By George Kelley, Chief Operating Officer
November 2021
DRG downgrades, also known as clinical validation denials (CVDs), have been affecting hospital revenues for a number of years. Recently, though, many hospitals have been experiencing a significant uptick in the volume of CVDs. The increase is coming primarily from Medicare Advantage and managed Medicaid plans, and the volume of denials can be significant.
According the Centers for Medicare and Medicaid Services’ 2011 Recovery Audit Contractor (RAC) Statement of Work, “Clinical validation is a separate process from DRG validation and involves a clinical review of a case to see whether or not the patient truly possesses the conditions documented. ”When a clinical validation denial is made, the auditor is claiming that the diagnosis or condition is not valid for clinical reasons. The auditor may change a diagnosis to something else, or might even completely remove the diagnosis with no replacement. However, for an actual denial of services to take place, the auditor must conduct a review of the medical record.
CVDs can consume more resources than straight DRG validation or medical necessity denials because both clinical and coding review resources are needed. More importantly, as we will highlight in a moment, the provider should also be involved in the process of appealing the denials. These denials generate a great deal of frustration, not to mention revenue reduction.
While we never want to let entitled revenue go, there are times when payers may have valid reasons for reductions or denial of payment, so the first action needed for a healthcare provider is to perform a high-level review of the denial. Since both clinical and coding resources should be employed, and often times the denial is nebulous, denials should be reviewed first for coding issues. If there are not valid issues present, then the clinical team should review for medical necessity. These two reviews should be able to categorize cases where there may be a valid downgrade. Once these initial reviews have been completed, energies can be focused on those cases where there is a fighting chance for winning the appeal.
One issue that has generated a high number of CVDs is related to the downgrading and denial of cases with sepsis. While payers may have valid issues regarding documentation in their denial (e.g., whether the provider is employing Sepsis 2 or Sepsis 3 for documentation purpose), to appeal these cases successfully it is imperative to involve the provider(s) of care for these cases. It is important to remember that the payer does not diagnose sepsis with the application of diagnosis coding or criteria; the clinicians providing the care do.
For these types of sepsis cases, your strategy from the outset should be to include the treating providers, or the physician advisor representing them while preparing the appeal. It is highly likely that a first-level appeal will be upheld, so your approach from the beginning should be building toward a higher-level appeal expecting to bring these cases before the payer’s medical director with your physician support. This is an example where the payers may be focusing on issues that have a great deal of gray, preying on the difficulty and confusion associated with fighting the denials. Hospitals need to be aggressive in cases where their documentation is strong and the physicians providing that care will work with you to support their diagnosis. These types of cases can range anywhere from $1,500 to $15,000 in reduced revenue. For these types of cases, you should consider the volume of winnable appeals. Without a fight, the payers will continue to focus on these areas.
While most payers play by the rules they have established in their contracts with you, at least in regard to process, some payers seem to be employing less than consistent and forthcoming approaches regarding CVDs. First and foremost, indication of case denials, follow-up correspondence, and review steps for some payers are not consistent. Correspondence may be sent to various departments for the same types of appeals by the same payer. Follow-up correspondence often does not indicate specific reasoning for decisions and appeal responses do not indicate why the decision was upheld or if the appeal document was even considered.
Additionally, certain payers have been using the presentation of the medical record as a first-level appeal. In CBIZ’s belief, this is an unfair practice, since the denial by the payer cannot be confirmed without the medical record; however, it is happening. It is important for providers to indicate in writing that submitting the required medical record documentation is not an appeal and that the provider reserves the right to appeal the decision after the records have been reviewed.
To manage CVDs successfully, providers need to establish an effective triage process. Focus your energies and resources on those cases that will generate wins and hot button issues that you have documentation and support to fight (i.e., sepsis).Track all of the CVDs that are being denied or downgraded to establish patterns or opportunities. Group appeals together and approach the payer on these aggregated issues, rather than on a case-by-case basis.
Remember, there may be instances where the denial issues are valid – tracking this information can provide specific issues for your downstream teams to work on to improve your outcomes and to stem future revenue reduction. Fight for the rights and processes established in your contract; hold your payers to the terms of their contracts; and ensure that they are following the procedures they have agreed to. If you follow these steps, you will be able to mitigate the overall effect of CVD denials.
For any questions about clinical validation denials or more information, please contact our office at 800-957-6900 or email at kaconsults@cbiz.com.
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