Medicare+Choice Risk Adjustment: Don't Leave Money on the Table - analysis of Principal In-Patient Diagnostic Cost Group methodology - Statistical Data Included

Healthcare Financial Management, August, 2001 by John K. Gorman

Underlying versus Presenting Conditions

Congestive heart failure (CHF) is diagnosed in more than 6 percent of all Medicare beneficiaries and is a leading cause of inpatient admission among the elderly It provides a good example for examining the difference between underlying and presenting conditions. Understanding these differences can lead to higher payment.

CHF itself, when coded as the principal diagnosis for a patient's two-day stay, qualifies for DCG 16, resulting in about $900 in additional payments. Many of the causes and manifestations of CHF, however, are wastebasket diagnoses or qualify for much lower payments. For instance, fluid or electrolyte disorders, respiratory distress, fatigue, and unspecified hypertension are causes or symptoms of GHF, but all are wastebasket diagnoses that result in no additional payments. Myocardial infarction, angina, arrhythmias, and other conditions related to CHF qualify for substantially lower payments than CHF itself.

The key to more appropriate payments is to recognize when chronic conditions are "equally principal," that is, whether CHF or angina or respiratory distress caused the admission. If hospital staffs recognize and code for the underlying condition (such as CHF), as opposed to the presenting condition (such as respiratory distress), substantial increases in payment result. Good record-keeping is central to this recognition.

Steps for Plans and Providers

Medicare Choice organizations and hospitals should join in partnership to ensure appropriate payment for the care of chronically ill Medicare beneficiaries. There are a number of steps to take to effect a winning risk adjustment strategy

First, Medicare Choice organizations must ensure that hospitals are rewarded for their efforts to improve the quality of their coding, record-keeping, and encounter-data reporting. The possibility of sharing risk-adjusted payments is an issue of long-term strategy that should be considered by Medicare Choice organizations. Risk adjustment driven by provider-generated encounter data is here to stay.

Second, hospital staffs should receive inservice training about the details of risk adjustment if improved performance in coding, record-keeping, and encounter data reporting is to be expected. Encouraging hospital coders to code Medicare encounters to the fourth or fifth digit is essential.

Third, Medicare Choice organizations should synchronize care and disease-management infrastructure with a PIP-DCG risk-adjustment strategy This synchronization could include such features as tracking of chronically ill patients and reminder systems for physicians.

Finally claims and encounter data should be analyzed by Medicare Choice organizations to identify hospitals and other providers that are not keeping thorough and accurate records. The analysis team should include representatives from the finance department, information systems department, and care management department, as well as a medical director and a physician "champion" who is influential among hospitals in the network. The first round of analysis for each provider should focus on whether encounter data are or could have been recorded appropriately to qualify for DCG cost rather than wastebasket codes.