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On March 10, President Obama issued an executive memorandum to the heads of federal executive departments and agencies, directing them to “expand their use of Payment Recapture Audits, to the extent permitted by law and where cost-effective.”

“Payment Recapture Audits,” a newly coined term, refers to the efforts of various entities to collect payments made “in error.” During the last several months we have witnessed a rapid upswing in denials from a variety of these entities. In a prior article, I addressed the DRG validation process and how we were observing new challenges to correctly coded diagnoses.

J. A. Thomas & Associates (JATA) began to receive from our clients examples of unprecedented, creative repayment demands from the denial industry. It is apparent that the current guidelines for compliant, consistent, sufficient, non-conflicting and clinically supported diagnoses have been subjected to new interpretations and applications. In other words, citing previous practice based on official guidelines is no longer sufficient to prevent demands for repayment.

The issue for many hospitals is not whether such denials ultimately can be won on appeal, but rather the staff expense of going through a lengthy appeals process.

To assess national trends, we have requested that client hospitals send us examples of the types of denials they currently are experiencing. Remember, these are cases selected by hospitals to illustrate what they feel is an inappropriate denial process. We subsequently have aggregated and analyzed these responses, including an assessment of which contractors were involved.

Our initial findings reveal the following:



While this initial data is limited, it is clear that certain RACs and QIOs seem to be “out front” in developing innovative denial strategies. While a given hospital may not have been subject to any of these specific strategies yet, understanding what is occurring across the nation can give advanced warning of potential denials. Clearly, commercial payers and state Medicaid review agencies also have entered the fray.

Principal Diagnosis Denials

Principal diagnosis denials are most common, with certain diagnoses shown above being primary targets.  Acute respiratory failure is a principal diagnosis with generally accepted criteria, including observed clinical findings. The challenge here often is that acute respiratory failure is present at the time a decision to admit is made, but it is documented poorly by the subsequent treating physician performing a history and physical later in the day – often after the acute symptoms requiring admission have improved markedly. Clearly, the emphasis here must be on accurate concurrent documentation at time of admission. Sepsis is another diagnosis “under fire.” This is due in part to reviewers challenging whether the patient was “sick enough” to warrant the diagnosis, whether or not he or she met appropriate diagnostic criteria.

One example of a particularly innovative denial approach involved a patient admitted with an “elevated troponin.” A hospitalist documented “elevated troponin” and consulted a cardiologist, who made the clinical diagnosis of a “subendocardial myocardial infarction,” which was well-documented.  The hospitalist, however, continued to document “elevated troponin.” The coder appropriately coded the patient’s principal diagnosis as “subendocardial myocardial infarction,” the condition warranting admission to the hospital. On review, the DRG assignment for the myocardial infarction was denied on the basis of “conflicting diagnoses” between the hospitalist and the consultant, with the admonition that the coder should have identified the “conflicting diagnoses” and selected the hospitalist’s diagnosis – which is not a diagnosis at all. If the hospital did not appeal or perhaps lost an appeal, what is the proper next step? Should the hospital remove the coding of the MI? Does the medical record now accurately reflect the patient’s clinical condition? The quality implications of creative denials are substantial.

Procedure Code Denials

All 12 procedure code denials related to excisional debridement, for which explicit documentation frequently is lacking. There were a handful of medical necessity denials reported as well. The number of those under-represents the incidence of these denials, however, as client hospitals reported only those that appeared unfounded. Of all the denials we reviewed, we determined that 67 (63 percent) warranted appeal, in 37 cases we did not have sufficient information to determine whether an appeal was warranted, and only two cases did not appear to warrant appeal.  Remember, though, this is a select subset of denials, specifically those that clients felt were unfounded or inappropriate.

Common denial themes included “leading queries,” unconfirmed diagnoses not restated as unconfirmed on discharge, and selection of principal diagnosis.

A New Approach

The traditional approach has been to identify ambiguities in the medical record, bring them to the attention of treating physicians, and request documentation clarification. A more global approach looks at clinical documentation from all perspectives. For example, is there a diagnosis in the medical record that appears unsubstantiated, or perhaps is there documentation that could suggest a “conflict” between the attending physician and consultant? If such ambiguity can be corrected concurrently, the risk of subsequent denial decreases substantially. Here’s an example:

Progress note: 65-year-old female with history of COPD presents to the hospital with an acute exacerbation, acute respiratory failure. Will initiate IV Solu-Medrol, nebs, pulmonary toilet. ED nurses note: RR 20.

Issue:  during concurrent review the clinical documentation specialist noted the ED nurse’s documentation of a respiratory rate of 20, inconsistent with the diagnosis of acute respiratory failure (an erroneous entry).

Documentation clarification: please document your clinical findings and clinical judgment supporting your diagnosis of acute respiratory failure.

Subsequent physician progress note: the diagnosis of acute respiratory failure is based on an oxygen saturation rate of 77 percent on room air and 89 percent on 2L with a respiratory rate of 36. Patient has a past medical history of end-stage COPD. Accessory muscle usage was noted in the emergency room and patient was noted to be in a tripod position, cyanotic and retracting. Patient was placed on a non-rebreather mask in the ER. The ED documentation of a respiratory rate of 20 was erroneous.

The goal is to create a “bulletproof” medical record, ensuring the production of documentation that will stand up to creative denials for “conflicting” documentation, documentation “not sufficiently clinically supported,” “leading” queries, or physician reviewer denials for disagreement with documented diagnosis.

Fundamentally, the goal is to create a medical record that reflects the actual medical condition and diagnosis as accurately as possible to avoid the elimination of accurate clinical documentation by overzealous reviewers.

About the Author

Paul Weygandt, MD,  JD, MPH, MBA, CPE, has more than 20 combined years of experience in medical management, legal counsel and orthopedic surgery. He has served as a hospital VPMA, improving documentation across all DRG payers. Dr. Weygandt is vice president of physician services for J.A. Thomas & Associates and is a partner in the firm.

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To read the next article, “I’m “Shore” This Isn’t the Final Word on the 3-Day Billing Window,” please click here


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