Health Information Management

Be diligent about documentation review to prevent denials and ensure sufficient detail supports medical necessity

JustCoding News: Inpatient, March 28, 2012

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As I read reports and articles that discuss overpayments and underpayments, recoupment and take-backs, I wonder where exactly the responsibility lies for the recoupment in clinics and facility dollars. Does it lie with the physicians, nurses, clinical documentation improvement (CDI) specialists, or coders? Does it lie with them all? It’s natural for this question to arise every time facilities receive demand letters from government contractors and auditors or independent audit companies that review coding and documentation for purposes of financial recoupment.

Likewise, who is responsible for these financial losses? All clinicians and caregivers who document in the health record potentially contribute, whether directly or indirectly.

One such article addressed denials that originated in the physician clinic and progressed by virtual patient healthcare delivery processes (i.e., patient care flow) all the way to the hospital. How did the medical necessity get “overlooked” on the physician side as well as the inpatient side with case managers, utilization review staff, physician advisors, CDI specialists, and coders, each of whom carry out specific duties and responsibilities when reviewing medical records.

Case managers, utilization review, and physician advisor staff review the record for severity of illness and intensity of service to ensure the documentation supports the admission and continued stay criteria, thereby establishing medical necessity.

Coders review the entire record for completeness and accuracy with ICD-9-CM code assignment of clinically appropriate principal and secondary diagnoses and procedures that reflect all clinical conditions under active management during the hospitalization. This coding thereby indicates hospital resource consumption and establishes medical necessity.

Factors contributing to lack of medical necessity

Do denials stem from deviation from education or guidelines, or do the business and financial demands of organizations distract physicians from addressing medical necessity and documentation shortcomings? In reality, deficits in physician understanding of what constitutes appropriate documentation to support medical necessity as well as variation in adherence to coding guidelines both contribute to potential financial recoupments.

The establishment of medical necessity begins with the physicians, nurses, and other ancillary providers involved in patient care in the office setting. They all have a vested interest and responsibility in documentation of medical necessity for planned inpatient procedures.

Because most CMS local and national coverage determinations governing medical necessity and limitations of coverage center around outpatient procedures (e.g., lesion removals, cataract surgeries, and blepharoplasty repairs), typically physicians’ clinical judgment and medical decision-making alone have qualified as sufficient support for the need for inpatient procedures.

To meet medical necessity for commonly performed inpatient procedures (e.g., hip and knee replacements and spinal fusions), medical necessity for performing the procedure in and of itself is predicated upon supporting documentation in the physician’s office notes. Unfortunately, oftentimes this documentation is sparse, clinically nonspecific, and without sufficient detail to meet the stringent medical necessity requirements by Medicare and other third-party payers. The end result is medical necessity denials for these inpatient procedures for both the hospital and the surgeon. This makes for a tangled web from all aspects of the collection of health information.

Examine guidelines for reporting diagnoses and procedures

The Medicare Program Integrity Manual, chapter six, section 6.5.2, “Medical Review of Acute Inpatient Prospective Payment System (IPPS) Hospital,” and section 6.5.4, “Review of Procedures Affecting the DRG,” contains language on diagnosis and procedure code assignment:

The contractor shall determine whether the performance of any procedure that affects, or has the potential to affect, the DRG was reasonable and medically necessary. If the admission and the procedure were medically necessary, but the procedure could have been performed on an outpatient basis if the beneficiary had not already been in the hospital, do not deny the procedure or the admission. 

Section 6.5.4 offers guidelines for the MAC when a procedure wasn’t medically necessary:

• If the admission was for the sole purpose of the performance of the non-covered procedure, and the beneficiary never developed the need for a covered level of service, deny the admission;
• If the admission was appropriate, and not for the sole purpose of performing the procedure, deny the procedure (i.e., remove from the DRG calculation), but approve the admission.

In other words, if the clinical documentation does not clearly and unequivocally support the medical necessity for a procedure, the Medicare contractor will deny the entire stay for both the hospital and the physician. This congruent Part A and Part B denial for medical necessity is becoming more common from the Medicare administrative contractor (MAC) standpoint, as the following information published by MAC Trailblazer Health illustrates:

Prepay service-specific edits are in place to review services billed with the following DRGs:

  • 243, Permanent cardiac pacemaker implant with complications
  • 246, Percutaneous cardiovascular procedure with drug-eluting stent with major complications or 4+ vessels/stents
  • 247, Percutaneous cardiovascular procedure with drug-eluting stent without major complications
  • 460, Spinal fusion except cervical without major complications
  • 470, Major joint replacement or reattachment of lower extremity without major complication

To increase consistency in Medicare reimbursement, effective November 1, 2011, TrailBlazer began cross-claim review of these services. The related Part B services (i.e., procedure and evaluation and management services) reported to Medicare will be evaluated for reimbursement on a postpayment basis. Overpayments will be requested for services related to the inpatient stay that are found to be paid in error.

Trailblazer outlines documentation requirements for DRG 470

Trailblazer Health has outlined and defined specific joint replacement (DRG 470) documentation for both hospitals and physicians to follow in support of medical necessity.

Clinical documentation from both the physician’s office as well as the hospital must support medical necessity for joint replacement procedures. Coders cannot directly control the quality and completeness of documentation in the record, but they can certainly familiarize themselves with the guidelines of clinical documentation necessary for joint replacements and apply this knowledge when reviewing these records.

Coders can collaborate with case managers and utilization review staff to identify documentation deficiencies, which place both the hospital and the physician at financial risk for recoupment due to a lack of medical necessity. To this end, consider developing a training program for physicians and other clinical staff that covers principles of documentation to establish medical necessity.

For example, physicians need to be aware that for a knee replacement, they need to document:

  • Pain in the knee (e.g., level of pain and whether it has worsened)
  • Pain increasing with activity (e.g., whether the pain increases with weight-bearing and daily activities)
  • Passive or limited range of motion or swelling of the joints
  • X-rays that support any of these findings:
    • Subchondral cysts
    • Subchondral sclerosis
    • Periarticular osteophytes
    • Joint subluxation
    • Joint space narrowing
  • The use of medication that was unsuccessful in providing pain relief

This is quite a bit of information that the physician needs to document to support medical necessity, but without the proper diligence of various parties (e.g., utilization review, physicians, and coders), and without this supporting detail, it could lead to costly denials.

Editor’s note: Krauss is an independent revenue cycle consultant based out of Madison, WI. E-mail him at

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