Providers can expect UnitedHealthcare to undertake closer inspection of coding patterns

Healthcare spending that exceeded expectations is motivating UnitedHealthcare to take a more rigorous look at provider coding practices.

For two consecutive quarters, parent company UnitedHealth Group (UHG) has reported that the medical-cost ratio (MCR) of UnitedHealthcare is being impacted by several factors. One is provider coding trends, the company’s leaders said during investor calls.

“In some cases, the coding actions are extreme,” John Rex, president and CFO of UHG, said this month, pointing to an increase of more than 20% in coding intensity factors by certain providers.

The company’s MCR was 85.2% in Q3, up from 82.3% year over year. In Q2, the 85.1% ratio was up from 83.2% a year earlier.

Defying previous projections

UHG had expected the rise in coding intensity to be more transient. In Q2, the company attributed the trend to the waiver of utilization management (UM) protocols for roughly 45 days following the cyberattack that shut down UHG subsidiary Change Healthcare in late February.

The coding issue largely hinges on a hospital’s designation of patients as inpatient versus outpatient observation. Brian Thompson, CEO of UnitedHealthcare, said the company noted an unusual level of inpatient cases in the immediate aftermath of resuming UM protocols.

“We feel like it’s an anomaly tied to what we saw during our [UM] waiver,” Thompson said during a Q2 call.

As Q3 wrapped up, however, the trend had not ebbed.

“It certainly has persisted,” Thompson said this month. “[There are] a few large systems driving it, and we certainly do remain focused on evaluation of this practice.”

The coding issue is not the only driver of a relative spike in the MCR, company leaders said this month. Other factors include:

• A lag in state Medicaid payment updates relative to recent acuity shifts stemming from the eligibility redeterminations that took place starting in 2023
• An acceleration in high-cost specialty drug prescriptions, partially owing to Inflation Reduction Act provisions that eliminated the 5% coinsurance requirement within the Medicare Part D catastrophic-coverage phase starting in 2024

But to the degree that UnitedHealthcare views coding as a pivotal issue to address with some of its partners, those providers can expect to see intensified validation efforts and potentially an increase in denials.

“We remain vigilant on focusing on this, hoping to see it abate to levels that we’re more used to seeing in the past,” Thompson said.

Under the microscope

External payer audits quadrupled in volume in 2023, according to a vendor’s report published late last year. The report by MDaudit examined both commercial and government payers and drew on metrics from more than 650,000 providers and 2,200 facilities that are in the company’s database.

Although the volume increase partially corresponded to a rise in patient volumes, that correlation did not fully explain jumps of 170% in hierarchical condition coding audits (which are linked to Medicare Advantage) and 300% in DRG audits. The audits often involved large documentation requests, per the report.

“Mounting requests with tight deadlines and appeal timelines posed a significant risk of revenue loss and potential claw-backs, creating challenges for hospitals due to staffing issues,” the report summary states.

In a May letter to CMS concerning Medicare Advantage (MA) policies, the American Hospital Association (AHA) said MA plans increasingly have been going beyond DRG validation audits to incorporate clinical validation processes. That’s invariably to the detriment of hospitals and health systems.

The letter referenced a mid-sized independent hospital that reported losing $2 million in 2023 from payment reductions that were based on clinical validation audits. A 50-hospital system incurred a $32 million revenue loss over a five-year period.

“The justification for second-guessing the judgment of the physician who diagnosed and treated the patient is extremely problematic,” the AHA wrote.

Noting that traditional Medicare prohibits recovery audit contractors from conducting clinical validation audits, the AHA said a similar policy should apply to MA plans.

In a 2022 article announcing it would implement clinical validation audits, Blue Cross Blue Shield of Michigan wrote that “it’s possible to have a claim that is correctly coded based on national coding guidelines, but where the clinical indicators aren’t met.”

A complex issue

For providers, coding challenges described in 2023 sponsored research include the frequently changing payer requirements for filing a claim. Other obstacles to consistent coding involve the sheer volume of the 11,000-strong CPT code set, with the potential for several hundred modifications per year.

There also are impediments within a hospital or health system, such as indecipherable or confusing notes left by a physician in the electronic health record. A 2019 hfm magazine feature noted that queries from coders to physicians were attracting additional inspection in payer reviews.

“Make sure queries are appropriate and not leading,” the article states.

Concerns about coding can run both ways. Payers have been scrutinized for employing dubious coding practices in MA, allowing them to run up their risk scores and receive higher payments from Medicare.

On the bright side for providers, UnitedHealthcare also has launched an initiative designed to make life easier: a gold card program that the company says will reduce the number of prior authorizations by 500,000 per year among qualified in-network participants. That could take some of the pressure off a participating provider’s coding department.