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Winter 2022

Coding Corner: Systematic Coder Audits Help Stem Revenue Leakage
By Catherine Proctor
For The Record
Vol. 34 No. 1 P. 28

Bundling errors and COVID-19 claim denials continue wreaking havoc on hospital and health system bottom lines that are already being battered by ongoing pandemic losses, which are projected to exceed $100 billion in 2021 alone. In response to the resulting pressure to optimize revenue flow and reduce compliance risk, a growing number of health care organizations are embracing the power of technology-enabled systematic coder audits as part of a comprehensive revenue integrity strategy.

When coupled with properly targeted education, systematic coder audits can play an important role in reducing compliance risk and revenue leakage due to delayed or denied claims and undercoding. They identify crucial missing pieces of a health care organization’s revenue and compliance risk picture by adding another dimension to billing and reimbursement data—a process that has taken on greater urgency as denials add to already tight operating margins and shrinking reimbursement rates.

The Current State of Revenue Integrity
In its “Healthcare Auditing and Revenue Integrity: 2021 Benchmarking and Trends Report,” released in October, an analysis by Hayes of more than $100 billion worth of denials and $2.5 billion in claims found that bundling errors alone were the culprit behind 34% of inpatient hospital charge denials in 2021, each with an average value of $5,300. Internal auditors also identified a significant number of concerns centered primarily around disagreements between procedure codes and diagnoses, resulting in 33% of all internal audits containing “disagree” findings.

The report is based on a review of professional and hospital claims, including current charge and remit data sent to all payer types, audited in MDaudit Enterprise during the first 10 months of 2021. It includes more than 900 facilities, 50,000 providers, 1,500 coders, and 700 auditors from US-based acute care and children’s hospitals, academic medical centers, health care systems, and single and multispecialty physician groups.

In terms of denial trends, the report identified bundling as the top category for both inpatient and outpatient hospital charge denials, with the latter having an average value of $585 for each denied claim. The top reason was that the benefit had been included in a previously adjudicated service or procedure. Professional services had a first-time denial rate of 15%, led by claim submission/billing errors, and carried an average value of $283 each.

The report also found the following:

• 43% of rendering physicians and 27% of hospital coders failed internal audits.

• Missing modifiers resulted in an average denied amount of $900 for hospital outpatient claims, $690 for inpatient hospital claims, and $170 for professional claims.

• 33% of charges submitted with hierarchical condition category (HCC) codes were initially denied by payers, highlighting increased scrutiny of complex inpatient stays and higher financial risk exposure to hospitals.

These findings drive home the urgent need for health care organizations to address revenue and compliance risk through a unified revenue integrity-based approach that will provide an opportunity to use denial insights to help focus auditing efforts while also incorporating prospective audits to reduce denials. No matter the strength of an organization’s billing compliance and revenue integrity program, if it can’t rely on the coding team, it will never stop revenue leakage.

A Systematic Approach
While most organizations conduct regular audits of provider billing, not everyone has a systematic plan for auditing their coders beyond tracking productivity, effectiveness, and efficiency, often using spreadsheets in what is a manual and laborious process. Others conduct only annual coder audits—and many don’t conduct coder audits at all due to resource and budget constraints.

However, just as auditing hospital billing (eg, high-risk diagnosis-related groups, cases with high severity) is integral to revenue integrity, so too is auditing the coders who are responsible for making those decisions. Having responsible coders with high coding acumen who work with both integrity and accuracy is often the deciding factor between higher reimbursements and crippling penalties.

The first component of a successful systematic coder auditing program is technology that allows easy generation of audits and provides insights to know where efforts should be focused. In today’s technology-driven health care environment, no one should be tracking coder audit results on a spreadsheet. Doing so makes it extremely difficult to keep all the relevant information and data visible, which in turn complicates identification of trends and makes it almost impossible to hold meaningful discussions about findings.

Conversely, use of an auditing platform enables coder audits to be both performed and tracked, along with any provider billing audits an organization is already conducting. The right platform can also incorporate robust analytics dashboards, which help focus improvement efforts and provide an at-a-glance understanding of coding team performance. Importantly, because it protects the organization from compliance risk, optimizes reimbursements, and improves revenue retention, there is a solid business case for investing in the right platform, one that can override budget constraint arguments by converting what is often considered a cost center into a source of recovered revenues.

Also important are regularly scheduled audits and insight reviews, which identify those coders who are performing well and those with inconsistencies and accuracy issues. At minimum, coders should be audited quarterly, with new coders and coders previously identified as not meeting accuracy benchmarks checked on more frequently. Audits should also be undertaken more frequently when significant changes occur to coding regulations, such as the new evaluation and management coding mandates in 2021 and the introduction of new telehealth codes in 2020.

A plan should be in place to educate coders on eliminating billing errors, mitigating denials, and maximizing reimbursements. Both as a team and individually, when errors and trends are spotted, time must be taken to show coders what has been discovered and how to correct it moving forward. There is far too much revenue at risk to rush the process.

System Audit Tip Sheet
When it comes to optimizing the effectiveness of a systematic coder audit program, the following are several actions that can be built into the process and will have a significant impact.

Be positive and transparent. Rather than something coders should fear, audits should be positioned as a positive, collaborative way to understand how well they are executing their job. Share results and acknowledge positive outcomes. Present areas for improvement as educational opportunities.

Focus on those with the greatest risk for errors. When there is insufficient time to conduct a full audit of every coder, it is important to identify, audit, and work with those coders who present the greatest risk to the organization, typically new coders and those with previous unsatisfactory audit outcomes. Here is another area where the right technology can play an important role by streamlining identification and tracking of high-performing coders and those who warrant more scrutiny and corrective action and education.

Allow coders to rebut audit findings. There will be cases where coder and auditor have a different opinion or interpretation of the medical record. In these circumstances, the coder must be provided with an opportunity to review the auditor’s findings and justify the initial coding decision, which will enable learning on both sides. The right platform enables this two-way dialogue within the software and keeps a record trail.

Perform prospective and retrospective audits. By performing prospective (pre-bill) coder audits and catching “errors” up front, days in accounts receivable are decreased, first-pass pay rates are increased, and reimbursements are maximized. Enabling real-time coder-auditor collaboration to ensure pre-bill charges are submitted with the highest level of accuracy and integrity is invaluable to an organization’s revenue integrity.

A Unified Approach
There is little question that health care organizations must take immediate steps to address revenue and compliance risk and staunch the losses associated with claims denials, overcoding, and undercoding. A unified, technology-enabled revenue integrity-based approach does so by streamlining auditing efforts and enabling the scope of audits to be expanded to include prospective, retrospective, and systematic coder audits.

By taking a multifaceted approach to audits—and ensuring coders are armed with the insights and education they need to avoid the errors that lead to denials—organizations can increase the impact of their compliance programs. Doing so enables rapid identification and resolution of risk, which in turn results in improved revenue flow, reduced risk of financial penalties, and elimination of revenue leakage.

— Catherine Proctor is a product manager with Hayes. Prior to her current role managing and optimizing MDaudit for health care auditing and revenue integrity teams, she worked at a university medical center planning and implementing hospital and physician billing audit work plans, performing billing compliance audits, conducting physician education, and coding specialty services.