ICD-10 & Cash Flow: What Denials Are Ahead?

ICD-10 promises to be one of the biggest medical coding updates in memory. Industry forecasters promise clinical documentation shortfalls, staff productivity losses, spotty vendor readiness, claim payment sluggishness and, at the end of this long line of performance pitfalls, we have been advised to expect double-to-triple increases in claim denials.

Of course, preparations have been extensive. However, many medical financial officers are now saying the “unknowns” are among their last minute concerns and one of those big unknowns is what our denial rates will look like and how can they be resolved.

“I keep hearing that the insurance companies will be denying many claims after ICD-10 starts, however no one has clarified why. I do wish someone could give us guidance so we can be prepared,” said Tina Hales, certified professional coder for The Plastic Surgery Group in Chattanooga, TN.

The Centers for Medicaid and Medicare (CMS) have been actively testing the ICD-10 claims submission process. While this provides some comfort that the claims processing software is ready for deployment, the denial rates for the testing period are not expected to be indicative of true denial rates since some testers may have intentionally submitted incorrect claims to review how rejections would be processed. However, July testing results included a 1.8 percent denial rate due to invalid submission of ICD-10 diagnosis or procedure codes and a 2.6 percent rejection rate for invalid submission of ICD-0 diagnosis or procedure codes. Other denials were related to incorrect NPI, Health Insurance Claim number or Submitter ID, dates of service outside the range valid for testing, invalid HCPCS codes and invalid place of service.

One obvious reason for rejections will be data entry errors. However, a data entry error may translate to different rejection codes based on where the incorrect data was entered. For example, a miss-key in the authorization number might generate a denial related to incorrect authorization while incorrect entry of the procedure codes might generate a denial for medical necessity. The bottom line is that ICD-10 denial resolution might take much longer than your current denial processing as billing professionals track down root causes of denials.

“Particularly for non-E/M services, one of the most common denials is “the diagnosis is inconsistent with the procedure” in which the payer conveys its decision that the service was not medically necessary. That determination results in a series of actions that a medical practice must take to get the claim paid,” said Elizabeth Woodcock of Woodcock and Associates. Her current newsletter highlights several tips for handling ICD-10 denials: elizabethwoodcock.com/newsletter/2015/09/01/icd10-likely-to-bring-payment-challenges/

Woodcock has advised healthcare billing departments to be on the lookout for denials related to the following Claim Adjustment Reason Codes (CARC) which are likely to be used for ICD-10 denial issues:

  • CO11 – inconsistent with procedure
  • CO16 – claim lacks information
  • CO15 – authorization number is missing/invalid
  • CO165 – no referral
  • CO197 – precert/authorization/notification absent
  • CO198 – precert/authorization exceeded

Unfortunately, each of these denials will impact coder productivity due to the need to recode and resubmit the claim. Further, claims will still need to be submitted timely during the ICD-10 implementation period and claims which had too little information to process through the system may not even trigger a denial. Therefore data input accuracy is extremely important.

“We expect most of the denials to fall under some type of coding denial,” said Tammy Tipton, President of Appeal Solutions. “However, organizations track coding denials very differently depending on their information management systems.”

Many ICD-10 coding denials are simply too vague to act upon, particularly with complex claims involving a number of procedures and/or diagnoses. Most coding appeals must make a clearly worded request for the denial justification and to seek compliance with nationally recognized coding standards.

“You will want to be collecting any guidance you receive from your professional coding organizations, coding experts and Medicare/Medicaid payer publications. This type of material submitted with an appeal letter can be very effective on coding appeals,” said Tipton.

At Appeal Solutions, new appeal letter templates have also been developed for the following denial categories: medical necessity, prompt payment, lack of precertification, duplicate, timely filing and benefit variance. As follows is a brief description of each of these categories, what impact might occur and what steps can be taken to avoid and/or address these denials.

Lack of Medical Necessity: ICD-10 denials may be based on newly developed medical necessity claim edits. However, these edits may not be appropriate for every clinical scenario. This type of appeal will likely need to focus on the clinical documentation and include the supporting records.

Lack of Preauthorization/Precertification: ICD-10 may result in a delayed response time as payers deploy updated precertification procedures. Further, payers may have challenges matching precertificaiton with claims. Therefore, be sure to quickly address incorrect precertification denials by reviewing the precertification details in the claim history.

Lack of Prompt Payment: ICD-10 claim review may result in stalled claim decisions by the payer. Therefore, take a look at your organization’s prompt payment appeal letters. Make sure that you know the state regulations which provide for interest payment on late payments and cite this information when applicable. Further, your managed care contract may address prompt payment penalties and compliance with these terms must also be monitored during the transition.

Lack of Timely Filing: Unfortunately, many ICD-10 claims may require some type of data corrections. However, claims which were incorrectly submitted the first time may not be identified, corrected and resubmitted within the original filing limitations. Therefore, it is extremely important to identify incorrectly submitted claims quickly. If resubmitted claims are denied for lack of timely filing, you may want to appeal with information regarding the original submission date. Be sure to provide proof of the original submission with this type of appeal.

Benefit Variances: ICD-10 coding may result in unexplained benefit changes when compared to ICD-9 coding of certain claims. Your appeal letter should seek review of unexplained benefit variances and specifically request a detailed explanation regarding benefits and/or copays/discounts have been calculated.

Lastly, make sure the patient accounting department has a clear understanding of the denials “escalation plan.” Your patient accounting/financial staff may have many pressures during the ICD-10 implementation. Give extra emphasis to the need for good communication among team members and management. If you do not have tracking policies in place, develop some general guidelines for handling questionable denials, payer stalls and records requests. Also, emphasize with patient accounting staff that signs of poor payer performance, such as untimely decision-making and high denial rates, should be tracked and reported to management so that appropriate follow-up with higher level payer contacts can be initiated.

If your organization does not routinely schedule provider representative meetings, now is a good time to develop stronger relationships with payers via face-to-face meetings. Many payers still will be training provider representatives on ICD-10 issues and can provide assistance to your billing team regarding payer-specific requirements. Since ICD-10 has greater specificity, payers are developing documentation guidance which may assist your providers with clinical documentation improvement.

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