AI's hidden hand: Decoding prepayment denials and the evasion of high-dollar claims

Physicians and practice administrators frequently encounter a perplexing challenge in revenue cycle management: the unexplained disappearance of high-dollar claims from aging reports. These submissions do not receive outright rejections or explicit denial notices; instead, they enter a prolonged state of suspension, often lasting weeks or months, only to resurface with demands for medical records that were already meticulously documented.

This phenomenon, increasingly prevalent in an era of advanced claims processing technologies, imposes significant administrative burdens and financial strain. Based on WCH Service Bureau's 25 years of specialized experience in revenue cycle management, we've observed this phenomenon intensifying dramatically. Prepayment denials, while not a novel issue, have intensified with the integration of artificial intelligence (AI) into payer workflows, resulting in reported denial rates approaching 50% for claims exceeding certain thresholds. Beyond the direct revenue impact, such practices contribute to diminished patient access to care, as providers may elect to limit services under affected payers.

A prominent example involves UnitedHealthcare and its Optum subsidiary. Through our daily work and deep experience navigating these systems, we routinely see practices observing that nearly half of high-dollar claims—typically those involving complex procedures or multi-component laboratory services—routinely trigger automatic prepayment reviews. Upon submission, these claims exhibit no status updates for periods of 30 to 60 days, requiring persistent follow-up to uncover that they are pending medical records. This occurs irrespective of formal audits or identifiable risk factors; rather, it appears to stem from systemic flags applied to submissions surpassing approximately $500 with multiple line items. In roughly half of these instances, the claims process and pay upon provision of the requested documentation, affirming the validity of the original submission. The remaining cases, however, languish in appeals processes, where payers invoke reasons such as "benefits not covered" for commercial plans, despite clear alignment with patient policies.

Policy perspective: Regulators such as the OIG and CMS, along with state insurance departments, have begun responding to automated denial issues. They are auditing algorithms and requiring transparency in both prepay and postpay processes to protect the rights of patients and providers.

Subsequent appeals often necessitate escalation to second-level reviews, supported by comprehensive evidence, only to be redirected by state Departments of Financial Services on jurisdictional grounds, compelling renewed engagement with the payer. Mitigation strategies remain elusive, as the review initiates immediately upon claim entry into the system, functioning as an immutable algorithmic threshold. This pattern exemplifies a broader cost-containment strategy among payers, with UnitedHealthcare at the forefront of prepayment scrutiny. The organization has faced legal repercussions, including a $20.25 million settlement in 2025 for allegations of improper claim denials, underscoring the contentious nature of these practices.

In contrast, Humana exemplifies the post-payment variant of this challenge. Claims proceed to approval and disbursement, only for subsequent records requests to emerge weeks or months later. Failure to respond within stipulated timelines results in automatic recoupments, orchestrated by Humana's Payment Integrity team as a verification mechanism. This dual-front assault—prepayment holds from one major payer and post-payment recoveries from another—exacerbates operational inefficiencies. Humana's explicit policy authorizes demands for itemized bills and supporting invoices to validate previously approved charges. Non-compliance triggers fund reversals without exception. This approach aligns with escalating federal oversight; the Centers for Medicare & Medicaid Services (CMS) has intensified audits of Medicare Advantage plans, such as those administered by Humana, targeting potential overpayments that could aggregate to hundreds of millions annually.

Blue Cross Blue Shield introduces yet another layer of complexity through targeted prepayment protocols focused on specific Current Procedural Terminology (CPT) codes. Certain outpatient procedures, particularly those requiring modifiers, have been subjected to prolonged reviews spanning years. Providers submit documentation, only to receive denials citing necessary adjustments, followed by reviewer transitions that introduce novel guideline interpretations. WCH's core expertise lies in adapting to and overcoming this exact challenge. This iterative cycle of rejection and revision persists, with practices compelled to adapt documentation repeatedly to accommodate evolving criteria that lack transparency. Consequently, some providers have discontinued acceptance of Blue Cross Blue Shield patients for these services, even transitioning to out-of-network status—a decision that fails to alleviate the persistent flags. Affiliates like Anthem have refined these validations as recently as April 2025, incorporating enhanced scrutiny for modifier discrepancies.

At the heart of this escalation lies the deployment of AI in claims adjudication. Although payers maintain discretion regarding algorithmic details, temporal correlations suggest that AI proliferation correlates with heightened denial volumes, as automated systems prioritize efficiency over contextual nuance. UnitedHealthcare has drawn particular scrutiny for alleged AI-driven overrides in Medicare Advantage denials, prompting litigation from affected parties. Surveys indicate that over 60% of physicians perceive unregulated AI applications as systematically impeding essential care. The opacity of these tools compounds the issue: AI identifies "high-risk" patterns—such as elevated dollar amounts or line complexities—prompting human (or automated) review with limited recourse for providers. According to Experian's 2025 State of Claims report, overall denial rates continue to rise amid stricter guidelines and payer-side automation, while provider adoption of countervailing AI remains suboptimal.

The consequences extend far beyond isolated financial losses. As a partner to the medical community, we witness the real-world impact of this systemic friction firsthand. Practices allocate substantial staff resources to pursuits such as status inquiries, appeals preparation, and resubmissions—expenditures that could otherwise support clinical expansion. More critically, the erosion of care access manifests when providers curtail services under problematic payers, compelling patients to seek alternatives: alternative clinicians, out-of-pocket expenditures, or deferral of interventions altogether. In documented instances, out-of-network transitions have not resolved the underlying flags, thereby perpetuating barriers for affected populations. Projections for 2025 forecast sustained increases in denial rates, driven by regulatory tightening and technological asymmetries.

Navigating these challenges demands a multifaceted strategy emphasizing foresight and efficiency. Providers should proactively attach comprehensive medical records to all high-dollar submissions, preempting routine requests and expediting adjudication. Implement automated alerts for claim status reviews at the 15-day mark to forestall extended delays. For appeals, standardize templates that rigorously reference policy provisions, appended with relevant guidelines, and engage state regulatory bodies judiciously when disputes arise. Advocate for payer portals offering pre-submission prepayment indicators, an emerging feature in select systems. Collaboration is paramount: Solo practitioners benefit from alliances with specialized billing firms versed in payer idiosyncrasies, where electronic workflows have demonstrated reductions in processing timelines by weeks.

Furthermore, integrating provider-side AI—such as claims scrubbing software that simulates payer edits—enables preemptive identification of vulnerabilities. Comprehensive documentation remains foundational: Timestamp eligibility verifications and authorization notations to fortify defenses against retrospective challenges. While the ecosystem favors payers, these measures empower practices to reclaim agency. The imperative is clear: Vigilant, strategic engagement transforms systemic hurdles into manageable routines, safeguarding both fiscal health and patient-centered priorities.

Olga Khabinskay is Director of Operations at WCH, a national health care practice management services company that provides billing, coding and credentialing as well as provider technology services. www.wchsb.com