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Hospital medical directors, quality of care, and financial returns.

Most hospitals have experienced a shift in patient population away from self-pay to heavier proportions of third-party payers, such as Medicare, Medicaid, managed care organizations, and national insurers. All these payers demand adjustments to charges in one form or other. In some states, several payers have based their reimbursements on DRGs. Consumers have charged that, with cost-cutting, they are being denied care or receive poor care. HCFA was directed by Congress to ensure that quality of care was not compromised by providers. So, through its PRO audits, HCFA is focusing on quality issues. The immense data bank that Medicare has allows HCFA to analyze and select DRGs most frequently over- or underutilized and compare providers nationally and by region., Recently, a prestigious hospital was informed that HCFA felt it was underreporting its complications of medical and surgical care. Audits will follow.

Are you up on how the new Medicare regulations affect cash flow? Do you know how much money your hospital loses because of coding errors and software limitations? Nonsense, you think. My medical records department is excellent. That's far as it goes.

What are the major difficulties that preclude hospitals from achieving 95 percent accuracy in coding?

* Physician factors. Tardiness, sketchy progress notes, inconclusiveness of diagnostic impressions, overly detailed novel style, unfamiliarity with coding guidelines, refusal to listen, inappropriate fear of admitting perioperative complications, and late dictation of discharge summaries that are inconsistent with information recorded in the progress notes.

* Administration and financial factors. Medical records and frequently quality assurance/utilization management departments report to the chief financial officer. This person's responsibilities and comfort zone may not allow close involvement with the complex tasks of quality improvement.

Meanwhile, each medical department reviews its own charts and the continuous quality improvement (CQI) committee has a physician chair who is in full-time practice.

The typical hospital of medium size will have more than one coder, the hospital has a software package that does DRG grouping, the medical records director may be the only registered record administrator (RRA), and accounting bills out the DRGs. The coders are asked to enter initial codes from the history and physical examination and to complete final coding on the patient's discharge. Frequently, the discharge summary or pathology report may not be in the chart prior to the bill's being mailed. The coders are supposed to check accuracy later, when all documents are filed in the record. Their job is to code, transmit the information as fast as possible to the billing department, or be judged poor performers on productivity. Physicians sign the attestations trusting the coders to get it right. More than 40 percent of the hospital's revenue may depend on this system, and your case mix index determines the Medicare compensation paid to the institution. Your facility falls in the average for the local area, so you feel good. What's wrong with this scenario?


During the past 2 1/2 years, I have had the opportunity to review thousands of charts in several states at small hospitals (75 beds) to large tertiary hospitals (more than 600 beds). The majority of these hospitals are profitable and had installed state-of-the-art DRG software but they still wanted my associates and I to review their work for quality issues and accuracy of coding and to provide an in-house training program for the coders. These institutions already had a corporate corps of RN/RRA auditors whose job was to ensure accuracy in coding of medical records, with the goal of obtaining appropriate reimbursement from HCFA for the resources expended. I was skeptical of the notion and of my role but decided to keep an open mind. I knew very little about ICDM-9 coding, the assignment of DRGs, the surgical hierarchy on DRG determination, etc., but I reasoned that when I had learned the rationale for the system, I could determine the motives of the hospitals. I could then decide if I wanted to continue in a consultant role or return to managed care.

Most hospitals had already found that their financial recovery from accurate coding had more than offset their expenses for the service. There were already some scandals involving bounty hunting firms that will share a percentage of gains from their hospital reviews, so that their only goal was to "up-code." They generally employ paramedical staff trained in coding. Could physicians who had a working knowledge of coding rules provide a service beyond that? It so happens that physicians frequently do not state the obvious or document clearly their thinking processes during a hospitalization. Half or more of the time, the writing is also illegible and reduced to abbreviations the physician makes up. While our intelligence may not be higher, our training in medicine provides us with unique insight into the convolutions of the whole medical decision model, so we can interpret with higher accuracy the thinking of our peers. Not surprisingly, this dimension refines the DRG assignment process with the attending physician when the appropriate questions are asked.

Because I held a healthy cynicism about my involvement with this process, I stipulated to the hospitals that I might review cases where their coded DRGs were really too high, and my recommendations would force a lower payment from HCFA. After all, I was transitioning from the HMO business, where "less is better." "No problem," said the hospitals, "we want to make sure we get the coding right, no more, no less." They were true to their word. Furthermore, as I identified quality of care issues that had nothing to do with coding, I could refer those to their quality assurance managers to deal with.


During the past year, several of the hospital administrators have asked me to actually concentrate efforts on identifying glitches in their quality improvement process and to work with CQI staff to educate them and the physician committees on processes/protocols to improve quality of care. My review of medical records directs me to question nursing procedures, anesthesia and surgical procedures or complications, credentialing and recredentialing decisions, admission and discharge orders or workups, and lack of support from the chief-of staff or chair of the CQI committee in implementing meaningful changes to improve patient care. We have brain-stormed on sticky medicolegal issues and then implemented strategies to accomplish set goals. Success does depend primarily on the support of administration, one or more respected hospital physicians, and dedicated staff members from CQI and medical records. You can provide the leadership in the process.

As anticipated, some hospitals are further ahead on quality than others. It is also clear that the activity itself (accurate coding of admissions) can immediately improve the hospital's compensation from any payer that reimburses on the basis of the DRG system. Best of all, when audits by PROs occur, they validate and approve the completeness and accuracy of the clinical coding. Physicians like yourself can provide invaluable help.

What is the degree of financial benefits? Reimbursements range from 10 to 50 percent higher after physician review. These percentages tend to decrease over time if the physician continues to educate the coding staff. Medicare changes occur every 6-12 months. I would therefore encourage hospital physician executives to look at records if they want a good way to assess the overall quality of care in their hospitals. Learn from your best coder. If you cannot or do not want to be enlightened from within, attend courses on the subject.


Hospital physician executives should investigate opportunities through medical record review to evaluate and elevate quality in their medical departments and individual providers. The education and communication processes can be improved in all medical organizations from such activities. The benefit is high-quality care at the most affordable price to all patients. Concomitantly, the institution receives compensation appropriate to the care and resources consumed by patients.

J. Sim Tan, MD, FACPE, is a health care services consultant in Santa Ysabel, Calif. She is a member of College's Societies on Federal, State, and Local Government and on Managed Health Care Organizations and of its Forum on Women in Medicine and Management
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Author:Tan, J. Sim
Publication:Physician Executive
Date:Nov 1, 1994
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