SNF Billing Denials: Medical Necessity & Prior Authorization Tips to Prevent Revenue Loss

Running a Skilled Nursing Facility (SNF) comes with enough challenges, but nothing hits harder than seeing a carefully documented claim rejected. Every denied claim due to medical necessity issues or missed prior authorizations is not just about paperwork. But it is all about lost revenue, extra stress for your team, and potential delays in patient care.

The good news? Most denials are preventable with the help of the best practices and tips to save thousands of dollars in terms of revenue loss. The key to avoiding these costly denials lies in mastering medical necessity and prior authorization. When SNFs get these two right, claims are more likely to be approved on the first submission, revenue stays steady, and residents receive the care they need without delays.

In this blog, we will explore why denials happen and provide actionable strategies to prevent them.

Essentials of SNF Billing

Medical necessity in SNFs refers to the requirement that care must go beyond basic custodial support and involve skilled nursing or rehabilitation services that only trained professionals can provide. Under Medicare and CMS guidelines, this means that services such as IV medication, wound management, or intensive therapy are required daily and cannot be safely provided in a non-skilled setting. In fact, care must be ordered by a physician for medical necessity to be recognized and supported with detailed documentation that shows the clinical condition, the need for skilled interventions, and the expected outcomes.

Prior authorization is closely related to medical necessity but focuses on payer approval before services begin. Though medical necessity determines whether a service qualifies for coverage, prior authorization is the payer’s method of confirming such medical necessity in advance. Many Medicare Advantage plans and commercial insurers require facilities to obtain this approval before admitting a patient or starting specific treatments. Without authorization, even medically necessary services may be denied payment. In this way, medical necessity defines the standard of care, while prior authorization ensures that payers agree the service meets that standard before reimbursement is granted.

How do Denials Happen in SNFs?

Denials in SNFs typically occur when medical necessity is not fully documented or prior authorization requirements are not met. It includes--

Medical Necessity Denial Triggers

• Documentation missing or vague: Claims are denied when patient records do not clearly show the need for skilled nursing or therapy.
• Patient doesn’t meet hospital stay or qualifying criteria: Denials occur if the patient lacked a three-day inpatient stay or was admitted too late to the SNF.
• Custodial care mistaken for skilled care: Payers reject claims when daily living assistance is billed as skilled care without clinical justification.
• Services not shown as daily or medically justified: Coverage is denied if skilled services are not provided at the required frequency or lack supporting evidence.
• Benefit days exhausted or eligibility lapses: Claims are denied when the patient has no remaining covered SNF days or their insurance eligibility has expired.

Prior Authorization Denial Triggers

• No authorization obtained before admission or services: Claims are denied when required prior approval is not requested in advance.
• Wrong or incomplete details submitted: Denials occur if prior authorization requests include missing or incorrect dates, codes, or provider information.
• Authorization covers fewer days or services than billed: Payers deny claims when billed services exceed the approved authorization.
• Payer policies changed but SNF has not updated: Denials happen when the SNF continues to follow outdated payer rules or requirements.
• SNF not certified for billed services: Claims are rejected if the payer or Medicare does not recognize the facility for the specific service billed.

Tips & Best Practices to Prevent Denials

Preventing denials requires proactive steps before admission, accurate documentation during care, and consistent follow-through with payers. The following are the tips and best practices to be implemented:

• Eligibility & Benefit Verification Up Front

Before admitting a patient, SNFs should confirm whether the individual has Medicare Part A benefits, remaining covered SNF days or active commercial insurance that includes SNF care. This verification prevents the risk of admitting patients who are not eligible for coverage.

• Admission Documentation & Physician Orders

Physician orders should clearly state the skilled service being prescribed, the frequency of the intervention, and the medical reason for the care. For example, an order that reads “daily skilled wound care to monitor infection risk and support healing” is far stronger than a vague note such as “wound care as needed.”

• Therapy & Nursing Documentation

Progress notes, therapy assessments, and nursing documentation should demonstrate measurable progress, changes in condition, or ongoing medical needs. Objective measures such as range of motion improvements, wound size reduction, or respiratory function monitoring show that services are medically necessary.

• Hospital Stay Requirements

SNFs must verify that patients had a qualifying three-day inpatient hospital stay and that they were admitted within 30 days of discharge unless an exception applies. Staff should also check that the hospital stay was not under observation status, as this does not count toward Medicare requirements.

• Prior Authorization Workflow Design

Facilities should maintain a payer-specific list of authorization rules and use checklists to ensure submissions include all necessary information. In fact, requests should be submitted early, with a buffer for payer delays, and staff should track pending approvals to avoid lapses.

• Internal Audits & Pre-Claim Review

SNFs can catch errors or incomplete documentation early by reviewing a sample of claims before submission. Internal audits help identify recurring denial patterns, such as missing therapy notes or expired authorizations, so that corrective steps can be taken.

• Staying Up to Date on Policy Changes

SNFs should monitor CMS announcements, Medicare Learning Network (MLN) updates, and payer policy manuals. As coverage criteria and authorization requirements often change, staying current ensures compliance and reduces the risk of denials.

• Staff Training & Accountability

Nursing, therapy, admissions, billing, and coding staff all play a role in meeting medical necessity and authorization standards. Regular training sessions ensure everyone understands their responsibilities, while clear accountability prevents tasks from being overlooked.

SNF-Specific Regulations & Standards to Keep in Mind

SNFs must follow strict Medicare and payer regulations to secure reimbursement. These rules define what qualifies as skilled care and how coverage is maintained throughout the patient’s stay.

• Medicare Part A SNF Coverage Rules

Medicare requires a qualifying three-day hospital stay before SNF admission, and the patient must be transferred within 30 days of discharge unless an exception applies. These standards are clearly outlined in the CMS Benefit Policy Manual and must be followed without exception.

• Skilled Service Frequency Expectations

Payers expect skilled services to be delivered at a specific frequency to justify coverage. For example, therapy should be provided according to a set schedule, and skilled nursing must occur daily if billed. Therefore, failure to meet these expectations often results in denied claims.

• Plan of Care & Physician Certification

Each patient must have a documented plan of care that is signed and certified by a physician. This plan must outline the services being provided, the expected outcomes, and the duration of care. In fact, recertification at required intervals is also necessary to confirm that services remain medically necessary.

Conclusion

Managing SNF billing can feel like a constant balancing act. Medical necessity rules are strict, prior authorizations can be complicated, and payer requirements often change without notice. Even with diligent staff, missed details or incomplete documentation can lead to claim denials that result in lost time and revenue.

In fact, facilities that adopt structured workflows experience fewer errors and smoother claim processing. However, maintaining this level of precision consistently demands outsourcing SNF billing and coding services.

SNFs can ensure claims meet payer standards and reduce denials by integrating expertise. Proactively addressing potential billing pitfalls not only protects revenue but also strengthens overall operations, creating a system where financial health and patient care go hand in hand.

FAQs

Q1. Can outdated clinical notes trigger billing denials?

Payers often reject claims if notes don’t reflect the patient’s current condition.

Q2. Do insurance payers review SNF claims manually?

Many use automated systems first, but flagged cases undergo manual review.

Q3. Can SNFs appeal medical necessity denials?

Yes, but appeals are time-consuming and require strong supporting documentation.

Q4. How often do SNFs need to update payer authorization lists?

Ideally, every quarter or whenever payers announce policy changes.