Updated on: November 28, 2016

ICD-10 Denials Are Increasing: Fact or Fiction?

Original story posted on: May 16, 2016
Before I begin, I would like to take a moment and acknowledge Dr. Robert Gold, who passed away last week. Dr. Gold was a pioneer and leader in our field of clinical documentation improvement (CDI) and coding. He was first my mentor, then my colleague, and then my friend. I know the industry’s CDI and coding communities will miss him very much, and so will I.

There seems to be ample debate and mixed messages in the ICD-10 world lately regarding whether providers are experiencing an increase in claim denials since the implementation of ICD-10. Several experts, such as Stanley Nachimson, founder of Nachimson Advisors, and Holly Louie, president of the Healthcare Billing and Management Association, to name a few, have been indicating over the last few weeks on ICD10monitor’s weekly Internet broadcast, Talk Ten Tuesdays, that yes, denials do seem to be increasing. Add to that the shift in diagnosis-related groups (DRGs) that the industry is starting to see, the conversion and reimplementation of many local coverage determinations (LCDs) and national coverage determinations (NCDs), payors turning on more edits, and ICD-10 coding accuracy rates hovering on average in the 80-percent range, and there would seem to be an expectation that denials would begin to increase. We have also conducted polls on Talk-Ten-Tuesdays indicating that many providers have not even assessed their denial status yet.

ICD10monitor recently decided to conduct a poll to see how our provider subscribers are actually doing. This article summarizes the results of our survey. We’ll also be discussing it on the May 18 edition of the Talk-Ten-Tuesdays broadcast, so be sure to listen live or to the recording that can be found at www.icd10monitor.com.

Let’s begin with some demographics of our survey responders. The majority, constituting 51 percent of our survey responders, have specialist titles such as coder, clinical documentation specialist (CDS), analyst, biller, etc., and 33 percent have management titles. Eighty-two percent were from healthcare systems and hospitals, and the remaining mostly represented physician practices and clinics, post-acute providers, and insurance/billing companies.

We wanted to get a feeling of what our subscribers believe in general regarding where the industry is with ICD-10, so we asked responders to rate how strongly they agreed with the following statement: 

We are in the honeymoon phase of ICD-10 and I believe things are going to get worse before they get better.

There was a three-way split on this response, with, about one-third of responders believing the worst is yet to come, one-third in the middle, and one-third believing that things will not get worse. Interesting results, but I believe it is safe to say that we are evenly divided on this one.

The first two poll questions that we’ll discuss further I believe drill down to the actual financial impact that providers may be experiencing. The first question was: What percentage has your denials increased on average since the implementation of ICD-10?

  The results showed:

  • 10% or less (38%)
  • 11-20% (17%)
  • 21-30% (16%)
  • None (13%)
  • 31-40% (9%)
  • 41-50% (4%)
  • 51% or more (3%)
If we look at the top three, 71 percent of our responders have seen an increase in ICD-10 claim denials since implementation.

The second question was: What percentage has your denial dollar amount increased, on average, since the implementation of ICD-10? 

The results showed:

  • 10% or less (39%)
  • 11-20% (19%)
  • None (15%)
  • 21-30% (14%)
  • 31-40% (7%)
  • 41-50% (3%)
  • 51% or more (3%)
For this question, if we look at the top two responses, we have 58 percent experiencing an increase in denial dollars since the implementation of ICD-10. For a financial perspective on this, I asked Greg Adams, chief strategy officer for Panacea Healthcare Solutions, a past chairman of the Healthcare Finance Management Administration (HFMA), and a former hospital CFO, to offer his thoughts.

“Based on these estimates,” he said of this portion of the survey, “for an average-size hospital, the average increase in denials could be $1 to $3 million. Add to this the decrease in hospital margins as a result of the PPACA (Patient Protection and Affordable Care Act), and these amounts could significantly impact financial performance.”

The remainder of the survey questions drilled down to the types of ICD-10 denials, provider types, claim types, and payor types, as we wanted to see details regarding what providers are experiencing.

First, we wanted to know if there was a change in what providers thought were of important significance three months into ICD-10 versus seven months. For the most part, items were ranked in the following order of importance for both time periods:

  • Lack of Physician Documentation/Increase in Queries/Increase in Use of Unspecified Codes
  • Drop in Coding Productivity
  • Decrease in Coding Accuracy Rates
  • Claims Denials
  • Problem with Claims Submission
  • Payment Issue
  • Decrease in Cash Flow
  • Other
These results show that the same items are remaining significant for providers. The top four responses were expected concerns since, after all, this is a new coding system. I am also sure that we will be struggling with the first and third items for a while.

Next we drilled down to the ICD-10 denial types and asked respondents to rank the following ICD-10 claim denial types in the order that they were experiencing them.

  • Medical Necessity, LCD, NCD
  • Use of Unspecified Diagnosis Codes
  • Hospital/Provider Procedure Coding Errors
  • Hospital/Provider Diagnosis Coding Errors
  • Payor Processing Error (System/Software)
  • Payor Processing Error (Misunderstanding of Correct ICD-10 Guidelines)
  • Payor-to-Payor Processing Issue
  • Appeal Delays
  • Other
It is clear that medical necessity and the application of the new ICD-10 coding system is impacting most denials, based on our poll. 

Next we drilled down to the type of claim and asked respondents to rank the type of service for which they were experiencing the most ICD-10-related denials:

  • Acute Inpatient
  • Observation/OP Surgery/ED
  • Hospital Ancillary Services
  • Physician Practice/Clinic
  • Hospital-Based Clinic
  • Post-Acute Services (Rehab, Skilled Nursing, Behavioral Health, etc.)
  • Free-Standing Services (ASC, IDTF, Imaging Center, etc.)
  • Other
Next we asked respondents to rank the following in the order that they most experienced claim denials since the implementation of ICD-10:

  • Increase in Rejections of Denials
  • Returned Timely and Paid Correctly
  • Returned Un-Timely and Paid Correctly
  • Claims Being Held Longer Than Usual
  • Payment Different Than What Was Expected
  • Other
These results indicated that most responders have been experiencing an increase in injections and denials, and issues with timely payment.

Finally we asked respondents to rank payor types in order of the most denials experienced:

  • Medicare and Medicaid
  • Commercial
  • Medicare Advantage
  • Managed Care
  • Workers Compensation
  • Other
To summarize, I believe we can all agree that for most part, the actual implementation of ICD-10 went off without a hitch. However, I also believe it is still too early to say that all is fine in the land of ICD-10. We are only seven months into this new coding system, so there is still much to see, and I truly believe it will be a couple of years before we realize the true impact.

We should all be diligently focusing our time now on analyzing our data to see what it actually looks like. This data includes financial, coding, and quality metrics: basically any data that is impacted by code assignment and where a decision or impact is being made from that code assignment. There are many external decisions made based upon our coded data. Financial reimbursement is one such area, but there are also decisions to be made on patient health, treatments, standards of care, research, etc. These are the most important decisions we make, so we must do our diligence to ensure that we document, code, and report what we do so that the decisions based upon our coded data are correct.
Disclaimer: Every reasonable effort was made to ensure the accuracy of this information at the time it was published. However, due to the nature of industry changes over time we cannot guarantee its validity after the year it was published.
Kim Charland, BA, RHIT, CCS

Kim Charland is senior vice president, clinical consulting services, Panacea Healthcare Solutions, Inc., St. Paul, MN.

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