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Labs See Increased Denials as Payors Get Stricter With ICD-10 Coding

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NEW YORK – With the US now several years into the transition to the International Classification of Diseases, Tenth Revision (ICD-10) medical coding system, payors appear to be tightening their standards for compliance.

According to some lab heads, this has led to an increase in rejection of claims for inappropriate codes, with some labs seeing rejection rates as high as 40 percent.

The ICD codes are used by healthcare systems around the world to report diagnoses, allowing stakeholders throughout the healthcare system to collect, monitor, and analyze data on patient conditions at the individual, institutional, and population level.

In 2015, the US moved from the previous version of the coding system, the ICD-9, to the ICD-10, with the goal of better capturing patient data and accounting for changes in medicine since the ICD-9 code began being used in the 1970s.

The move to the ICD-10 system dramatically expanded the number of codes. The ICD-9 set contained 3,824 procedure codes and 14,025 diagnosis codes, whereas the ICD-10 set contains 71,924 procedure codes and 69,823 diagnosis codes. This greatly increases the specificity with which healthcare systems are able to track patient conditions and care, but it also significantly ups the complexity of the system.

This added complexity has presented challenges for doctors in choosing the appropriate code under which to submit claims for procedures and tests, an issue that has led to a rise in rejected lab claims, said Michael Fini, laboratory manager at Montclair, California-based BioData Medical Laboratories.

Not infrequently, doctors "don't give us the right [ICD-10] codes for the tests they are ordering," Fini said. "We submit them to the insurance company and the insurance company denies it because the test isn't covered by the code they gave us."

In those cases, the lab typically bills either the patient or the doctor for the unreimbursed test, Fini said, or the doctor is forced to spend time figuring out what ICD-10 code will work for getting the test reimbursed and resubmit it.

"This is a big problem, because the doctors are really busy," Fini said. "Not too long ago, I went into a physician's office and he had a stack probably two or three inches high of requisitions [from labs] that said 'Your codes don't cover these tests, so either give us a new code, or we'll bill you for the test, or we'll bill your patient.'"

"It's difficult to near impossible for any non-specialist physician to know what ICD-10 codes cover what tests," he said. "As a result, the lab bills the ICD-10 code provided by the physician, and the insurance company denies payment."

Fini said that over the last year his lab saw denials on around 40 percent of all the tests it ran. The lab has since moved to using a test utilization tool from Irvine, California-based Medical Database that allows the lab to quickly look up ICD-10 codes submitted with test orders to make sure they are appropriate.

"What happens is that the doctor's knowledge of the ICD codes is outdated or sometimes they don't know the code to use for a test, so they just use generic codes," said Ozman Mohuiddin, president of Westminster, California-based Health360Labs. "But [private payors] and public payors like [Centers for Medicare & Medicaid Services] have gotten very specific. So if you write an [ICD-10] code that doesn't apply to a test, they will say that the code doesn't match the test."

Like Fini, Mohuiddin said rejection rates have risen significantly over the last year or so.

"Before then, we didn't get that many denials [for ICD-10 coding issues]," he said, adding that his lab has seen denial rates of between 20 percent to 30 percent due to incorrect coding.

"It's a big problem," Mohuiddin said, adding that this was particularly the case for smaller labs like Health360Labs, which often "end up holding the bag" and having to deal with billing patients for rejected claims.

He suggested that larger labs like Quest Diagnostics and Laboratory Corporation of America were likely able to simply pass the bill on to the ordering physician, though he said he didn't know how frequently they did this.

Quest and LabCorp both declined to comment for the story.

Judy Monestime, an instructor in health administration at Florida Atlantic University who has studied the implementation of the ICD-10 system said that the issues Fini and Mohuiddin reported were, to an extent, expected as providers and payors transition to the new codes. She said that while payors allowed some leeway for non-specific coding at the beginning of the transition, they have since begun tightening up their standards, likely leading to the increase in denials the two lab heads have observed over the last year or so.

When the ICD-10 system went live in the US in 2015, "CMS said that for the first six months to a year, if you're submitting non-specific codes, 'We'll give you some leeway because we understand that this transition required so many resources and so much preparation,'" Monestime said.

"But then after that point they said they would be tidying those unspecified codes, because by that time providers should have a handle [on the new system]," she said.

She added that private payors more or less followed CMS' lead in giving providers some leeway around coding in the first stages implementation but then tightening up their requirements.

Monestime said she recently attended an industry meeting where the transition to the ICD-10 system was discussed.

"What we heard was that this was anticipated, that you would have these denial or rejections if unspecified codes were being used," she said.

The expansion of codes in the ICD-10 set gives payors a more granular look at what they are spending money on, but it also gives them additional "reasons to say no," said Mick Raich, CEO of consulting firm Vachette Pathology.

"It used to be you had an injury in your left forearm," he said. "Now it's left forearm, interior aspect, upper wrist region.

And, depending on the cost of the claim, it may not be in the provider's interest to follow up on it, Raich added.

"If a $6 clinical lab claim is denied because of an ICD-10 code, you're not going to allocate resources to that," he said. "You literally can't afford to. It will cost you more to appeal it than you are going to get paid."

On the lab side, test utilization management tools like that implemented by Fini offer one way to address the challenge. Robert Boorstein, a pathologist and medical director at Lenco Diagnostic Laboratory, said that his organization has used outside consultants to improve coding.

And while some labs are still struggling with changes brought on by the switch to ICD-10, the move to the next version of the coding system, ICD-11, will likely come in the next several years, Monestime said. The World Health Organization introduced the ICD-11 in June 2018 and it is slated to go into effect in January 2022, though if the example of the ICD-10 rollout holds, the US will likely lag behind much of the rest of the world in implementing it.

The changes to the code will focus on areas like infectious disease, Monestime said, adjusting, for instance, codes related to antimicrobial resistance.

"There are a lot of different moving parts, but the essence is to continue to improve the code to ensure that we are really telling the whole picture about a patient," she said.