Denials Management

Utilization Review Reduces Inpatient Denials

November 17, 2015 12:51 pm

Second-level physician review helped Covenant Health respond to a surge in commercial payers downgrading patient status from short-stay inpatient to observation.

Utilization review of patient cases from commercial payers was always a high priority for Covenant Health in Lubbock, Texas. However, in October 2013, they saw a significant spike in observation cases that amounted to an approximately 50 percent increase.

A root-cause analysis of the spike in observation cases revealed that commercial payers were requesting downgrades in status from short-stay inpatient to observation due to insufficient clinical documentation, says Rachael Stehling, RN, executive director of care management for Covenant Health, which comprises five acute-care and specialty hospitals with a total of 1,300 beds, and is part of Irvine, Calif.-based St. Joseph Heath.

“When we saw the requests for downgrading and an increase in our overall observation cases, we knew we needed to implement a plan whereby we were getting reimbursed for the patient care we were providing, because we truly felt the documentation in the medical records supported the inpatient medical necessity,” Stehling says.

Calculating the Loss

A third-party physician advisory firm was already providing a second-level review of Covenant Health’s Medicare and Medicaid cases. Implementing a commercial review process was a logical way to reduce downgrades and denials, Stehling says.

The firm estimated that downgrades in observation status would cost the health system $1 million to $1.5 million if applied to all of its commercial payers. The analysis used Covenant Health claims data to account for the average differential between payment for inpatient cases and payment for observation cases for commercial payers and then benchmarked the incidence of average national observation rates against Covenant Health rates to determine the share of cases that it should deem either observation or inpatient.

Implementing Utilization Review

The commercial utilization review program went live in August 2014. Case managers refer short-stay inpatient cases to the physician advisory firm if Covenant Health’s evidence-based clinical compliance tool determines that the cases do not meet medical necessity criteria.

The second-level review is conducted by the third-party physician advisor who uses proprietary data to screen for medical necessity and compares those findings to data in the patient’s medical record. The physician reviews about 10 to 15 data elements in the medical record, such as results from diagnostic tests and procedures and physician notes, to identify possible gaps in clinical documentation and then forms his recommendation, Stehling says. The physician advisor will sometimes contact the Covenant Health attending physician in the case to seek clarification on documentation.

Next, the physician advisor sends a determination letter to Covenant Health that outlines the clinical elements and rationale for inpatient or observation status recommendations. If the physician advisor recommends inpatient status, Covenant Health case managers then send the determination letter to the health plan with the clinical review, Stehling says.

Covenant Health refers 300 to 500 cases monthly from commercial health plans, Stehling says. Cases are sent for referral electronically and the physician advisory firm is able to access clinical data in the patient’s chart directly from Covenant Health’s electronic record. The physician advisory firm’s determination letter is sent to Covenant Health electronically.

A typical case sent for referral might involve an overnight stay where the patient presents from the physician clinic with complaints of chest pain, a history of previous cardiac stents, congestive heart failure, and diabetes. The physician believes an inpatient stay is necessary due to the risk and comorbidities, but does not transcribe the appropriate documentation in the patient chart to prove medical necessity for an inpatient stay, Stehling says.

In addition, case managers also refer inpatient cases that do meet the Covenant Health software tool’s medical necessity criteria but for which commercial payers have either concurrently or retrospectively requested a downgrade to observation. These cases are referred for “peer-to-peer” review between a physician from the advisory firm and a medical director from the commercial health plan, Stehling says.

Peer-to-peer discussions often center on elements within the documentation that the health plan reviewer may have missed, Stehling says. Sometimes, the issue is simply timing. For example, the documentation may not have been fully updated at the time it was reviewed by the health plan.

Reversing Downgrades and Denials

For a one-year period beginning April 2014, when Covenant Health began sending a handful of commercial cases for review, the health system realized an additional $23.5 million in revenue attributable to the commercial utilization review program, resulting in a return on investment of 11 to 1.

During this one-year period, 4,656 cases were referred to the physician advisory firm for review; 66 percent of these cases were supported as inpatient by the physician advisory firm while 34 percent were supported as observation/outpatient. Of the cases that were supported as inpatient, 94 percent were billed to payers as inpatient, and 3.7 percent of those claims were denied as inpatient, an improvement over the 6-7 percent denial rate before the commercial utilization review program was initiated, Stehling says. Of the 107 inpatient cases denied, two were overturned in appeal, 10 were lost, and 71 were in the appeal process at the time of this reporting.

The median revenue differential between inpatient and observation status was approximately $5,000. The underlying solution proved to be twofold.

  • Improve clinical documentation
  • Increase engagement with payers regarding downgrades and denials of short-term inpatient stays

Covenant Health has its own physician advisor for care management. However, the role is part-time (filled by the chief medical information officer). Covenant Health’s physician advisor is responsible for physician education in areas that include documentation improvement and the importance of reducing length of stay, Stehling says.

Most of the peer-to-peer discussions with the health plan medical director are conducted by the third-party physician advisors, who are trained in discussing utilization review with health plans, while Covenant Health physicians are not, Stehling says. Often, the discussions focus on whether the medical director will recognize certain data elements in the medical chart as relevant to the status of the case, Stehling says.

However, Covenant Health physicians may contact health plans for peer-to-peer discussions. When they do, the physicians are coached by care managers or a third-party physician advisor on how to manage utilization review discussions. Stehling says the coaching mainly involves explaining what to expect during the discussion and the importance of focusing on the reasons why the case is appropriate for inpatient status.

Physicians from the physician advisory firm also conduct on-site educational sessions on various topics, such as appropriate documentation for both inpatient and observation status, she says.

Moderating Pushback

Stehling acknowledges that Covenant Health physicians resisted discussing their cases with third-party physician advisors. However, the pushback was used as an opportunity to educate physicians on the ways that the physician advisors can support them, Stehling says.

For example, Stehling explains that the third-party physician advisors are well-equipped to produce audit-defensible medical records. “Regulatory requirements and changes in health plans happen so rapidly that our attending physicians and our hospitalists can’t keep up with it all,” Stehling says.

As a result of these efforts, physicians accepting calls from third-party physician advisors to discuss a case increased from 22 percent—when the program started—to approximately 55 percent today.

Moving Forward

Covenant Health, working through St. Joseph Health, is in the process of creating an interface that will enable Covenant Health to automatically send claims data to the physician advisory firm for analysis and develop quarterly reports on the revenue differential between inpatient and observation status of referred cases. Stehling says this will provide Covenant Health with a more accurate and timely indication of the return on investment of the commercial utilization review program.

In addition, Covenant Health expects to go live this month with a centralized utilization review process and interface to connect all facilities to the same care management system. Currently, the utilization review process is unit-based and directed by each unit’s care manager. The centralization will provide more support to smaller facilities and enable the audit, appeals, and utilization review team to identify problems with documentation, seek solutions, and prevent denials.

“We need to perfect documentation on the front end, so we’re not having to continue to fight denials on the back end,” Stehling says.

Karen Wagner is a freelance healthcare writer based in Forest Lake, Ill., and a member of HFMA’s First Illinois Chapter.

Interviewed for this article: Rachael Stehling, RN, is executive director of care management for Covenant Health.

Discussion Starters

Forum members: What do you think? Please share your thoughts in the comments section below.

  • What approach do you use to track patient status claims denials?
  • Are there any ways you leverage claims data to discuss documentation requirements with physicians?


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