Clinical Validation Audits and the Impact on Hospitals and Health Systems

00:00:00:16 - 00:00:33:28
Tom Haederle
Clinical validation audits are a new tactic that certain commercial insurers are adopting to reduce or deny payment to health care providers for diagnoses they treated in patients. It can take months or even years for these audits to be adjudicated and resolved, adding tremendous cost and burden to the health care system. And at the end of the day, some insurers are getting away with not paying their bills as a result of these audits.

00:00:34:00 - 00:00:54:00
Tom Haederle
Welcome to Advancing Health, the podcast from the American Hospital Association. I'm Tom Haederle with AHA communications. Clinical validation audits are growing rapidly and increasingly straining the financial viability of hospitals and health systems and the resources they need to care for their communities. What's happening and what can be done?

00:00:54:02 - 00:01:23:02
Michelle Millerick
This is Michelle Millerick from the AHA policy team. I'm joined by Richelle Marting who's the director of managed care contracting from North Kansas City Hospital in Kansas City, Missouri. Richelle is an attorney by training, a registered health information administrator and a certified coder. She has spent her career focused on the legal aspects of health information management and reimbursement issues for health care providers and has helped overturn millions of dollars in clinical validation audit findings through developing systems to effectively appeal payers’ inappropriate denials.

00:01:23:04 - 00:01:43:29
Michelle Millerick
Second, I'm joined by Christine or Chris Thompson, who's the executive director of reimbursement and compliance for managed care at AdventHealth in Altamonte Springs, Florida. Chris is an accountant and CPA by training and directs teams responsible for contract negotiations, reimbursement and financial analysis in a large health system. So, let's just dive into the meat of it. So, maybe Richelle, you can start.

00:01:44:05 - 00:01:47:09
Michelle Millerick
Can you explain what the heck a clinical validation audit is?

00:01:47:12 - 00:02:22:29
Richelle Marting
Sure. Well, I can try my best. Clinical validation audits are almost a derivative of a type of inpatient audit that looks at diagnostic-related group coding. In the past, looking at DRGs and the way that we bill as inpatient accounts used to be focused on coding guidelines. We looked at the way principal diagnosis codes were sequenced and coding additional diagnoses, all of your coding rules and concepts, and clinical validations sort of stemmed from that concept that has a very different focus.

00:02:23:02 - 00:02:59:03
Richelle Marting
Rather than looking at documentation and the medical record to determine if coding guidelines allow us to assign the codes that we reported, that in turn dictate what that DRG is, clinical validation recognizes that these conditions were documented by medical providers typically, but instead examines clinically whether a health plan believes that the diagnosis is supported based on signs and indicators and different underlying conditions within the record.

00:02:59:09 - 00:03:35:24
Richelle Marting
In other words, we see that the patient's physician diagnosed this condition and documented it, but do we believe that the patient actually had that condition, or is it clinically supported to report? The result of the clinical validation audit, if a plan believes that a documented diagnosis like sepsis or acute respiratory failure is not clinically valid, we almost ignore or omit that diagnosis code, as if it were not there on the claim, to derive a new DRG for payment purposes.

00:03:35:27 - 00:03:52:15
Michelle Millerick
So, in other words, they're not really saying, you know, it's not about whether the claim was coded or billed correctly, it's about whether does the health plan believe that the patient actually had that diagnosis, and they're kind of coming back, after the fact, and trying to decide whether they think that the patient actually had that diagnosis based on the documentation.

00:03:52:15 - 00:03:53:14
Michelle Millerick
Is that right?

00:03:53:16 - 00:03:55:08
Richelle Marting
That's exactly right. Yes.

00:03:55:10 - 00:04:02:01
Michelle Millerick
Can you maybe give me an example of a patient case where that happened or sort of walk us through an example of what that might look like for a patient?

00:04:02:03 - 00:04:25:24
Richelle Marting
Sepsis is probably the most common example that I think a lot of hospitals can relate to, where we have a patient come in who's sick, who has some type of infection, maybe that's pneumonia or cellulitis, whatever that that infection is, and we have a physician who determines they believe the patient is septic. So, they would document their diagnosis of sepsis in the record.

00:04:25:24 - 00:05:05:10
Richelle Marting
And you typically see the progression of antibiotics and treatment focus both at the underlying infection and the patient's systemic manifestations of that infection. No question in the record that at least one physician, if not multiple physicians and multiple specialties, diagnosed and document the condition of sepsis. What we see then on the back end, our coders would, of course, code and report that condition according to coding guidelines, because it is documented by physicians in the medical record.

00:05:05:11 - 00:05:37:17
Richelle Marting
That diagnosis code gets transferred on to the claim form, and because it is a CC or an NCC, it increases the severity or the complexity of the DRG that is assigned on the claim. After submitting that claim, the health plan might ask for copies of the medical records to clinically validate whether they believe the patient actually was septic in the view of the plan, regardless of what the patient's local or personal attending and specialty physicians believe.

00:05:37:19 - 00:06:17:15
Richelle Marting
So, the plan might look at things like SOFA scores, they might look at the mean arterial pressure, the PF ratio, was the patient on oxygen, creatinine levels. And based on however the plan or their reviewers define sepsis and what criteria they expect to see, if they don't find all of those in the record, they might issue a letter to indicate we believe that the documented diagnosis of sepsis is not clinically valid and indicate what DRG they will pay the hospital if different from the DRG that was reported.

00:06:17:18 - 00:06:34:27
Michelle Millerick
So really, in most of these cases, the patient is getting the care and the treatment associated with that diagnosis. But this is something that happens after the fact to just really reduce the payment. So, Chris, maybe you can talk a little bit more. Feel free to add anything that you might want to Richelle's explanation of what these audits are,
but what are you seeing at Advent?

00:06:35:00 - 00:06:59:15
Chris Thompson
It is a huge issue for AdventHealth with many different payers and many different types of payers. But we met with a large payer in the state of Florida, and it boils down to this: the medical director there agreed that our treatment of a patient was absolutely spot on the way it needed to be, using the criteria of ICD-10 for sepsis.

00:06:59:17 - 00:07:26:18
Chris Thompson
And they agreed that they wouldn't want us to wait later for that sepsis case, because the criteria that they're using for payment much of the time is sepsis 3 and not sepsis 2, which he virtually said, oh, no, I would want you to treat that patient that way, but we're not going to pay for that. We're seeing with clinical validation audits, we're seeing it in all types of insurance: Medicare, Medicaid, commercial.

00:07:26:21 - 00:07:50:22
Chris Thompson
It's very prevalent in the Medicare space, obviously, but it is in all types for us. It's all payers are conducting clinical validation audits. It is a practice that continues to get bigger as time goes on. We have tried to put some things in place to combat the ability to do those clinical validation audits with not complete success, but a limited measure of success.

00:07:50:24 - 00:07:57:11
Michelle Millerick
Do you see these kinds of issues, you said all payers, but with traditional Medicare as well, or is it predominantly in Medicare Advantage?

00:07:57:13 - 00:08:06:18
Chris Thompson
I am of the opinion that Medicare does not do those based on my industry knowledge. It is only with Medicare Advantage that we see this practice, not Medicare.

00:08:06:20 - 00:08:09:15
Michelle Millerick
That's a helpful distinction. It may be something we want to come back to in a few minutes.

00:08:09:20 - 00:08:25:21
Chris Thompson
I think that is interesting as we think about sort of parity between traditional Medicare and Medicare Advantage, of the types or sorts of audits and payment issues we're seeing in MA that maybe don't sort of exist in the same way in traditional Medicare. I guess that also kind of raises another question. And maybe, Richelle, you want to weigh in on this about, you know, are these audits allowed?

00:08:25:21 - 00:08:32:05
Michelle Millerick
You know, that that if it's not something that happens in traditional Medicare, you know, is this allowed in Medicare Advantage or why?

00:08:32:07 - 00:08:54:25
Richelle Marting
Yeah, there's been a lot of, sort of, intellectual and academic discussion around that on both sides in trying to grapple with even defining and characterizing what it is and how it is different than DRG validation. Is it a medical necessity decision, or is it something else? So, I hate to give the lawyer answer, it depends, but maybe it depends.

00:08:55:02 - 00:09:41:21
Richelle Marting
And I think not having that very clear, well-defined concept is challenging. We do have some definitions, originating from the RAC scope of work. So when you mentioned does traditional Medicare clinical validation, that's one of the sources where CMS in its contract with RAC auditors years ago indicated, no, that RAC auditors cannot do clinical validation, and that's why it was defined to distinguish it from what is permitted DRG validation, where you're looking more at the coding guidelines. Whether it's allowed, for an MA plan, or commercial plan or a Medicaid plan, for example, and a provider, I think really is going to come down to the parties discussing that and putting some language in their

00:09:41:21 - 00:09:56:22
Richelle Marting
agreements to address what these are, parameters on when and how they're performed. At least at this time, where we don't have explicit guidance from CMS on how that can or cannot be handled with respect to different government programs.

00:09:56:24 - 00:10:23:08
Michelle Millerick
You know, I think one of the things, you know, just reflecting on what both of you just said, that's really troubling to me is, if you sort of think about this from the patient perspective, if you're a patient, you have an illness or an injury or a sickness that you go to a doctor for, your doctor diagnoses you with the condition, you know, and says you have this, treats you for this, but then somebody later reads your record who never even saw you as a patient, might not even be a physician necessarily, you know, and comes back later and says, even though you were treated for this condition, you don't actually have that.

00:10:23:09 - 00:10:27:17
Michelle Millerick
Like that just seems kind of crazy. So, I guess, you know, how do we make sense of that?

00:10:27:18 - 00:10:43:19
Chris Thompson
I think the plans let the attending physician do their job. I think the attending physician is the director of all of it. The problem that we have is that the health plan comes behind that physician and basically says, I'm just not going to pay you for that.

00:10:43:22 - 00:11:04:00
Chris Thompson
I want them to provide the care. You didn't do anything wrong. You didn't perform excessive tests. You didn't delay the care. You did all that was supposed to be done. But the health plan comes behind and basically says, we're not going to pay you for that. That that's the crux of it as I see it. I would welcome Richelle’s input on that too.

00:11:04:03 - 00:11:27:14
Richelle Marting
I think there's a couple of challenges there. And I mentioned the RAC statement of work, but there is a, there's a coding clinic article that I think providers and plans use in different ways and addressing that both providers and plans that have their own definitions of diagnoses. And so, we take that in different ways where our medical staff may have a definition of sepsis that we adopt, and we use.

00:11:27:14 - 00:11:50:29
Richelle Marting
And this is how we want to implement, identify early signs of sepsis, intervene and prevent that from being exacerbated, and a plan may say the same. So often it may come down to whose definition gets to trump. And that's assuming, of course, that a clinical validation audit is permitted to begin with. I think of several different rules that come to mind.

00:11:51:06 - 00:12:20:12
Richelle Marting
In Medicare Advantage, for example, there are regulations on poststabilization services and that when provider and plan disagree as to whether the patient is stable for discharge or transfer, there's deference to the attending physician in that example. To me, that signals that when we have two medical professionals who disagree, it might be appropriate to give deference to the provider that's actually there in the room, with eyes and hands, with the patient.

00:12:20:14 - 00:12:42:14
Michelle Millerick
Yeah, absolutely. The person who touched and met with and evaluated the patient, that makes a lot of sense. So, I want to shift gears a little bit to just the impact on hospitals and health systems, and, you know, it's clear that these kinds of audits are having an impact, or certainly we wouldn't be talking about it today. And I can say from the AHA perspective that we're increasingly hearing from hospitals and health systems across the country about concerns with these kinds of practices.

00:12:42:20 - 00:13:02:07
Michelle Millerick
And so, there's, you know, a real concern that these kinds of audits are inappropriate, but more so, too, that they're actively harming the financial viability of some hospitals, especially those that are rural and small and maybe don't have the resources to fight every one of these things on the scale that it's happening. So, you know, one of you is, you know, a midsize independent acute care hospital and another, a large system.

00:13:02:07 - 00:13:07:10
Michelle Millerick
And I wonder if you can both just sort of comment on kind of the impact that this has had on your organizations.

00:13:07:13 - 00:13:26:21
Chris Thompson
So, you know, when clinical validation audits first started, there was a trend for us where payers were not paying anything unless you removed the diagnosis code from your claim and resubmitted it. We still have two payers taking that stance with us in various markets.

00:13:26:21 - 00:13:54:04
Chris Thompson
So, the impact of that is huge because you've provided the care, yet no payment is received. More payers have moved to, we'll pay you the DRG we think we owe you, and you can use your dispute resolution process to deal with the rest. For AdventHealth, over the last four years, I would say this issue has been worth probably about $150 million total, and it just continues to grow.

00:13:54:07 - 00:14:17:06
Chris Thompson
Obviously, some payers are larger than others. You know, it does pay to be persistent with the payers. And that is, at the beginning, we were actually able to work with a payer who's fairly large in the Medicare Advantage space, and they agreed that clinical validation audits were not part of the Medicare program, were prohibited by Medicare, and they don't actually do them for our hospitals.

00:14:17:08 - 00:14:32:23
Chris Thompson
So, that was a win on our part. That was one payer out of many. But yeah, the trend is large for us. It continues to grow. I will be honest to say, our recourse has been pretty much the dispute resolution process within our agreements.

00:14:32:25 - 00:14:36:07
Michelle Millerick
Chris, can I also just ask you before Richelle comments, how far does that go back?

00:14:36:07 - 00:14:45:13
Michelle Millerick
Like when did you start to see these things? Because we think about that, that scale of impact that you're saying even just in terms of the dollar amount, has this been going on for a long time or is this relatively new?

00:14:45:16 - 00:14:50:14
Chris Thompson
I think it started and was kind of something before we actually tracked it the way we should.

00:14:50:14 - 00:14:57:03
Chris Thompson
But I know for us it goes back to probably 2018. That's about as far back as I have seen claims and issues for clinical validation audits.

00:15:00:26 - 00:15:05:14
Michelle Millerick
That's interesting. So, this is a relatively new phenomenon in the last five years, five or six years.

00:15:05:15 – 00:15:07:14
Chris Thompson
Yes, absolutely.
00:15:07:15 – 00:15:10:03
Michelle Millerick
Richelle, how about you guys? What's the impact been for you?

00:15:10:23 - 00:15:44:11
Richelle Marting
Yeah. Well, I'd echo that same timeframe. We were not seeing many. For North Kansas City Hospital specifically, I can say a handful, maybe a month, that we would see a true clinical validation audit that was not a coding issue. So, it certainly evolved, starting in about ‘18, ‘19, 2020, we started to see more and more to the point where there was this very clear shift from DRG validation to predominantly the vast majority were clinical validation.

00:15:44:13 - 00:16:05:04
Richelle Marting
We saw about 80% of those in the Medicare Advantage plan space. There were some commercial, and then I would even more recently, maybe in the last two to three years, where we started to see a small number of the Medicaid and COs doing the same thing. So, I expect that that's also an upward trend that we can expect in the coming years as well, and unless guidance or things change in the meantime.

00:16:05:04 - 00:16:37:25
Richelle Marting
Certainly has had a significant financial impact. Not only has the prevalence among different types of plans increased, but the volume is increased. Where we might have a handful four or five years ago, we are now easily appealing anywhere from 80 to 100 for one hospital organization per month. The average dollar amount in this dispute can be anywhere from, on average, I'd say $5 to $8,000,

00:16:37:25 - 00:17:04:14
Richelle Marting
the difference between two DRGs. So, you add that up, it adds up very quickly. And that's not just the dollar amount in dispute. These are extremely time consuming to process, to appeal. You've got somebody who needs to know coding and clinical digging into the record and can sometimes spend hours preparing a single appeal to do a really good, thorough job and address all of the plan’s concerns.

00:17:04:16 - 00:17:16:24
Richelle Marting
It is just a very burdensome, time-consuming process with a lot of administrative costs, delays in payment, yet pretty good outcomes at the end of the day, getting these overturned.

00:17:16:26 - 00:17:34:09
Michelle Millerick
That's a really good point as we think about just unnecessary cost and burden on the system and the resources required to fight against these things, especially if, as you said, the outcome at the end is that most of these things get overturned after many months or years of, you know, arbitration or trying to resolve them. I wonder if either of you could comment on this.

00:17:34:14 - 00:17:40:02
Michelle Millerick
Is there an impact to patients? You know, a lot of this is payment related, but is there a patient facing side to this?

00:17:40:05 - 00:18:03:17
Richelle Marting
Arguably, yes and no. It’s no, in the sense that you talked about a patient, who had their physician make a diagnosis and it's in the record and then a plan, a provider, hopefully a clinician, but who's never seen the patient, makes this change. Yet the patient doesn't really see those changes. There's really not a difference. We don't see often a change in the medical record.

00:18:03:19 - 00:18:29:08
Richelle Marting
What you might see, though, is a delay in getting the patient statement out to the patient while we are trying to adjudicate that inpatient claim and go through the appeal process, because this can often take, as you said, many months, and in fact, sometimes we've had, it's been years just to work our way through the internal appeal process, without even considering formal dispute resolution.

00:18:29:11 - 00:18:55:10
Richelle Marting
We had a patient example not too long ago, where the admission was in 2020, and we just reached a final decision this year. So patient impact, if there was a patient financial responsibility, getting their statement, you know, potentially four years after a date of service absolutely has an impact. Even if the dollar amount’s not different than what it would have been at the beginning,

00:18:55:13 - 00:18:58:12
Richelle Marting
that to me has a very real impact on patients.

00:18:58:15 - 00:19:00:28
Michelle Millerick
Chris, it looked like you wanted to jump in there.

00:19:01:01 - 00:19:27:12
Chris Thompson
I'm flabbergasted at, you know, four years. After four years, a patient thinks there must not be a bill. I mean, truthfully, and I always, because much of this revolves around Medicare Advantage, I know I have had to work with my mom in situations like this. She has a health plan, and this is an issue that she, just what Richelle said, the delay in getting the information and the bill to her.

00:19:27:19 - 00:19:34:27
Chris Thompson
I have seen that firsthand through her interactions with her health plan and hospital for various states.

00:19:35:00 - 00:19:46:15
Michelle Millerick
So, I want to shift this to sort of move into the final stretch of our conversation just around, you know, what should we do about this? Are there solutions? Are there things that that we should be thinking about to curb some of these potentially problematic practices?

00:19:46:20 - 00:19:53:26
Michelle Millerick
So, I'll ask you maybe both to respond to that. Maybe, Chris, if you want to start, you know, where do you think we go from here? What, how should we tackle this?

00:19:53:29 - 00:20:02:03
Chris Thompson
I don't know if I'm as forward thinking as Richelle is. I know how as a company, we have tried to tackle it, and that is, we're large,

00:20:02:03 - 00:20:23:22
Chris Thompson
we're typically contracted with every payer and every market, but we've tried to tackle it through different contract language that we negotiate into our contracts. I will tell you that we have payers that blatantly ignore what's in our contracts, which again, the dispute resolution process is, it's pretty much where we're channeled to go when you're contracted with and payer.

00:20:23:24 - 00:20:51:05
Chris Thompson
I would like to see, and I think others would like to see, CMS weigh in on this particular topic. When they prohibit it in their own program, but they allow it under the Medicare Advantage program, and it will become through the complaint portals that are changing for providers, I think it will become very apparent and much more in the face of CMS staff that these things are occurring.

00:20:51:05 - 00:20:58:14
Chris Thompson
It's a definite impact, maybe, that’s one of the avenues we can use moving forward.

00:20:58:14 - 00:21:26:16
Richelle Marting
One of the pieces we haven't really discussed yet that makes these challenging, in addition to plans, having specific criteria, is there's also a lack of transparency and that they won't provide them to the hospital where we can educate our medical staff. Chris is probably alluding to that in contract language, that to the extent there are these criteria or definitions from the health plan that are going to impact whether and how we get paid for sepsis or other conditions, we'd like to see that.

00:21:26:17 - 00:22:03:29
Richelle Marting
We'd like to know that; we'd like to have our medical staff weigh in, ask questions, express concerns before we're held to standards, and for the most part, with very, very, very limited exception, we have absolutely no insight into what those criteria are until after the fact. But I think that ties back to some of the work that CMS has been doing that could help in the space of clinical validation audits surrounding coverage criteria and defining and characterizing these audits, and whether a specific definition of diagnosis is a coverage criteria. CMS alludes to that in the final rule,

00:22:04:05 - 00:22:26:03
Richelle Marting
and there are pieces where they say, to the extent of plan, create specific definitions of diagnoses. They have to follow these rules, but really didn't elaborate that to be so explicit that we can really have a very clear conversation with health plans. Although I will echo Chris's sentiment that there are other places where we have very clear language

00:22:26:03 - 00:22:46:04
Richelle Marting
in the final rule, that we've also had plans directly say they're not going to follow it. So, whether that actually yields any results, but I think it's the start to have better clarity and guidance from CMS, not only for Medicare Advantage, but to the extent that may or may not also affect Medicaid programs and Medicaid NCOs.

00:22:46:06 - 00:23:10:12
Michelle Millerick
Those are a great set of points, and I think you certainly both have given us a lot to think about and want to thank, both of you, Richelle and Chris, for sharing your time, expertise and insight with us and really more broadly for all of the work that that both of you and your organizations do on behalf of the patients and communities that you serve., From the AHA perspective, holding commercial insurers accountable to their patients and network providers, continues to be really a top priority for us.

00:23:10:15 - 00:23:17:25
Michelle Millerick
So, we will continue to try to shed light on these kinds of issues and look forward to working with both of you going forward to continue trying to tackle these challenges.

00:23:17:28 - 00:23:19:15
Richelle Marting
Thanks for having us.

00:23:19:17 - 00:23:27:27
Tom Haederle
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