Reaching Agreement on Accurate Coding and DRG Assignment

Got denials?   

This article is about building relationships between hospitals and payers. Hospitals in our country are currently taking one or more of the following three steps in some form, with the goal of reaching agreements with insurance companies and other payers.

Step No. 1: Documentation

“Code assignment is not based on clinical criteria used by the provider to establish the diagnosis,” the 2017 ICD-10-CM Official Guidelines state. An unintended and unfortunate consequence of this new wording may be to push hospitals and payers even further into their opposing corners. Medical record entries that clarify the presence and significance of documented diagnoses can bring hospitals and payers closer together. Never has the need for open communication between coders and physicians been greater. 

The American Health Association (AHA) Coding Clinic published for the third quarter of 2000, page 6, advises that “facilities can work together with their medical staff to develop facility-specific coding guidelines.” The quality of healthcare data can improve greatly from an effective partnership between coders and physicians. Facility-specific coding guidelines (FSCGs) can cite published consensus guidelines (e.g. whether the Sepsis-1, Sepsis-2, or Sepsis-3 definition should apply), pertinent medical and coding publications, and patient-specific factors that can influence interpretation of diagnostic tests and resulting treatment plans. FSCGs are expressions of physician consensus on documentation supporting code assignment, including the importance of considering each patient as an individual.

FSCGs can be a blessing to clinical documentation integrity (CDI) programs as well. Physicians and CDI professionals, who are both familiar with FSCGs, often have immediate common ground on which to base discussions.Professional standards affirmed by local physicians historically have been given great respect by third parties. Integrity of documentation can also provide common ground for pre-denial discussions with payers.

Step No. 2: Pre-denial Case Review

Hospitals and payers can agree to discuss cases identified by the payers’ screening processes prior to any decision by the payers. Many of these cases will require consideration of both clinical and coding realities. These discussions will produce great benefits if decision-makers from both parties have both clinical and coding expertise. 

The administrative efficiencies of this process are compelling. Within a few minutes, one of three outcomes can result:

  • The payer and the hospital can reach a final agreement by phone. 
  • The payer and the hospital can agree to meet a second time before proceeding to impartial dispute resolution.
  • The payer and the hospital can agree to proceed directly to impartial dispute resolution.

Step No. 3: Impartial Dispute Resolution

A decision-making process that systematically favors or disfavors one of the parties is said to be biased toward one party or the otherImpartial dispute resolution reduces or eliminates such bias. Several alternatives for impartial dispute resolution are available:

  • Continued discussion between representatives of the hospital and payer, with flexible consideration of all options. 
  • By consensus of both parties, discussion can continue until terms of an agreement are acceptable to both parties.
  • Arbitrators and mediators can be chosen by agreement of both parties, based on factors including impartiality and subject matter expertise.
  • A mediator can facilitate agreement between parties. 
  • An arbitrator can be empowered by both parties to make a final judgment.  This final judgment may include provisions and arrangements that recognize strong elements of both parties’ positions.
  • An administrative law judge (ALJ) hearing can ensue.
  • Medicare provides a model offering multiple levels of appeal for dispute resolution. Level 3 is an ALJ hearing, an impartial level of third-party review that is followed by additional levels of impartial third-party review.

The great majority of recent disagreements between hospitals and payers have been about “clinical validation.” In clinical medicine, a set of clinical criteria accepted to define a disease is known as a “gold standard.” “Criterion validity” is established by the “correlation between one measure and another that is assumed to be superior,” i.e. a gold standard set of diagnostic criteria. 

If the payer and the hospital agree on criteria supporting a clinical diagnosis, pre-denial case review discussions will likely be productive. Parties who share the same frame of reference can exchange ideas in an educational atmosphere. Respect, trust, and understanding can be built between clinical and coding professionals during these calls. Agreement between hospitals and payers under these circumstances seems a valid approximation of the true clinical state of the patient. 

Bias related to clinical criteria on either side can create an “illusion of validity” that can lead to overconfidence. If the payer and hospital do not agree on a set of diagnostic criteria, repeated discussions of similar cases will likely meet Albert Einstein’s definition of insanity: doing the same thing over and over again and expecting different results. Peer-to-peer (P2P) discussions between professionals who do not share the same frame of reference will likely be pointless, unless such discussions have the goal of creating agreement on a set of diagnostic criteria. 

Dissenting voices might say that pre-denial case review will take too much time. On the contrary; discussion between skilled professionals would almost certainly save time for all parties. Brief pre-denial discussions can result in resolution or agreement on next steps in a few minutes for many or most cases. The hours currently consumed by exchanging of denial and appeal letters could be avoided by pre-denial case review on those cases.

If no agreement on clinical criteria and the significance of patient-specific factors can be reached, both parties will save time and frustration by proceeding directly to impartial dispute resolution. A major reason for inability to reach agreement may be conflicts in interests and incentives motivating the disputing parties.

Alignment of Interests and Incentives 

A simply stated goal of coding and DRG assignment might be accurate healthcare data at low administrative cost. Teamwork and cooperation at multiple levels could contribute greatly to achieving this goal. The concept of therapeutic jurisprudence also may apply to this important work.

Therapeutic jurisprudence presents the “role of law as a therapeutic agent.,” the notion that the law can “promote the psychological or physical well-being of the people it affects.” Laws favoring effective communication and unbiased decision-making could result in teamwork between insurers and hospitals, aligning incentives of the parties as partners in support of accurate healthcare data. 

Why is this Important?

Accurate healthcare data is critically important to achieving good outcomes of care. Quality measures for hospitals and physicians depend on accurate assessment of severity of illness for hospitalized patients. Relative length-of-stay and relative mortality measures depend on accurate case weights, which in turn depend on accurate DRG and code assignment. Outcomes of treatment cannot be evaluated reliably without accurate measures of incidence and prevalence of disease; both measures depend on accurate DRG and code assignment. 


In summary, agreements are likely to be more reasonable approximations of reality than chronically unresolved disputes. Well-intentioned leaders in healthcare, insurance, and government can and should work together to create partnerships that work cooperatively toward shared goals. If hospitals and payers must remain adversaries, at least the processes of respectful discourse and impartial dispute resolution could be strengthened.


You May Also Like

Leave a Reply

Your Name(Required)
Your Email(Required)


Subscribe to receive our News, Insights, and Compliance Question of the Week articles delivered right to your inbox.

Resources You May Like

Trending News