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One item that has not yet received much attention is a guideline addressing the ability of a facility to report or not to report a diagnosis provided by a physician.

What is a facility to do when a physician documents a diagnosis that may be unsupported by the clinical circumstances reflected in the medical record?

If you go by what you read in all of the various guidance and rules promulgated by the Centers for Medicare & Medicaid Services (CMS), you are supposed to always report them … or never report them, depending on your philosophical interpretation. I am speaking specifically of the guideline addressing the ability of a facility and/or coder to independently opt not to report a condition.

To give you a little background on this, I work as a clinical documentation improvement (CDI) consultant. While working with clients, I am quite frequently faced with situations in which they tell me they chose not to report a diagnosis, even though it was documented by an attending physician, because it was not clinically validated.

“Dr. X gives everybody sepsis, and when we review the indicators, they do not really meet criteria for sepsis,” I’ll hear. “What are you doing about it?” I will ask. “Well, we just don’t report it” is the cringe-worthy answer I often receive in return.

Sepsis is not the only culprit diagnosis out there for which I see auditing processes effectively dictating coding rules to clients. I also see this quite frequently happening with conditions such as encephalopathy, complex pneumonia, and respiratory failure, a.k.a. “the usual suspects.”    

There is a section in the guidelines that reads: “the assignment of a diagnosis code is based on the provider’s diagnostic statement that the condition exists. The provider’s statement that the patient has a particular condition is sufficient. Code assignment is not based on clinical criteria used by the provider to establish the diagnosis.”

This represents a catch-22. If the diagnosis is not clinically validated, then both Recovery Auditors (RAs) as well as commercial insurance auditors are going to deny the claim. On the other hand, if the coder or the facility decides not to report the diagnosis, then they are in violation of the coding guidelines, which is also a major problem.

For the moment, let’s ignore the fact that CMS has repeatedly stood behind the idea that auditors do not dictate official policy (that is the purview of cooperating parties) while it continues contracting with RAs that ignore coding and reporting rules and effectively cause the facilities undergoing audits to develop internal policies that are in violation of coding rules. This is not a new problem. This scenario has been playing out in facilities across the country since the late 2000s, and it has gotten to the point where coders and CDI staff are so confused by the auditors that they often no longer are even aware of which rules were actually official guidelines and which rules are actually some facility-specific response to an inappropriate RA rationale. 

Either you violate the coding guidelines or you set yourself up for denials and face financial penalties, which can include being placed on the CMS “naughty list” and dealing with the bad publicity of being on record as having received a large set of denials.

In many cases, the facility’s hands are completely tied. There is no way a health information management (HIM) director or revenue head can go in to work at the start of the day and have any clued what the appropriate policy actually is any more.    

As a consultant, I have solutions. We consultants can educate coders, CDI specialists, and even providers. We can work with physicians and review the clinical criteria that need to be present, along with the current state of the practice and denials landscape. We can talk about an escalation process for poor documentation. We can recommend the formation of a documentation steering committee. We can take a very strong stand that documentation of any of these problematic diagnoses must include certain key clinical elements to pass muster with the current crop of commercial and government auditors.

However, at the end of the day, the physician is going to document what the physician is going to document, and the auditors are going to deny what the auditors are going to deny. The facility? Caught in the middle.

And therein lies the contradiction. On the one hand, the conditions of participation for Medicare prevent the reporting of diagnoses that are not clinically validated – but then the coding guidelines turn around and require providers to ignore clinical indicators and report such diagnoses.

Logically speaking (and I realize that logic is rarely one of the acceptable arguments when discussing audits), one or the other has to give. Either we don’t deny these stays based on medical necessity or we don’t force the facility to report conditions that are not supported by the particular flavor-of-the-month, evidence-based indicators that are considered defensible in the medical record.

When I go to a client and they ask me how they are going to deal with this, I don’t have an answer for them. Presently, there is really no solution. I can’t tell them to ignore the coding guidelines, and by the same token, I can’t tell them to just start reporting all of these diagnoses that are not clinically validated. I can’t answer the question, and I have to meet anyone yet who can. 

One additional noteworthy point is that physicians often use clinical rationale that goes much deeper than these cookie-cutter criteria that make up a two-sentence “McPolicy,” which then forms the basis of all these denials. In at least some of the cases when we are looking at what seems to be an unsupported physician diagnosis, that diagnosis is completely appropriate for the patient, and for good reason. Could this be the rationale behind the guideline that the physician’s diagnosis stands on its own? Quite possibly so. However, issuing such guidance without addressing the denials situation is pure folly, in my opinion.

Probably the worst kept secret in the healthcare industry is that insurance companies and auditors will just deny more than they should and hope that facilities do not have the resources to maneuver through an appropriate appeal. At some point in recent years, a lack of clinical knowledge on the part of someone empowered with payment veto power has translated into grounds for rejection. According to this philosophy, I should just be able to declare the Higgs boson an error. I don’t understand it; therefore, I can just declare it incorrect right?

It seems that ignorance isn’t bliss; but it is, however, grounds for saving money.


Allen Frady, RN, CCDS, CCS

Allen Frady, RN has been in the healthcare industry for over 25 years. He is currently working with 3M as a solutions advisor and specializes in CDI and coding. He is known as an instructor, author, website creator, and podcaster.

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