Reasons for health plan denials: how to avoid financial losses

Health plan denials cost Brazilian private hospitals R$ 5.8 billion in 2024. The figure, compiled by the National Association of Private Hospitals from data from 85 institutions, represents 15.89% of the industry’s total revenue (almost R$ 16 of every R$ 100 billed by hospitals).

Although most denials were reversed, hospitals had to work to recover amounts that were already rightfully theirs, with additional costs and withheld revenue.

This article presents the main reasons for health plan denials, explains how each one affects the hospital’s revenue and points to the preventive actions that reduce losses.

What a health plan denial is

A denial is the full or partial refusal by the health plan to pay for an item on the hospital claim. When a health plan denies a procedure, it signals that the item, as billed, will not be paid. To better understand the concept and the types of denial, see the article Claim denials: what they are and how to avoid them.

A full denial occurs when the payer refuses to pay for the entire claim or a complete episode of care. A partial denial applies to specific items: a medication, a material, a single procedure within a hospital stay.

Most occurrences are partial, but the accumulation of small denials over the month has a significant financial impact when the revenue cycle closes.

Communication of denials between providers and payers follows the TISS standard, the Supplementary Health Information Exchange, regulated by the ANS (Brazil’s National Supplementary Health Agency). Under this standard, each denial reason receives a standardized numeric code. For example, 1702 refers to duplicate billing; 3052, to a TISS documentation error, which identifies the reason for the refusal and points the way to an appeal or a correction.

Understanding what each code represents is the first step toward preventive denial management.

Why denial reasons matter more than the amount denied

The most common reaction to a denial is to focus on the amount: how much was withheld, how much can be recovered, how much has already been lost. That logic is understandable but incomplete. The amount denied is the consequence; the reason is the cause. And the cause is where the possibility of consistently reducing losses lies.

The cycle of denial, appeal and reversal is expensive even when the hospital wins the dispute. It consumes the billing team’s hours, lengthens the time to payment and puts pressure on cash flow.

In 2024, the average time to payment for hospitals that are members of Anahp (National Association of Private Hospitals) exceeded 78 days. This reflects the volume of claims held up awaiting review by payers.

When the hospital knows the reasons behind its denials, it can act before the claim is submitted. Managing by denial reason turns it into an operational indicator with a known solution.

The main reasons for health plan denials

Health plan denials are concentrated in five categories of cause.

Filling and coding errors

The administrative denial is the most frequent and the most avoidable. It stems from errors on the forms: an incorrect TUSS code, duplicate billing, mismatched dates or an expired authorization number. The TISS standard organizes these errors into specific codes (denial 1702 for duplicate billing and denial 1414 for an expired authorization number, for example).

The risk increases in hospitals that serve multiple health plans: each payer may have its own rules that override the general standard. That requires the billing team to master the particulars of each contract.

Missing or inconsistent clinical documentation

When the documentation does not fully support the charge, the payer cannot validate that the procedure was necessary and appropriate.

The most common problems: a missing report, a medical record with generic entries, a missing signature and inconsistency between the procedure requested and the one performed. In these cases, the denial does not question the quality of care but the hospital’s ability to prove it.

Missing prior authorization

Elective procedures without a valid authorization number result in a full denial of the item, one of the situations with the greatest financial impact per occurrence. In urgent and emergency cases, ANS regulations allow care to begin without authorization, but require it to be regularized with the payer within 24 hours — a step that is often neglected.

Clinical incompatibility

This occurs when the procedure billed does not match the documented clinical course. Denial 1816 covers charges incompatible with the recorded diagnosis; denial 1820, charges in a quantity greater than authorized. Both reveal a lack of synchrony between the care team and billing.

Contractual discrepancies

Billing for an item outside the contractual scope, a mismatched price table or amendments the team is unaware of generate silent denials, that is, amounts that leave revenue without anyone noticing right away. In hospitals with a diversified portfolio of health plans, this risk multiplies.

How each denial reason generates a different financial loss

Not every denial weighs the same on the hospital’s results. The financial impact varies with the type of cause, the value of the denied item and, above all, how easy it is to reverse. The table below organizes this view:

The denials most likely to be reversed are precisely those that originate in operational failures: coding errors and documentation failures. They are also the most frequent. This means that a significant share of hospitals’ financial losses is concentrated in problems that well-structured processes can eliminate.

Denials for missing authorization and for contractual discrepancies are the hardest to reverse once applied. In these cases, prevention is the only effective strategy.

How to avoid health plan denials: actions by operational front

Preventing denials does not depend on a single area of the hospital. It cuts across three distinct operational fronts, each with specific control points.

Admission and authorization

Much of what will be denied weeks later is determined when the patient arrives. The essential controls on this front:

• Confirm the plan member’s eligibility and the validity of the plan before care.

• Identify the procedures that require prior authorization and request it before they are performed.

• In urgent and emergency cases, record the start of care and initiate regularization with the payer within the 24‑hour deadline.

• Monitor the expiration of authorization numbers for procedures involving prolonged hospital stays.

Clinical documentation

The medical record is the hospital’s main instrument of defense in an audit. A complete and coherent record supports the charge; a generic or incomplete record undermines it. The points of attention:

• Make sure reports, progress notes and prescriptions are signed and dated.

• Describe procedures, materials and medications with enough precision to justify the charge.

• Ensure consistency between what was requested, what was performed and what will be billed.

Billing and coding

The last line of defense before the batch is sent to the payer. This is where coding errors need to be identified and corrected:

• Review the TUSS codes applied to each procedure, paying attention to each payer’s specific rules.

• Compare authorized quantities with billed quantities before closing the form.

• Keep contract tables up to date and accessible to the billing team.

• Establish a routine of batch review before submission, with a checklist by type of procedure.

Avoidable denials require active management, not just reaction

Most reasons for health plan denials originate in known, repeatable operational failures. An incorrect code, a missing report, an authorization that was not requested: errors that show up every month, at the same stages of the process, and that silently consume revenue.

Without visibility into the reasons, the hospital operates in reactive mode: denial, appeal, reversal, and the cycle starts over. Each round has a cost: the billing team’s hours, a longer time to payment and pressure on cash flow.

Rivio automates this chain. The platform identifies discrepancies before the claim is submitted, corrects coding errors and manages denial appeals based on clinical and contractual evidence, so the hospital receives what it is owed without having to dispute every claim with the payer.

Frequently asked questions about reasons for health plan denials

What are the most common reasons for health plan denials?

The most frequent are coding and form-filling errors, missing or inconsistent clinical documentation, lack of prior authorization for elective procedures, incompatibility between the procedure billed and the documented clinical course, and discrepancies with the contract signed between the hospital and the payer.

What is an administrative denial and how can it be avoided?

An administrative denial originates in operational failures when filling in the forms: an incorrect TUSS code, duplicate billing, an expired authorization number or mismatched dates. The main way to avoid it is to establish a routine of batch review before submission, with a checklist by type of procedure and attention to each payer’s specific rules.

Does a lack of prior authorization always result in a full denial?

For elective procedures, yes. When the hospital provides care without a valid authorization number, the payer denies the item in full. In urgent and emergency cases, care can begin without authorization, but it must be regularized with the payer within 24 hours to avoid the denial.

How do you know whether a denial can be reversed?

The starting point is to identify the reason through the TISS code provided by the payer. Denials for coding errors and documentation failures are highly likely to be reversed with the correct documentation. Denials for lack of prior authorization or contractual discrepancies are harder to appeal and depend on case‑by‑case analysis.

What is the difference between a technical denial and a clinical denial?

A technical denial questions the formal aspects of the charge: filling, coding, documentation and authorization. A clinical denial questions the appropriateness of the procedure performed, assessing whether it was compatible with the patient’s clinical condition. In practice, technical denials are more frequent and easier to reverse; clinical denials require more robust medical arguments to appeal.