Physiatry Practice Management Resources

Coding professionals have been strong supporters of having complete and accurate documentation in the medical record in order to accurately code and receive proper payment. With all eyes upon them, government agencies focus on fraudulent coding and billing practices, hospital administrators focus on declining case mix, increase in A/R days, the coders are torn, to code or not code without the discharge summary.

A variety of regulations exist for medical record documentation requirements, the more widely recognized are the Joint Commission on Accreditation of Healthcare Organizations and the Medicare Conditions of Participation. Both of these entities require that the discharge summary be completed within 30 days following the discharge. In contrast, the Office of Inspector General's (OIG) Compliance Program Guidance for Hospitals states "the documentation necessary for accurate code assignment should be available to coding staff." In addition, Faye Brown's ICD-9-CM Coding Handbook states in the section "The Medical Record as a Source Document" that "review of the medical record should begin with the discharge summary because it provides a synopsis of the patient's stay …" The regulatory agencies tell us when and what needs to be documented, but not in relation to having this documentation available for coding. Most coders must code inpatient medical records within three to five days of discharge in order to keep the A/R down to an acceptable level as defined by the hospital administrators. When the coders are coding within this requirement, the discharge summary is more often than not unavailable for coding the medical record.

Because there is so much attention and focus on preventing fraud and abuse, what should healthcare organizations do to ensure they are in compliance, yet at the same time maintaining the financial viability of the institution by keeping the A/R days down?

• Include a policy that allows coding without the discharge summary, if this is currently the practice.
• Develop a procedure for follow-up/recode to validate the accuracy of the coded/billed data
• Have a policy and procedure in place for coders to query physicians for clarification/specification of any documentation necessary to accurately code the medical record.
• Demonstrate to the medical staff the importance of complete and timely documentation.
• One important factor to consider when performing these "back-end" policies and procedures is the rebilling. Each organization should conduct a short, but thorough study to determine the impact on the organization of re-billing after the discharge summary is completed and reviewed for accuracy of the coded/billed data. Be sure to include the Corporate Compliance Officer or General Counsel prior to instituting such policies and procedures.

Physician documentation being timely, complete, and specific are the most important and key factors for accurate coding. With all factors being considered as discussed above, another alternative approach is the implementation of a documentation improvement process concurrently. Major benefits of such a process are the improvement of more timely documentation, more importantly having more specific or complete documentation. There is also an opportunity to improve communication with the medical staff to obtain any additional documentation needed for more accurate reflection of the patient care being received. Thus, coding without the discharge summary would be less likely a risk when all the documentation necessary to code the medical record is present within the content of the patient's record.

In summary, coders rely on documentation in the medical record to be complete and timely in order to accurately code the data. Each organization should establish both front-end and back-end policies and procedures to ensure compliance and that the facility is receiving the highest reimbursement allowable.

By: Joyce Belden

I. Introduction

Since the onset of health care compliance and the focus on potential violations of the Federal False Claims Act under HIPAA, the quality of coded data for reimbursement is constantly under review. As a result, each health care organization must insure the quality of its coded data. One of the best means for achieving accurate, consistent and reliable data is to develop comprehensive documented internal coding guidelines.

It is more important than ever to have information regarding the specific coding practices which an organization’s coding staff is expected to follow in writing and accessible to all members of the staff. Your coding guidelines will not only serve as a way to steer your coding staff in the right direction, they could also serve to protect you in the event of an audit or investigation.

II. Sources for Coding Guidelines

Official basic coding guidelines for both the inpatient and outpatient settings were developed by the Federal Government. In addition to these basic guidelines, the only officially recognized source for hospital based-coding guidelines is the Coding Clinic published by the American Hospital Association. Coding Clinic Guidelines are fairly comprehensive and date back to 1985, however, they will not address every issue that every coder will encounter in the process of coding. In addition, the officially recognized coding guidelines for CPT coding come from the CPT Assistant published by the American Medical Association. To prevent haphazard coding practices, each organization will need to look to secondary sources or "quasi-official" sources for coding guidance. These include:

1. The provider’s Fiscal Intermediary
2. The OIG's Compliance Program Guidance
3. The ICD-9-CM Coding Handbook published by the AHA (this contains explanations and examples for many of the Coding Clinic guidelines)
4. The ICD-9-CM Coding Handbook for Physician Practices published by AHA
5. Applicable versions of the Federal Register (only refer to this document if Coding Clinic has not ruled on an issue – as Coding Clinic will over-rule the Federal Register on particular coding issues)
6. Guidance from the American Health Information Management Association’s (AHIMA) coding experts for ICD-9-CM and CPT advice or the American Academy of Professional Coders’ (AAPC) coding experts for CPT issues.

III.  Why Develop Comprehensive Coding Guidelines?

The livelihood of every health care organization rests upon correctly coded data. This is true from a basic financial tenant – coding drives reimbursement – as well as a compliance perspective. While all of the resources noted above are excellent resources for various pieces of coding information and guidance, they can be meaningless without the health care organization itself sifting through all of the information and translating it into provider-specific coding guidelines. Essentially, the health care organization needs to develop a dynamic "living" document that reflects official coding guidelines and fills in the blanks with quasi official resources and provider-specific interpretation of how those quasi official resources should be applied by the coding staff of the health care provider.

The use of well-documented comprehensive coding policies will:

1. Provide consistency, accuracy and reliability of the coded data in a provider’s database;
2. Assure sound and ethical coding practices; and
3. Provide back up if coding practices are questioned by the government, payor or other third party.

IV. Who should be involved?

The guidelines should be developed and managed on an ongoing basis by the HIM department representative - usually the coding or data quality manager. This individual should have the final responsibility for finalizing the guidelines, ensuring they are updated and gathering the right individuals and groups together to provide appropriate and necessary feedback into the initial as well as ongoing development process. In addition to the HIM manager, other individuals or groups that should be involved in coding guideline development include:

1. The Coding Staff– input from this group is particularly key in identifying areas where they may have questions or unclear guidance and need to have clear-cut guidelines for reference.
2. The Medical Staff– key members of the medical staff in various services should be identified as individuals who will assist the HIM manager in clarifying clinical and documentation concerns. In addition, these individuals can serve as a resource in ensuring that all policies are clinically validated. This concept is discussed in detail below.
3. The compliance officer– while generally not a content expert (although in a growing number of facilities the compliance officer is in fact also an HIM professional), the compliance officer should be brought into the guideline development process as a "consultant" to put the compliance stamp of approval on the guidelines.
4. Clinical Committees– the number and specific type of clinical committees within each health care organization will vary. However, these committees, like the Tissue and Mortality Committees, can be used as Clinical Expert references during the guideline development process.
5. The Medical Staff as a Whole– you will need to develop some guidelines that will apply to your medical staff as a whole – usually because it is already their practice and you are just clarifying the practice via a documented guideline. (i.e. in the case of urosepsis, a medical staff can determine that the term, as used within that organization, signifies sepsis with its origin in the urinary tract.) When you do develop guidelines like this, your medical staff will need to vote on the guideline. And, a record of this vote must be kept within the ‘administrative" section of the guidelines.
6. Medical Record/HIM Committee– final approval for the guidelines must come from some organized, recognized committee within the organization. Generally, the Medical Record/HIM Committee is the best place for this activity – but, again, this may vary based on the organization. Minimally, this committee must approve the guidelines initially, approve updates on some regular basis, and provide an annual review and re-approval.

V.  How should the guidelines be developed?

The development of Coding Guidelines should follow these steps:

1. Decide on the format of the guidelines.

   Guidelines may be organized by Medical Service, ICD-9-CM chapter, body system or any other logical format. Once you have determined the format, it should be applied consistently. In addition, depending on the organization, your guidelines may need to address several different types of coding. For example, in the hospital setting, guidelines should be developed for the following types of coding:

   1. Inpatient
   2. Ambulatory Surgery
   3. Emergency Room
   4. Outpatient/Ancillary Services
      
2. Identify all coding issues addressed in Coding Clinic or the CPT Assistant and reference them in the guidelines. You do not necessarily need to reproduce the entire guideline (although you may want to). The important thing is that your staff knows that for a particular issue they have looked up, they need to abide by Coding Clinic guidance.
   
3. Identify all coding issues not in Coding Clinic, but addressed in other "quasi-official" resources like those mentioned above. Incorporate these references into your guidelines where possible and applicable.
   
4. Identify all issues not addressed clearly and comprehensively by any of the sources and develop hospital-specific guidelines for them relying to the extent possible on "quasi-official" sources. This process will be very time consuming, if performed correctly. But remember, that the benefits (in terms of correct billing and compliant coding practices) will definitely exceed any initial costs that may be associated with guideline development.
   
5. Clinically validate all organization-specific guidelines before implementation. You can do this by determining which medical specialty, service, or hospital committee would be most appropriate (and willing) to review and validate the clinical significance of each guideline. Ideally, for example, a group of cardiologists should validate any coding policies pertaining to coding cardiovascular diagnoses and procedures. The medical staff is usually the most important clinical component in coding guideline validation. There may be some standing committees in your organization (with physician members) that can apply criteria they use to validate coding guidelines. Some examples are:
   1. Tissue Committee
   2. Transfusion Committee
   3. Mortality Review Committee
   4. Utilization Review/QA Committee
   5. Infection Control
      
6. Develop a functional Table of Contents as well as an alphabetical index for the policy manual. If the manual is online, it must be in a permanent format that does not allow the user to make changes. In addition, you should build in a search capability for online policies. This will take the place of the alphabetical index in the manual version. Alphabetical indices can be created using various computer publishing programs. Both the table of contents and the alpha index will make the manual more useful and functional for the user.

VI. What should the content of the Coding Guidelines be?

The outline provided below is an example of content for a hospital coding program, but the outline can be adapted to coding in any setting - keep in mind that it is essential that the policies are specific to the organization. Just as no organization should have a "canned" compliance plan, no organization should have 'canned" coding policies.

1. Ethical Standards of Coding– your guidelines should reference the AHIMA Standards of Ethical Coding generally (include a copy if possible) and your organization’s Standards of Conduct that apply to coding tasks specifically.
2. Documentation Policy
   • Cardinal Rule for All Coding: a coder may not code a condition/diagnosis/procedure unless it is clearly documented by the physician.
   • Medical Abbreviations
   • Medical staff approved
   • Process for updating
   • Frequency
   • Type
   • Addition
   • Deletion
   • Change
   • Physician Liaison – role, functions, interface with coding staff
   • Define minimum set for coding and billing purposes
3. Physician Query Process
   • When it is acceptable to query the physician
   • Criteria for a "clinically valid" physician query
   • Format of the query
   • Peer review of the query process
4. Auditing Policy(Outline of Information to be addressed)
   • Benchmarking
   • Method of sample selection (random vs. focused vs. both)
   • Number and type of records to be audited
   • Determine target proficiency rate
   • Defining Coding Error (DRG assignment vs. overall data quality)
   • Frequency of audits
   • Interface with compliance staff
   • Follow up
5. Qualification of Coders and Auditors Policy
   • HIM credentialed staff only as coders/auditors
   • List acceptable credentials for each position
   • Determine minimum number of CE hours in coding-related topics per year
   • Required years of experience

1. Inpatient Coding Policies

   • Coding versus Reporting
   • Establish number of diagnoses and procedures to code
   • Define facility specific diagnoses and procedures to code
   • Specific Diagnostic Policies that should be developed/documented 
     •  Certain Conditions Originating in the Perinatal Period (Chapter 15)
     • Classification of Factors Influencing Health Status and Contact with Health Service (V Codes)
   • Classification of External Causes of Injury and Poisoning (E Codes)
   • Complications of Pregnancy, Childbirth, and the Puerperium (Chapter 11) 
     • Group B Streptococcus Infection
   • Obstructed Labor
   • Diseases of the Blood and Blood-Forming Organs (Chapter 4)
     • Blood loss anemia 
     • Clinical indicators
     • Acute versus Chronic
   • Diseases of the Circulatory System (Chapter 7) 
     • Severity 
     • Congestive Heart Failure
     • Symptoms
     • Pleural effusion
     • Pulmonary edema
     • Coronary Atherosclerosis, CAD and sequencing
     • Cardiac Valve Disorders
   • CVA versus TIA
   • Hypertension 
   • Myocardial Infarctions
     • Specificity 
     • Location 
     • Severity
   • Thrombophlebitis versus Thrombosis
   • Diseases of the Genitourinary System (Chapter 10)
     • Urinary Tract Infection
     • Urosepsis
   • Diseases of Respiratory System (Chapter 8)
     • Pleural effusion vs. symptom of underlying cardiac condition
     • Pneumonia - bacterial vs. NOS vs. aspiration, etc
   • Endocrine, Nutritional and Metabolic Diseases and Immunity Disorders (Chapter 3)
     • Dehydration/Clinical indicators 
     • Principal versus secondary diagnosis
   • Infectious and Parasitic Diseases (Chapter 1) 
     • HIV/AIDS
     • Septicemia
   • Mental Disorders (Chapter 5) 
     • Define the medico-legal significance of psychiatric diagnoses 
     • Emphasize importance of physician documentation
   • Symptoms, Signs and Ill-Defined Conditions (Chapter 16)
     • Define when it is OK to use 
     • No definitive diagnosis
     • Not an integral part of the disease process
     • Symptom, followed by comparing/contrasting diagnoses
   • Discharge Status 
     • Identify process
     • Define staff roles and responsibilities
     • Initial entry
     • Verification prior to billing
   
   
2. Ambulatory Surgery Coding Policies
   • Miscellaneous Diagnostic and Therapeutic Procedures
   • Obstetrical Procedures
   • Operations on the Nervous System
   • Operations on the Endocrine System
   • Operations on the Eye
   • Operations on the Ear
   • Operations on the Nose, Mouth and Pharynx
   • Operations on the Respiratory System
   • Operations on the Cardiovascular System
   • Operations on the Hemic and Lymphatic System
   • Operations on the Digestive System
   • Operations on the Urinary System
   • Operations on the Male Genital Organs
   • Operations on the Female Genital Organs
   • Operations on the Musculoskeletal System
   • Operations on the Integumentary System
   
   
3. Medical Necessity
   • Source of edit
   • Application of the National Correct Coding Initiative Policy
   • Local Medical Review Policy
   • Type of edit
   • Advance Beneficiary Notice
   • Definition of medically unnecessary services
   • Acceptable versus Unacceptable forms
   • Duplicate services
   • Frequency of testing
   • Lack of diagnostic and procedural linkage
   • Mutually exclusive procedures
   • Non-covered services
   • Unbundling of services
   • Screening versus Diagnostic Mammograms
   • Laboratory
   • Radiology
   
   
4. Emergency Room Coding Policies
   • Evaluation and Management Services
   • Define who is responsible for code assignment
   • Facility versus physician billing
   • Linkage
   • Accountability
   • EMTALA (role of coder in identifying potential risk exposure)
   • Triage documentation/use of
5. Policy regarding outside coding services
   • Require all outside firms to read and sign off on coding policies
   • Require all outside firms to follow coding policies
   • Detail the procedure that will be followed if the policies are not applied
   • How will policies be made available? On line? Hard copy?

VII. Coding Education to Reinforce Coding Guidelines

The OIG has made it very clear that it sees coding and billing as currently the biggest compliance risks for every health care provider. In the OIG's Compliance Program Guidance and in every settlement to date, the OIG has stated that "general compliance education is required for all provider employees, but additional focused training is recommended for individuals in higher risk areas, like coding and billing." In addition to training on basic coding issues, every provider should use their coding policy manual as a basis for ongoing education and training of its coding staff. More importantly, the coding manager should keep records of the education sessions drawn from the coding policy manual and document the content of the meetings as well as who was in attendance. In addition, each coder should be required to take periodic quizzes on different sections of the policy manual. These records will serve as evidence that the coding staff understood and was familiar with the organization's coding manual.

Question Our practice is a hospital-based physician group planning to leave the hospital system to start a private practice. We are struggling with the choice of legal structure for our practice. Could you give us advice on which type of business entity we should form?

Answer Your practice has several choices available to you. The legal entity you choose would depend on the flexibility and limitations of those legal structures, and the income tax characteristics of each. Below is a summary of the different types of legal entities available and some of the advantages and disadvantages of each.

The choices available to most practices are the corporation, the partnership and the limited liability company (or partnership). Some states also allow a single-member limited liability company.

All of these legal structures provide protection from legal suits outside of those connected with medical malpractice. Which entity you choose will determine how your practice reports the practice's income tax information to the government. (For our purposes we will discuss only the federal government reporting.)

If you choose the corporate structure, the IRS allows two types of tax reporting, as a C-corporation or as an S-corporation.

A C-corporation reports its annual activity to the government, and if there is a tax liability, the corporation pays the tax. The IRS categorizes a C-corporation medical practice as a personal service corporation. The IRS taxes any profit of a PSC at 35%.

In your case, if profits were left in the corporation at year-end, the corporation would pay a 35% tax on that profit. In the next year, when the physicians paid that profit to themselves in the form of a salary, it would be taxed again to the physicians, resulting in a double taxation of that money. To avoid this double taxation, your accountant will advise you to "strip" all profits out of the corporation by year end by paying a bonus to the doctors.

While most doctors enjoy getting this year-end bonus check, stripping all the profit from your corporation means taking most or all of the money out of the corporation. However, the practice needs cash for operating overhead. In most cases the doctors must either lend back a portion of their bonus to the corporation to cover expenses, or they must guarantee a line of credit to draw on to cover practice expenses until cash flow is restored to the practice.

In addition, it is difficult to know how much bonus will be necessary to wipe out all the profit, because it is impossible to predict how much money will be received from payers. Too little bonus will result in profit left in the corporation. Too much will cause the doctors to report more personal income than necessary and will cause a loss to the corporation that will not provide a benefit until the following year.

The S-corporation is different from a C-corporation in that any profit left at year-end is taxed only to the shareholders of the corporation, avoiding the double taxation. This profit will be divided among physician shareholders in proportion to their ownership interest.

This income is reported regardless of whether or not the cash representing this income is taken out of the corporation. However, when the money is subsequently taken out, it can be taken as a nontaxable distribution.

Because most practices pay physicians according to a compensation arrangement based on productivity, dividing the remaining profits of the corporation according to ownership percentages could cause a conflict with the compensation formula. This can be avoided by paying bonuses to the doctors in differing amounts to account for the differences in productivity. Any discrepancies remaining after the final accounting is made can be corrected early the next year through salary adjustments.

Income is measured nearly the same, whether your practice is a C-corporation or an S-corporation, except for health insurance premiums for the owners. In a C-corporation, the medical insurance premiums are a nontaxable fringe benefit paid by the corporation. In an S-corporation, medical insurance premiums are a taxable fringe benefit, the value of which is added to the physician's W-2.

A deduction for a portion of the insurance premiums is allowed on the physician's personal income tax return, to offset the amount included on the W-2. This deduction will increase over time until the IRS finally allows a 100% deduction of the premiums in several years.

A partnership and limited liability company or partnership act virtually the same for financial and income tax reporting. In most cases, all will report to the IRS as a partnership. Like an S-corporation any remaining profit at year-end is taxed to the partners. However, the profits can be divided in any manner the partners wish, and the allocation can change from year to year. This allows much more flexibility and little or no planning for compensation.

The major difference from a corporate structure is in how a partner is paid. As an employee of the corporation, all the physicians will be paid via W-2 wages, with income taxes deducted and paid to the government with each payroll period. The partners take draws of profit from the partnership. These draws are very much like the doctors' base salary. However, no taxes of any kind are deducted from these draws.

The partners must pay their income taxes and payroll taxes (self-employment taxes) on these draws and their share of the partnership's remaining profit through personal quarterly estimated income tax payments. This process can be a little intimidating. However, personal accountants can guide you through this process and it will become routine.

A single-member limited liability company is allowed in some states and is a very good choice for a single practitioner or single owner. For income tax purposes it is the same as a proprietorship. There is no separate income tax form to file, which is not the case with a corporation or a partnership. But it provides legal protection that is not available to a proprietorship.

By Rita M. Schwager

Question Our practice is considering establishing a 401(k) or SIMPLE plan. We have been practicing for many years but have never offered retirement benefits to our doctors and employees. When we considered the administrative costs and hassles of a retirement plan, our doctors always shied away from it.

We have heard that the recently enacted tax laws have changed the retirement plan arena and created additional benefits for the employer and employees. We have three doctors and 18 staff members who would be very pleased if we adopted a 401(k) plan. What are the changes and how would it affect our practice?

Answer One of the many goals of Congress when it passed the Economic Growth and Tax Relief Reconciliation Act of 2001 was to make saving for retirement more attractive, cheaper and substantial for the taxpayers. There are many provisions included in the new tax law that execute this directive and may convince you that now is a good time to set up a retirement plan.

First, a new nonrefundable credit is available for expenses your practice incurs in establishing a new qualified retirement plan.

This credit applies to plans established after 2001 and is equal to 50% of the first $1,000 in administrative and retirement/education expenses incurred by you for each of the first three years, with a maximum credit of $500 per year.

The credit is available to your practice because you did not employ more than 100 employees last year.

A nonrefundable credit is also available to your employees for their contributions to a 401(k) or SIMPLE plan, to encourage their participation in a tax-favored retirement savings account.

The maximum annual contribution eligible for the credit is $2,000 and the credit rate depends on their income level. The credit is eliminated for higher income earners, such as the doctors of your practice.

Be sure to consider not only a 401(k) plan but also a SIMPLE plan. Although the tax deferrals are less with a SIMPLE plan, the administration costs and simplicity make them an attractive retirement vehicle.

Both types of plans allow for employee elective deferrals and have been changed significantly by the new tax law.

The old and new law limits what your employees can contribute, but the new law gradually raises these limits. For 2001, the most they can contribute to a 401(k) and SIMPLE plan is $10,500 and $6,500, respectively. The new law gradually raises these limits beginning in 2002, to eventually allow an employee to defer $15,000 for a 401(k) plan and $10,000 for a SIMPLE plan by 2006.

Furthermore, if you have employees 50 or older, after 2001 they may contribute even more than these limit amounts.

Under a 401(k), in addition to an employee elective deferral of a portion of their salaries, the practice may match the deferral and contribute up to $40,000 per year. The old law allowed $35,000.

However, under the old and new law, your employees' elective deferral must be included in these contribution limits.

Under the old law, qualified plans can take into account no more than $170,000 of your employees' compensation at 15% for purposes of calculating maximum employer contribution deductions and nondiscrimination tests. This increases to $200,000 after 2001, and the 15% of total compensation contribution limitation becomes 25% of compensation.

The new tax law allows more of your practice funds to be deferred for your doctors' retirement and provides additional incentives for retaining employees.

Whether you choose a 401(k) ora SIMPLE plan, the new tax laws should help you in creating a more attractive package to your doctors and employees.

Question We are an ob-gyn practice, and the doctors in our practice use their vehicles to travel between our offices and hospitals throughout the day. Do you think there are more tax benefits for our practice to own or lease a vehicle for our doctors?

Answer Whether your practice leases or owns the vehicles, you may deduct the operating costs of gasoline, repairs, insurance, parking and car washes. However, generally the tax laws are more generous with the auto-lease deduction than the auto-owned depreciation deduction.

If your practice leases a "business luxury automobile," which is defined to be in excess of a $15,500 fair market value, the deduction for the lease payments requires an income inclusion. You may find this income inclusion in a published IRS table, but generally the income inclusion amount is small. If your practice owns the vehicle and it is considered a "luxury" automobile, the tax write-off or depreciation is limited to a "luxury auto dollar cap."

It is necessary to perform the computational exercise but usually the depreciation deduction attributable to company-owned vehicles is less than lease-payment deduction, net of the income inclusion, attributable to company-leased vehicles.

You should also consider the economics of buying versus leasing your vehicle before making your decision; tax considerations should only be part of the analysis process.

By Cathy B. Goldsticker