Level the Playing Field: How Payers Keep Denial Rates High, and What to Do About it

More than 25 years ago, on a day like any other, when Dr. Jerilyn Morrissey (now Chief Medical Officer at CorroHealth) was just a new physician and documentation was a pen-to-paper endeavor, she admitted a patient from the ER with a very common diagnosis. 

“It was a diagnosis I had seen hundreds of times during the course of my medical school and residency training, so I was very confident in the care that I provided. The patient got better and went home after three days.”

But about six months later, she recalls, “I got a letter in the mail asking me to defend my decision to admit this patient into the hospital and provide the recommended care.”  Dr. Morrissey responded the way any rational clinician would: “I was personally and professionally offended! I knew that the care I had provided was exactly what I was supposed to do. It’s what I had been trained to do.”

This tension between payer and provider is still happening — and arguably being amplified — nearly 25 years later. Denials are soaring, information requests are rampant, and providers are struggling to manage the demands of patient care and administrative burden created by this system.

What’s Wrong with the “Denials Prevention” Strategy?

It might seem logical to approach a solution to the denials epidemic through the “fixing” the “problems” the payer cites in its queries. “The number one denial reason year-to-date is information requests,” states Annabelle Seippel, Senior Vice President of Denials Management services at CorroHealth. Sometimes referred to as medical records requests, the payer will often cite missing or inconsistent information as a strategy to either delay or deny reimbursement.

In the years post-COVID when this trend exploded, hospitals have responded with procedures and technologies that improve clinical documentation. Yet, denial rates continue to soar.

Case in point: DRG downgrades, another growing tactic in the payer denial playbook, were up 57% between 2022 and 2023, and continue to increase through 2025. (This webinar specifically breaks down the denials data.) The rationale for citing them has evolved over time, from coding errors to clinical validation matters, as technology helps hospitals improve the accuracy of their coding and documentation. 

And, even more clever dodging is emerging in areas such as the 30-day readmission statistic, which is being used to justify denials 134% more than it was just a year ago at this time. “This increase is not due to a hospital inadequacy in premature discharge or delay of care,” explains Seippel, “it’s directly tied to a major national payer shifting policy.”

The bottom line: no matter how “good” hospitals get at providing more complete clinical data to the payer, the problem persists.

“It reminds me of Lucy and Charlie Brown,” says Morrissey. “Remember, Lucy sets up the football and Charlie Brown thinks, ‘I’m gonna get it this time’!” She continues, “but, every single time Charlie Brown goes to kick that football, Lucy picks it up and Charlie Brown falls flat on his back.”

Hospitals routinely get trapped in a similar dynamic. “You think if I just follow the rules that they give me and just try hard enough and educate my teams, I will have fewer denials,’” says Dr. Morrissey. But the data proves otherwise.

Annabelle Seippel puts it this way. “The payer gets to be judge, jury, and executioner. They get to make the decision, they get to deny freely at will, so why wouldn’t they? If there are no limits on that behavior, they’re going to continually make hospitals bear the burden of proof.”

It’s an unwinnable game.

A Closer Look at Denial Tactics: Sepsis

There’s probably no better illustration of this denials trap than in the case of sepsis, one of the hottest care topics facing providers today. DRG downgrades related to sepsis claims are skyrocketing due to many factors, including a lack of clear documentation and increasing discrepancies between providers’ and payers’ criteria for the condition. One large acute-care hospital working with CorroHealth decided to tackle this challenge by adopting Sepsis 3 criteria, as was indicated from most of their contracted payers. “So essentially they made the change to align with payer standards because they thought that it would be a cost savings initiative,” explains Seippel. They expected fewer denials, and therefore a reduction in the number of cases requiring costly, lengthy appeals.

However, instead of saving them money, the shift reduced the provider’s CMI, lowered average reimbursements, and produced a dramatic rise in denial rates over the past two years, resulting in a calculated financial impact exceeding $11.7 million.

So, what happened? Even though the hospital was following the payers’ criteria every time, a more aggressive attack on high-value MCC’s targeting the ambiguities of the coding and documentation allowed the payers to reimburse at lower rates or not reimburse at all. Sepsis also remained a primary payer target, even when most denied cases met the payers’ own Sepsis3 criteria.

Like Lucy and Charlie Brown, the ball had been pulled, the target had been moved, and the provider lost once again.

Enter AI: What it Adds and What it Doesn’t

Artificial and generative intelligence have flooded healthcare with promises to automate documentation and eliminate administrative burden. In many areas, those tools deliver real results. But as Dr. Jerilyn Morrissey pointed out during a Becker’s Health IT + RCM featured session, AI isn’t a silver bullet for payer denials—and where it’s applied matters.

“Many organizations are rushing to use AI to write appeal letters,” she said. “But that’s like asking the bot at the payer to argue with the bot at your hospital. It’s not a value-add activity.”

Yes, AI can help scale your appeals process—but it’s a volume game. “When written appeals only overturn about 20% of the time,” Morrissey explained, “you have to ask whether producing more letters justifies the cost of the technology.”

The real opportunity for AI lies upstream, before the denial occurs. “Payers have been using AI to generate denials for more than a decade,” Morrissey continued. “That puck has already moved. The real power comes from using clinical AI and GenAI to strengthen documentation accuracy and defensibility before a claim ever reaches the payer.”

AI works best when it supports clinicians — validating documentation, flagging inconsistencies, and helping ensure that diagnoses like sepsis are fully supported with payer-ready evidence. That’s how providers can “skate to where the puck is going,” leveraging AI not just for reaction, but for prevention.

Innovative Approaches to Fighting Denials: Tech + People + Policy

While many hospitals look at their denials management strategy from the standpoint of the value of each type of denial, Dr. Morrissey and Ms. Seippel recommend a more holistic and strategic approach, built on intimate knowledge of regulations and informed by your data. They recommend providers take the following actions:

Get your data straight. Effectively analyzing your data and getting clear on what problems really exist for your hospital is imperative, explains Dr. Morrissey. “I can’t tell you how often I’ve heard a hospital say that they have a huge problem with this, or that. And when we actually run the data, it’s a tiny problem.” Understanding the data, having really robust denials analytics ensures you understand where you need to focus, whether it be on process improvement or on your problematic payers. Some tips: track your approvals, educate everyone who touches a claim, and track denial data by DRG and impact, not just one or the other. Additionally, providers should be wary of self-downgrading to “prevent” denials – not only because data shows it’s an ineffective strategy – but also because it forfeits the hospital’s right to escalate issues later.

Use contract negotiation as a battlefield. Payers generally want to remain in network to preserve member access and the contractual discounts that follow. Leverage emerges only when payers fear losing market share, and that concern creates opportunities to negotiate protective contract language that hospitals have struggled to secure so far. Some smaller facilities have partnered with nearby providers when they lack sufficient individual volume to influence contracts. “There’s power in numbers,” says Seippel. “If one hospital in a region threatens to go out of network, it doesn’t really do a lot. But if all hospitals in the region go out of network, those patients still need care… so use that power.” The intent is never to restrict patient access, but when hospitals coordinate, more protective language tends to get successfully negotiated into agreements.

Integrate your clinical and revenue cycle systems. Working in silos often leads to gaps in documentation and missed revenue opportunities. An example of this, explains Seippel, might be, “make sure that your patient accounting team knows that a payment does not necessarily mean that there isn’t a denial. That no denial on the 835 doesn’t mean you’ve been paid appropriately.” Even instituting simple solutions such as regular cross-functional meetings and increased education on CMS rules and updated payer denial tactics can help seal leaks in your procedures.

Create and use Escalation Playbooks. Hospitals can and must hold payers accountable for inappropriate denials with consistent, aggressive and widespread escalations. As payers continue to increase their denial activity, strategic payer management and escalation are required to recover historical gross grievances, secure contract enhancements and materially optimize net revenue going forward. Outreach discussions, peer-to-peers and written appeals can be a first step in enforcing your rights. Additionally, holding routine Joint Operating Committee (JOC) meetings with the payer can provide opportunities for grievance mediation and even better contract terms. Dr. Morrissey strongly recommends setting a thoughtful agenda and communicating grievances backed by data – rather than anecdotal or emotional cases – to maximize the impact of those meetings. If the payer fails to respond meaningfully to those tactics, arbitration and litigation, as well as reporting violations to CMS, tend to have extremely high success rates.

As an example, see CorroHealth’s Payer’s Playbook.

In Conclusion

Backed by innovative technology, defensible clinical documentation, integrated and multidisciplinary departments, and collaboration with allies – an effective provider strategy must be aggressive, holistic, and data driven.

Providers will never fully stop inappropriate denials, but with a focused and offensive stance that includes smarter strategies, appropriate AI integration and stronger contracts, providers can level the playing field.