Line Item Disallowances And Coding Denials

King & Spalding
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Health plans are using both new and old methods to deny healthcare providers’ claims, all of which are legally and factually unsupportable. These tactics have repeatedly been rejected by arbitrators in scores of arbitrations, yet the health plans continue to use them to deny payment due providers. This is likely due to the unwillingness of providers to challenge these tactics.

Line-Item Disallowances

Since 1998, health plans have tried to line-item disallow certain charges on hospitals’ bills on the grounds that the charges are for “routine” services, or on the grounds that the charges should be included in a room charges or in a charge for another service. For example, the health plans have asserted that charges for oxygen should not be separately billed for services provided in an ICU on the grounds that most patients in ICUs need respiratory services. They have also asserted that charges for items such as venipuncture should be included in the charges for laboratory tests or that saline solution should be included in the charges for medications.

The genesis of this problem started when a publication called St. Anthony’s Chargemaster Guide incorrectly cited to a Medicare Provider Reimbursement Manual as support for the argument that certain charges were “routine” charges. The Medicare Provider Reimbursement Manual made no such assertion, and, on the contrary, provided that hospitals can establish their charges as they see fit. Furthermore, the Medicare Provider Reimbursement Manual applies only to Medicare cost reporting issues and has nothing to do with (a) how Medicare reimburses claims or (b) how commercial claims should be charged or reimbursed.

Health plans also inappropriately use the National Correct Coding Initiative (“NCCI”) edits to deny charges on hospitals’ commercial claims. For example, plans will deny certain radiology charges for emergency room patients if coding modifiers are not used. The NCCI edits do not apply to commercial claims, do not apply to inpatient claims, and do not set “industry standards” for billing and payment of commercial claims.

Attorneys in our law firm have litigated this issue successfully in numerous arbitrations against every major health plan. In no case in which we have been involved has the arbitrator held that it is “industry standard” not to charge separately for such items, or that the contracts permitted the health plans to disallow these charges. Some health plans have revised their hospital agreements to expressly provide that they can disallow some items, but most have not. While hospitals could choose to include many items and services provided to patients in their room charge, regardless of whether the patient actually receives the items or service, most hospitals choose not to do so because (a) it is improper to charge for items or services not provided to a patient and (b) it is easier to track inventory based upon the usage of individual items and services. Hospitals continue to lose substantial amounts of money due them due to the improper practice of line item disallowances.

Evaluation and Management Downcoding

Health plans are also denying payments due hospitals by improperly asserting that the hospitals are not coding their claims correctly. For example, some plans, like United HealthCare and Kaiser, are downcoding Evaluation and Management (E&M) levels for emergency room claims using an Optum Emergency Department Claims Analyzer. We have shown the inappropriateness of these downcoding edits in specific actions we have handled for clients. The Optum Claims Analyzer is only programmed to reduce the levels coded; it never identifies under-coded claims.

The Centers for Medicare and Medicaid Services (CMS) has stated that each facility must develop its own policy and procedure for assigning ED facility E&M codes. CMS declined to establish national guideless for facility E&M coding and recognized that there are factors unique to each facility system that make utilizing a national system unlikely to accurately reflect resource utilization by each facility. These principles were published in the CMS 2008 Outpatient Prospective Payment System (OPPS) and indicate that the coding guidelines developed by facilities for selecting ED E&M levels should:

1. Follow the intent of the CPT code descriptor in that they should be designed to reasonably relate the intensity of hospital resources to the different levels of effort the code represents.

2. Be based on hospital facility resources. They should not be based on physician resources.

3. Be clear to facilitate accurate payments and be usable for compliance purposes and audits. To determine whether your guidelines are clear and usable, ask someone who uses them to explain the tool.

4. Meet Health Insurance Portability and Accountability Act requirements.

5. Require only documentation that is clinically necessary for patient care.

6. Not facilitate upcoding or gaming.

7. Be written or recorded, well documented, and provide the basis for selection of a specific code.

8. Be applied consistently across patients in the clinic or ED to which they apply.

9. Be flexible.

10. Be readily available for Financial Intermediary or, if applicable, Medicare Administrative Contractor review.

11. Result in coding decisions that could be verified by other hospital staff members, as well as outside sources.

As long as hospitals follow these guidelines, they can establish their own systems for coding ED claims.

The EDC Analyzer is a system developed by Optum that, according to its website, “systematically evaluates each ED visit code in the context of other claim data (i.e., diagnosis codes, procedure codes, patient age, and patient gender) to determine if it reasonably relates to the intensity of utilized hospital resources.” This system is an algorithm that utilizes what it deems “standard costs” (based on patients’ demographic characteristics and presenting problem diagnosis code from the facility’s claim), “extended costs” (based on the CPT codes from the facility claim for services provided), and “patient complexity costs” (based on principal and secondary diagnosis codes from the facility’s claim). In our view, the EDC Analyzer violates the first 2 of the 11 principles established by CMS by diluting the emphasis on “intensity of hospital resources” and focusing two of its three algorithm components on diagnosis coding. We believe this is inappropriate according to the official guidelines for outpatient coding. By relying on the EDC Analyzer to determine an ED facility E&M level, the health plans are placing emphasis on the diagnoses coded rather than the resources utilized by the facility, which runs counter to the CMS principles for ED facility E&M level selection.

DRG Downcoding

Some health plans are using outside vendors to provide “overpayment identification services.” These companies will request medical records from the provider within a particular timeframe (e.g. 21 days), and if the records are not provided timely, they will deny the claim. If the medical records are provided timely, the vendor will review the records to determine if the claim was over-coded; they never review the medical records to determine if a higher intensity DRG should have been coded. The reason why these companies only look for over-coded claims is that they are paid based on a percentage of the amounts they “save” for the plan, i.e., the amount of the reduction in the reimbursement. This may violate state laws.

In cases we have reviewed, we have determined that in many, if not most, cases the vendors have incorrectly downcoded the DRGs. In many cases, the reviewing company simply ignores certain information in the medical records. For example, in one case, the vendor changed the DRG of 383 with Severity of Illness (“SOI”) of 3 to 2 on the grounds that the secondary diagnosis of moderate protein calorie malnutrition should have been excluded. The reviewer ignored laboratory tests showing low levels of albumin (which can indicate malnutrition).

Another example is where the reviewing company changed the principal diagnosis from COPD with exacerbation to acute chronic combined systolic/diastolic heart failure. While both diagnoses were on discharge summary, the COPD was the primary reason that the patient went to the emergency room that day and was the primary focus of the treatment. While the patient previously had heart failure, it was not the primary diagnosis for purposes of coding. The “overpayment identification” vendors are motivated to change the principal diagnosis, in order to generate refund requests from the hospital.

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While challenging denied charges or downcoding of claims can be time-consuming and frustrating, we urge providers to review and challenge these plan practices, as it may be costing you tens of thousands, if not millions, of dollars.

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