"March Madness": Take the offense! Managing Hospital Inpatient Denials

Hospital inpatient claim denials are coming from every direction.  In addition to commercial payers, Medicare Program Integrity Contractors, Recovery Audit Contractors, Quality Improvement Organizations and the Office of the Inspector General are all conducting hospital inpatient audits. Providers are under pressure to respond to one or more of these entities in a timely manner, so what is a provider to do?  We believe, the best defense is a good offense!

Offensive Strategy

There are two most prevalent types of hospital inpatient denials currently:

1.     Clinical validation denials.

2.     Denials related to the Two Midnight Rule.

What is the proper offense to beat these denials?

  • Utilizing the Clinical Documentation Improvement ("CDI") team, in conjunction with Coding, to review clinical validation denials;
  • Utilization Management ("UM") to address medical necessity denials pertaining to the Two Midnight Rule. 

Critical to the effectiveness of the CDI, Coding and UM departments, is the engagement of a physician advisor who understands the nuances of documentation, coding and UM Guidelines, and is willing to champion the efforts with the medical staff.

Clinical Validation Denials

Many clinical validation denials stem from lack of documentation, or incomplete/conflicting documentation pertaining to "high risk" diagnoses such as sepsis, severe malnutrition, respiratory failure, and encephalopathy.  Payers look not only for the documentation of the diagnoses, but also the clinical indicators. When documentation is present, but the clinical indicators are not, a denial may ensue which can result in decreased or no payment. The CDI/Coding team is in a unique position to be able to prevent clinical validation denials of these types of diagnoses since they review records on a concurrent and retrospective basis. Best Practice steps to prevent clinical validation denials, and moving to an offensive position, include: 

  • Deploy CDI staff in a manner that focuses on problematic areas.  

The goal is a focused CDI team assisting the physicians and ancillary providers to appropriately document high risk diagnoses with clinical indicators, in real time, through use of compliant queries.  This will result in a reduced need for retrospective queries from the coding staff that could delay the billing process. It will also ensure the diagnoses documented on the record are clinically valid, reducing denials.

  • Develop a hospital or system-wide definition of, and clinical indicators for, high risk diagnoses.

Involve a team of people to include Coding, Quality Improvement, CDI and medical staff to collaboratively determine the definition of, and clinical indicators for, high risk diagnoses.  For example, a new definition of sepsis was released in 2016 which significantly changed what types of clinical indicators need to be documented to support the diagnosis of sepsis.  A team approach is therefore needed to describe the necessary documentation to support the new diagnosis of sepsis. Use of these definitions to guide provider documentation also provides an appeal strategy for denials that may still occur.

  • Develop a process for CDI and Coding staff collaboration.

While records are reviewed concurrently by CDI and retrospectively by Coding, each evaluate the documentation from a different perspective.  Therefore, ongoing collaboration is essential to resolve any discrepancies and ensure the most appropriate diagnosis and procedure codes are assigned prior to billing.  When both groups collaborate effectively, there is a significant lower risk for denials.

  • Conduct clinician education pertaining to the clinical indicators for each high-risk diagnosis.

Clinicians are sometimes unaware that their documentation affects reimbursement or denials. They should be educated on how and why they document; not only high-risk diagnoses, but all diagnoses. Education can be conducted in a group setting; ideally led by the physician advisor and/or physician champion for the applicable specialty, in collaboration with the CDI staff.  

Education is also accomplished through the daily interactions from CDI with clinicians.  CDI staff should be trained to demonstrate that compliant documentation does not mean more documentation but documenting "smarter." 

  • Conduct ancillary provider education pertaining to the clinical indicators needed for coding of the higher risk diagnoses.

Ancillary clinicians capture key clinical indicators for many diagnoses. However, denials result when clinician and dietary documentation do not agree. Prevent the impending denials by educating dieticians and nutritionists on the criteria needed to support the diagnosis of severe malnutrition. CDI can also assist to clarify the documentation through use of appropriate queries. 

Short Stay Denials

Denials also result from the Quality Improvement Organization audits of Medicare beneficiaries who had a short inpatient stay; defined as a one day stay. 

One day stays should be a focus for the UM department and when concurrently reviewed, one day stays can be converted to observation stays through use of Condition Code 44, allowing for appropriate and maximum reimbursement if the short stay is deemed medically unnecessary. In addition, concurrent reviews avoid delaying claims from being released.  Best practice steps for UM staff pertaining to one day Medicare inpatient stays include:

  • Ensure that a valid inpatient order is entered in the record.

If there is no valid inpatient order, UM should contact the clinician for the appropriate order.  In this case, UM may provide guidance to the physician as to the most appropriate level of care status.

  •  Ensure that there is documentation supporting the need for a two midnight stay.

If there is no documentation for the expectation of a two midnight stay, or the documentation supports less than a two midnight stay, the case should be referred to the physician advisor to determine if the stay should be changed to an outpatient status using Condition Code 44.

  •  Review the record for any exceptions to the Two Midnight Rule.

Most exceptions to the Two Midnight Rule are easily identified. One exception, rapid clinical improvement, should only be determined by another clinician, such as the physician advisor, to determine the most appropriate status.

As you shore up your denials' offense, denial rates and accounts receivable days will decrease! While denials may still occasionally occur, reducing the volume and being proactive in your documentation practices can have a substantial impact on a hospital's bottom line. 

SunStone offers comprehensive denial management solutions, to include diagnostic reviews, operational transformation and outsourcing solutions. If you have any questions about our denial management solutions, please contact Vonda Moon, Principal at vondamoon@sunstoneconsulting.com or Laura Ehrlich, Senior Clinical Specialist at lauraehrlich@sunstoneconsulting.com.