3 Components of a Proactive Hospital Compliance Program

There is a lot at risk in healthcare. Patient safety, quality of care, and patient privacy are always on the line with every encounter at the hospital. But as the healthcare industry moves to a more complex financing structure, providers are now facing new risks with how they bill for care.

About 3.3 percent of net patient revenue is at risk because of claim denials, according to an analysis of over 3.3 billion provider transactions. For the average hospital, that equates to nearly $5 million a year.

Inaccurate and/or incomplete registration and eligibility verification, missing or invalid claims data, prior authorization and pre-certification issues, and service eligibility concerns are top reasons why hospitals are putting their revenue at risk, the analysis found.

A lot can go wrong between patient registration and account resolution, especially when hospitals send claims to dozens of different insurance providers. There are many moving parts that must work together to create a clean claim. But effective, proactive compliance programs can help.

Inpatient claims validation and coding compliance programs can identify clinical documentation and coding weaknesses that will result in inaccurate or incomplete reimbursement, payment delays, and worse, claim denials and write-offs. Coupled with staff and provider education, these compliance programs have the potential to put fewer dollars at risk and ensure a smoother revenue cycle despite the increasing complexity of payer contracts.

How can hospitals leverage inpatient claims validation and coding compliance programs to identify opportunities for improvement? Here are three steps for creating a proactive hospital compliance program to recoup lost revenue and protect the bottom line.

1. Develop an internal auditing strategy

RACs alone recouped approximately $73 million in improper payments made to providers in fiscal year 2018, and new reforms to Medicare’s audit program aim to make RACs more effective at identifying overpayments, CMS recently reported.  

External audits from Medicare’s Recovery Audit Contractors (RACs) and private payers for items like quality, billing, and coding accuracy are only growing in frequency and scope, creating a need for hospitals to establish an internal auditing strategy to catch areas of weakness before payers do.

Auditing how patient charts are coded and documented is key to pinpointing opportunities for improvement before auditors identify compliance issues and recoup money from hospitals, which are already facing slim operating margins.

To develop an effective internal audit strategy, compliance and health information management (HIM) teams need to:

Assess risk areas and implement continuous risk assessments. Common risk areas for hospitals include charge description master, one day inpatient stays, admitting and registration of patients, clinical documentation in patient charts.

Keep up with annual updates to inpatient coding and billing changes, such as the OIG’s Work Plan and DRG updates

Establish compliance or accuracy rate goals for high-risk areas (i.e., DRGs experiencing excessive denial rates).

Create policies and procedures for the audit, including choosing an appropriate sample size and creating a multidisciplinary team to carry out audit and present results.

Execute audit and create report with findings and recommendations for improvements.

Engage in ongoing monitoring of corrective action plans and high-risk areas.

2. Engage a third-party auditor

While internal audits are crucial to proactively identifying areas of opportunity, third-party auditors can elevate a hospital’s compliance program and processes.

Having an outside party evaluate hospital billing processes can provide an unbiased perspective that can prevent claim denials and costly recoupments down the road. These auditors are experts in the field of compliance and may use proprietary technology to better identify billing and coding weaknesses, as well as opportunities to improve workflows.

This outside perspective can come in handy for pinpointing risk areas that may not have been on the compliance team’s radar because they simply did not know that the billing or coding process was at risk. For example, the hospital may not have identified early discharges from inpatient rehabilitation facilities to home health services as a high-risk area based on internal data. However, this type of service is a top priority for OIG’s Office of Audit Services this year.

When selecting a third-party auditor, hospitals should evaluate the organization’s knowledge and experience with evaluating billing and coding processes for the hospital’s specific risk areas identified by internal audits. Considering the types of hospitals the auditor has worked with is also key to finding the right fit.

3. Educate providers and staff

No hospital compliance program is complete without processes in place to educate staff and providers on billing and coding weaknesses. 

Claim validation, coding, and other hospital compliance audits can catch errors or inefficiencies that lead to lost revenue down the line. But failing to educate staff and providers on how to improve accuracy and streamline workflows is a missed opportunity.

Hospitals need to have a feedback mechanism in place to ensure staff and providers know what an audit caught and how to improve processes. And the audits should guide education and training. If hospital compliance staff and/or a third-party auditor identifies deficiencies in clinical documentation for certain types of claims, for example, then the compliance team should tailor their training to address medical coders, clinical documentation specialists, and provider departments that work on those types of claims.

Effective compliance audits are critical to identifying weaknesses and opportunities for improvement. The retrospective analyses of what happened in the past are key to moving forward in a more proactive and compliant manner.