Medical billing denials are one of the most pressing issues concerning professionals dealing with the revenue cycle in medical billing. Several research models and surveys show that the most common reason for claim denials is incomplete applications or incorrect data. However, there are still some technical hurdles that the billing team can face when approaching payers with their appeals. One of the common cases that comes up often is that the payers deny the claims based on an issue with a diagnosis related group (DRG).

The reason from the payer’s side reads that the DRG mentioned in the particular claim lacks substantial clinical evidence. The medical billing and coding teams at healthcare organizations usually include the required codes if the provider mentions any condition in their notes. However, the situation is more complicated than that when it comes to scrutinizing from the payer’s end. The management should equip the billing professionals with proper guidelines on dealing with such denials to keep the revenue cycle in medical billing strong. Learn how you can navigate through DRG denials with this guide.

Why is DRG important for revenue cycle in medical billing?

  • Diagnosis related group (DRG) is a structured classification system used to designate patients’ groups according to their medical diagnosis.
  • The main aim of the classification system is to bring parity to the billing parameters and make it easier for specific insurance panels to recognize the group.
  • The payment of hospitalization costs becomes easier to comprehend with the help of this classification system. Hence almost 30% of the hospital discharges contain at least one of the top 10 DRGs.
  • Experts in revenue cycle management of healthcare organizations believe that the DRG payment system help in improving the efficiency of the system while increasing the transparency in workflow management.
  • DRG is an integral part of the coding procedure when it comes to preparing the claim for any medical treatment. While ICD focuses on the diagnosis, CPT codes focus on the procedures performed. DRG takes both diagnosis and procedure into account.

How are DRGs scrutinized?

Diagnosis related groups used by the coding teams are highly scrutinized when it comes to payer networks. If you are not conscious of the different methodologies of submitting the DRG claims, you can face repeated denials from the payers.

  • The inclusion of DRG in the submitted claims automatically sends the claims through a highly complicated scrutiny process to ensure that the claim comes with the required clinical evidence from the provider.
  • In general, there are three tiers of DRG used in Medicare’s coding structure. They go up the ladder depending on the risk of mortality and severity of the illness.
  • The first tier, the standard DRG, corresponds to the lowest reimbursement rate for the group.
  • The second tier is a notch higher than the standard one since there is a presence of comorbidity or complication (CC).
  • The third tier of DRG brings the highest reimbursement rate for that group. The DRG comes with a significant CC, denoting a considerable complication in the system.  
  • According to the AMA, specific claims contain at least one diagnosis code, complication, or comorbidity (CC). The inclusion of CC raises the reimbursement rate, thus making a claim more susceptible to a closer look from the payer network.
  • For example, when a patient is admitted to a hospital with a breathing issue and discharged with a diagnosis and treatment of pneumonia, the coder might have used CC on the claim, taking a cue from the provider’s notes.
  • The payer, in this case, will require proof if the patients needed management interventions such as BiPAP, intubation, or ventilation.
  • The upgraded DRG will stand only if the claim comes with clinical evidence that the patient suffered from an acute respiratory issue, and hence the corresponding code could be used.    
  • Otherwise, the payer network will reject the claim due to lack of evidence or downgrade the DRG code to the standard tier.

How can billing teams avoid DRG denials?

  • Documentation review is one of the primary steps to ensure that any DRG claims or a CC do not face denial from the payer network.
  • The coding professionals involved in the revenue cycle in medical billing need to be trained about the latest methods of claim processing to understand which of the evidence qualifies as enough clinical data.
  • In the case the coders are unsure about the details of the DRG mentioned in the claims, they must get in touch with the concerned providers to get hold of the relevant information.
  • Appealing is another available option for the medical billing teams to recover the reimbursement from the payer’s end. However, you need to know the correct method to appeal or know if at all the appeal is possible in certain scenarios.
  • The AAPC identifies that it is crucial to track and analyze the DRG denial rates in different healthcare systems to understand and manage the different issues.
  • One of the first steps of managing the DRG denial is to distinguish between a clinical validation denial and a coding denial.
  • Once a denial has been identified to be due to a lack of enough clinical evidence, teams handling the revenue cycle in medical billing should focus on adequate data collection to track the issues.
  • Experts suggest that scrutinizing clinical documentation improvement (CDI), health information management, auditing frequency, and end-to-end revenue cycle management is of utmost importance in order to keep a tab on the denial rates.
  • Billing parameters should be updated in the contract at regular intervals to suit the needs of the upgraded and evolved workflow patterns.
  • You can get in touch with professionals from companies dealing with the revenue cycle in medical billing to get their expert opinion on the issue.

We hope this article helped you understand how you can identify and handle the DRG denials in the revenue cycle in medical billing. For any queries, connect with us in the comment section below. Please subscribe to our blog for more such articles on healthcare billing, technology, and management. Follow us on LinkedIn, Twitter, Instagram, and Facebook.