OIG DRG upcoding project poses major risk

In the last few years, hospitals have become the biggest target of the federal enforcement efforts under Medicare and Medicaid, warns Craig Holden of Ober Kaler in Baltimore. The maze of confusing billing and regulatory requirements coupled with the importance of their community reputation and their dependence on Medicare and Medicaid make that fact likely to continue, he adds.

Zeroing in on warnings by the General Counsel to the Department of Health and Human Services’ Inspector General Mac Thornton, Holden contends that the diagnosis related group (DRG) coding initiative has created the single highest risk exposure for most hospitals.

The project, as it was rolled out, focuses on two DRGs, DRG-79 for complex pneumonia and DRG-89 for simple pneumonia. "Those sound like very similar types of diagnoses and they are," he warns. "But depending on which of those DRGs you select and what the base rate is, that can be the difference of between $2,000 to $3,000 per discharge."

"It gets to be even more interesting when you look at how you determine whether one is a DRG-79 or a DRG-89," he adds. The primary diagnoses may appear rather straightforward, but viral bacteria pneumonia might be a DRG-79 or DRG-89 depending on what the bacteria is, he explains.

"To make life even more interesting, you usually never know what the bacteria is because most pneumonia patients are admitted after having a course of outpatient treatment where they have been taking various antibiotics that suppress the organism," he adds. "The patient is not better, but the lab test is going to be negative." Worse yet, Holden says an array of billing consultants "drove a truck through that ambiguity."

Holden cautions hospitals that the next three DRGs likely to gain the attention of the OIG are DRG-475 (respiratory diagnosis with ventilator), DRG-416 (septicemia), and DRG-14 (specific cardiovascular ailment).

Holden points out that DRG data are unique because those data from every hospital in the United States are available in a national database that anybody can purchase for a meager $3,000 a year. "You can slice, dice, and crunch the numbers any way that you want to," he explains, "and look at things like the ratio of DRG-79s to DRG-89s."

"With respect to DRG coding, if there is a problem that is statistically noticeable, you better assume that eventually somebody is going to come knocking," warns Holden. To limit their risk in this area, he says hospitals should first examine their own data. "If you have a problem, at least consider some sort of disclosure at some level," he argues. "You can probably count on the fact that if you come forward, you will end up treated better than if they came to you first."

Here are the other steps Holden suggests hospitals follow to limit their risk in this area:

Make sure the government is doing appropriate extrapolation of their damage estimate. According to Holden, there are many different ICD-9 codes that can lead to a DRG-79. "I have seen some instances where they will take the highest error rate ICD-9 code and try to apply it to all DRG-79s," he reports. "That is going to overstate your damages significantly."

Watch out for DRG coding mistakes that have no financial impact. According to Holden, hospitals sometimes code a diagnosis improperly but still wind up with a DRG-79 that does not overstate costs.

Don’t overlook PROs. Holden says peer review organizations (PRO) sometimes approve the very coding activity to which the government objects. "Obviously, that has great value in defending a case, and I recommend you look for it."

Look for the consultant’s advice. Finally, Holden advises hospitals not to overlook the role of consultants. "There is often a consultant there and it is always nice to find somebody else to blame," he says.