Countering the clinical validation surge in coding denials and underpayments

Computer-assisted coding technology has helped hospitals significantly reduce true coding errors over the past few years. Commercial payers are adapting their reimbursement guidelines to focus more on clinical validation to justify denials and, more often, downgrades. Clinical validation represents 90% to 95% of coding-related denials hospitals received in 2018.*

Clinical validation denials and downgrades

With clinical validation, payers are shifting their focus from the codes providers use to the clinical documentation and the related diagnoses that support the use of those codes. Payers show little tolerance for uncertainty. Sometimes, payers will suddenly shift their criteria set — such as from sepsis-2 to the stricter sepsis-3 — when contract terms do not restrict them.

While clinical validation underpayments can certainly come in the form of denials, more often they appear as downgrades, which can make identifying them more difficult. Managing clinical validation denials and underpayments isn’t just a job just for your coding team, but must involve multiple departments and kinds of expertise.

Below are some strategies for dealing with clinical validation underpayments.

1. Appeal everything
Your denial strategy must include both sufficient resources and specialized expertise to address all types of denials and downgrades. Secondary Medicare Advantage claims are plentiful, but each one represents a low dollar value. Along with administrative denials, they consume significant time. On the other end of the spectrum, appealing clinical validation denials requires specialized clinical knowledge and expertise. Remember that payers are analyzing your denials and adjusting their strategy based on what they observe. Without appealing all denial types, hospitals are effectively allowing payers to dictate their denial strategy.

Without appealing all denial types, hospitals are effectively allowing their payers to dictate their denial strategy.

2. Involve your CDI team in crafting appeals
Though clinical validation denials and downgrades involve adjustments to coding, these payment reductions are actually targeting the clinical documentation supporting the patient diagnosis and its related coding. Involving your clinical documentation improvement (CDI) team is vital to fighting these underpayments. Only CDI can take the proactive approach necessary to engage physicians and resolve the root cause of these denials. Without this support, your coders cannot make a case for appeal. By leveraging both your coding and CDI knowledge resources, you can develop the necessary appeal arguments to justify your original coding decisions and protect your reimbursement.


3. Track downgrades and underpayments by condition/payer/physician type
Identifying underpayments can be surprisingly difficult, since downgraded claims still generate some reimbursement. For this reason, most hospitals only analyze underpayments by payer and reason. But hospitals should dig deeper. Drilling down to condition can identify poor documentation or payer denial habits to address. Knowing which part of the clinical criteria payers say was not met when denying and downgrading allows you to focus your appeal and physician education efforts to stop the bleeding. Identifying which physicians are experiencing the most challenges will highlight opportunities for targeted education. Analytics should be actionable, helping you to recognize the root causes you should address.


4. Share insights about denial reasons upstream to avoid future denials
Payers expect clinical documentation to paint an unambiguous picture of the patient encounter. Words like “probable” and “possible” may reflect the physician’s judgment, but payers interpret those words as doubt or uncertainty and use them as justification for issuing denials and downgrades. Sharing the phrases that result in these denials with your CDI team can enlist their help to clarify ambiguous documentation. Physician advisors or physician champions can further increase physician engagement for improved documentation and meaningfully decrease the extent of clinical validation denials and underpayments.


5. Build upon a foundation of evidence-based research and knowledge
Hospitals gain a significant advantage over payers when they can apply past lessons and clinical knowledge to appeals. The most effective appeals for clinical validation denials and downgrades rely on a foundation of evidence-based medicine. This kind of foundation combines the latest medical research, effective appeal arguments from prior experience and extensive condition-specific clinical knowledge into an easy, referenceable library. An evidence-based foundation produces the strongest appeal argument and is of particular benefit to counter clinical validation underpayments.

Learn how Optum360 can help your facility address underpayments from clinical validation denials and downgrades.

* According to Optum360 internal data.

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