Early Warning: Hospital Billing Errors Portend Bleakness

Audits rise, revenues fall.

Hospitals across the nation are seeing lower profits, and it’s all because of a sudden tsunami of Medicare and Medicaid provider audits.

Whether it be by Recovery Audit Contractor (RACs), Medicare Administrative Contractors (MACs), Unified Program Integrity Contractors (UPICs), or otherwise, hospital audits are rampant. Billing errors, especially “supposed bundling,” are causing a high rate of insurance claims denials, hurting the finances of hospitals and providers.

A recent report from the American Hospital Association (AHA) found that “under an optimistic scenario, hospitals would lose $53 billion in revenue this year. Under a more pessimistic scenario, hospitals would lose $122 billion, thanks to a $64 billion decline in outpatient revenue”

The “Health Care Auditing and Revenue Integrity 2021 Benchmarking and Trends Report” is an insider’s look at billing and claims issues, revealing insights into healthcare cost trends and why administrative issues continue to play an outsized role in the nation’s high costs in this area. The data used covers more than 900 facilities, 50,000 providers, 1,500 coders, and 700 auditors – what could go wrong?

According to the report,

• A total of 40 percent of COVID-19-related charges were denied, and 40 percent of professional outpatient audits for COVID-19 (and 20 percent of hospital inpatient audits) failed.
• Under-coding poses a significant revenue risk, with audits indicating the average value of underpayment at $3,200 for a hospital claim and $64 for a professional claim.
• Over-coding remains problematic, with Medicare Advantage plans and payors under scrutiny for expensive inpatient medical necessity claims, drug charges, and clinical documentation to justify the final reimbursement.
• Missing modifiers resulted in an average denied amount of $900 for hospital outpatient claims, $690 for inpatient claims, and $170 for professional claims.
• A total of 33 percent of charges submitted with hierarchical condition category (HCC) codes were initially denied by payors, highlighting increased scrutiny of complex inpatient stays and higher financial risk exposure to hospitals.

The top fields being audited were diagnoses, present-on-admission indicators, diagnosis positions, CPT®/HCPCS coding, units billed, and dates of service. The average outcome from the audits was 70.5 percent satisfactory. So, as a whole, they got a “C.”

While this report did not in of itself lead to any alleged overpayments and recoupments, guess who else is reading this audit, and salivating like Pavlov’s dogs? The RACs, MACs, UPICs, and all the other alphabet-soup auditors. The 900 facilities and 50,000 healthcare providers need to be prepared for audits with consequences.

Programming Note: Listen to healthcare attorney Knicole Emanuel’s RAC Report, Mondays on Monitor Mondays, 10 Eastern.