Denial Prevention – Paul Arias RN, BSN, MIS, EJD, CMAC

Denial prevention is the ability to use a systematic approach to review admission to meet the definition of medical necessity. It includes assisting the medical staff in understanding the importance of documenting the need for an acute-care admission and to provide orders that can be provided only by highly skilled staff.

Most case management departments today understand the importance of preventing a medical necessity denial and can articulate the reasons behind its importance; however, what some departments do not understand is how to prevent denials and what resources should be allocated in the prevention. This chapter will enable the reader to understand methods to achieve denial prevention and which resources can and should be allocated for the job.

Utilization review

In discussing denial prevention, we first should note that activities surrounding initial utilization review (UR) are the groundwork necessary to maximize the approval of admissions, thus preventing an admission denial. UR. UR is the systematic process of review for medical necessity by whichever evidenced based criteria or AI based tools (scoring system) are used to examine the need for an admission. Beyond the criteria or tools, the reviewer also should be aware of the criteria or tools used by the patient’s third-party payer, whether it is Medicare, Medicaid or another payer source. The need to understand the payer source is most evident by the different states in which Medicaid does or does not acknowledge an admission to observation service. Agreements between the hospital and the other payer sources can also affect to which status the patient can be admitted. Most private payer sources will pay for observation for only a 23- to 24-hour stay, depending on the agreement regardless of how long they provide an authorization for observation services which at times can be days. Case managers or UR specialists doing UR should have the opportunity to see a matrix of the payer sources to better understand how to complete a UR. Figure 3.1 is an example of a payer matrix that can be used by case managers.

The importance of the review coupled with an understanding of the agreement is vital for the UR nurse to properly work with the patient’s admitting physician to select the appropriate status in which to admit the patient to maximize reimbursement and prevent a denial.

Denial prevention begins when a patient enters the system; therefore, it is incumbent upon the case management department to examine where patients come from. For most facilities, this means the emergency department (ED), outpatient surgical areas, and direct admissions. For larger institutions and regional centers, transfers and clinics can add to the daily caseload. A review of volume of admissions per area can provide insight into the resources necessary to provide sufficient case management coverage to review admissions. Most initial reviews take 15–20 minutes depending on the knowledge and skill set of the reviewer, the criteria used, and whether a manual- paper based assessment or software assessment is completed. Patient’s with complex situations, which include transfers, can take longer. When assessing for staffing resources to be allocated, consider the time of admission, throughput, volume, and the level of expertise of the reviewer.

Case mix

Another key area that should be analyzed is the case mix of patients. In organizations with a high percentage of managed care patients, there is a need to examine the patient’s points of entry more carefully. This is required to obtain the maximum ability to ensure proper notification to the payer and assure authorization for admissions. Most state insurance laws, along with federal regulations, allow time prior to an emergency admission—usually up to 24 business hours—to notify the insurance carrier of an admission; thus, the review, if not completed at the point of entry, can be completed on the unit where the patient is placed. Best practice would avoid delay in notification and authorization by treating all patients equally for review purposes.

Medicare beneficiaries

Medicare patients should have a review at the point of entry. Medicare provides an opportunity to use the advanced beneficiary notice (ABN) to inform and include the beneficiary in the decision for an admission if the necessary criteria are not met. According to CMS, the purpose of an ABN is to inform a beneficiary before he or she receives specified items or services that Medicare is unlikely to pay for the services on this particular occasion. CMS says, “The ABN allows the beneficiary to make an informed consumer decision whether or not to receive the items or services for which they may have to pay out of pocket or through other insurance” (Healthcare Financial Management Association, 2004).

By including the beneficiary in the discussions, the facility has the opportunity to prevent a denial for an unnecessary admission. However, if the patient insists on the admission and the physician concurs, a ‘preadmission denial’ may be issued, which provides the patient with the opportunity to have the quality improvement organization (QIO) review the admission and then determine whether medical necessity for the admission meets local standards of care. The preadmission denial notice is infrequently used. The QIO acts like a ‘second opinion’ since it has a broader focus. Although the QIO cannot determine who is responsible for the reimbursement It can answer the question asked by payers: Was this admission medically necessary. This process can happen only if there is a Utilization Review committee in place and knowledge about when to invoke the denial process.

Executing Denial Prevention

Denial prevention begins by establishing channels that lead to a systematic review of each patient’s admission. A systematic review should begin with the history of the present illness, past medical history, current treatment, and the medical plan for continued treatment. In some situations, social issues that can impact admission or discharge need to be taken into consideration particularly if the issues affect the patient’s ability to receive necessary medical care. Prehospital treatment should be included, as it pertains to medical intervention by the patient’s private physician or other medical personnel (e.g., a paramedic). Other resources that assist in the prevention of a proper reimbursement are in the documentation by the medical staff, contracting language, and the use of regulations that assist in ensuring the financial success of the hospital.

Documentation

Documentation by the medical staff is one of the pillars that lead to reimbursement success. It can be argued that documentation is the singular issue in receiving a denial. At the end of this article is a case study that will demonstrate the need to educate physicians and other independent licensed providers (APP and PA) about how a denial can be prevented by documenting the true nature of the acute episode. Most physicians and independent licensed providers are not educated to think in terms of denial prevention but rather in terms of how to document findings, symptoms, and signs, and what the plan of care will be. If it becomes necessary, it is within the documentation that the reviewer will be able to prove his or her case to an outside agency, for example the QIO responsible for determining the medial necessity and status of the admission.

Clinical documentation specialists

Many hospitals have turned to clinical documentation improvement specialists (CDIs) to assist in the improvement process to maximize reimbursement by increasing the case mix index (CMI). Although the CMI can add revenue, it does not necessarily translate into prevention of a denial. The CDIs needs to work in collaboration with case management to ensure that the needs of both coding and prevention are attained. In executing a plan to prevent denials, CDIs and case managers should work in conjunction to educate the medical staff about the necessity to describe the acute episode in such a manner that will unequivocally demonstrate that the patient cannot be treated at a lower level of care. Many CDI programs focus on disease states that have an opportunity to appropriately be coded into a higher Medicare severity diagnosis-related group (MS-DRG), thus providing a higher reimbursement rate; however, that can also falsely elevate the expected length of stay and create missed opportunities to admit patients that commonly present for evaluation.

Contracting language

Hospitals enter into contracts with various payers and the contracting language should be part of the prevention program. Hospitals would be well services to bring case management into the review of the proposed agreement prior to the signing of the contract. Case management should be involved in the contracting to ensure that medical necessity review language is included in the agreement, to the extent that the agreement follows state and federal regulations, and that information is shared on the methodology of the reviews along with timing, appeals, and rate structure. The author has reviewed contracts that contain a rate for a skilled nursing facility for high-risk pregnancies. Why should an acute care facility receive a reduced payment rate for a service that cannot be provided at a lower level of care? Many would argue that it is better to receive some payment than none, but if there is no place other than the acute care hospital to provide care then the payer should pay for the services provided. If there is such a clause in a contract then the hospital should be in constant and detailed discussions with the insurance company’s case manager to assist in finding a facility willing to take on that patient and provide the necessary care. These types of situations do not need to go to this extreme and this scenario is meant as an example only, but the negotiation of the contract should be in the best interest of the patient, and pointing this out to the insurance company can only be done in the proper execution of a denial prevention program.

Regulations

Regulations such as the Employee Retirement Income Security Act (ERISA) and state insurance review laws, along with prompt payment laws, should also be included when rolling out the prevention program. Include language in the agreements that contain ERISA provisions. Consent forms should be tailored to provide an avenue for appeal without the need to obtain a separate consent to appeal. Consent forms also should provide an avenue to include third parties in the transmission of necessary information to obtain authorizations for care.

A well-executed plan will fit within the UR plan that is necessary under the Conditions of Participation, The Joint Commission standards, and many state laws. Having a clinical determination policy to reference is also part of the plan, but to maximize the potential of the program and to achieve success, education of the case management staff, medical staff, executives, admissions, registration, health information management, nursing, and any other department that has a hand in the business side of patient care is necessary. Denial prevention does not exist in case management alone and must be shared by the parties listed here. To achieve buy-in for the necessary resources, a plan should demonstrate a return on the investment.

The Roles of the Physician Advisor (Medical Director of Case Management)

What is a physician advisor (PA) and why should you have one? A PA is a physician whose role it is to work with and advise the case managers in UR in determining medical necessity, and should be an integral part of the case management department for many reasons: The PA can bridge the gap to the medical staff, prove support for review, act as a co-chair for the UR committee, and be a liaison in situations where the advice of a clinical expert is needed to provide further information for a patient or the family to give informed consent.

Many job descriptions and myriad roles exist for the PA. The PA should be a physician who understands medical necessity and controlling length of stay as a means to providing care to those in need and to assist in preventing the loss of revenue by unmonitored medical staff. As previously stated, the days of the physician being in total control of the admission and discharge process has long passed. The PA can serve as the bridge to the reluctant practitioner who still insists that he or she is in control and explain to the physician in his or her “language” the need to assure the proper admission and proper discharge of his or her patients that eventually and directly affect reimbursement and controlling costs.

PAs may assist in making a medical necessity determination after the initial review is complete if there is a question about the need for an admission or the level of care assignment. PAs’ work should be tracked, including interventions that lead to changes in status assignment, approval of level of care, and assistance with discharges and overturning denials.

In preventing denials, the role of the PA should be to educate his or her peers on how to properly document a patient’s level of illness and the treatment modality that demonstrates the acuteness of the illness to avoid denials. Physicians are more apt to listen to a peer than a case manager until a good relationship is established; the PA can assist in this relationship development by being supportive of the case management role.

The availability and breadth of the PA role is usually dictated by the size of the facility, but it should be based on the necessary interventions. Even small facilities may find that, when initiating a prevention program, they require a full-time advisor to be a champion and to assist in the fundamental culture change necessary to achieve success.

Choosing the correct PA can be a difficult and lengthy process if there has never been one or if there have been weak advisors in the past. Ideally, the advisor should be a physician that has the respect of his or her peers, understands the business side of healthcare, and can articulate the importance of properly admitting and discharging patients to the best level of care and in the best interest of the patient. When interviewing a candidate, the case management/UR department should be involved but should be careful not to base decisions on “criteria” knowledge alone. Anyone can be taught “criteria” if he or she has the requisite foundation and is willing to learn.

Tracking Denials for Prevention

How do you measure success? The typical way is to establish the goal, set in place an action plan, and track the data to determine progress. Denials, like most issues in healthcare, should be tracked and trended over time to determine the level of success that is or is not achieved. Many of the larger facilities and healthcare systems have software systems to assist in the task of tracking and trending. The most successful organizations include quality management to assist in the production of the data to demonstrate with a high level of confidence that the information is accurate so that it may be shared and defended as needed. For smaller facilities that do not have the IT budget to purchase software systems, a good spreadsheet can handle the outcomes.

The big questions are: What should be tracked, how often, and by whom? The answers depend on the business model at your facility, but it is strongly advised that whoever is involved in the reviews should be able to receive reports on the denial percentage and what caused the denial. The following is a list of the most common elements to include in the tracking and trending:

1. Patient demographics

2. Insurance information

3. Date and finding of initial and subsequent reviews with results (i.e., approved, not approved)

4. Days approved

5. Level of care approved

6. Reviewer

7. Attending physician

8. MS-DRG

9. Unit patient was on

10. Service line

11. PA involvement (second-level review, outcome)

12. Date of denial

13. Date denial received

14. Appeal due date

15. Date appeal sent

16. Date appeal determination due

17. Results of appeal and level of appeal (reversed, upheld, agreed, first or second level, external)

18. Net revenue due

19. Proposed amount

20. Final payment

21. Net gain or loss

Other items may be added for specific circumstances as needed. It is important to collect the data and then to, at a minimum, conduct a monthly review of the data to examine any trends.

Denial prevention is a cannon in the arsenal of methods that facilities can use to minimize underpayments and maximize reimbursement. Through the expertise of their staff, case managers are in the best position to lead the way in increasing profitability that can prove the worth of the case management department. By showing that case management can affect the bottom line, while still providing the necessary clinical services to patients, strengthens its reputation as a respected department of any hospital regardless of size, payer mix, or patient population.

Case Study

Consider the following case study:

A 78-year-old male presents to the ED on Friday evening accompanied by his son who states that “Dad” has had an increase in the number of falls and an increase in his confusion. His son states that he and the rest of the patient’s family can no longer care for him and wants him admitted for placement in a nursing home. The physical exam reveals a well-nourished patient who has difficulty relaying the history of his illness; vital signs are within normal limits and his baseline labs show a slight out of normal range but are not within the range that would indicate the necessity for admission based on the criteria set. The son provides information about the patient’s history that includes diabetes, hypertension, history of a myocardial infarction, and recent escalation of confusion with an inability for self-care. The patient is living with his son, daughter in-law, and their two young children. The patient’s bedroom is on the second floor with a bathroom located on the same floor. He uses an assistive device to ambulate, but until four weeks ago had not had any falls. In the last five days there have been three falls, with one urgent care visit for bruising after a fall, with no fractures. A CT scan reveals degenerative changes but no acute process.

The physician orders a full inpatient admission for further evaluation and places the patient on telemetry to rule out any cardiac origin for the falls, as well as orders an MRI/MRA in the morning. An IV at 75cc/hr and routine labs in the morning are also ordered. The patient has neurological checks every four hours and a check of routine vitals with I&O per shift. He is placed on a low-sodium diet, physical therapy (PT) and neurological consult with case management for discharge planning for placement.

After reviewing the information, the case manager makes the determination that the patient does not meet admission criteria; however, the physician insists on it, citing the son’s wishes and agreeing with PT that the patient is unsafe to discharge.

The patient has Fee for Service Medicare Part A. In this extremely common scenario, the case manager knows there is a high probability that Medicare will not pay for the stay, nor will the patient qualify for the needed three-day stay to be transferred to a nursing home.

The question that arises in this case is how to best approach the physician to explain that an ABN and or a pre-hospital HINN needs to be issued since there is insufficient medical necessity for an inpatient admission. At most and it may be a stretch the patient my be placed in Observation since an MRI/MRA is being ordered to further review for more potential issues that a CT scan may not have found along with the telemetry for cardiac issues. If the physician insists on the inpatient admission, then the case manager should discuss with the patient’s son the possibility that Medicare will not pay for the admission.

After reviewing the patient’s situation with the ED physician or the physician advisor, an ABN can be provided to assist in the decision process. If the son and the beneficiary insist on the admission and the admitting physician agrees to admit, a preadmission HINN (hospital-issued notices of noncoverage) should be issued. If the son appeals, there will be documentation to support the admission, so the hospital places itself in the best situation for a win-win scenario. The case manager should also begin the discharge process to seek out community based resources, that provide care in the home to potentially avoid the nursing home admission following the patient’s stabilization and diagnosis. The plan should also include seeking short-term respite care, which is sorely needed by the patient’s son.

Wrap Up

Prevention begins by establishing a method of systematic review by case managers at point of entry. The review encompasses the patient, the family, and the medical team’s treatment and thoughts, as well as the documentation. Bringing the patient and the family into the equation can also prevent unnecessary admissions.

References

Healthcare Financial Management Association. Medical Necessity Denials: Prevention Pays Off. Gale Group, 2004.