Complete Healthcare Compliance Manual

Table 1. Inpatient Coding and Medical Necessity Auditing Targets

In the following sections, detailed explanations are provided on how to properly address coding audits (e.g., malnutrition) and medical necessity audits (e.g., total knee replacement). These processes and guidance can be used to identify and improve any coding or medical necessity audits.

Malnutrition Coding Audits

In recent years, the OIG has visited the diagnosis of malnutrition twice, in 2017 and in 2020. In 2017, an OIG review identified that healthcare providers were increasingly coding a specific type of MCC malnutrition known as Kwashiorkor that is rarely found in the United States but generally affects populations in famine-stricken regions.^[10] That review resulted in healthcare providers returning millions of dollars to the Medicare trust funds.^[11]

More recently, OIG review has shifted attention toward nutritional marasmus (an MCC that codes to E41) and unspecified severe protein-calorie malnutrition (an MCC that codes to E43), alleging that CMS was billed more than a billion dollars for incorrect malnutrition code assignment. Like Kwashiorkor, nutritional marasmus is rarely seen in the United States but is commonly seen in developing, famine-stricken nations. As far as the severe protein-calorie malnutrition code assignment is concerned, if a healthcare provider coded E43 but didn’t provide documentation to support its code assignment based on UHDDS’s definition of secondary code assignment, then the provider should get ready to start returning hundreds or thousands of dollars back to the Medicare trust funds.

To ensure compliance with Medicare payment rule and to meet medical necessity, providers must ensure that registered dietician’s nutrition assessment (such as body mass index, past surgical history, muscle wasting), nutrition intervention (such as enteral or parenteral nutrition, shakes, meal plan), and nutrition goals (such as weight gain interventions, food intake plan) are documented in the medical record.^[12] These plans need to be validated by the attending provider who needs to document the diagnosis throughout the medical record, especially in the discharge summary.

The UHDDS’s core elements for reporting malnutrition as a secondary diagnosis are met through documenting clinical evaluation (nutrition assessment), therapeutic treatment (nutrition intervention), and increased nursing care and/or monitoring (nutrition goals and plans). Medicare has no issues reimbursing additional payment to healthcare providers who provide and document extensive patient care in the medical record. However, if providers are lax about capturing all aspects of patient care, then Medicare has no issues rejecting or recouping payment. For now, it looks like the malnutrition review is more of a coding-related review with some medical necessity review aspects involved. Providers need to ensure malnutrition is evaluated and monitored throughout the patient care and consistently documented, from history and physical (H&P) to discharge summary (DS).

Medical Necessity Audits

Medicare, Medicaid, and commercial insurers use medical necessity as a key factor for paying claims for medical services. Section 1862(a)(1)(A) of the Social Security Act directs that Medicare will not cover services that “are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member.”^[13] That means the provider’s or supplier’s documentation must “support the medical need for the service rendered. . . . The documentation may include clinical evaluations, physician evaluations, consultations, progress notes, physician’s office records, hospital records, nursing home records, home health agency records, records from other healthcare professionals and test reports. It is maintained by the physician and/or provider.”^[14]

Medical necessity audits often fail when medical documentation is simply insufficient or incomplete, or not present at all in the record to substantiate the claim. Payers may define this further; in the words of one MAC, medical necessity means treatments must be:

• Safe and effective;

• Not experimental or investigational; and

• Appropriate, including the duration and frequency in terms of whether the service or item is:

  • Furnished in accordance with accepted standards of medical practice for the diagnosis or treatment of the beneficiary’s condition or to improve the function of a malformed body member;

  • Furnished in a setting appropriate to the beneficiary’s medical needs and condition;

  • Ordered and furnished by qualified personnel; and

  • One that meets, but does not exceed, the beneficiary’s medical need.^[15]

For any service reported to Medicare, it is expected that the medical documentation clearly demonstrates that the service meets all of the above criteria. All documentation must be maintained in the patient’s medical record and be available to the contractor upon request.

Total knee replacement (TKR) audits are heavily based on medical necessity and documentation review. Effective January 2018, TKRs were removed from Medicare’s IP–only procedures list, allowing healthcare entities to perform TKRs on the IP as well as on the OP side.^[16]

Recently, healthcare entities have noticed increased scrutiny and claims denial for TKRs, especially if performed on the IP side. A majority of IP claim denials are not related to coding and instead are due to a lack of medical necessity surrounding the two-midnight rule. Per CMS, a provider’s decision to admit a patient to perform TKR on IP basis is complex but must involve review and documentation of multiple medical risk factors, such as a patient’s history, comorbidities, and/or risk of complications. IP TKR claims must support the two-midnight rule by physician clearly documenting patient needing two or more midnights of hospital care because of patient’s risk of developing intra-operative or postsurgical complications due to medical history. IP TKR claims without significant complication or risk documentation, or claims lacking medical necessity as per local coverage determination (LCD) L36575, providers will have a difficult time challenging or overturning any claims denial or appeal. Per LCD L36575, a TKR surgery is considered medically necessary if it meets the following criteria:

• Performed due to advanced joint disease demonstrated through radiological imaging such as a magnetic resonance imaging (MRI) and/or computed tomography (CT);

• Documentation of pain impacting activities of daily living (ADL); and

• Failure to respond to conservative therapy such as anti-inflammatory medications or supervised physical therapy.^[17]

This is not an all-inclusive list, and L36575 should be reviewed for a complete list of criteria LCDs.

Medical Necessity Coding Audit Review

Coders should not code “signs and symptoms” if a more definitive diagnosis has been provided by the provider to ensure medical necessity is captured. Time and time again, healthcare providers see their OP claims denied because of lack of medical necessity. Let’s take cataract surgery as an example. RAC has been denying cataract surgical claims by stating medical necessity not met per LCD L37027.^[20]

The LCD contains a list of all CPT/HCPCS codes and ICD-10-CM codes that support medical necessity for cataract surgery claims to Medicare. Once you click on L37027, scroll to the “Associated Documents” section to get to “A57196 - Billing and Coding: Cataract Surgery in Adults.” If a claim is submitted without any of the listed ICD-10-CM codes, then the chances of a provider being reimbursed become very slim. So, is it difficult to show medical necessity on a claim? The answer is simply, “no.”

By educating coders and physicians on LCD L37027 and documentation requirements, it is very possible to support medical necessity and compliance with Medicare. A provider may document “patient with type II diabetes” in a cataract-suffering patient, but a coder who lacks understanding of coding guideline “13. Etiology/manifestation convention (‘code first,’ ‘use additional code,’ and ‘in diseases classified elsewhere’ notes)” may not pick the casual relationship between diabetes and cataract and not code E11.36 - Type 2 diabetes mellitus with diabetic cataract.^[21] Instead, the coder may code diabetes as E11.9 - Type 2 diabetes mellitus without complication and H26.9 - Unspecified cataract. Neither E11.9 nor H26.9 are part of ICD-10 codes housed under the L37027 LCD. This basic lack of coding guideline knowledge and understanding causes a cataract claim to be submitted with codes that don’t support medical necessity and in return, heighten a provider’s chance of claim denial.

On a more basic level, medical necessity could simply fail if there is no valid physician (signed and dated) order that is required for a procedure or service. Good record-keeping and explaining reasons for the care go a long way toward correct coding and eventually appropriate billing.

In Table 2. Outpatient Coding and Medical Necessity Targets, some of the most commonly denied OP targets by government auditing agencies are captured. RAC has been aggressively pursuing the review of cataract, pacemaker/AICD, and TKR claims and denying payment.

Table 2. Outpatient Coding and Medical Necessity Targets