“Never attribute to malice that which is adequately explained by stupidity.”-Hanlon’s razor

“Never attribute to malice that which is adequately explained by stupidity.” --Hanlon’s razor

Do you engage in peer-to-peer (PTP) discussions? That may sound like a rude question, but it’s not. Do you or your hospital participate in PTP discussions of claims denied by payers? Is it productive? How do you measure outcomes? Should you participate in PTP discussions?

I’ll start with some examples of PTP “gone wrong.” You’re probably thinking I’m going to describe “failed” PTPs: the ones without an overturn. That’s not what I’m going to do. I’m going to share examples of a growing occurrence of “successful” PTPs with paradoxically adverse financial outcomes. The examples are based on real cases shared by colleagues from denial management and revenue integrity. The names have been changed to protect the foolish.

  1. A physician successfully overturned a denial on a zero-midnight stay. There were high-fives all around because no one thought a denial of such an inpatient stay could be overturned. The hospital CFO had already determined that he wouldn’t bother to appeal if the PTP was unsuccessful. The claim would simply be re-billed.

The stay was due to a transfer. The final coded DRG was a shared DRG (there are 270 of these). The transferring hospital got significantly less than an observation payment because of the “share.” The hospital has no A-B rebilling option, since thanks to the “successful” P2P, the claim is no longer denied.

This is admittedly a complex situation, and potentially, a novel application of transfer Diagnosis-Related Group (DRG) rules. But is it possible that the medical director knew this and discovered a way to “throw the physician a bone” while reducing payment? I have an image of the physician snickering at this, interpreting it as “sticking it to the payer.” I also have images of the medical director thinking this is like shooting fish in a barrel.

Transfer rules are complex. A summary can be found here in the Centers for Medicare & Medicaid Services (CMS) MLN Matters No. SE21001.

  1. Another colleague shared a story of a “successful” P2P overturn. At the time of the P2P, no one had recognized that the claim was a readmission. It wasn’t the same hospital and same day, but it was only a few days and the same DRG. The CFO was understandably pleased.
    Subsequently, the hospital received a denial for the readmission. Had someone noticed that the second claim was a readmission, it might have been determined to have been better to rebill one of the claims and collect something for each. The hospital has appeal rights, but readmission denials for the same DRG with short intervals are very hard to overturn.
  2. Finally, a colleague shared a story about a P2P for a case they had no hope of overturning. The physician was known to be very aggressive about PTP discussions and took almost all of them. The denial was not overturned. When the denial reached his appeals team, they said it would be a complete waste of time to appeal. The failed P2P did little more than delay resubmission of the claim. It also added expense and decreased margin on the lower reimbursement.

If those examples aren’t enough to cause reconsideration of PTP discussions, here are some more reasons not to participate in PTP discussions.

  1. They’re labor-intensive. Physician time is generally the most expensive time spent outside of the C-suite. The only thing worse than preparing for a PTP and then the endless waiting for a medical director to call is having the medical director not show up during the four hours reserved for the call. PTP is an expensive investment.
  1. An appeal doesn’t require a physician. A well-trained non-physician can effectively manage an appeal. For example, an experienced “appeals nurse” can have the extensive contractual and regulatory knowledge to manage the appeal at a lower price, thereby preserving margin.
  1. Lost opportunity. Every minute spent preparing is time a physician can’t be doing something else – anything else – that might have more, or at least measurable, value. This could be anything from patient care to valuable administrative duties to physician coaching.
  1. Most physicians (including payer medical directors) conducting PTP discussions do not have the necessary extensive understanding of payer contracts and controlling regulations related to the delivery of care, coding, billing, and reimbursement, to allow the discussion to be reliably successful.
  1. There’s no “paper trail.” Any verbal agreement between the provider representative and the medical director is worth the paper it’s printed on. Further, there’s no way to analyze or track payer rationale.
  1. Reimbursement may not be subject to payment timelines. Contracts often address timeliness of payment for overturned denials. PTP discussions, unless specifically addressed, may not be considered a successful appeal.
  1. Payers may not have to treat PTP as an “appeal.” In this case, the payer can essentially hide the denial and subsequent overturn from stakeholders. If a long-term goal for a provider is decreasing predatory payer behavior, it might be worth imposing as much fiscal pain as possible on the payer.

The historic reason for PTP has been “we get our money sooner.” But few CFOs know that to be true. Many do not track timeliness or accuracy of payment after PTP. CFOs should understand the impact of PTP on finances. PTP isn’t an alternate pathway “easy button.” It’s a component of an effective revenue integrity program. As we’ve seen, sometimes a “successful” PTP results in lower payment, margin erosion, or longer accounts receivables (ARs). Few CFOs have conducted robust analysis of the impact of PTP programs, and particularly the paradoxical adverse impacts of some “successful” PTP discussions. Ironically, many CFOs have in-depth knowledge of the hospital appeals process. But the CFO may not consider PTP part of appeals.

Overturn rates for appeals are closely monitored by CFOs and most revenue cycle teams. These rates are important to understanding the appeal selection process. Very high overturn rates are often associated with “cherry-picking.” It’s a reasonable assumption that the relationship between appeal rates and appeal success is inverse. Indiscriminate appeals without regard to “appealability” reliably result in lower overturn rates, and in the extreme, may adversely impact finances despite apparent “wins.”

A 100-percent overturn rate on PTPs (or even appeals) seems amazing. But it’s not. It’s a measure of payer competence and predatory behavior. Consider inpatient status denials. Status is a bimodal decision which, in theory, should be correct 50 percent of the time just by flipping a coin. A 100-percent overturn rate indicates a decision-making technique that is far worse than random decisions. These invidious denials would almost certainly be overturned on appeal. If they can be overturned on appeal with less margin erosion and a clear paper trail, why conduct a PTP discussion? The balance seems to be between an unknown increase in AR associated with an appeal and an equally unknown increase in AR associated with PTP.

Hospitals should take steps to employ PTP discussions as an integrated component of a strategic revenue cycle program. As noted above, physician time is the most expensive outside the C-suite. Physicians are often the most expensive resource a facility has outside of pharmaceuticals, facilities, and some capital equipment.

Hospitals should subject PTP discussion to the same fiscal scrutiny as other revenue cycle components. CFOs should know the impact of PTP on AR and proper payment. CFOs should compare the margin (erosion) associated with PTP against margin associated with the time-value of money through a traditional appeal. This comparison must also account for any late payment and interest accrued through the appeal process.

PTP is an expensive strategy, and should only be deployed strategically. Sometimes “sooner” money isn’t “better” money.

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John K. Hall, MD, JD, MBA, FCLM, FRCPC

John K. Hall, MD, JD, MBA, FCLM, FRCPC is a licensed physician in several jurisdictions and is admitted to the California bar. He is also the founder of The Aegis Firm, a healthcare consulting firm providing consultative and litigation support on a wide variety of criminal and civil matters related to healthcare. He lectures frequently on black-letter health law, mediation, medical staff relations, and medical ethics, as well as patient and physician rights. Dr. Hall hopes to help explain complex problems at the intersection of medicine and law and prepare providers to manage those problems.

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