AI Denial Management for Orthopaedic Practices: What Automation Can and Can't Fix in 2026

AI denial management for orthopaedic practices works best on three jobs: preventing denials before the claim is submitted by getting codes, modifiers, and documentation right; sorting and prioritizing the denials that do come back so staff work the recoverable dollars first; and drafting complete, payer-specific appeal letters with the right records attached. It does not fix payer policy, missing prior authorizations that were never requested, or documentation that was never written.

That distinction matters because denials are still rising. Kodiak Solutions data reported by HFMA shows initial denial rates reaching 11.65 percent in 2025 (through November), and in a January 2026 MGMA Stat poll, 48 percent of practice leaders named denials and appeals as their single biggest revenue cycle leak.

This article explains where the denial problem comes from, what payers are doing with their own AI, which parts of denial work automation handles well, where it falls short, and how orthopaedic groups should evaluate tools.

The denial problem in numbers

The data from the last two years points the same direction.

• Denial rates are high and rising. In Experian Health's 2025 State of Claims survey, 41 percent of providers reported denial rates of 10 percent or higher. Kodiak Solutions data put the initial denial rate at 11.65 percent for 2025 through November, up from 11.41 percent in 2024.
• Most denials trace back to data problems. In the same Experian survey, 50 percent of respondents cited missing or inaccurate data as a top denial reason, 35 percent cited authorizations, and 32 percent cited registration data.
• Fighting denials is expensive. Premier's analysis of 2023 claims data estimated that providers spent $25.7 billion adjudicating claims, about $18 billion of which was potentially unnecessary, at an average administrative cost of $57.23 per claim. Roughly 70 percent of denials were ultimately overturned and paid, which means most of that cost went to recovering money that should have been paid the first time.
• Prior authorization does not guarantee payment. Premier found 10.4 percent of claims were denied even after prior authorization was obtained.

For Medicare Advantage specifically, KFF's analysis of 2024 data found insurers made 52.8 million prior authorization determinations and denied 7.7 percent, up from 6.4 percent in 2023. Only 11.5 percent of denials were appealed, and 80.7 percent of those appeals were fully or partially overturned. On ACA marketplace plans, KFF found insurers denied 19 percent of in-network claims in 2024, with fewer than 1 percent of denials appealed.

The pattern is consistent: denials are frequent, a large share are wrong, and most are never challenged. Orthopaedics feels this acutely because the dollars per claim are high, surgical and imaging services are frequent targets for prior authorization, and modifier-dependent claims (25, 59, the X modifiers, and global period modifiers) give payers many ways to deny.

Payers are already using AI, which changes the stakes

Practices are not adopting automation in a vacuum. Payers use algorithms at scale, and that has drawn litigation and regulation.

Class actions against UnitedHealth (over the nH Predict algorithm), Cigna (over its PXDX review process), and Humana have survived motions to dismiss in whole or in part. In February 2024, CMS clarified that Medicare Advantage plans may use algorithms to assist coverage decisions, but decisions must be based on the individual patient's circumstances rather than a larger data set. California's SB 1120, effective January 1, 2025, requires that medical necessity denials be made by a licensed physician or qualified health care provider rather than by AI alone, and several more states passed laws on payer AI or automated downcoding in 2026.

Physicians have noticed. In an AMA survey published in 2025, 61 percent of physicians said they fear that payers' use of unregulated AI is increasing prior authorization denials. HFMA reported in January 2026 on what one health system revenue cycle leader described as payer AI denials "coming faster than we can keep up."

Even traditional Medicare now uses technology-assisted prior authorization. CMS's WISeR model, running from January 2026 in Arizona, New Jersey, Ohio, Oklahoma, Texas, and Washington, requires prior authorization or pre-payment review for selected services, including knee arthroscopy for osteoarthritis, cervical fusion, epidural steroid injections, and vertebral augmentation. Participating vendors use AI and machine learning tools, while licensed clinicians make every non-payment decision.

When payers automate their side of the transaction, practices that rely only on manual follow-up fall further behind every quarter.

What AI denial management can do well

1. Prevent denials before submission

The cheapest denial is the one that never happens. Since missing or inaccurate data and coding issues drive a large share of denials, the highest-return use of AI is upstream: reading the clinical note and operative report, recommending the correct CPT, ICD-10, and modifier combination, and flagging documentation gaps before the claim leaves the building.

In orthopaedics this includes checks such as whether a same-day E/M visit is truly separately identifiable before modifier 25 is appended, whether a procedure falls inside a global period, whether toe or finger anatomic modifiers are used instead of modifier 59, and whether the diagnosis supports medical necessity for the procedure billed. Payers deny these with remarks such as CARC 4 (procedure code inconsistent with the modifier used), CARC 11 (diagnosis inconsistent with the procedure), and CARC 97 (payment included in the allowance for another service already adjudicated).

2. Read and route the denials that come back

Every denied dollar arrives in the 835 remittance with a group code, a claim adjustment reason code, and often a remittance advice remark code. Automation can categorize denials by root cause, route them to the right owner, and rank them by dollar value, appeal deadline, and likelihood of recovery. A CARC 197 (precertification or authorization absent) belongs with the authorization team; a CARC 16 (claim lacks information or has billing errors) may be a same-day correction; a CARC 50 (not deemed medically necessary) needs a clinical appeal.

This matters because deadlines are short. A Medicare redetermination must be filed within 120 days of the remittance notice, and a Medicare Advantage plan reconsideration request generally must be filed within 60 days of the denial notice. Commercial timelines vary by contract.

3. Draft appeal letters with the right evidence attached

Appeal writing is where many practices simply give up. A strong orthopaedic appeal cites the payer's own policy, quotes the operative note or clinic documentation that meets the criteria, references the relevant CPT, NCCI, or CMS guidance, and attaches the right records. AI can assemble a first draft in minutes from information already in the chart and claim. HFMA reported that one academic medical center cut appeal letter drafting time from about 15 minutes to 8 to 10 minutes with automation and saw a modest improvement in overturn rates.

4. Find patterns humans miss

Once denials are structured, trend analysis becomes practical: which payer is denying modifier 25 visits at a higher rate this quarter, which surgeon's templates are generating medical necessity denials, which location is missing authorizations for MRIs. Those patterns point to fixes upstream, which is where the durable savings are.

What AI denial management can't fix

Being clear about limits is what separates useful automation from marketing.

• Documentation that does not exist. No tool can create support for a level of service or a procedure that the note does not describe, and no tool should. Automation can flag a gap for the provider to address when the documentation is incomplete, but it should never prompt documentation of things that did not happen.
• Authorizations that were never requested. Retro-authorization is possible with some payers in some situations, but a denied CARC 197 for an elective procedure scheduled without an authorization is mostly a front-end workflow failure.
• Payer policy itself. If a payer's policy requires six weeks of documented conservative care before an MRI, automation can surface the requirement and the evidence, but it cannot change the rule.
• Contract terms. Underpayments and bundling that follow your contract are contract problems. Automation can detect variance against expected reimbursement, but renegotiation is still a human job.
• Judgment on clinical appeals. For complex medical necessity denials, a surgeon's peer-to-peer discussion or a tailored clinical argument often still decides the outcome. AI should prepare the case, not replace the clinician.

Adoption data supports a measured view. An HFMA poll in late 2024 found 63 percent of organizations using AI or automation in the revenue cycle but only 15 percent reporting a positive return. In an August 2025 MGMA Stat poll, 71 percent of practices reported using some form of AI, but only 39 percent of those said it had reduced staff workload. In Experian's 2025 survey, only 14 percent of providers were using AI in claims, though 69 percent of those users said it reduced denials or improved resubmissions. Tools that are bolted on and generic tend to disappoint; tools built for the specialty and embedded in the workflow tend to deliver.

How to evaluate an AI denial management tool for orthopaedics

Use these questions when comparing vendors:

1. Does it prevent denials or only process them? A tool that only works the back end will always be reacting. Look for pre-submission coding and documentation checks.
2. Is it built for orthopaedics? Ask how it handles global periods, modifier 25 with same-day injections, NCCI edits for arthroscopy, bilateral and multiple procedure rules, and DME and injectable drug billing.
3. Does it work inside your EHR? If staff have to export, upload, and re-key, adoption will stall. Confirm integration with your EHR and practice management system.
4. Does every recommendation come with a reason? Coders, auditors, and payers need the clinical justification behind a code or an appeal argument, not just the output.
5. Can it be audited independently? Ask whether accuracy has been validated by an outside coding authority and how the vendor measures ongoing performance against your own data.
6. Does it keep humans in control? Experian found 90 percent of denied claims still receive human review before resubmission. A good tool makes that review faster and better, rather than removing it.
7. How is PHI protected? Confirm SOC 2 and HIPAA compliance and a signed business associate agreement.

Frequently asked questions

What is AI denial management?‍

AI denial management uses machine learning and language models to prevent, categorize, prioritize, and appeal insurance claim denials. The most effective tools work before submission by checking codes, modifiers, and documentation, and after denial by reading remittance codes, routing work, and drafting appeals with supporting records.

Can AI reduce denial rates for orthopaedic practices?‍

It can reduce denials caused by coding errors, modifier misuse, missing information, and documentation gaps, which make up a large share of orthopaedic denials. It cannot eliminate denials driven by payer policy, missing authorizations, or contract terms. In Experian Health's 2025 survey, 69 percent of providers using AI said it reduced denials or improved resubmissions.

Are insurance companies using AI to deny claims?‍

Payers use algorithms in utilization review and claims processing, which has led to lawsuits against several large insurers and new state laws. CMS requires Medicare Advantage plans to base coverage decisions on the individual patient's circumstances, and California requires that medical necessity denials be made by a licensed clinician rather than AI alone.

How many claim denials are overturned on appeal?‍

Most appealed denials are overturned. Premier found about 70 percent of hospital claim denials were eventually paid in its 2023 data, and KFF found 80.7 percent of appealed Medicare Advantage prior authorization denials were overturned in 2024. The problem is that very few denials are appealed at all.

What are the most important denial codes for an orthopaedic practice to track?‍

Common codes to monitor include CARC 4 (modifier inconsistent with procedure), CARC 11 (diagnosis inconsistent with procedure), CARC 16 (missing information or billing error), CARC 50 (not medically necessary), CARC 97 (bundled into another service), and CARC 197 (authorization absent). Mapping each to a root cause and an owner is the first step toward reducing them.

Will AI replace billing staff in orthopaedic practices?‍

The evidence so far suggests AI changes the work more than it removes people. Staff shift from keying and chasing to reviewing, exceptions handling, and payer escalation. Practices that frame AI as a way to handle rising volume without adding headcount, and to reduce the impact of coder turnover, tend to get better results.

Where Maia fits

Maia was built to attack denials at both ends. AutoCoder reads the note inside the EHR and recommends codes, modifiers, and clinical justification before a human coder touches the chart, catching preventable denials before submission. When a denial does come back, Maia's Denial Appeal Automation drafts appeal letters with the relevant claim documentation attached, and Prior Auth Reconciliation helps teams submit retro-authorizations in time to protect reimbursement. Maia is SOC 2 certified, HIPAA compliant, integrates with athenahealth, eClinicalWorks, Epic, ModMed, NextGen, and Tebra.

See how Maia's helps handle this automatically for orthopaedic practices. Book a demo at usemaia.com.

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