Are Your Coders Leaving Money Behind?

Vol. 9 •Issue 4 • Page 57
Are Your Coders Leaving Money Behind?

Lost revenue due to medical coding and billing errors could be health care’s hidden crisis.

Coders regulate one of the most critical junctions in health care: the intersection of billing and reimbursement. This high-traffic corner determines overall patient access to care and the hospital’s productivity. CIOs must ensure that coders keep the traffic moving fluidly to maximize reimbursement. Any bottlenecks could affect the entire enterprise.

Is your coding department maximizing patient access to care and facility reimbursement while accurately reflecting productivity, or are your coders leaving money behind? These are the critical questions you must address on behalf of your health care organization.

Errors and lost revenue

Medical offices are reportedly losing thousands of dollars on coding errors every year. According to a survey by the American Academy of Professional Coders, in any sample of 200 claims it is not uncommon to find 80 percent with the wrong code altogether, 41 percent over-coded, 45 percent undercoded and 17 percent billed for services not documented in the record.

Another study, “America’s Hidden Healthcare Crisis,” conducted by HSS, found the U.S. health care industry is losing upwards of $100 billion each year due to payment errors, which increases the cost of care paid by American businesses and consumers and further jeopardizes the solvency of the Medicare Trust Fund.

Such reports document how the health care industry’s complex billing practices and regulations have created a business climate in which payment errors frequently occur. According to the HSS study, payment errors may have totaled nearly $104 billion in 2003, and are projected to total as much as $120 billion in 2005. The majority of payment errors tend to be the result of hospitals, physician offices and other care providers overbilling private insurance companies in public programs such as Medicare and Medicaid for services that they cover. However, it is important to note that payment errors are often the result of health care providers underbilling for services rendered.

Beginning to understand how payment errors occur requires some knowledge of medical coding and the reimbursement process. Medical coding is used by provider organizations to bill for the services that they deliver to patients.

Three things are happening at the medical coding level that create payment errors Here’s the breakdown:

First, some providers artificially increase payments that they receive from insurance companies by coding the bill to indicate that more services were provided than were actually delivered. This practice is referred to as “overcoding.”

Second, many providers include on their bills diagnosis and procedure codes not properly supported by documentation in the medical record. When asked subsequently to provide such documentation, they often fail to demonstrate that the services were medically necessary and actually provided.

Third, many providers do not bill for all the services provided by undercoding diagnoses and procedures or by omitting items from the bill entirely. In many instances, underbilling is a direct result of inadequate coding and billing infrastructure. In some cases, providers may undercode patient visits to avoid scrutiny by regulators and/or rejections by insurance companies.

According to the National Health Care Anti-Fraud Association, the most common areas of overcharges and errors include:

• duplicate billing;

• number of days in hospital;

• incorrect room charges;

• operating room time;

• upcoding;

• keystroke error;

• canceled work;

• services never rendered;

• lack of medical necessity; and

• unallowable expenses.

Billing inaccuracies

The main cause of medical billing errors points largely to unqualified coders — including physicians. Too often, offices hire untrained staff to save money on salaries, and as a result, they miss out on thousands of dollar per month because of coding mistakes.

“Although medical coding seems to be the epicenter of where payment errors begin, one underlying cause is the complex and frequently changing regulations that govern the industry’s coding and billing practices. In many cases, health insurers and providers are not given adequate notice before new regulations take effect, which results in confusion and payment errors that are both unintentional and unavoidable,” said Dean Farley, PhD, HSS’ vice president of health care policy and analysis.

“Undercoding is often a direct result of lack of knowledge of the coding systems, including coding conventions, guidelines and reporting requirements,” added Mary Stanfill, RHIA, CCS, CCS-P, manager of practice resources division of AHIMA.

Stanfill noted that the following AHIMA products and services can help build the coding professional’s knowledge of the administrative code sets employed for billing:

• Coding certification and credentials, both entry-level and mastery level.

• Up to 30 audio seminars throughout the year on various coding topics.

• A complete Web-based training program that covers the fundamentals of medical record coding.

• Web-based continuing education from basic to advanced coding topics.

• Free practice standards on many health information management topics, including developing a coding compliance plan and writing physician queries.

• Multiple coding publications, many specific to practice settings, with material ranging from basic to advanced.

• A monthly online newsletter with practical news for coding, reimbursement and health care compliance.

• Up to six regional meetings annually, aimed at achieving coding excellence.

“It is my experience that most reputable providers intend to bill correctly and believe they are billing correctly,” said Linda S. Heller, senior vice president of MC Strategies. “However, many providers could benefit from an outside, objective assessment of their coding and billing accuracy to verify that the systems and human processes are working together accurately. I recommend quarterly assessments of both inpatient and outpatient billing to ensure top-level performance.”

Executive responsibilities

CIOs can be agents of change and process improvement for their organizations by understanding that the interfaces between clinical and financial systems are critical to ensuring accurate data collection and billing. Bridging the gap between clinical and financial professionals and conducting periodic objective reviews of how those systems work together to produce accurate and timely bills is a valuable activity.

“Inaccurate coding is a serious problem for health care providers,” said Heller. “In random samplings of both impatient and outpatient cases, more providers reveal a pattern of undercoding rather than overcoding. There are serious consequences for inaccurate coding, which include loss of reimbursement, inaccurate severity indexing and compliance risk.”

Kim Charland, vice president of consulting for Medical Learning, explained, “Undercoding can be viewed as an attempt to induce business by providing services at a lesser cost than other facilities. It also can have an impact of future payments because the Centers for Medicare & Medicaid Services [CMS] uses claims data to update annual payment rates. In addition, it can affect a facility’s cost-to-charge ratio/wage index via the cost report. This, in turn, affects reimbursement, and lower overall payments can result.”

Charland added, “We continue to find more problems with undercoding and reporting services than we do with overcoding. While charge description masters are usually quite accurate, that’s not typically true in staff use of them.”

According to Nelly Leon-Chisen, RHIA, director of coding and classification for the American Hospital Association, “CIOs should be concerned about undercoding for several reasons. Consider that any kind of coded data used for policy-making may not accurately reflect a true picture. Externally, payers, like Medicaid, use claims data for future rate-setting. Undercoding may adversely affect how all providers get paid for specific types of patients when the data does not reflect all the resources utilized. Even internally, if a hospital wanted to perform a study, analyze utilization of services, do research on a particular diagnosis or procedure, or analyze patient outcomes, case identification would be flawed if services were not correctly coded. Both upcoding and undercoding result in bad data for everyone who uses the information.”

For CFOs, undercoding is a concern for two reasons, said Stanfill. First, appropriate reimbursement is achieved through accurate coding and reporting, with neither undercoding nor overcoding of services. Next, undercoding may be considered fraud or abuse by the federal government or other health care payers. It may also be considered improper inducement of Medicare beneficiaries under the Stark regulations.

She added, “A CIOs’ concern primarily centers on data-integrity issues. Undercoding is harmful because it means that the organization’s data does not accurately represent the health care services that were provided.”

“Undercoding can negatively impact an organization’s case-mix calculation, which is generally considered a reflection of the clinical complexity of the patient population served by the organization,” said Jill Wolf, RHIT, CCS, CHC, vice president of coding and compliance for CodeCorrect. “Coding inaccuracies can therefore affect everything from reimbursement to payer contract negotiations to clinical decision-making.”

Addressing the crisis

To begin rectifying the “hidden crisis” of medical billing and coding errors, the following points must be considered and addressed.

• CMS needs to revise its regulatory update cycle to give health insurers and providers sufficient time to react and implement new regulations that change dozens of times throughout the year. Hospitals and payers alike simply cannot assimilate the knowledge to effectively put into operation regulatory changes given the current CMS update policy.

• Health insurers should validate and group the medical claims that they receive from health providers to prevent overpayments to providers that make mistakes, or are overly aggressive in their medical coding practices to increase the dollar amount of payments.

• Health care information vendors and health care providers should streamline their own deployment and implementation of updates to regulatory content. Although some emerging technologies, such as Web services, offer real opportunities to streamline the update process, embracing new technologies will take a real commitment on the part of vendors and providers alike.

According to Leon-Chisen, “The Central Office on ICD-9-CM is the official clearing house for ICD-9-CM. We provide assistance with difficult questions. We work with the developers of the classification [the National Center for Health Statistics and the Centers for Medicare & Medicaid Services] to obtain official answers. Health care organizations can be assured that the advice they get from us is solid and consistent with the intent of the classification developers. Our publication, Coding Clinic for ICD-9-CM, is relied upon by providers for advice. Our readers can be assured that the advice will be acceptable by Medicare since every issue is approved by the cooperating parties: AHA, NCHS, CMS and AHIMA.”

She added, “Our publication, as well as our advice service, addresses the correct way to code. Oftentimes, there are problems with diagnoses or procedures not being specifically identified in ICD-9-CM. Our office helps to determine what the correct codes should be for new technology or new diseases. We also provide clarification for issues where the classification may be vague. We do not condone deliberate undercoding or upcoding. We recommend that all conditions, diagnoses, procedures or services meeting the guidelines and criteria for reporting should be reported. Deliberately and knowingly omitting codes is just as bad as overcoding.”

Outsourcing benefits

Industry sources note that there may be benefits to outsourcing your organization’s coding to a medical billing firm in certain circumstances.

“Health care organizations depend upon accurate coding in order to receive proper reimbursement for the clinical services they render,” said Heller. “In addition to the direct reimbursement received, accurate coding also feeds clinical data into regional, national and international databases that support public health policy, reimbursement rate-setting and clinical research.”

She suggested that by engaging an outsourcing firm, health care organizations can expect to improve the accuracy of their coding, billing and reimbursement. They can also identify issues preventing the submission of clean claims.

“Many financial and IT professionals assume that accurate coding is the responsibility of the medical records department. However, there are many other factors that routinely impact the accuracy of coding,” added Heller.

Interfaces between the coding, clinical and financial systems used by the organization may not always produce a correct final bill. Likewise, clinical personnel may not always understand the systems, or know how to select the correct entry for the procedure performed or the supply used. Finally, most clinicians, coders and sometimes even the billers do not see the final billing document to ensure that it reflects the work they performed. Outsourcing companies can help identify some of those billing errors, and assist the hospital in correcting the causes of the errors.

Charland added, “Because of their knowledge and expertise, consultants are experts in all areas of coding, billing and compliance. They can address a wide variety of topics, such as how to find lost reimbursement and how to conduct an initial assessment, as well as how to develop facility-specific programs based on individual needs. One of the end goals should be to help clients feel confident that they are in compliance.”

Taking responsibility

The economic implications of medical billing errors are far-reaching and underpayments compromise the bottom line of organizations that provide care. In the end, errors increase the cost of care for everyone involved as they spark a chain of reactions. Increases affect American businesses by forcing them to pay insurance premiums that are higher than necessary to provide health coverage for employees. Next, consumers are hurt by higher premiums, which reduce take-home pay, and larger deductibles, which decrease discretionary spending.

“I believe undercoding is every bit as prevalent as the government’s claims about overcoding,” said Wolf.

Farley added, “Medical coding and reimbursement errors are tangible problems that require practical solutions. All participants in the process need incentives to address the needs at hand. Otherwise, wide-scale changes will not take place, and the financial stability of the health industry will continue to deteriorate.”

Ms. Haak is senior associate editor of ADVANCE for Health Information Executives. You can contact her via e-mail at [email protected].

Coding Rx

The key to accurate reimbursement is accurate coding and reporting. Accurate coding requires an understanding of how to properly use the coding classification systems. The following resources, from MedLearn, focus on proper use of the coding systems currently employed.

Interventional radiology

• Evaluation & Management Coding for Interventional Radiology

• Interventional Radiology Coding Charts


• Peripheral and Cardiology Coder

• Cardiology Color-coded Charts


• Coding Essentials for Laboratory

• Laboratory Correct Coding Initiative


• CPT Coding Workbook

• Evaluation and Management Essentials

Additional coding and billing resources include:

• Coding Clinic for ICD-9-CM, from the American Hospital Association, which provides practical advice on real questions.

• UB-921 Editor, a reference tool to manage the constant changes to the medical billing and reimbursement process.

• WebInservice, a Web-based learning environment that provides staff training resources.

• AHIMA’s coding resource Web page (, which features comprehensive coding information from certification to networking and online training.

• CodeCorrect, an ASP that serves as a personal coding and billing coach.

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