Revenue Cycle, Health Data, Regulatory and Health Industry

Challenges of Clinical Validation: Coding Guidelines vs. Billing Regulations

What is clinical validation? Why is it important? What’s the big deal? Is it enough to just query the provider?

One of the fundamental challenges for physicians is that they must keep abreast not only of updates to clinical criteria for numerous conditions but also with specific terminology to ensure proper code assignment. Clinical documentation integrity (CDI) programs serve to assist providers with these challenges through education and queries.

Of course, sometimes solutions bring their own problems: Some clinicians have become overzealous in documenting conditions that are commonly queried. This is in part because they’re trying to be good team players but, in some cases, it’s also to avoid queries, which some find annoying and take up precious time. As a result, some hospitals are plagued with clinically invalid “over-diagnoses” that lead to improper diagnosis-related group (DRG) reimbursement and payer denials.

According to AHIMA’s Clinical Validation: The Next Level of CDI (January 2019 Update), “clinical validation is the process of validating each diagnosis or procedure documented within the health record, ensuring it is supported by clinical evidence in the medical record.” Clinical validation is a regulatory requirement for claims submission and reimbursement intended to prevent overpayment due to over-diagnosis. It is the hospital’s responsibility to ensure clinical validity of all diagnoses submitted on claims.

Claim submissions and reimbursements are governed by Centers for Medicare & Medicaid Services (CMS) regulations and policy manuals such as the recovery audit contractor (RAC) statement of work (SOW) and the Medicare Program Integrity Manual (MPIM).

According to the RAC SOW 2014 page 21: “Clinical validation involves a clinical review of the case to see whether or not the patient truly possesses the conditions that were documented in the medical record.” Similarly, the MPIM 2018 section 6.5.3 states: “The purpose of DRG validation is to ensure that diagnostic and procedural information … coded and reported by the hospital on its claims matches the attending physician’s description and the information contained in the medical record.”

Healthcare professionals are also aware that clinical validity of diagnoses is a primary focus of Medicare Advantage and commercial payers, and clinical validation is the most frequent reason for DRG payment reductions.

Furthermore, the False Claims Act prohibits providers to submit claims with codes for conditions that cannot be clinically validated based on authoritative and/or widely accepted diagnostic standards if it results in an overpayment. Penalties can be severe. Be reassured that it is the organization that is at risk, not its employees so long as they follow the hospital’s policy.

However, the Official Guidelines for Coding and Reporting (OCG) Section I.A.19 in 2016 stated: “The assignment of a diagnosis code is based on the provider’s diagnostic statement that the condition exists. The provider’s statement that the patient has a particular condition is sufficient. Code assignment is not based on clinical criteria used by the provider to establish the diagnosis.”

This coding guidance seems to conflict with the CMS billing regulations and leaves one wondering whether clinical validation is really required or not. The dilemma seems to arise from the difference between coding guidelines and billing regulations.

Following OCG I.A.19, a coding professional could assign a code for a diagnosis based solely on the provider’s diagnostic statement regardless of the clinical criteria used by the provider. But, following CMS billing regulations, the code would have to be removed if not substantiated as clinically valid based on widely accepted diagnostic criteria.

The consequences of submitting clinically invalid diagnoses are numerous: improper DRG reimbursement, excessive denials, unnecessary appeals, risk of regulatory audits, and penalties. Over-coding leads to major complication or comorbidity (MCC)/ complication or comorbidity (CC) classification downgrades, as have occurred with AKI and encephalopathy. To add insult to injury, denials and appeals mostly serve to enrich audit contractors at the expense of the Medicare trust fund.

The AHIMA practice brief (January 2019) titled “Clinical Validation: The Next Level of CDI”
lends support to the position that clinical validation to comply with CMS regulations is a necessary part of CDI.

AHIMA states that clinical validation is “the process of validating each diagnosis or procedure documented within the health record, ensuring it is supported by clinical evidence… [and] clinical evidence should be present in the medical record to support code assignment… Organizations are also well served to develop internal guidelines defining those diagnoses most vulnerable to denials. The criteria should be created in collaboration with the medical staff, CDI professionals, coding professionals, compliance, and quality of care professionals.”

As a solution, AHIMA recommends the use of clinical validation queries, which it defines as a request that “the practitioner confirm the presence of the condition and provide additional rationale for common scenarios such as a diagnosis was documented, but the patient has an atypical presentation; a diagnosis appears to lack the clinical indicators needed to meet organizational or payer criteria; a documented diagnosis appears to be no longer valid, but the documentation does not show the condition as ruled out/eliminated/resolved.”

But clinical validation queries have their own limitations. What if the provider doesn’t respond? What if the provider does not provide the required “additional rationale”? What if a rationale is given but is still inadequate to support the diagnosis in question? In such cases, the diagnosis may remain unsupported, and putting it on a claim is contrary to CMS regulations.

The hospital must have a policy for dealing with these situations. Who decides whether to submit a claim with an unsubstantiated diagnosis or to omit it from the claim, and by what means? Certainly the CDI team, including physician advisors, should be involved as well as compliance. Any provider identified as a “repeat offender” should be counseled by a peer.

In summary, confusion exists between official coding guidelines and CMS claims and reimbursement regulations when a diagnosis is not supported by the clinical evidence in the medical record. Clinical validation queries may help to solve the problem but, in some circumstances, further action may be required involving the CDI team and the compliance department, based on hospital policy.

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Richard Pinson is a physician, educator, administrator, and healthcare consultant.

Cynthia Tang (ctang@pinsonandtang.com) has extensive operational and consulting expertise in clinical documentation improvement and coding, performance improvement, health information management, and case management.

Tags: clinical documentation integrity , CDI , clinical validation , Official Guidelines for Coding and Reporting