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EDITOR’S NOTE: The following is part one in a three-part series on outpatient clinical documentation integrity.

There is a great push within the healthcare industry to move clinical documentation integrity (CDI) into the outpatient arena. People refer to this as “outpatient CDI,” but I think this is a misnomer. If you plan on stationing CDI specialists (CDISs) in physician offices, that could be construed as “outpatient CDI,” but I believe the larger issue is whether we should start tending to conditions even if they are not risk-adjusting in the inpatient realm.

In this three-part series, I am going to explain the concept of risk adjustment and how it relates to healthcare quality measures and reimbursement. We will examine hierarchical condition categories (HCCs) and understand how the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) is realigning physicians’ interests with those of the hospitals.

First, we need to understand how we got here.

Inpatient hospital stays are reimbursed according to diagnosis-related groups (DRGs), as opposed to line-item charges. The DRG system was designed in the 1970s to group patients by clinical conditions (i.e., principal diagnosis or procedure) and resource utilization (risk adjustment to take into consideration comorbid secondary conditions). In the 1980s, Medicare adopted the CMS-DRG system, and then 3M developed the All-Patient-Refined DRG (APR-DRG) to account for the severity of illness (SOI) and risk of mortality (ROM) in the non-Medicare patient population.

The current Medicare-Severity DRG (MS-DRG) system came into use in Medicare’s Inpatient Prospective Payment System (IPPS) in 2007, offering a more extensive DRG set with expanded tiers (no CC/MCC; with CC; with MCC). Comorbid conditions or complications, CCs, are somewhat risk-adjusting, and major comorbid conditions or complications, MCCs, risk-adjust more than CCs. The APR-DRG system is four-tiered, with SOI scores of 1-4, for minor, moderate, major, and extreme.

Risk adjustment is a tool used to calibrate payments to health plans based on the relative health of the at-risk populations. It is based on the accurate risk assessment of an individual or group in comparison to the average patient or population.

We are very familiar with this concept in relation to the DRG system: one inputs the principal diagnosis, the secondary conditions, and the procedures, and a sophisticated computer algorithm outputs a “relative weight” (RW). The RW is a numerical representation of the expected consumption of resources based on that patient’s conditions, as compared to the average consumption of resources, which is set as 1.0.

Reimbursement is based on the RW. The system compensates care for sicker, more debilitated, more complex patients at a higher rate because they need more tests, more treatment, and more nursing care, and they tend to be in the hospital longer.

Risk adjustment is also in play when considering quality metrics. My definition of “quality” in medical care is having an outcome as good as or better than the average, most or all of the time. “Value” is defined as quality divided by cost. If you improve outcomes (numerator) or reduce costs (denominator), you increase value.

In quality parlance, the O/E, or “observed to expected” ratio takes a given outcome and assesses how likely it was when compared to a population with that outcome, taking into consideration all contributing factors. A previously healthy 47-year-old man who has a myocardial infarction (MI) is not as likely to die as a hemiplegic 88-year-old with gangrene from diabetes, aspiration pneumonia, and metastatic lung cancer. We suspect this intuitively, but how do we know? Pooling a large cohort of expirations from MI and extracting the conditions that make death more likely. These conditions risk-adjust the expected: the likelihood that this patient will die.

So far, we have only addressed the inpatient, technical side of healthcare, but we must now contemplate the professional fee. Historically, physicians were paid on a fee-for-service basis. The healthcare provider (HCP) gets paid for the evaluation and management CPT® code, according to the level of service he or she administered to a patient, each time, in addition to any other procedures performed that are additionally covered. You see more patients, or you see a given patient multiple times, you get paid more. What benefit would a provider reap from curtailing patient visits in a system that rewards volume? Along these lines, it is improper for a physician to make referrals for designated health services to an entity with which he or she has a financial relationship, according to the Stark Law.

Payers also want to reduce resource consumption. A volume-based system incentivizes ill health and was (is?) threatening to bankrupt the healthcare system. Folks realized there has to be a better way.

Check back next week for the next article in this series when we explore the shift to population health management.


Erica E. Remer, MD, CCDS

Erica Remer, MD, FACEP, CCDS, has a unique perspective as a practicing emergency physician for 25 years, with extensive coding, CDI, and ICD-10 expertise. As physician advisor for University Hospitals Health System in Cleveland, Ohio for four years, she trained 2,700 providers in ICD-10, closed hundreds of queries, fought numerous DRG clinical determination and medical necessity denials, and educated CDI specialists and healthcare providers with engaging, case-based presentations. She transitioned to independent consulting in July 2016. Dr. Remer is a member of the ICD10monitor editorial board and is the co-host on the popular Talk Ten Tuesdays weekly, live Internet radio broadcasts.

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