Achieving Compliant Medicare Billing By Focusing On What Government Monitors Focus On

With so much focus within the federal government on abuse, fraud, and waste, I thought it might be helpful to review a couple of federal compliance requirements that are directly applicable to clinical documentation integrity (CDI) and coding professionals.

The Office of Inspector General (OIG) within the U.S. Department of Health and Human Services (HHS) publishes guidance to support compliant billing within federal healthcare programs via “the General Compliance Program Guide (2023).”

Many healthcare organizations lack clear policies and procedures defining the roles, responsibilities, and processes associated with CDI activities, one of the OIG’s recommendations. Having such guidelines in place:

• Creates standardization, both within and across clinical revenue cycle teams;
• Provides a rubric of performance expectations; and
• Supports compliant coding and billing practices, which can minimize human error, a frequently cited reason when billing errors are identified through federal audits.

Although most hospitals offer general compliance training (i.e., on HIPAA, the Health Insurance Portability and Accountability Act), many fail to offer role-specific compliance training, another OIG recommendation. Compliance risk areas applicable to CDI and coding professionals include:

• Billing;
• Coding; and
• Quality of care.

OIG guidance recommends that such training occur during onboarding, as well as annually. Education should be multifaceted and designed to address the specific needs and risks of the hospital or health system, e.g., billing, coding, documentation, and medical necessity. It is recommended that compliance training be a condition of continued employment and included as an annual performance criterion.

There are many resources available to identify general compliance risks identified by Centers for Medicare & Medicaid Services (CMS) contractors. Conducting audits based on these risk areas can help hospitals identify topics for compliance education. According to the OIG, there is much opportunity within the Inpatient Prospective Payment System (IPPS) for manipulation or “gaming” to increase revenue from Medicare beneficiaries. The OIG has found that “gaming” takes two principal forms:

• Optimization
  • The OIG defined optimization as strategies that adhere to coding rules but maximize hospital reimbursement through selection of the most expensive principal diagnosis (or adding secondary diagnoses). Optimization is a compliant practice permitted under the structure of the IPPS system.
• Diagnosis-Related Group (DRG) “creep” occurs when coding practices deviate from coding rules. This includes:
  • Misspecification: The attending physician lists an incorrect principal diagnosis, secondary diagnosis, or procedures on the attestation sheet.
  • Miscoding: The hospital assigns incorrect numeric codes to diseases or procedures correctly attested to by the attending physician.
  • Resequencing: The hospital substitutes a secondary diagnosis for the correct principal diagnosis.

In the 2000 fiscal year (FY), CMS implemented two programs that track error rates for Medicare Fee-for-Service (FFS) claims: the Hospital Payment Monitoring Program (HPMP) and Comprehensive Error Rate Testing (CERT) program.

The Hospital Payment Monitoring System (HPMS) establishes the Medicare paid claims error rate for inpatient acute-care hospitals on a state and national level, and provides statistical and administrative data for use in reducing improper admissions and payments. A key component of this program is the Program for Evaluating Payment Patterns Electronic Report (PEPPER), which is currently suspended, to allow CMS to redesign the program to enhance education, usability, and impact.

The CERT program reports its estimate of Medicare improper error rates to Congress annually. Medicare Part A IPPS billing accounted for 12.1 percent of the improper payment rate. The 2024 report identified the top three services with the highest projected improper payment rates as:

• MS-DRGs 469 and 470, Major hip and knee joint replacement or reattachment of lower extremity;
• MS-DRGs 273 and 274, Percutaneous intracardiac procedures; and
• MS-DRGs 266 and 267, Endovascular cardiac valve replacement and supplement procedures.

Noteworthy nonmedical MS-DRGs with high improper payment rates attributed primarily to incorrect coding and medical necessity (which is impacted by assignment of the principal diagnosis) include:

• MS-DRGs 291-293, Heart failure and Shick (41.6 percent for coding and 58.4 percent for medical necessity);
• MS-DRGs 177-179, Respiratory infections and inflammations (22.3 percent for coding and 54.7 percent for medical necessity);
• DRGs 056 and 057, Degenerative nervous system disorders (3.7 percent for coding and 67.4 percent for medical necessity);
• MS-DRGs 682-684, Renal failure (13.5 percent for coding and 44.8 percent for medical necessity);
• MS- DRGs 971 and 872, Septicemia or severe sepsis without mechanical ventilation, greater than 96 hours (90.8 percent for coding and 7.5 percent for medical necessity);
• MS-DRG 312, Syncope and collapse (9.0 percent for coding and 81.9 percent for medical necessity); and
• MS-DRG 689 and 690, Kidney and Urinary tract infection (47.7 percent for coding and 52.3 percent for medical necessity).

When focusing only on coding, the top services with incorrect coding errors include the following MS-DRG families:

• Septicemia and severe sepsis without mechanical ventilation, greater than 96 hours;
• Heart failure and shock;
• Simple pneumonia and pleurisy;
• Intracranial hemorrhage or cerebral infarction;
• Kidney and urinary tract infections;
• Gastrointestinal hemorrhage;
• Extensive OR procedure unrelated to principal diagnosis; and
• Respiratory infections and inflammations.

A key best practice is for organizations to audit a random sample of claims billed within MS-DRGs at risk for improper payment to identify and prevent billing errors.

There are other Medicare contractors that also publish data and education about conditions at risk for improper billing, like the Medicare Administrative Contractors (MACs) and Recovery Auditors (RAs). These are great resources for a hospital review process as well.

Primary areas of audit include coverage determination (medical necessity), which requires clinical review judgement, and coding determinations. Medicare contractors will determine that an inpatient claim is correctly coded when it meets all the coding guidelines listed in the International Classification of Diseases (ICD) Guidelines, Coding Clinic for ICD, ICD policy, Local Coverage Determinations (LCDs), or any coding requirements listed in CMS manuals or MAC articles. Performing these types of internal audits can be tedious, but necessary, to avoid willful ignorance, which can be the basis of a False Claims Act investigation should a trend of inaccurate billing be identified through review.  

It is also important to point out that technically, Medicare auditors do not perform clinical validation reviews. The most recent Recovery Auditor Scope of Work states that “clinical validation (a process that involves a clinical review of the medical record to ascertain whether or not the patient truly possesses the conditions that were documented) is prohibited by all RAC reviews.” However, Livanta, the Medicare contractor that performs reviews on high-weighted DRGs, stated that their audits may involve a clinical review by physicians.

The physician reviewers “determine the clinical validity of physician queries, documented diagnoses and procedures, and the medical necessity of the inpatient admissions.”

Understanding what audits can be performed by Medicare contractors and the resources they use can assist hospitals in developing compliant billing programs. The internal findings can be used to build strong foundational practices or highlight where remediation may be needed.

An added benefit of a strong monitoring process is the confidence to appeal denials by other payors that often challenge the same types of claims.

Programming note:

Listen live today when Cheryl Ericson delivers the CDI Report on Talk Ten Tuesday, 10 AM with Chuck Buck.