Hospital claim denials from the payer's side: criteria, justification and how to cut unfounded denials on both sides

In Brazilian private healthcare, a glosa is a payer's denial or downward adjustment of an item on a hospital bill: the health plan operator refuses to pay all or part of what the hospital charged. The payer decides it through medical claims audit, and every denied item gets a coded reason. The hospital can challenge it in a denial appeal, and the payer responds by upholding or reversing the amount. In the rest of this article we call it a claim denial or billing denial.

That definition answers the search. What is rarely explained is the decision on the other side of the counter: what criteria the payer uses to deny, how it justifies each item, what separates a fair denial from an unfounded one, and what getting it wrong costs, both for the party that denies and for the party that is denied.

Why claim denials matter to both sides

Public numbers show why the topic matters on both sides. According to the Anahp Observatory report of April 2025 (Anahp is Brazil's National Association of Private Hospitals), the initial managerial denial rate at member hospitals rose from 11.89% in 2023 to 15.89% in 2024, which corresponds to R$ 5.8 billion on gross revenue of R$ 36.7 billion across the 85 hospitals in the survey. In the same report, the accounting rate of accepted denials was 1.96% of gross health-plan revenue in 2024. Anahp itself writes that denying claims is a right of any payer. The problem is not the denial. It is the denial that does not hold up.

On the payer side, the IESS study on fraud and waste, from November 2023, estimates that fraud and waste consumed between R$ 30 billion and R$ 34 billion in 2022, somewhere between 11.1% and 12.7% of sector revenue, and that between 12% and 18% of hospital bills contain improper items. A payer that does not audit pays what it does not owe. A payer that denies without criteria pays twice: in the appeal and in its relationship with the network.

This article treats the denial as a payer decision. It relies on three regulatory sources: the TISS standard from the ANS (the National Supplementary Health Agency, Brazil's regulator of private health plans), which defines the messages and reason codes; ANS Normative Resolution (RN) 503/2022, which defines what the payer-provider contract must say about denials and appeals; and Federal Council of Medicine (CFM) Resolution 2,448/2025, which regulates medical auditing. For a view of the whole process, from batch intake to decision, see the article on medical claims audit.

Types of denial and the TISS reason codes

The market classifies denials into three types. The classification is not in an ANS rule, but it organizes the work well, because each type calls for a different review profile and has a different chance of being reversed on appeal.

Administrative denial. It stems from a registration, authorization, deadline or form-filling problem. The member's card has expired, the claim form has no authorization number, the claim arrived after the contractual deadline, the same procedure appears twice. The review is objective: the system compares the claim with the registration, the authorization and the contract. This type is usually resolved by correcting the data, and reversal on appeal is common when the hospital proves what was missing.

Clinical (technical) denial. It stems from the clinical review of the claim. The auditor compares what was billed with what the medical record supports: the clinical notes justify the length of stay, the prescription justifies the drug, the surgical report justifies the material. This is the territory of medical and nursing auditing, and this is where justification makes the difference. A well-justified clinical denial tends to be upheld. A generic one tends to fall on appeal.

Linear denial. A denial applied by a single rule across a set of items, with no individual review: every material above the negotiated table is cut to the table price, every fee already included in the bundle is removed, every percentage above the contract is trimmed. It is the fastest to apply and the most contested, because it often hits items that would have been paid if reviewed one by one. It only holds up when the rule is written into the contract.

Denial reasons are coded in the TISS standard, in Table 38, Messages (denials, refusals and others), published by the ANS and known in the market as the denial reason table. The payer uses these codes in the claim review statement and in the appeal response. The table below maps the three types to real codes from the current version (descriptions translated).

Denial type	What the payer checks	Example codes from TISS Table 38
Administrative	Member registration, authorization, deadline, duplicates, claim form completion	1001 Invalid card number; 1007 Care within the member's waiting period; 1308 Claim form already submitted; 1402 Procedure not authorized; 1404 No related authorization form; 1702 Duplicate procedure billing; 3091 Billing outside the deadline set in the contract
Clinical	Consistency between the bill and the medical record: prescription, clinical notes, reports, record of performance	1709 Missing medical prescription; 1811 Procedure with no record of performance; 1816 Procedure billed in a quantity incompatible with the procedure/clinical course; 1903 Hospital stay incompatible with the clinical course; 1912 Clinical course not compatible with the ICU stay; 2014 Billing for material not used; 2209 OPME billing inconsistent with the technical report; 2603 Professional fee billed with no record of the professional's actual participation
Linear (contractual)	Amount and composition of the item against the price table, the bundle and the contract rules	1704 Amount billed above the bundle agreement; 1714 Service amount above the table price; 1817 Billing for a procedure included in the main procedure; 2011 Billing for material included in the negotiated bundle; 2413 Billing for a fee included in the negotiated bundle
Appeal response	Outcome of the re-review	2902 Denial upheld; 3095 Denial appeal accepted; 3092 Amount accepted because the denial was improper, after review of the appeal; 2909 Deadline to request a denial appeal has expired

Three notes on the table. First: the code is mandatory, but it does not replace the justification. Code 1903, hospital stay incompatible with the clinical course, says what, not why. A payer that records only the code hands the hospital an easy appeal. Second: the table itself includes code 3092, amount accepted because the denial was improper. The standard assumes the payer makes mistakes and gives the mistake a name. Third: the appeal response codes, 2902 and 3095, close the loop. A payer that measures how many denials end in 3095 knows exactly where its criteria are failing.

How the payer reviews a claim before denying

The claim arrives in a batch, in the TISS standard, with the claim forms and items. The TISS Organizational Component, January 2025, describes the cycle's messages: batch submission, receipt protocol, claim review statement, payment statement, denial appeal and appeal response. In practice, the payer's review has four layers.

Layer 1: structural validation. The file follows the standard, the member exists, the provider is in the network, the claim form is complete. Failures here produce codes in the 1000 to 1300 and 5000 ranges of Table 38, and rarely reach a human auditor.

Layer 2: check against the authorization. What was billed matches what was authorized, in quantity, code and room type. An extra daily rate, a procedure without an authorization number, an ICU stay that was not extended. Codes in the 1400 and 1900 ranges show up here. CFM Resolution 2,448/2025 set an important limit on this layer, discussed below: a procedure that was previously authorized and proven to have been performed cannot be denied by the physician auditor.

Layer 3: check against the contract. Price table, bundles, included items, submission deadlines. This is the layer of the linear denial. RN 503/2022 requires the grounds for denial to be written in the contract. Without that, the rule the payer applies is unilateral, and the appeal tends to succeed.

Layer 4: clinical review. The core of medical claims audit. The auditor reads the claim against the medical record: the prescription supports the drug and dose, the clinical notes support the days of admission, the surgical report supports the OPME (orthotics, prostheses and special materials), the nursing record supports the supplies. This work is what CFM Resolution 2,448/2025 calls the medical act of auditing, and it is where consistency between auditors decides whether the denial will hold up.

What makes a denial defensible is the record of these layers. For each denied item, the payer should be able to answer, without reopening the claim: which rule was applied, which evidence in the record or the contract supports the rule, and who decided. When that answer exists, the appeal is fast, because the hospital sees the reason and either presents the missing evidence or accepts the denial. When it does not, the appeal becomes a new audit, done twice.

Fair and unfounded denials: the cost of error for both sides

A fair denial is one grounded in one of the layers above, with recorded evidence, that holds up when the hospital appeals. An unfounded denial is one the payer itself reverses on appeal, whether because the rule was not in the contract, because the auditor did not read the evidence, or because the criteria changed from one auditor to the next. Between the two sits a gray zone: the correct denial that was poorly justified and therefore falls on appeal. For the payer, that last one is the most expensive, because it loses an amount it had the right to withhold.

A numerical example helps show the cost on both sides. It is illustrative: the numbers were chosen to keep the arithmetic simple and do not describe any specific payer or hospital.

Imagine a hospital that bills R$ 4 million a month to a single payer. The payer applies an initial denial of 12%, or R$ 480 thousand, spread across about 1,200 items. The hospital appeals almost everything. By the end of the cycle, the payer reverses 70% of the denied amount, R$ 336 thousand, and upholds R$ 144 thousand. The final denial is 3.6% of billing.

Now the administrative cost. Suppose each appealed item costs the hospital R$ 25, between billing analyst, claims nurse and system time, and each re-review costs the payer R$ 20, between physician auditor, nurse auditor and rework. That is R$ 30 thousand a month for the hospital and R$ 24 thousand a month for the payer. Together, R$ 54 thousand a month, or R$ 648 thousand a year, spent arguing over R$ 480 thousand that, 70% of the time, goes back where it was. And the financial cost adds up: R$ 336 thousand is held for the entire appeal cycle. For a reference on the time involved, Anahp measured an average collection period of 60.91 days in 2024, counted from the invoice, and notes that the appeal runs in parallel with that period.

Compare the same hospital and the same payer in a consistent-criteria scenario. The payer denies only what it can justify: 6%, or R$ 240 thousand, across 600 items. The hospital appeals, and the payer reverses 30%, R$ 72 thousand, upholding R$ 168 thousand. The final denial is 4.2% of billing.

Look at what changed. The payer retained R$ 24 thousand more per month than in the first scenario, because the justified denials held up. The administrative cost on both sides fell to R$ 27 thousand a month, half of the previous figure. The hospital received R$ 3.76 million in the first payment instead of R$ 3.52 million, and had R$ 72 thousand held in the appeal cycle instead of R$ 336 thousand. Both sides won. What changed was not how strict the payer was. It was the quality of the criteria.

The example is simple on purpose, but its structure is the one that shows up in public data: a high initial denial rate with a high reversal rate means much of the work of denying was wasted. For the payer, the unfounded denial also has a cost that does not show up in the monthly numbers: the hospital network reprices the relationship, asks for longer payment terms, contests price adjustments and takes the dispute into contract negotiation and, at the limit, to court. And the medical loss ratio (sinistralidade, claims expense over premium revenue) does not improve, because the reversed amount goes back to being medical expense.

Appeal and counter-appeal deadlines: what the ANS and TISS define

The ANS does not set a number of days for a denial appeal. It sets what the contract must say. Normative Resolution 503/2022, which covers the written contract between payers and providers, requires the contract to define the billing and payment deadlines and procedures, the circumstances in which the provider may be subject to a denial, the deadline to challenge a denial and the deadline for the payer's response. And it imposes a parity rule: the deadline agreed for the provider to challenge must equal the deadline set for the payer to respond. If the hospital has 30 days to appeal, the payer has 30 days to respond. If 60, the payer has 60.

The same rule bars the payer from setting rules that prevent the provider from accessing the technical or administrative audit routines and the justifications for denials. In other words: the payer denies, but it has to show the reason. A denial without an accessible justification is one the ANS already treats as irregular in form, before any discussion of merit.

The TISS standard structures the cycle in messages. The provider sends the batch. The payer returns the claim review statement, in which, for the claim forms already reviewed, the procedures and items that were denied must be listed. The provider sends the denial appeal, identifying the member, the performing provider and the appealed items, with the necessary clinical explanations. The payer returns a receipt protocol and, later, the appeal response, accepting it or not, or reporting that the item is still under review. Table 38 itself holds the closing codes: 2902 for denial upheld, 3095 for appeal accepted, 2909 for appeal filed after the deadline.

The counter-appeal, the name the market gives the second round, when the hospital challenges an upheld denial, has no message of its own in TISS and depends on the contract. In practice, a payer that recorded the justification in the first review settles the counter-appeal in minutes, because the evidence is already attached to the item. One that did not reopens the claim for the third time.

There is also a professional-ethics layer on top of the contract. CFM Resolution 2,448/2025, published in November 2025, which revoked CFM Resolution 1,614/2001, defines medical auditing as an act reserved to physicians and sets direct duties regarding denials. The auditor's disagreements must be grounded in findings from the clinical history and the physical examination. The auditor must communicate the inconsistencies found in writing to the attending physician. Denying a procedure that was previously authorized and proven to have been performed by the attending physician is prohibited. The physician auditor's pay cannot be tied to denials. And the payer must recognize the codes of TUSS (the unified terminology of Brazilian supplementary health), without creating its own rules that alter them. For the payer, the resolution turns item-level clinical justification, which used to be good practice, into an obligation of the physician auditor.

How consistent auditing cuts unfounded denials

Unfounded denials rarely come from bad faith. They come from three process failures every payer knows.

The first is inconsistency between auditors. The same claim, with the same evidence, gets different decisions depending on who reviews it. One auditor denies the third ICU daily rate for lack of an extension; another accepts it because the clinical notes justify it. The hospital spots the pattern before the payer does, appeals everything and wins the lottery. The inconsistency also contaminates the indicators: the payer cannot tell whether the denial rate went up because claims got worse or because a new auditor joined the team.

The second is missing justification. The Table 38 code goes into the statement, but the evidence behind the decision stays in the auditor's head or in a loose note. On appeal, nobody can find the original reason, and the claim is re-reviewed from scratch, now under deadline pressure.

The third is partial coverage. With high volume and a limited team, the payer audits by sample or by amount. Small claims go through unreviewed and large claims get a rushed review. Denials concentrate where there is time to look, not where there is error.

Artificial intelligence applied to medical claims audit targets exactly these three failures, and it is important to be precise about what it does and does not do.

What it does: apply the same criteria to every claim, item by item, without fatigue and without variation between Monday and Friday. Cross-check each item against the authorization, the contract, the price table and the structured medical record. For each item it flags, record the reason with the correct TISS code and the justification: which rule, which evidence, which excerpt of the prescription or clinical notes. Release the claims where nothing was found, so the human auditor concentrates on the claims with a signal. And measure, claim by claim, what happened on appeal, so the criteria are adjusted when a rule starts being reversed often.

What it does not do: decide. A clinical denial is a medical act, under CFM rules, and administrative and contractual denials are decisions of the payer under a contract regulated by the ANS. The role of AI is to hand the auditor a claim that has already been read, with the items flagged, the proposed reason and the evidence alongside, so the decision is fast, consistent and recorded. The auditor confirms, changes or discards, and the record stays.

The effect on unfounded denials comes from three places. Consistency: two auditors looking at the same item get the same flag with the same evidence, and their decisions converge. Justification: each denial goes out with the reason recorded, which cuts generic appeals and speeds up legitimate ones. Coverage: because every claim is read, denials land where there is error, not where there was time. The expected result is the second scenario in the numerical example: less initial denial, less reversal, more value retained on solid grounds and less administrative cost on both sides. A description of how this works in practice is on the medical claims audit with AI page.

Indicators the payer should track

A payer that wants to cut unfounded denials needs to measure the whole cycle, not just the denial rate. Five indicators are enough to start.

Initial denial rate. Amount denied in the claim review statement divided by amount billed. On its own, it says little: a high rate can be rigor or noise.

Upheld denial rate. Amount still denied after appeal divided by amount billed. It is the denial that actually protected the payer.

Reversal rate. Amount reversed on appeal divided by amount initially denied. It is the most honest indicator of criteria quality. A 70% reversal rate means seven in every ten reais denied did not have enough grounds to hold up, or did not have those grounds recorded.

Reversal by reason and by auditor. The reversal rate broken down by Table 38 code and by auditor shows where the criteria are inconsistent. If code 1903 is reversed in 80% of one auditor's cases and 20% of another's, the problem is not the hospital.

Appeal cost per real recovered or retained. Audit hours spent on re-review divided by the amount the re-review moved. When that cost approaches the amount in dispute, the denial has stopped being a control and become friction.

With these five numbers, the conversation with the network changes. Instead of arguing about whether the payer denies too much, the discussion becomes which reasons hold up and which do not, and the contract can be adjusted based on evidence. These are also the numbers the audit team uses to show the payer's finance team that consistent criteria reduce medical expense without increasing disputes with the network. More articles for payers are gathered in the healthcare section.

How UpFlux does it

UpFlux takes over the transactional work of healthcare claims with a digital team: AI agents operated by specialists, working inside the systems payers already use, with the auditor in control of every decision. In claims audit that means consistent criteria and item-level justification: 100% of claims audited with 450+ clinical models, each denial with its reason and clinical justification recorded. In a typical cooperative, 92% of claims are released automatically, and the auditor concentrates on the claims with a signal. The solution runs in 40+ Unimed System cooperatives. See UpFlux medical claims audit with AI.

Frequently asked questions

What is a hospital claim denial (glosa)?

A hospital claim denial, called glosa in Brazil, is the refusal to pay all or part of an item on the bill the hospital submitted to the health plan operator. The payer decides it through medical claims audit, and each denied item gets a reason code from the ANS TISS standard. The hospital can challenge the denial on appeal, and the payer responds by upholding or reversing the amount.

What are the types of claim denial?

The market classifies denials as administrative, clinical (technical) and linear. Administrative denials come from registration, authorization, deadline or form-filling issues, such as an invalid card or a claim form without an authorization number. Clinical denials come from reviewing the claim against the medical record, such as a length of stay incompatible with the clinical course or material with no record of use. Linear denials are applied by a single rule across a set of items, such as cutting every amount above the contracted table, and only hold up when the rule is in the contract.

What is an unfounded denial?

An unfounded denial is one the payer itself reverses on appeal, because the rule applied was not in the contract, because the evidence in the medical record was not read, or because the criteria varied between auditors. CFM Resolution 2,448/2025 also bars the physician auditor from denying a procedure that was previously authorized and proven to have been performed. TISS Table 38 has its own code for the case, 3092, amount accepted because the denial was improper, after review of the appeal.

What is the deadline for a denial appeal?

The ANS does not set a number of days. Normative Resolution 503/2022 requires the payer-provider contract to define the deadline to challenge a denial and the deadline for the payer's response, and requires the two to be equal. The actual deadline therefore lives in each hospital's contract with each payer. The payer also cannot create rules that prevent the provider from accessing the justifications for denials.

How do you reduce claim denials?

On the hospital side, the reduction comes from a complete bill consistent with the medical record: prescription, clinical notes, reports and authorization aligned before submission. On the payer side, it comes from consistent criteria between auditors, recorded item-level justification and reading every claim, so denials land where there is error and hold up on appeal. On both sides, measuring the reversal rate by reason is what shows where to act.

How does a payer justify a denial?

The payer assigns each denied item a reason code from TISS Table 38, reported in the claim review statement, and must keep the justification accessible to the provider, under RN 503/2022. For clinical denials, CFM Resolution 2,448/2025 requires the physician auditor's disagreement to be grounded in findings from the clinical history and physical examination and communicated in writing to the attending physician. A complete justification states the rule applied, the evidence that supports it and who decided.