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The new MS-DRG system makes getting help with documentation more important than ever.

Not many hospital leaders knew exactly what to expect when the new Medicare Severity Diagnosis-Related Group coding system took effect in October 2007. But after more than a year of working with it, hospitals are discovering not only that changing the way they code is a benefit for clinical specificity, but that training their physicians to code with the exactness the new system demands could have a major impact on reimbursement.

The new rules are intended to change the DRG reimbursement system that Medicare administers to better reflect the severity of illness, a system by which hospitals receive various rates of Medicare reimbursement. The idea is to encourage physicians to better document the principal patient diagnosis along with existing comorbidities—conditions that increase patient stays or resource consumption. The problem is, if those co-morbidities aren't recorded effectively in the patient record, reimbursement is impacted negatively. When taken as a group, a hospital's Medicare admissions are ranked on a case mix index, which can significantly impact reimbursement. For example, a 5% increase in case mix index for a hospital with 5,600 annual Medicare discharges could translate into an increase of $4.8 million in revenue, according to Smyrna, GA-based clinical documentation improvement consulting firm J.A. Thomas.

The key is to translate the importance of the new coding initiative to physicians. And some facilities are finding that a little outside expertise can help that process quite a bit.

Sam Huenergardt, senior vice president at 69-staffed-bed Gordon Hospital in Calhoun, GA, hired J.A. Thomas to consult on clinical coding to see if the firm could improve the hospital's case mix index with the advent of MS-DRGs in February 2008, before he was promoted to senior vice president from chief financial officer at the Adventist Health System hospital.

Huenergardt says since Gordon Hospital implemented its documentation improvement program, he can see clear reimbursement benefits including a 6% improvement on its case mix index in June, the most recent month for which information was available. "If we can continue on that rate," he says, "it could impact us to the tune of about $600,000 in annual revenue. That's about 1% of our total operating revenue."

Making the case to the doctors who may or may not recognize how spending more time and effort on accurate coding terminology will help them is the key challenge to the case management department, which administers the program, says Huenergardt.

The physicians have a quality report card. "If they're not documenting appropriately, and if you try to severity adjust a physician and the mortality is not good, they're not going to look as good as they should," he says. "They also know that as a nonprofit, if the hospital does well, we put that money back into the facility." Cory Reeves, the hospital's current CFO, says the case management department reviews every Medicare account for proper documentation. "We question a physician on documentation in about one of four accounts," he says.

Richard Salluzzo, MD, the new CEO of Hyannis, MA-based Cape Cod Healthcare Inc., hopes to bring the same focus on documentation at his new facility as he did as CEO of Wellmont Health System, his previous stop.

"We've done very well with these clinical documentation programs," he says, adding that the MS-DRG system still doesn't correct for Medicare's risk adjustment system. "Coding becomes so critical because the system itself is flawed. You have to code appropriately to effectively delineate the severity of the patients, because the Medicare risk adjustment system is not as effective as it used to be."

Salluzzo says it's critical to hire people to review the charts who have the explicit backing of the hospital's senior leadership. However, he cautions that hospitals can't bully physicians into using the proper and appropriate terminology during coding.

"These people become the champions, but you still need qualified coding specialists supported by physician champions," he says. "At the end of the day, the physicians want the hospitals to succeed but their incomes have dropped in real terms by 6% to 8%. They don't begrudge the hospital more revenue; they just don't want it to be at their expense."

—Philip Betbeze

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