Staunching The Tide of Medical Necessity Denials

The Importance of CDI Involvement in Denials and Appeals

Denials and appeal is a major challenge for hospitals with the Advisory Board’s biennial revenue cycle survey finding that a median 350-bed hospital would have lost $3.5 million to increased denial write-offs from healthcare payers over the past four years. Hospitals wrote off as uncollectable 90% more denials than six years ago, a difference of $3.5 million for a median 350-bed hospital, according to the report. The Advisory Board found that the median for successful denial appeals for hospitals fell from 56% to 45% for commercial payers over the past two years and from 51% to 41% for Medicaid. (Fierce Healthcare Article- November 15, 2017 Denials Rampant. Medical necessity denials continue to grow exponentially as third-party payers become more aggressive in denying care both in the inpatient and outpatient setting as part of a major business strategy to reduce the medical loss ratio, the amount insurance companies pay out for actual care provided compared to the premiums they collect, in the interest of increasing profits and shareholder and C suite annual payouts.

Hospital’s Approach to Addressing Medical Necessity Denials

A hospital’s typical approach to addressing medical necessity denials, DRG down-codes and clinical validation denials is to throw and devote more resources, staff, and acquire more software to manage the onslaught of denials. This approach is a lesson in inefficiencies and futility from the sense the hospital is overlooking and neglecting the addressment of the root cause of these denials, poor and/or insufficient documentation. Claims are placed into this category when the medical documentation submitted is inadequate to support payment for the services billed, as defined by Medicare. Poor and insufficient spans the gamut from lack of documentation, documentation that adds little if any value to the care of the patient, lack of clarity in documentation, cut and paste of documentation creating issues with situational awareness and carry forwards with concerns of contextual consistency. A contensious area that has a strong tendency to breed DRG down-codes and clinical validation denials is Clinical Documentation Improvement Programs, initiatives heavily ingrained in most hospitals as a means of optimizing inpatient DRG revenue. What Chief Financial Officers fail to realize is that present CDI processes are conduits for denials mainly due to the realized fact that CDI programs were never intended or designed to improve actual documentation. Instead, CDI programs were designed and intended to serve as a band-aid approach to documentation improvement, securing the capture of additional diagnoses and/or clarification of nonspecific diagnoses in the interest of producing “optimal revenue” through the MS-DRG assignment. Optimal DRG assignment translates into case-mix increases that produces enhanced reimbursement for the hospital. Often overlooked by CFOs is the notion that increases in case mix are measured in gross patient revenue versus more accurate and reliable net patient revenue, taking into mounting costly denials and the resources needed to appeal with no assurance of success. The underlying limitations and shortfalls of CDI programs centers on the limited effort and capability of CDI specialists to actually improve physician documentation beyond diagnoses capture through the repetitive transactional reactive query process. What is missing is the general lack of enhancement and improvement of the quality, completeness and accuracy of the physician’s documentation describing, showing and telling the true patient story reflective of the patient’s severity of illness, need for hospital level of care and the potential risks and untoward event to the patient without said hospital level of care. In short, what is required is a clear detailed account of all relevant clinical facts, clinical information and context surrounding the care ordered and/or provided accompanied by clear concise documentation by the physician of his/her clinical judgment, medical decision making and thought processes.

Medical Necessity Denials-A Unique Challenge

Medical necessity denials present unique challenges to mounting a successful effective appeals campaign for lack of supporting clinical documentation in the record. Medicare defines this category of denials as when the contractor reviewers receive adequate documentation from the medical records submitted to make an informed decision that the services billed were not medically necessary based upon Medicare coverage and payment policies. This lack of supporting clinical documentation can be appropriately addressed through transformation of current clinical documentation improvement program processes from one predicated upon transactional reactive processes to one more closely aligned with the revenue cycle that embraces proactivity and a tailored balanced approach to documentation improvement that achieves meaningful measurable positive change in physician overall behavioral patterns of documentation. The crucial first step in driving real improvement in documentation is to reengineer, refocus, redirect and rebrand current CDI efforts, recognizing the urgent need for wholesale directional change in CDI.

Effectively staunching the tide of tremendous revenue leakage associated with increasing medical necessity denials requires a refreshing novel approach that gets to the root cause consisting of poor and insufficient documentation. Medicare under its annual CERT program report highlighting the annual Fee-For-Service Improper Payment Rate consistently identifies insufficient documentation as accounting for the majority of medical necessity denials. The best course of action to mount that will directly address these medical necessity denials is to design, organize, plan and execute a focused strategy for transforming present day CDI initiatives into a program that engages physicians in a participatory manner in truly wanting to improve their communication of patient care for all the right reasons. In my next blog, I will outline the steps necessary to initiate this extremely time sensitive strategy. Time is of the essence as medical necessity denials continue to mount in most healthcare facilities contributing to lost net patient revenue opportunities and increased cost to collect associated with the denials and appeals process.

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