An estimated 20 percent of all healthcare claims in the U.S. are denied each year. The financial impact for some hospitals is estimated to be in the range of $250 million annually.

When denials are appealed, success rates can vary from 55 to 98 percent.

Some hospitals are moving from denial management to denial prevention by addressing the root causes of denials and acting on them.

The root causes may vary from hospital to hospital, but about 90 percent of denials can be prevented, and roughly three out of four denials are recoverable.

But we must keep in mind that the cost of the denial management process, even if it’s considered efficient, represents to some extent a financial loss.

Regarding ICD-10, among other things, we have to keep in mind that the flexibilities surrounding unspecified codes are long gone, and each diagnosis must be coded to the highest level of specificity. Most issues related to ICD-10 and denials can be addressed by a proactive clinical documentation integrity (CDI) program.

A personal interaction between clinical documentation specialists, with physicians and advanced practitioners involved, is extremely important and should occur as often as possible. Non-leading verbal queries, as a concurrent process, provide a unique opportunity for on-the-spot education, reducing the need for written queries and saving the physicians’ time. This is not only an opportunity for diagnosis clarification, but also for clinical validation.

We cannot stress enough the impact of complete and accurate clinical documentation as it pertains to the reduction of denials. The physician needs to document the thought process regarding differential diagnoses and the treatment plan, and document in detail the severity of illness, the care required, and the risk of complications and mortality.

This is particularly true when the denials are linked to diagnoses such as acute respiratory failure, acute kidney failure, encephalopathy, and hyponatremia, to name a few.

Good clinical documentation is also vital when dealing with denials by algorithm. These are computer-generated edits used by some insurance companies to reduce payments by arbitrarily removing complications and comorbidities (CCs) and major complications or comorbidities (MCCs) recorded in the medical record and also downgrading the DRGs, and consequently, reducing reimbursement.

On the other hand, studies have shown that medical necessity is the most commonly encountered source of denials, post-ICD-10 implementation.

It is obvious to me that, with the exception of fraud and abuse, almost everything that is done for the patient during a hospital stay is necessary. The big issue is the level of care (LOC): outpatient observation versus inpatient stays.

Without going into details about topics like the two-midnight rule, the key question to the attending physician should be: “Are inpatient services justified for the severity of illness and intensity of care provided, or observation services are appropriate?”

Utilization review nurses, case managers, and/or physician advisors should make clear in the conversation with the attending that the question is not about competence or the delivery of care, but simply assignment of appropriate LOC for compliance and reimbursement purposes.

If this dialogue is not successful, then the determination of medical necessity can be made by a physician advisor, according to the utilization review conditions of participation.

As a quick reminder, the Recovery Audit Contractors (RACs) are back, so fasten your seat belts and let’s get ready.

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