Podcast: Optimizing inpatient claim review

Many health plans choose to bypass editing on inpatient claims due to their complexity—but this means they potentially spend millions of dollars improperly in this rapidly growing area. While inpatient claims editing is challenging, with the right technology and expertise in place, payers can execute DRG and other inpatient claim reviews more efficiently while minimizing provider abrasion. In fact, this can often be accomplished even without requesting the member’s medical record.

On the second episode of our Payment Integrity Insights podcast, Cotiviti’s inpatient claim review experts discuss:

  • How to increase postpay review efficiency for inpatient claims while also moving to more prepay for improved payment accuracy
  • How artificial intelligence-driven chart selection can target medical records with the greatest likelihood of returning value
  • How postpay cross-claim clinical review and certain prepay review types enable accurate determinations without a medical record

Listen as Cotiviti’s Warren Lesnefsky, vice president of product marketing, is joined by Cheri Moehring, senior vice president of clinical chart validation, as well as Mike Jablon, vice president of product management. Stay tuned for future episodes of Payment Integrity Insights on Apple Podcasts, Spotify, and anywhere else that you get your podcasts.

Miss our first episode? Listen in as we discuss how to implement a robust payment integrity program for self-insured or administrative services only (ASO) employer groups.

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Podcast transcript

We know that improper healthcare claim payments in general are very expensive for the industry. Can you give us some context around how this affects inpatient costs specifically and why health plans need to include inpatient claim spend in their payment integrity programs?

Mike: You're correct. Improper healthcare claim payments are a very expensive industry problem, not only in the claim cost, but also the administrative burden of research and recovery. Inpatient care specifically is one of the most expensive types of healthcare services. So errors and payment can have a significant financial impact. They can delay payments, cause provider abrasion, and ultimately impact the plan's member satisfaction.

According to CMS data, improper payment rates are on the rise from pre-pandemic levels in 2019 with Medicare fee-for-service spending a staggering $31 billion in 2022 on improper payments. This amount includes a large portion from inpatient facility claims whose complexity often leads payers to bypass inpatient claims editing. And this results in millions of dollars in overpayments for just a single organization that could have been prevented. We look at the OIG as well. They closely monitor Medicare and they indicate that inpatient claims are a significant portion of spend and agree that costs are increasing. Inpatient claims spend is growing faster than general healthcare spend with increasing billing at the highest severity levels.

So at Cotiviti, we see the same results as OIG and CMS. We see the outsize growth in average inpatient claim spend not only in Medicare, which is trending about 8%, but also commercial and Medicaid. Overall between 2019 and 2022, there's been a 17.5% increase in hospital expense, so a big factor is increased billing at the highest levels of care.

Can you dive in some more on the complexities that you mentioned earlier regarding looking at inpatient claims prepay? Does the industry still even need postpay?

Mike: The industry does still need postpay review to capture all of the inpatient claim complexities. Many health plans have a robust prospective payment integrity program, and that's associated with just professional and outpatient claims. Typically, inpatient claim review has historically been associated only with those post-adjudication review services, but we are seeing plans begin to include inpatient claims or prepayment review, so these claims also serve as a reference for other types of claims for members. So looking at their historical contextual processing, we can bounce professional and outpatient claims against these inpatient claims as well for added value. We believe correct coding should be applied equally across all places of service.

We also talked about the continued need for postpay and it is very important that postpay is in place to serve as a backstop for prepay, and there are many situations that require the rigor of post-payment chart review and some things you can't do in a prospective manner. So some examples of policy that's best served in a postpay environment include things like sequencing and repricing, looking at provider exclusions, or prior authorization exclusions or payer adjudication limitations.

Is there room left for improvement in the postpay world?

Cheri: Yes, absolutely. Postpay chart review is still a very valuable component of a health plan’s payment integrity program. The key really is to make it as efficient as possible, reducing impact to providers.

There are a few ways that plans really should consider making those improvements. So first, incorporating the use of artificial intelligence and machine learning models. They will help to select the best chart review opportunities. The focus is to identify those claims with the highest probability of an incorrect payment, and then those claims where the complexity of the review truly requires a medical record to confirm that error that resulted in an overpayment. Second is leveraging outpatient and professional claims data in lieu of a full medical record to validate the accuracy of that inpatient DRG assignment. Clinical review of multiple claims across multiple providers and at various points in the patient's continuum of care enables that payment accuracy determination for the inpatient confinement without the requirement of a medical record. This will ease the burden of communication with providers and also allows for reviews even when a provider limits chart request.

And then finally, ensure that you have a comprehensive program that incorporates all three facets of validation. So documentation: does the medical record contain the necessary information coding review? Does the diagnosis code on the claim match the diagnosis that's in the medical record? And then the clinical component that validates whether the diagnosis on the claim is actually supported by the clinical information contained within that medical record. By combining both approaches, complex medical record review and cross claim clinical review, a plan can achieve an average of 2.5% annual savings from total inpatient medical spend.*

Why is adding prepay interventions so important?

Cheri: Although there's value from a retrospective review as we just discussed, there are also several inherent challenges. Expanding your payment integrity program to include prepayment review helps overcome these challenges. In postpay, payers are only able to recoup a fraction of the identified overpaid dollars, about 60 to 70% on average. In addition, both payers and providers have administrative cost of about $50 per overpaid claim. These costs make it prohibitive for payers to capture smaller overpayments, reducing the value capture another 20%. Both payers and providers feel there's less impact when the claim is pended for review and then paid accurately the first time rather than pursuing an overpayment amount through an offset or a refund recovery process.

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Earlier, you mentioned that there are reasons why prepay review of inpatient claims is so complex. So how can we do it without causing pain for the payers and the providers?

Cheri: So our postpay DRG review expertise has revealed areas of opportunity for prepay, and Cotiviti has added prepaid DRG to our Clinical Chart Validation solution. So we apply chart selection in a very similar way to that of postpay, but with a focus on claims where our scoring algorithms indicate the probability of an error is greater than 50%. By applying this probability factor, we ease the volume of medical records requested from a provider prior to them receiving payment.

Also similar to postpay review, our clinical and coding professionals validate the accuracy of both the clinical component as well as the coding component, and validate the documentation is accurate and available. Payers and providers both prefer that the claim be accurately paid the first time, again reducing those administrative costs and burdens. And as previously mentioned, most plans have relied on exclusively using a postpay claim review to catch these inaccuracies in inpatient DRG claims.

While this approach has value, we've talked a little bit about the significant room for improvement. So in our experience, the time to recoup that value from post-payment ID can exceed 90 days, and then that recovery only yields about 70% of the value. A prepay claim review is really the next step to optimize your value capture. Prepay claims review eliminates that headache of a pay-and-chase process, where a payment of the claim is made and audit identifies that overpayment, and then the plan is left with the task of adjusting that claim and then trying to either offset from future payments or pursuing an actual recovery. Again, accurately paying that claim from the start reduces those administrative costs for both the payer and the provider.

So I want to share a quick example of how we've moved value forward for one of our health plan clients. So they started using Cotiviti’s Clinical Chart Validation solution post-payment in June of 2021. They then added a prepay program in January of 2022 to really take full advantage of the comprehensive retrospective prospective approach. Since January 2022, this plan has recovered $14 million in overpayments identified postpay plus an additional $7 million of savings was captured prepay. Their audit sustainability for both the post and prepayment side remains at greater than 90%.

Mike: Yeah, that's a great example. And even the OIG, they recommend moving to a prepayment opportunity to catch this type of behavior upfront, but it doesn't have to stop at just the DRG claims. So here at Cotiviti we've introduced new and expanded inpatient payment policy content within our prospective products that health plans are utilizing.

In our opinion, it is important for health plans to utilize the full member contextual processing looking across the history of a member across their professional outpatient and inpatient claims. This process of adding inpatient claims data to a file ingestion is utilizing the same file layout that clients are already sending that contains the outpatient claims and what we call the institutional file layout. You want to have a longitudinal view of a member's claims to have the most accurate results. The inpatient claims inclusion increases savings to health plan by looking at an untapped area of prepayment spend.

So this increases yield compared to a strict recovery and their associated admin costs. This also lowers provider abrasion. It identifies correct coding issues upfront across all claim values and allows for these errors to be identified quickly and corrected in order to expedite the payment to the providers. So expedited payment is especially important for inpatient providers and in particular rural, maybe independent hospitals.

Not all inpatient claims are appropriate for prospective review. We talked about that a little bit earlier, and the different policies that are appropriate prospective versus retrospective, but inpatient claims where a chart is necessary for complex review for DRGs, for example—those are not appropriate for an automated prospective review. These types of claims will pass through the prospective editing and cascade to our manual review services. So the types of policies we offer for inpatient prospective payment integrity, those will include things like bundle facility payment policy, which looks at multiple admissions, duplicate services, transfer or incorrect discharge status, and a host of additional policies. Some of these policies plans will find do overlap with policies that are familiar with the prospective outpatient space and also in the retrospective space, but it makes sense to move those policies that they're familiar with in the retrospective space upstream to prospective to correct appropriate inpatient claims upfront.

Some payment integrity programs are still siloed, where postpay and prepay operate separately and even have separate savings targets. Can you talk to us about how these new prepay interventions will impact postpay data mining and savings?

Mike: They should be looking at the overall value to the total plan, but we do often see siloed payment integrity programs, these teams that are working claim payment integrity from different areas or different angles. They may be caught off guard when a prospective policy is enabled and think that lowering findings in the retrospective space could result.

It's always a best practice to communicate across payment integrity teams any changes in policy, and also to forecast any impact that may occur. What we have found in our production inpatient editing thus far is a pretty negligible impact on the post-pay findings when prospective inpatient editing is enabled. This was a bit of a surprise. We thought it'd be larger, but it's ultimately around 8% is where the impact lies. This was attributed to claims findings that were excluded or bypassed in prospective claims editing.

So this allows an opportunity for health plans to review and make sure that these exclusions and bypasses are still appropriate when enabling inpatient policy. In regard to health plans, looking at the bigger picture, applying correct coding, and protecting the member benefit at all levels of payment integrity, that's the goal. Plans should continue achieving savings through the utilization of data mining, retrospective recovery, and the audit of inpatient claims. These are a valuable component of what we call a comprehensive claims editing program at any health plan, and they'll continue to be going forward.

Cheri: As mentioned earlier, our results have demonstrated approximately 20% in additional value when both the pre and post auditing is performed compared to just a post-payment alone program. Another key measure is, again, that audit sustainability that's greater than 90%, and that's been consistent both pre and post auditing.

So to wrap up, in your work with clients, what lessons have we learned and what are some of the best practices when implementing inpatient payment integrity?

Mike: I think one of the important best practices is reviewing current exclusion and bypass criteria. Oftentimes, this has been in place for a very long time, and when inpatient payment policy is introduced, it's a good time to revisit, make sure it's current, make sure you don't want to make any changes to this criteria.

The other thing is that persona differences exist in inpatient claims editing, so clients need to understand why different payer personas require different inpatient review approaches, what's most applicable to how they're submitting claims, and what they're submitting claims for. We found that hospitals and inpatient facilities will have a more sophisticated revenue cycle department, so they'll learn quickly when payment integrity is put into place. So plans want to place an emphasis on communication and awareness of new policy being put in place by the plan, just being open about the policy going in and what the inpatient provider should expect.

And then lastly, consider utilizing inpatient claims payment policy as part of a network or rate negotiation. We often see plans factor in error rate thresholds as part of those discussions, so that’s something for health plans to consider moving forward.

Cheri: I would just add from a DRG perspective that one of the things we've learned is that the prepayment review program has opened up the opportunity to audit providers that were typically excluded from the postpay review process because they're non-contracted. And so by catching the errors prior to payment, a plan's able to avoid the challenge of not being able to offset overpayments from these non-participating providers and when requesting prior to payment, those non-par providers have a much higher rate of compliance with submitting medical records upon that request.

*Savings percentages stated above are estimates and are not guaranteed. Actual percentage of savings may vary by plan.


Jeff Robinson
As director of marketing communications, Jeff supports Cotiviti's customers by developing a wide range of communications including white papers, case studies, podcasts, articles, and videos offering best practices in healthcare analytics. Before joining the organization in 2016, he worked in journalism as the morning host and news director for KCPW, a public radio station in Salt Lake City.

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