Hospitals with Coding Proficiency Are Well Positioned to Weather Change

For many hospitals, the past year has required frequent adjustments to new coding regulations and initiatives. Hospitals have faced increased coding complexity under Medicare Severity Diagnosis Related Groups (MS-DRG) methodology, lower reimbursement for hospital-acquired conditions (HACs), and intense scrutiny from Recovery Audit Contractors (RACs).

Some hospitals have risen to meet these challenges with adaptable and compliant coding practices. Of these, 200 were recognized as “top coding hospitals” in the fifth annual “Top 200 Coding Hospitals in the U.S.” report from Ingenix, released yesterday. Hospitals listed in the report “have demonstrated a high level of completeness and accuracy of medical coding and billing practices that are used to bill Medicare for inpatient medical services,” the report states.

In the report, Ingenix highlights the increasingly important role that medical records coding and health information management (HIM) are playing in the revenue cycle management process, and emphasizes the value of quantitative HIM measures of coding performance.

“Pure and simple, we want to acknowledge the best coding performances that are out there,” said Dave Hochheiser, director of Data Analytic Product Solutions at Ingenix. “These top coding hospitals are process and practice leaders, with reduced risk for overpayment and other issues.”

Determining the traits of a top coding hospital

To identify the top coding hospitals, experts from the Ingenix Health Systems Optimization and HIM Consulting and Analytics divisions used the company’s HospitalBenchmarks.com^® solution to analyze the 2007 Medicare Provider Analysis and Review (MedPAR) file and examine more than 50 areas that indicate coding expertise with the DRG and ICD-9-CM systems. Of these, 13 metrics were selected for their high correlation with coding accuracy.

A total of 4,607 U.S. hospitals were ranked within their peer groups, resulting in a roster of 50 top coding hospitals in the following categories: (1) major teaching hospitals, (2) minor teaching hospitals, (3) urban, non-teaching hospitals and (4) rural, non-teaching hospitals.

Hochheiser explained that Ingenix adjusted its study methodology this year to reflect the many different factors that now affect coding. “The market is in a state of flux because of the MS-DRGs, the HAC changes and RAC audits. We needed to update the measures used to evaluate hospitals in a very real-world way,” he said.

Although these market pressures have created fresh incentive for hospitals to improve their clinical documentation and coding efforts, many hospitals are still struggling to address their coding issues. For example, Hochheiser noted, wound debridement coding has been an area specifically targeted by the RAC program, which as of March returned $693.6 million in overpayments to the Medicare Trust Fund for a variety of coding mistakes.

“There tends to be a lot of misunderstanding or confusion among hospitals about coding wound debridement,” he said. “With such high stakes for coding errors, hospitals can’t afford to turn a blind eye to coding problems. They need to assess procedures and implement changes to improve the situation immediately, because more change is coming.”

Further coding pressures expected

Under the MS-DRG changes implemented in October 2007, “hospitals that code more completely likely are receiving a larger share of the reimbursement pool – a trend that could continue as MS-DRGs are phased in through at least 2009,” Hochheiser suggested. He also noted that Ingenix has observed increases in the Medicare Case Mix Index, a good indicator of effective documentation and coding practices. “That increase means that hospitals are doing a better job of coding,” he said.

However, when the Centers for Medicare & Medicaid Services (CMS) obtains aggregated data about the initial stage of the MS-DRG implementation, he added, “it will have to adjust its payments downward to make the program budget-neutral.” Hospitals that currently are not seeing a Case Mix Index uptick are missing out on appropriate reimbursement now, and will receive even less in the future under the forecasted downward adjustment, according to Hochheiser.

In addition to the MS-DRGs and the RAC program (which CMS plans to expand nationwide in January 2010), other initiatives affecting reimbursement include:

• the HAC rule, under which 11 conditions will result in lower payments if they were not present on admission, and
• CMS’ value-based purchasing program, that attempts to link payment to performance based on 30 quality measures.

Hochheiser also cites the inevitable switch to ICD-10 codes and a movement toward episode-based reimbursement in the future. “After years of relative stability, we have embarked on a period of change that promises to be extended and exponential,” he said.

Becoming a top coder takes assessment, action

In light of both the current and expected shifts in coding practices, hospitals should act now to address any existing coding issues. Those that did not make the list of top 200 coding hospitals this year “may have one or more areas of concern to mitigate, both to improve their reimbursement and to reduce their exposure under the RAC program,” Hochheiser said.

Understanding process-level vulnerabilities and securing the right support are integral to establishing and maintaining a solid coding system. Ingenix provides a number of products and services in this area, including coder and physician educational resources, documentation analysis and consulting services. Ingenix Consulting includes a health systems optimization practice offering financial and operational performance assessment and solutions to hospitals, physician clinics and health insurers.

With so much industry transformation afoot, Hochheiser stresses the need for hospitals to take action now to be prepared. “This report should serve as a reality check for hospitals,” he added. “If you are not among the top coding hospitals, even if you aren’t having obvious problems now, are you ready for what’s coming down the road?”

For a copy of the Ingenix fifth annual “Top 200 Coding Hospitals in the U.S.” report, please go to http://www.ingenix.com/top200. For more information on Ingenix Consulting health systems optimization, call 800-765-6709 or email inform@ingenix.com.  

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