Audit of hospital claims identifies excessive charges and unbundling of service
Background
ClaimDOC’s comprehensive line-by-line auditing of claims uncovers errors that basic claim repricing and auto-adjudication do not catch, leading to greater savings to health plans and beneficiaries. Our audit team analyzes all types of healthcare claims for a variety of potential concerns including excessive usual and customary charges, duplicate claims, correct coding initiative edits, unbundling of services, improper coding/billing of services, and others. Our claims review is not intended to impact care decisions or medical practice.
In this Claims Audit Spotlight, we focus on hospital inpatient charges related to coding, billing, and fees for related services.
Hospitals report inpatient services on a UB-04 claim form or electronic equivalent 837-I. Medicare and certain commercial health insurance companies reimburse inpatient prospective payment system (IPPS) hospitals using a diagnosis-related group (DRG), which is a fixed amount for the applicable DRG. This pricing methodology uses various diagnoses for inpatient hospital stays to categorize groups and subgroups for payment purposes. The calculation of DRG payments involves a formula based on several factors. The concept behind DRG’s is to ensure reimbursement adequately reflects the fundamental role which a hospital’s case-mix plays in determining its costs and the number of resources the hospital needs to treat its patients.
ClaimDOC analyzes the hospital’s cost-to-charge detail by revenue code with markup and the Medicare DRG allowable with markup and prices the higher of the two, capping at 300% of Medicare’s DRG.
Case Scenario
Outlined below are three (3) examples where claims were reported/billed with the member’s primary diagnosis code of heart attack (ICD-10-CM code I21.09) and DRG 247 (percutaneous cardiovascular procedure with drug-eluting stent).
These examples illustrate the differences in a hospital’s total claim charges for similar services, individual charges for key services, Claim DOC’s pricing, plan savings, and the percentage of savings.
1. Member presented to the hospital and following assessment and diagnostic testing, the patient was diagnosed with a heart attack. A Texas hospital submitted its claim to insurance with the total charges of $108,582.75.
- Total charges for one-day hospital stay: $108,582.75
- Room and board per day: $2,948
- Pharmacy: $3,745.25
- Cardiac Cath Lab: $75,912
- Implants:$9,416
- EKG: $743
- Medicare pricing based on DRG: $13,232.97
- Hospital cost-to-charge ratio with markup: $10,076.36
- ClaimDOC Pricing: $16,541.21 based on Medicare DRG rate with markup
- Plan Savings: $92,014.54
- Percentage of Savings: 85%
2. Member presented to the hospital ER with irregular heart rate. Following assessment and diagnostic testing, the patient was diagnosed with a heart attack. A New Hampshire hospital submitted its claim to insurance with a total charge of $120,557.94.
- Total charges for a four-day hospital stay: $120,557.94
- ICU Room and board per day: $3,578
- Pharmacy: $3,317.19
- Cardiac Cath Lab: $55,360
- Implants: $13,674
- Emergency Room: $7,793
- EKG: $487 each
- Medicare pricing based on DRG 247: $13,890.91
- Hospital cost-to-charge ratio with markup: $16,011.86
- ClaimDOC Pricing: $17,363.64 based on Medicare DRG rate with markup
- Plan Savings: $103,194.30
- Percentage of Savings: 86%
3. Member presented to the hospital and following assessment and diagnostic testing, the patient was diagnosed with a heart attack. A Tennessee hospital submitted its claim to insurance with a total charge of $201,423.07.
- Total charges for a four-day hospital stay: $201,423.07
- ICU Room and board per day: $5,311.80
- Pharmacy: $9,976.91
- Cardiac Cath Lab: $142,285.07
- Implants: $19,209.65
- Emergency Room: $2,440.17
- EKG: $301.03 each
- Medicare pricing based on DRG 247: $12,903.72
- Hospital cost-to-charge ratio with markup: $20,539.18
- ClaimDOC Pricing: $18,508.85 based on Hospital C-C/R with markup and carveouts for unbundled services based on a review of the itemized bill
- Plan Savings: $182,914.22
- Percentage Savings: 91%
The Takeaway
Analyses of these hospital claims identified excessive charges and unbundling of services. While hospitals may elect and bill any amount they choose for services(s) provided, egregious charges and incorrect billing can complicate matters for members to understand their bills and payments, impact the collection of patient balances, build a reputation of unbundling services, and/or charging high fees, create burdens for uninsured patients and a host of other concerns.
Our goal at ClaimDOC is to use benchmark charges and costs nationally to negotiate fair and ethical payments. Employers turn to us to establish fair reimbursement rates for their plans allowing them to save money and provide richer benefits to their employees. A win-win for everyone.