Accurate Coding for Outpatient Procedures

Medical Coding
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According to CMS, over 5 billion medical claims are submitted for payment each year. Standardized coding is important to ensure that these claims are processed in a consistent manner. Insurance companies, third-party payers, and federal and state regulations have expressed the increasing concern regarding the importance of accurate coding for outpatient services. When providers fail to comply with the coding requirements that are necessary for billing outpatient procedures, the chance for improper billing is increased.

Medicare uses a PPS (Prospective Payment System) and fee schedules which use a reimbursement method that is based on a fixed amount. There are individual PPSs and fee schedules based on the services provided.

Prospective Payment Systems

  • Acute inpatient hospitals
  • Home health agencies
  • Hospice
  • Hospital outpatient
  • Inpatient psychiatric facilities
  • Inpatient rehabilitation facilities
  • Long-term care hospitals
  • Skilled nursing facilities

Fee Schedules

  • Physicians
  • Ambulance services
  • Clinical laboratory services
  • Durable medical equipment, prosthetics, orthotics, and supplies

Under the PPS and Fee Schedule, each provider is reimbursed a predetermined amount based on the reported procedure code. Inaccurate coding may result in a failure to comply with coding requirements. There are ten areas that are associated with incorrect outpatient procedure coding.

  1. Reporting incorrect units of service
  2. Inappropriate billing for observation services
  3. Reporting incorrect charges due to outdated chargemaster descriptions
  4. Submitting duplicate charges or failure to follow NCCI (National Correct Coding Initiative) guidelines for Medicare and Medicaid
  5. Inappropriate reporting of procedure code modifiers
  6. Improper E/M (Evaluation and Management) code selection
  7. Reporting an "inpatient only" procedure on an outpatient claim
  8. Submitting claims for medically unnecessary services
  9. Failure to follow the multiple procedure discounting rules
  10. Services furnished by an intern, resident or another professional with a nonapproved status without the required physician supervisor

Coding errors can be attributed to a number of factors.

  • Time pressures and/or restraints
  • Distractions
  • Lack of coding experience
  • Human error
  • Lack of communication
  • Outdated patient encounter forms

These factors tend to be unintentional but when coding errors occur on a consistent basis, providers may be considered in violation of the False Claims Act for abusive billing practices. Fraud is sometimes confused with abuse. Abuse is the unintentional billing for items or services that have not been provided. The four common areas that are identified as Fraud or Abuse are:

  1. Billing for Medical Equipment Never ProvidedThe most common area of Medicare fraud is billing for Durable Medical Equipment (DME). DME refers to any medical equipment necessary for a patient's medical or physical condition. It includes wheelchairs, hospital beds, and other equipment of that nature. The provider will bill Medicare for equipment that the patient never received. Mobility scooters have been particularly popular for Medicare fraud schemes.
  2. Billing for Services Never PerformedIn this instance, the provider bills for tests, treatment or procedures never performed. This can be added to the list of tests a patient has actually received and never be noticed. A provider may also falsify diagnosis codes in order to add on unnecessary tests or services.
  3. Upcoding ChargesMisrepresenting a level of service or procedure performed in order to charge more or receive a higher reimbursement rate is considered upcoding. Upcoding also occurs when a service performed is not covered by Medicare but the provider bills a covered service in its place.
  4. Unbundling ChargesSome services are considered all inclusive. Unbundling is billing for procedures separately that are normally billed as a single charge. For example, a provider bills for two unilateral screening mammograms, instead of billing for 1 bilateral screening mammogram.

Coding claims accurately let the insurance payer know the symptoms, illness or injury of the patient and the method of treatment performed by the physician. Coding mistakes occur when the claim is submitted to the insurance company with the wrong diagnosis or procedure code on the claim. Inaccurate coding can lead to many negative outcomes. It is imperative that the medical office develops a compliance system that can prevent the violation of medical coding requirements.

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