Prevention is the Best Medicine

Prevention of negative findings by RAC or other CMS payment monitoring agencies requires monitoring DRGs that these agencies have targeted in current and past claims within the look back period.  Typically records will be requested based on the fact that the assigned DRG has a much greater frequency for that hospital than other similar facilities in the US and region.  Examining the relative frequencies of all DRGs and comparing them to various benchmarks will allow the facility to concentrate limited audit resources on areas that are most likely to either contain errors or at a minimum represent a heightened risk area for external audit.  By focusing on subsets of DRG frequency, such as CC and MCC ratios or relationships between DRGs that are linked by similar diagnosis or procedure codes, a facility can view if they deviate from national or regional averages, thereby gaining insight as to direct their own audit efforts.

Highlight the Trouble Spots

Detection of under-coding can also be informed by DRG frequency analysis.  Because all inpatient CMS admissions must be mapped to one and only one DRG, a change in a one DRG will result in a change in another.  A histogram showing each DRG on the horizontal axis and the frequency on the vertical axis, lends itself to both variance analysis and reimbursement details.  DRGs that contain a high frequency will represent a potential risk area if the depending on the error rate in a particular DRG, likewise for highly weighted DRGs.

A properly designed coding audit can identify various types of coding errors, making general statements about the frequency of specific errors.  The materiality of those errors is a function of both the frequency or volume and the dollar amount of the given error (or value of the information to current and future users).  Areas of high risk would be those DRGs that account for a larger than average amount of revenue.  Because only a limited number of records can be audited, it is necessary to devise an audit strategy that allows the auditor to focus on those areas of highest or material risk.  Records with the highest DRGs should be constantly monitored to ensure their correctness, as this is where external auditors focus their efforts and where the facility could lose the most money per claim.