Putting a LID on Line-Item Denials

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Original story posted on: October 12, 2020

All payers are becoming more aggressive with their claim reviews. COVID-19 alone may trigger enough denials or requests for records to keep one or more people busy at each of our healthcare organizations. 

If you haven’t already memorialized the many coding guidance documents from the Centers for Medicare & Medicaid Services (CMS) on COVID-19, now is the time to do it since the activity by the Recovery Audit Contractors (RACs) may be a year or more from now and you’ll need your ammunition to explain why you coded COVID-19 the way you did.  This article discusses a denial type that is not solely relevant with COVID-19 claims, but also a potential possibility for any type of condition and commonly seen with inpatient claims. 

Denials come in different flavors but generally, there is either a full claim denial or a partial claim denial.  One of the partial claim denials is the line-item denial (LID).  The LID is one in which a specific line or lines of an itemized claim are carved out by the payer for one or more reasons.  The charge is deducted from the total charges and the payer pays the remainder of the claim in accordance with their contract.  The first signal that you may have claims undergoing an intense review by the payer, with the end goal of identifying line items to deny, is when you receive a request for an itemized claim statement. 

This request of the Patient Financial Services (PFS) department for an itemized statement should automatically trigger an alert to your denials team which should always—always—include a coding professional.  That itemized statement is often given to a third party review entity by the payer. That third party may or may not have any knowledge of the contract between your organization and the payer.  Their only purpose is to—after the fact—determine that services were unnecessary in their clinical opinion.  Typically, staffed by nurses, the review may also address coding.  Coders often need to explain and use CMS coding guidelines to justify the coding applied to the claim.

LIDs are not used by all payers because of the type of contract in place with the healthcare facility.  LIDs are more prevalent when a payer’s contract is based on a percent of charges.  LIDs may also play a role if a contract has a stop-loss provision.  If the payer’s contract is based on a case rate such as APC or DRG or if the contract is based on per diem payment, the imposition of line item denials is of no benefit for the payer since they are committed to pay the established flat rate for the APC or DRG or other condition specific service, such as flat rate normal delivery.

However, even the flat rate contracts may include a stop loss clause.  This is a clause that says when billed charges reach a certain threshold, the payer will either pay the flat rate plus a percent of the charges above a certain dollar amount or instead of paying the flat rate, the payer will pay a percent of charges.  If either of these conditions are present, itemized bills will be requested and the slashing of services may occur with one of the primary goals being to get the amount of charges under the stoploss threshold, so the payer is not required to pay any additional amounts. 

As denial specialists, our HIM and coding professionals can rally the physicians involved to contribute to the content of a compelling appeal letter that supports the rationale for those services.  What is the basis for a compelling appeal letter?  It is one where you:

  • Provide concrete proof that you are entitled to the payment
  • Use the opportunity to present information that wasn’t considered by the initial reviewer
  • Ensure the appeal is based on a payer’s misinterpretation, not your error
  • Researched the background of the denial before appealing

The reason I suggested that PFS alert us to an itemized claim request is to allow us time to start to identify the physicians involved in the case in anticipation of a denial.  We can start to review the record, tie the physicians to their orders and services, and forecast what might be denied.  Our timeline for submitting an appeal is often 30-45 days before the denied services are permanently denied.  So, every hour counts.  

There is value to pursuing line-item denials.  Without monitoring line-item denials, hospitals could be sacrificing 5 to 10 percent of their expected net revenue.  That’s a big chunk of greenbacks.  Remember, net revenue is the amount of dollars the hospital really expects to receive.

Roughly 65 percent of the denials are appealable, so for those of you that consider yourself tenacious, enjoy partnering with physicians to support the rationale for the care they delivered, and have a desire to help maintain the organization’s bottom line, leading or participating the management of line item denials is well worth it.

Rose T. Dunn, MBA, RHIA, CPA, FACHE, FHFMA, CHPS, AHIMA-approved ICD-10-CM/PCS Trainer

Rose T. Dunn, MBA, RHIA, CPA, FACHE, FHFMA, CHPS, is a past president of the American Health Information Management Association (AHIMA) and recipient of AHIMA’s distinguished member and legacy awards. She is chief operating officer of First Class Solutions, Inc., a healthcare consulting firm based in St. Louis, Mo. First Class Solutions, Inc. assists healthcare organizations with operational challenges in HIM, physician office documentation and coding, and other revenue cycle functions.