How Medical Necessity Disputes Cause Hospitals to Leave Revenue on the Table

Proper Documentation Before Claim Denials is the Only Antidote

Medical necessity disputes are causing hospitals to leave revenue on the table. 

Hospitals are already facing increased financial pressures as care moves outside of facility-based models and more of them adjust to value-based reimbursement. Added to that, payers under financial pressure themselves because of rising healthcare costs, are scrutinizing claims through increased medical necessity denials with hospitals.

Providers and health systems denied reimbursement for care by a payer can successfully appeal or ultimately litigate such disputes in many cases. But internal costs, and legal and consultant fees in support of the appeals and litigation process can be costly, and revenue can be degraded during the appeals and litigation process. Providers and health systems can take steps, however, to reduce the frequency of care ending up in dispute—and proper documentation before litigation is key.  

Incomplete or ineffective documentation is a frequent cause of denials. It has often been said in healthcare, “If it wasn’t documented, it wasn’t done.” That’s true, but perhaps even more relevant in today’s healthcare world, “if it wasn’t documented, it may be considered medically unnecessary,” resulting in denied payer reimbursement. In fact, CMS could even consider billing for that service to be a false claim.  Furthermore, poor documentation provides a weak defense in medical liability cases.
 
We have learned valuable lessons from evaluating thousands of medical records—including hundreds that have risen to the litigation phase. The following checklist can guide clinicians and their leaders in good documentation practices. At a minimum, providers should ensure that they clearly document the following elements for each hospital observation or admission.
  1. While EMRs have automated and created prompts for many documentation requirements, a resulting new problem has been the increased lack of distinctive patient notes. Therefore, it is essential that providers avoid the overuse of templates and make sure they have typed information that clearly distinguishes notes between patients.
  2. The order for observation or admission must include the diagnosis and be signed by a physician with a legible signature or electronic signature and with a date and time.  
  3. Orders for labs, procedures and medications must be signed by a physician or midlevel (as the scope of practice allows in the particular state) with a legible signature or electronic signature and a date and time.
  4. All notes must be legibly signed, dated and timed by the provider with regular evidence throughout the hospitalization of physician oversight documented in physician signed notes.
  5. The admit note must clearly describe the patient’s condition and document the reasons for hospitalization, the particular level of care required and the expected length of stay. If the patient is hospitalized as a full admission, the expectation of the patient requiring a stay crossing two midnights needs to be documented. Or, on the rare occasion that a patient in a highly acute situation requires inpatient or even intensive-level care but possibly not needing to stay past two midnights, this must be explicitly documented.
  6. Daily progress notes must be sufficiently detailed to clearly show the need for the continued hospitalization and the reasons for each service provided. Providers should ask themselves if a third-party provider would agree that the hospitalization and services are needed based on documentation.
  7. Nursing, respiratory therapy, physical therapy and other care team notes also contribute to the story of what care is provided and the reasons for it. However, the notes by the physicians or midlevels need to be able to stand alone in supporting the need for continued hospitalization.
  8. Discharge notes should again clearly articulate the reasons for admission, as well as the key services provided during the hospitalization that required the patient to remain hospitalized up until the time of discharge.   
Health system leadership needs to ensure that their providers know the expectations for documentation, that the EMR system prompts the key documentation items without creating too much duplication and that compensation incentives align with goals for appropriate documentation with fewer denials.  

Annual training sessions with regulatory and compliance updates equip and remind the providers about documentation requirements. Regular internal chart sampling and reviews prior to claims submission to the payer are also educational to the providers in actively guiding better documentation in the future. They can also allow the immediate correction of inadequacies of documentation prior to claims submission so that denials are reduced.

Engaging an external team with expertise in clinical documentation and reduction of claims denials can ease the burden on leadership and staff and often will identify areas of needed improvement that may be overlooked when doing an internal evaluation. 

When ongoing documentation education and reviews are done internally, an external team should conduct an annual risk assessment and chart documentation audit. A feedback session should follow, with a detailed action plan to correct the identified deficiencies in documentation and to enhance the processes that support good documentation.

Learn more about issues facing hospitals here.