Don’t Let Bad Medical Coding Drain Your Practice

Don’t Let Bad Medical Coding Drain Your Practice

Stop the downward flow of revenue by using accurate reporting and auditing of physician services.

The cost of doing business keeps going up and payer reimbursement keeps going down. Your practice can’t afford to lose thousands of dollars through needless waste and inefficiencies. But if you’re using inaccurate or outdated medical coding practices, that’s exactly what’s happening.

Internal medical coding audits accomplish four key business goals:

  1. Improve transparency on business process improvement that allow for more consistent and reliable coding evaluations
  2. Achieve and maintain high-quality information and data integrity
  3. Improve revenue integrity
  4. Satisfy compliance plan requirements

Signs of a Successful Audit

Medical coding audits should evaluate whether the practice is able to retrieve specified data in the encounter sample in a timely manner and whether the documents retrieved are complete and accurate with supporting information.

Audit how well your electronic health record (EHR) system can retrieve specified records and supporting documentation in a given timeframe. Producing more records than requested counts as a fail. If the records provided are for the correct patient, but the date of service isn’t what you requested, or if the record is incomplete, that’s a fail.

Auditing for Continuous Improvement

How often your healthcare organization performs audits depends on different variables. A high volume of cases or problematic specialties may require more frequent audits. Best practice is to perform internal audits on a quarterly basis and external audits annually to validate internal audit consistency. For audits conducted across various specialties, use a stratified random sampling approach to determine the sample size.

Also, determine the scope of the audit and whether to use internal or external auditors and how the quality assurance and quality control will be performed.

Some things to audit records for include:

  • Accuracy
  • Completeness
  • Inaccurate or erroneous coding
  • Missing codes
  • Inaccurate sequencing of diagnosis codes
  • Down-coding and up-coding
  • Correct use of modifiers
  • Correct assignment of procedural
  • Diagnostic
  • DRG assignments

When performing a coding audit, make sure to audit Medicare and Medicaid encounters separately.

Look for Fraud

Inaccurate coding can result in revenue loss from denied claims, partial reimbursement, and overtime for staff resolving denials and improper payments. It can also pose more serious consequences such as fraud.

Fraudulent coding includes:

  • Up-coding (coding services that reflect a more resource-intensive level of care than what is delivered)
  • Down-coding
  • Coding for services not rendered

Consequences for violating the False Claims Act (FCA) can be severe. For example, if the Centers of Medicare & Medicaid Services (CMS) suspects your claims have been up-coded, according to the MLN Booklet, Medicare Fraud & Abuse: Prevent, Detect, Report: “Civil penalties for violating the civil FCA may include recovery of up to three times the amount of damages sustained by the Government as a result of the false claims, plus penalties up to $22,927 (in 2019) per false claim filed.”

Bad Coding Chart

Look for Down-coding and Up-coding

Down-coding is the practice of deliberately selecting a billing code that is lower than the services rendered. A large amount of collections is lost due to evaluation and management (E/M) visits coded to incorrect levels. A single healthcare provider can lose approximately $40,000 a year in revenue, for example.

Many coders are cautious and conservative in E/M coding out of fear of Medicare audits. Consistent under-coding, however, can also trigger payer audits. The government and commercial insurance companies analyze coding trends, and when higher than normal code usage is reported, they may call for an audit to be conducted on your practice. An open and friendly office atmosphere will help coders feel comfortable communicating potential risks and challenges to their manager.

Look for Missed Opportunities

A large amount of revenue can be lost through missed charges. CMS reports that 30 percent of submitted claims are either ignored or denied when they are first submitted to insurance companies. Of those, 60 percent are never appealed, which means lost revenue for that practice.

These errors occur when codes are not assigned for services rendered. Other factors that contribute to revenue loss are lack of discipline in collecting patient receivables, poor denials management protocols, and under-trained staffing.

Having a thorough record of care is critical for reimbursement. EHRs can help reduce coding inaccuracies if your system has coding compliance editors or suggests codes based on provider documentation, which is then confirmed by a trained medical coder.

Analyze the Results

After the audit is complete, analyze the data with automated tools to draw inferences from coding correlations and outliers in the results. For example, compare accuracy data by specialty to see which departments or provider types have the most inaccuracies, and compare trends between coding inaccuracies and reimbursement, etc. This can be done by determining the costs associated with the codes that failed the audit. Measure this dollar amount by the potential loss in reimbursement for inaccurate coding, which in most cases also leads to fraud cases, claim denials, and an increase in appeals. Present the results to practice administrators and responsible stakeholders in an easy-to-understand and meaningful way. Always determine what must be done to correct the problems identified in the sample data. If you find that your sample error rate is greater than 10 percent, consider broadening the scope of your sample data.

When analyzing the data, draw inferences and trends among inaccurately coded data and the level of success in record retrieval. Price the procedure codes to determine financial liability and identify areas of improvement. Internal medical audits should be performed on a continuous basis once errors are identified.

Stay Educated and Follow Protocols

Lastly, make sure your staff is well trained and adheres to established coding procedures. It’s essential that auditors are current with their coding and/or auditing certifications and have hands-on experience in coding. Auditing with code books and tools that are applicable to the encounter dates being audited is also a must. Even the best coding and auditing protocols are worthless if your staff cannot follow them.

Classes are offered at AAPC and colleges throughout the country. Education and training are not just for coders. If your providers also code, they should be educated on changes within the industry. Providers should understand the differences between Medicare’s 1995 and 1997 Documentation Guidelines for Evaluation and Management Services, as well as the new E/M coding changes coming down the pipeline over the next couple of years.

Prevention Is the Best Medicine

Develop a system for auditing your medical coding and keep track of inaccurately coded encounters and the reasons for the inaccuracies. This will help safeguard your practice against future denials by increasing awareness among staff of avoidable mistakes. Preventing coding errors is the key to increasing your practice’s overall financial health.

The Important Role of Medical Coding

Coding impacts both upstream and downstream healthcare administrative functions, the implications of which reach far beyond typical billing and collections activities within the healthcare revenue cycle, to play an essential role in delivering high-quality, cost-effective healthcare.

The use of coded information can be divided into four main categories:

Financial: Statistical data from medical codes are used in payer relation negotiations and contractual agreements. Insurance companies use coded data to determine medical coverage for new admissions and scheduled visits through a pre-certification process. Payers also use coded data to determine reimbursement in various payment models such as fee-for-service and value-based purchasing. Approximately 35 percent of an average medical practice’s total revenue comes from patient receivables, according to “Hospital Revenue Cycle Operations: Opportunities Created by the ACA.” This means thousands of dollars can be lost yearly if follow-up on outstanding balances from claims payment and denials is not done.

Medical: Codes are used to measure the quality of service and help in the clinical decision-making for subsequent encounter visits. Codes also facilitate interdepartmental communication to support coordinated patient treatment.

Research: Medical codes reported within medical treatment facilities are aggregated and reported to local and state health agencies for community and public health research. These agencies use the data to estimate the burden of disease, determine epidemiological trends, evaluate biostatistics, determine disease outbreaks, etc.

Administrative: Coding is used to determine compliance and adherence to legal/policy regulations and requirements; maintain clinically pertinent, complete, accurate, timely, and readily accessible patient health records; and measure the quality of service and determine provider and facility productivity and effectiveness based on patient outcomes. Coding is also used to mitigate risks and address performance concerns; improve workload forecasting and resource allocations to accommodate encounter volume surges; and improve recruitment, onboarding, and development programs to expedite resource acquisition and readiness.

About the author:

Annie Lasway, MPH, PMP, CPC, is a senior healthcare researcher/analyst at the MITRE Corporation, where she supports Veterans Health Administration. Lasway is a PhD student in Health Services Research-Informatics. She is a member of the Leesburg, Va., local chapter.

For where to find the newest E/M news, read the article “Where to Find the Latest E/M News.”

Disclaimer: The author’s affiliation with The MITRE Corporation is provided for identification purposes only and is not intended to convey or imply MITRE’s concurrence with, or support for, the positions, opinions or viewpoints expressed by the author.


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