Aligning Utilization Management and CDI: A Unified Front to Improve Reimbursement

Aligning Utilization Management and CDI: A Unified Front to Improve Reimbursement

Defining the UM–CDI Relationship

Hospitals and health systems are navigating one of the most challenging denial landscapes on record. Denials have evolved from a back-office nuisance into one of the most significant financial threats to hospital solvency. The American Hospital Association recently estimated that payers’ denial tactics now threaten more than $20 billion in reimbursement annually. At the same time, denial rates remain stubbornly high—averaging 11.8% of all claims in 2025, according to ICD10monitor.

In this environment, the alignment of Utilization Management (UM) and Clinical Documentation Integrity (CDI) has shifted from a best practice to a financial imperative. When these teams operate in silos, gaps in medical necessity rationale, clinical validation, and admission status decisions become fertile ground for denials. But, when UM and CDI function in strategic alignment, preventable denials decrease, clinical clarity in the medical record improves, and a unified front protects revenue.

The Cost of Misalignment

Disjointed UM and CDI processes lead to inconsistent narratives across the patient record. A UM nurse may lean into inpatient admission based on InterQual or Milliman Care Guidelines (MCG) criteria, while CDI reviewers will see a lack of clarity in the Principal Diagnosis, creating mismatches in the acuity of the patient and divergence in the discharge plan and length of stay. The result?

• Medical necessity disputes tied to observation vs. inpatient status
• ALOS vs GMLOS observed vs. expected gaps
• Denials for high-risk inpatient diagnoses like UTI or Syncope
• Weakened appeals because clinical documentation doesn’t fully support the UM reviewer’s determination or the provider’s order for inpatient admission

Each denied claim represents not only lost revenue, but also added labor costs for appeals, avoidable days in accounts receivable, and downstream compliance risks. The impact on the patient should also not be overlooked from a patient satisfaction and goodwill perspective. Beyond dollars lost, patients experience delayed discharges, unexpected bills, and diminished trust – eroding the very foundation of value-based care, according to the American Hospital Association. For large systems, denial-related write-offs can quickly climb into the tens of millions annually.

Where Breakdowns Happen Across the Patient Journey

The cracks emerge at predictable points in the patient’s journey:

• Admission status determination — unclear rationale for inpatient vs. observation.
• Initial and concurrent review — CDI typically completes an initial review at 48 hours. This is far too late in the patient stay to be helpful to the UM team. Shorter lengths of stay, combined with the demand for a more accurate LOS target, are increasing the demand for more timely and accurate Working DRGs from CDI.
• Documentation of severity and present on admission (POA) — missed specificity creates coding and validation risk.
• Discharge status — incomplete or even conflicting documentation to justify the admission, in support of the principal diagnosis, or that condition which after study, contributed to the admission of the patient to the acute care setting, can fuel payer downgrades.
• Late physician clarification — queries issued after the fact, especially post-discharge, weaken appeal defensibility.

As AHIMA notes, each of these breakdowns increases the workload of appeals teams and the likelihood of costly write-offs. At Sage Clinical RCM, we co-design UM×CDI governance and day-1/2 joint reviews, keep the Working DRG/GMLOS current seven days a week, and stand up shared denial analytics—typically via a 90-day alignment sprint that reduces preventable denials and rework while strengthening documentation integrity. We’re technology-neutral and integrate with Epic/Cerner, InterQual/MCG, and your CDI platform.

What Payers Target (and Why)

Payers have become increasingly sophisticated in mining coded data to challenge claims. Hot-spot denials fall into three categories:

• Medical necessity — level-of-care disputes where inpatient status isn’t fully supported.
• Clinical validation — diagnoses like sepsis, AKI, or malnutrition lacking consistent clinical indicators.
• Level of care and discharge disputes — cases downgraded from inpatient to observation or SNF to home health.

As ACDIS research highlights, denials are no longer just about coding mechanics, but also about whether documentation supports the necessity and severity of each diagnosis. The quality of provider documentation now sits at the center of payer defense.

A Cohesive Operating Model: UM + CDI

In a climate where margins are razor-thin, aligning UM and CDI isn’t just a financial strategy—it’s a leadership decision that defines operational excellence. The blueprint for success is a more cohesive operating model where UM and CDI teams no longer operate on purely parallel tracks, but have shared goals, KPIs and integrated workflows:

• Inclusive governance and accountability for certain outcomes with teams led by physician advisors, UM, and CDI leadership.
• Daily huddles or CDI participates in Interdisciplinary Rounds to align on clinical documentation gaps, changes to patient status, and clinical clarity in support of ALOS and discharge plan.
• Adapted technology to ensure that UR and Clinical Teams have access to key CDI information, such as Working DRG, GMLOS. Too often, CDI solutions are ponds of data that are not accessible to the teams that need the data.

Accessibility to an accurate Working DRG 7 days per week to achieve a systematic cadence of availability that does not stop on weekends. Critical to this process is post-surgical updates to WDRGs so that the GMLOS is adjusted for Utilization and Care Coordination. One client engagement surfaced inconsistent use of severe malnutrition codes – an OIG-flagged risk area – with sample review revealing substantial overpayments. Our experts established a cross-functional cadence (CDI, coding, physician advisor) with clear criteria, concurrent checks, and focused provider education. The result was a unified, defensible record and reduced clinical-validation risk for a high-denial diagnosis – exactly the kind of UM×CDI alignment our operating model scales.

This more cohesive operating model is better reflective of the symbiotic relationship between clinical documentation and UR in addressing potential gaps in the patient story, including evidence of diagnoses being actively treated, but not thoroughly documented.

Data & Technology Enablers

Technology can accelerate alignment by:

• Integrated work queues that allow UM and CDI to see the same cases in real time.
• Shared denial analytics to identify hot-spot diagnoses and feed trends back into training.
• AI-assisted workflow prioritization that helps identify cases which require attention first when there are many requiring attention.

As AHIMA Scholar reviews confirm, AI holds significant promise in flagging gaps early in the stay, reducing preventable denials before they occur.

Leadership Services We Provide: How Sage Helps You Align

Our firm partners with health systems to bridge UM and CDI through a full spectrum of services:

1. Advisory & Program Design — governance structures, escalation paths, and integrated workflows.
2. Interim Management & Physician Advisor Support — ensuring clinical leadership is aligned, well-trained, and ready to transition to future state.
3. CDI/UM Workflow Reboot & Training — equipping staff with tools and cross-disciplinary knowledge.
4. Denials Command Center — trend-to-training feedback loops that transform denial data into action.
5. Technology & Criteria Optimization — technology selection, tailoring platforms and criteria sets to organizational needs.

Each service is tied to tangible outcomes: improved compliance, optimized length of stay, and recaptured revenue.

KPIs That Prove It’s Working

A unified UM–CDI model must demonstrate results through measurable metrics:

• Initial denial rate (overall financial exposure).
• Clinical validation denial rate (accuracy of diagnoses).
• Overturn rate (appeals success).
• Time-to-query response (physician engagement).
• Case-mix index (CMI) movement (severity capture).
• Avoidable days (impact on throughput).
• Net revenue recaptured (true bottom-line value).

These KPIs, aligned with ACDIS and industry guidance, provide a dashboard for continuous accountability and transparency.

Schedule Your Readiness Assessment with Sage

In today’s denial climate, no health system can afford the cost of misalignment between UM and CDI. A unified operating model not only reduces denials but also ensures accurate reimbursement, stronger compliance, and more sustainable financial performance.

The next step is simple: evaluate your readiness. We invite executive leaders to schedule a readiness assessment or pilot program to see firsthand how UM–CDI alignment can stabilize revenue, reduce denials, and create lasting operational impact.

This article was written by Michelle Wieczorek, RN, RHIT, CPHQ, CCDS-O, Senior Vice President, Product & Clinical Operations, and reviewed by Hira Hasnain, MD, Senior Managing Consultant, CDI & Quality.