HPC: Hospitals are inflating severity of diagnoses

THE STATE’S HEALTH POLICY COMMISSION released data on Wednesday that suggested Massachusetts hospitals are inflating the severity of patient diagnoses to boost their revenues by hundreds of millions of dollars.

The practice, called coding or up-coding, is not illegal or even improper. Hospital officials mine the health background of patients to build up the seriousness of their diagnosis. The more serious the diagnosis, the more the hospital is paid for the treatment it provides.

Tracking data over a five-year period, researchers at the Health Policy Commission found a sharp increase in the number of hospital patients being discharged with high-acuity codes and a hefty increase in patient risk scores. The researchers said it was implausible that the general population is suddenly getting sicker, so they concluded something else is happening.

“An industry has formed around leveraging electronic health record systems to mine patient clinical history to increase the number and complexity of diagnoses coded to maximize reimbursement,” according to the presentation to the commission.

The researchers used the example of COPD, or chronic obstructive pulmonary disease, to illustrate what is happening. Patients with COPD are categorized into one of four severity levels. In 2017, the Medicaid hospital payment was $4,584 at the lowest severity level and $16,500 at the highest level. The percent of hospital discharges at the lowest two severity levels fell from 59 percent in 2013 to 36 percent in 2017. The percent of discharges at the highest two levels increased from 40 percent in 2013 to 65 percent in 2017.

As a result of rising inpatient acuity, the Health Policy Commission estimated the state as a whole incurred $280 million in additional inpatient Medicare costs and up to $300 million more in inpatient commercial costs in 2017.

All this is happening as the number of patients being treated at hospitals is declining.  According to the commission, commercial inpatient spending grew 10.7 percent between 2013 and 2017, topping out at $4.02 billion, even as inpatient volume declined 12.8 percent.

Beyond the cost, the researchers said the coding phenomenon undermines the accuracy of patient risk assessments, puts more pressure on clinicians to document every patient ailment, and gives a competitive edge to those hospitals with the resources to invest in electronic record systems and coders.

Don Berwick, one of the commissioners, asked the agency’s researchers if coding and the extra spending associated with it are plateauing.

“We keep looking for the plateau and we haven’t seen it,” said David Auerbach, the commission’s director of research and cost trends.

“How can we put a stop to this? This is hurting the Commonwealth,” Berwick said.

David Seltz, executive director of the Health Policy Commission, said more research needs to be done to document the problem and unearth potential solutions. “These are organizations that are acting very rationally given the incentives that are in place,” he said.

Dr. John Christian Kryder said one simple way to find out how much money hospitals are investing in coding is to ask for a headcount of workers to see how many are assigned to positions providing care and how many are working in coding, or data management, functions.