Michael Hill, MD and Associates, The Claims Dispute Resolution Company
Claims Dispute Resolution Brief
July 19, 2026
Payment Integrity · Revenue Cycle Strategy

From Pay-and-Chase to Precision

Why the hospitals winning in 2026 are the ones auditing their own claims with the same forensic rigor a payor would, before the claim ever drops.

In healthcare, the only constant lately has been complexity. Fragmentation, mounting costs, shifting regulations, the conditions that once felt like exceptions have become the baseline. The 2025 Comprehensive Error Rate Testing (CERT) program put the improper payment rate at a staggering 6.55%, which is roughly the kind of number that, in any other industry, would qualify as a structural emergency.

For hospital senior leadership and revenue cycle directors, it is not an administrative footnote. It is a margin threat. And it is happening at the exact moment health plans are watching their Medical Loss Ratios climb past 90%, which means every dollar of spend is now under the microscope, and total cost management has become the operating principle on the other side of the table.

The strategic implication is uncomfortable but obvious: reactive billing is no longer a strategy. Hospitals that wait for denials to arrive will spend the year chasing them. The hospitals making it through the squeeze are the ones evolving toward proactive Payment Integrity, a model that bakes audit-grade scrutiny into the claim before it leaves the building, instead of trying to recover it afterward.

Industry data suggests payors are aiming to shift up to 70% of their payment integrity work to the pre-pay phase. For hospitals, the meaning is simple: the window to correct a claim is closing faster than ever.

The 2025 CERT Baseline The Comprehensive Error Rate Testing program put the 2025 improper payment rate at 6.55%. With health plan Medical Loss Ratios crossing 90%, every dollar of spend is under the microscope on the payor side.

Where the Status Quo Leaks

Most revenue cycles are built on siloed systems, eligibility, prior authorization, and billing existing in separate vacuums. That fragmentation is fertile ground for the four errors most likely to trigger audits and denials in 2026.

DRG Mismatches

Claims that lack the clinical "footprint" in the medical record to support the assigned DRG.

Improper Readmission Billing

Failing to account for the clinical link between related stays, a frequent payor recovery target.

Unbundled Services

Billing for line items that should be included in global DRG rates, a chronic source of recoupment.

Charge Inflation

High-charge outliers that immediately trigger intense forensic oversight by payors.

From Pay-and-Chase to Precision
July 19, 2026

Four Actions to Future-Proof Payment Integrity

Protecting a hospital's financial health from this point forward takes a system that scales and a process that cuts through clinical complexity. Four shifts make the difference.

1

Bridge Clinical and Finance (Data Orchestration)

Payment integrity fails when the coding team doesn't understand the clinical narrative. Implement orchestration that connects the EHR directly to the scrubbing process, so a diagnosis of Sepsis-3 or Acute Respiratory Failure is verified against real-time lab values and physician titration notes before the claim is dropped.

2

Implement Forensic Line-Item Auditing

Outlier payments are highly dependent on hospital charges. Internal line-item audits on high-charge cases verify that the Cost-to-Charge Ratio (CCR) is applied to clinically documented resources, prevent leakage from items ordered but never administered, and ensure compliance with payor contract terms.

3

Standardize Clinical Validation (Forensic Rubric)

Payors increasingly use "dispassionate" forensic reviews to deny on medical necessity. Counter with your own Clinical Rubric, standardized internal protocols for high-risk DRGs that mirror the criteria auditors use (SOFA for sepsis, P/F ratios for respiratory failure).

4

Leverage Responsible AI for Prevention

Use AI to pre-audit, not just to capture. The point isn't finding missing modifiers; it's flagging claims where the documented Length of Stay doesn't align with the billed clinical intensity, so the issue can be corrected before the payor's gatekeeper AI triggers a denial.

6.55%
2025 CERT Improper Payment Rate
The structural error baseline hospitals are now working to compress.
> 90%
Health Plan MLR
Medical Loss Ratios crossing 90% are driving aggressive cost-management on the payor side.
70%
Payor PI Shift to Pre-Pay
Industry data suggests payors are moving most of their PI scrutiny to before payment is issued.
The Five Audit Anchors Sepsis-3 (SOFA ≥ 2) for sepsis. KDIGO for AKI severity. ASPEN/AND for malnutrition. Two-Midnight Rule for inpatient admission. P/F ratios for acute respiratory failure. These are the rubrics auditors apply, and the rubrics your pre-bill scrub should mirror.

Done right, this is not just a defensive posture. It is how the actuarial integrity of a hospital's revenue gets protected over time, ensuring that every dollar received is for verified, medically necessary care, and that the chart can prove it. On the next section, five DRG categories where that proof matters most in 2026.

From Pay-and-Chase to Precision
July 19, 2026

Audit Spotlight: Top 5 High-Risk DRGs for 2026

In the current regulatory environment, payors have moved beyond simple coding audits and into Clinical Validation Reviews. A claim coded correctly under ICD-10 will still be denied if the clinical narrative, the Forensic Footprint, does not support the intensity of the diagnosis. Five categories now carry the heaviest scrutiny.

1
Sepsis
DRGs 870, 871, 872
Risk
The ongoing "Definition War" between SIRS and Sepsis-3. Payors are increasingly defaulting to Sepsis-3 (Anthem CPCP041) standards.
Focus
Look for documented SOFA ≥ 2 and a clear link between infection and acute organ dysfunction. If the chart shows only elevated heart rate and WBC counts without evidence of organ failure, the claim is a high-likelihood target for downgrade to the underlying infection.
2
Acute Respiratory Failure
DRGs 189, 190, 191
Risk
Downcoding from Acute Respiratory Failure (J96.01) to simple Hypoxemia (R09.02) or Acute Respiratory Distress (R06.03).
Focus
Payors look for an "escalation of care" footprint. Supplemental oxygen alone won't survive audit, the chart needs evidence of clinical distress necessitating aggressive intervention (HFNC, BiPAP, significant titration of therapy).
3
Severe Protein-Calorie Malnutrition
MCC Validation
Risk
Malnutrition (E43) is one of the most frequently used MCCs to "optimize" a DRG. Its financial weight keeps it under a permanent microscope.
Focus
Ensure the diagnosis meets ASPEN/AND criteria (weight loss, muscle wasting, reduced intake). Audits often fail when the physician makes the diagnosis but it isn't supported by objective measurements or a Registered Dietitian's assessment.
4
Heart Failure & Shock with MCC
DRG 291
Risk
Clinical validation of "Acute" vs. "Chronic" status, and the necessity of the Inpatient setting over Observation.
Focus
Forensic review of Two-Midnight Rule application. Payors challenge these cases by arguing the patient was stable enough for outpatient observation management with diuresis, and that the intensity of service did not require full inpatient admission.
5
Acute Kidney Injury
DRGs 682, 683, 684
Risk
Validation of AKI severity based on KDIGO criteria.
Focus
Auditors verify baseline creatinine. If the "acute" rise actually reflects chronic kidney disease, or if levels return to baseline too quickly without significant intervention, the AKI diagnosis, and the associated DRG weight, may be stripped.
Michael Hill, MD and Associates, The Claims Dispute Resolution Company
Don't wait for the denial letter. Apply the same dispassionate clinical rubrics payors use, during your pre-bill scrub.

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