Select the search type
  • Site
  • Web

CMI Improvement Programs – Clinical Validation Denials Can Significantly Offset the Gains

Learn how DRG Downgrades can quickly undo the effectiveness of improvement programs and the best approaches to mitigate.

November 2022

By George Kelley, Chief Operating Officer

In recent years, many hospitals have taken an aggressive approach to ensure that their DRG coding is at the highest level of reimbursement the documented case allows. Hospitals will also have a secondary goal of ensuring that their Case Mix Index (CMI) is optimized. Many hospitals have utilized Clinical Documentation Improvement (CDI) programs for coding and documentation improvement. In many cases, these programs involve third parties to review 100% of DRG-based cases prior to billing.

Although CDI programs have an admirable goal of improving coding and documentation, serious headwinds have been thwarting the effectiveness of these programs and the ability to optimize CMI.

Enter stage left – payers. While hospitals are working diligently to improve coding, payers are hard at work with the use of DRG Downgrades, or Clinical Validation Reviews. The introduction of payment reductions targeted directly at the assignment of the DRG adds a crucial wrinkle to this CMI improvement strategy.

Hospitals and health systems are making a significant effort into ensuring that the selected DRG is the best available, but are providers ignoring what has actually been paid? Has this consideration been factored into the overall cost/benefit of these initiatives?

DRG Downgrades can quickly undo the results of these improvement programs – especially if the denials are not aggressively addressed. In addition, the resources required to appeal these downgrades and denials can be significant. Whereas the DRG review process requires only coding resources, to address DRG downgrades effectively, coding and clinical resources need to be engaged and more importantly they need to work in unison.

Each case downgraded is a small chip away at the CMI improvement that the provider is working toward (and in most cases, payers are targeting higher-weighted DRGs). Is your organization closely monitoring the actual or net results of your CMI improvement?

Based on your program and what was billed, there may be a steady increase in your CMI and payments, but once the downgrades have been incorporated, where does the effectiveness of the program stand?

If an outside vendor was engaged to perform your pre-bill reviews, you may need to reevaluate how your compensation arrangement is structured. Additionally, will the vendor work with your team to address and/or mitigate the downgrades?

Hospital reimbursement has never been easy – providers are always looking for avenues to sustain and improve revenues. An undertaking like CMI improvement relies on many inputs and is a significant initiative; closely monitoring the results and any impact the initiative has going forward is key to the success and sustainability of the process. You shouldn’t pay for poor or mediocre performance levels. And denials should be a significant factor in how you evaluate the performance of your program.

One key to long-term success with a program like this is to ensure that feedback is routed to appropriate teams. As was discussed earlier – this CMI improvement process often operates outside of the hospital’s CDI program. When appropriately shared, this information will result in a more effective CDI program in addition to reducing the need for such intense pre-bill reviews, because the teams will understand from provider experience where opportunities exist to improve coding and documentation initiatives.

Denials and their impact on the bottom line have mooted or lessened the effectiveness of many CMI improvement initiatives. Hospitals need to factor in denial activity when considering the overall performance of their program. 

For additional questions about DRG Downgrades or for help in evaluating the effectiveness of your CMI improvement program, please contact CBIZ KA Consulting Services at 609-918-0990 or at 

Copyright © 2022, CBIZ, Inc. All rights reserved. Contents of this publication may not be reproduced without the expressed written consent of CBIZ.