend smart, hospitals must reframe their view of UM, CDI, and denials management. Rather than seeing them as costs to be contained, they should view them as a means to drive financial results. As CorroHealth’s Sam Dominik put it, organizations often fixate on the initial investment and miss the substantial return. Balancing both builds a stronger, more resilient revenue cycle, protecting today’s margins while ensuring long-term sustainability. 

How to Break the Silos in the Revenue Cycle 

So, how do hospitals move from simply understanding the value of these functions to actually implementing them? The answer often lies in breaking down the silos that divide the clinical revenue cycle. UM, CDI, and denials teams often operate in silos with disconnected metrics and limited communication. A case manager may never speak with a CDI specialist. Appeals staff may not know the status decisions that set them up for success–or failure. Dr. Morrissey posted a simple litmus test: Do your directors of case management, CDI, and appeals even know each other’s phone numbers? If not, chances are your hospital is leaving revenue on the table. 

Building a truly cohesive model requires more than simply housing these functions under the same roof. It calls for shared goals and analytics that cut across teams, along with coordinated handoffs that reduce duplication and delay. Just as importantly, leaders should align meaningful outcomes such as appropriate reimbursement, regulatory compliance and quality patient care, rather than narrow, transactional metrics, like cases reviewed or appeal volumes. When these functions work together, the impact multiplies. Accurate status determinations enhance documentation quality; stronger documentation reduces preventable denials; and effective denials management not only recovers lost revenue but also informs upstream improvements. The result is a closed loop that reinforces both financial integrity and clinical excellence. 

How Documentation Protects Both Care and Revenue 

Of course, none of this works without high-quality information.  If UM sets the stage, documentation and coding shape the performance. As Morrissey puts it, “garbage in equals garbage out.” Weak documentation leads to denials, revenue leakage, and compliance risks, while strong, defensible coding creates a foundation for sustainable ROI. 

Sepsis cases illustrate the stakes clearly.  Clinical costs for Medicare Advantage (MA) patients are nearly identical to those for traditional Medicare. Yet hospitals are often reimbursed 6-25% less by MA payers due to aggressive denial tactics and DRG downgrades. High-quality documentation, supported by CDI and coding teams, ensures that the true complexity and resource intensity of these cases is reflected in claims. Without it, hospitals bear the full cost of care but receive only a fraction of what they are owed. 

The return on accurate documentation, however, extends well beyond reimbursement. It supports clinicians in telling the patient’s story and provides a reliable basis for both compliance and quality reporting. ​​In this way, documentation is the connective thread between clinical reality and financial sustainability, ensuring that hospitals are paid fairly while preserving trust. 

Why Technology Needs Clinical Intelligence 

This cohesive, data-driven approach is essential, but it needs the right technology to scale. These days, every hospital executive’s inbox is flooded with the promise of AI-powered revenue cycle tools. Some may deliver but, taken in isolation, they risk creating a fragmented patchwork of point solutions. 

Dr. Morrissey illustrated this vividly. One approach looks like a hodgepodge of unconnected lenses, each offering only a narrow view. The other resembles an Olympic archer–clear, focused and steady–guided by a trusted partner. 

While technology is critical, it only delivers real impact when paired with clinical expertise and strategic direction. Automation without intelligence can create new risks, from inaccurate status determinations to flawed documentation and non-strategic appeals. The future lies in combining AI with expertise that drive sharper insights and better outcomes. 

What Real Partnership Looks Like 

What drives success isn’t only what hospitals invest in (i.e. technology) but how they invest. There’s a meaningful difference between bolt-on vendors and true partners.  

Transactional vendors may provide short-term support but they rarely align with the broader strategy of a health system. True partners, on the other hand, act as an extension of the hospital itself, bringing clinical, operational and analytical expertise that integrates seamlessly with internal teams. 

Annabelle Seippel, Senior Vice President at CorroHealth, puts it well, “We know from experience that strong documentation and coding problems reduce preventable denials.” But we also know we have to continually work together and educate one another.  That’s how we build a cohesive continuum.” 

In practice, this can look like a denials task force where case managers, CDI specialists, and appeals experts meet regularly, share data, and adjust strategy together. That kind of collaboration shifts the focus from cleaning up denials to preventing them altogether. 

When Hospitals Push Back on Payers 

Even the strongest UM, CDI and denials program can’t eliminate payer friction. Medicare Advantage plans in particular often apply more restrictive criteria than Medicare itself–a practice that runs counter to federal standards. ​​​​To protect both today’s reimbursement, tomorrow’s revenue streams and the patient, hospitals must be prepared not only to defend individual claims but also to escalate disputes strategically.   

That escalation can take many forms. At the case level, peer-to-peer reviews and written appeals help recover revenue that might otherwise be lost. At a broader level, hospitals can convene joint operating committees with payer decision-makers to address system issues, pursue arbitration or litigation when contract terms are violated, and renegotiate agreements to establish guardrails against unilateral downgrades. 

When escalation is handled thoughtfully, it resets the dynamic between hospitals and payers. This not only secures revenue that would otherwise be lost but also forces payers to honor the integrity of the clinical record. 

Building Smarter, Sustainable Healthcare Finance 

The pressures on hospitals are not abating. Margins will remain tight, denials will continue to rise, and the Medicare Advantage population will keep expanding. 

But hospitals are certainly not powerless. By rethinking their approach—spending smarter rather than simply spending less—they can safeguard financial sustainability while keeping patient care at the center. That means treating UM, CDI, and denials as a single continuum and making investments that deliver measurable ROI. It also means using technology to strengthen clinical expertise, choosing partners who work as true extensions of the health system, and escalating strategically with payers when needed to defend reimbursement. 

As Morrissey noted, hospitals have a choice: they can accept the inefficiencies of a fragmented model, or pursue a more deliberate path that preserves revenue integrity, compliance, and sustainability. The future will favor those willing to invest wisely.