Sepsis Coding Issues Support Enhanced Payment Integrity

Sepsis Coding Issues Support Enhanced Payment Integrity

OIG recommends continued vigilance and targeted clinical reviews to ensure proper documentation

In the largest study of Medicare sepsis data ever conducted, the U.S. Department of Health and Human Services (HHS) estimated the 2019 total cost of sepsis care for inpatient hospital admissions and skilled nursing facilities to be more than $62 billion. The landmark study found that the rate of Medicare beneficiaries hospitalized with sepsis from 2012 to 2018 increased by a whopping 40%, nearly double the increased rate of enrollment in Medicare.

Sepsis is a life-threatening condition that arises when the body’s response to an infection injures its own tissues and organs. The potentially lethal condition involves organ dysfunction, indicating a pathobiology that is more complex than infection plus an accompanying inflammatory response alone.

Sepsis is the leading cause of death, the leading cause of readmissions and is the most expensive condition treated in U.S. hospitals, accounting for nearly $24 billion or 6.2% of the aggregate costs for all hospitalizations. According to the Centers for Disease Control (CDC), sepsis is diagnosed in at least 1.7 million adults annually in the U.S., causing approximately 270,000 deaths each year.


    Marked rises in reported sepsis incidence have generated substantial concern across the healthcare industry, leading to numerous research studies to better understand the condition and international initiatives such as the “Surviving Sepsis Campaign” to raise awareness and promote the latest best practices for improving sepsis recognition and early intervention.

    Ongoing efforts by clinicians, administrators, policy makers, and patient advocates to increase sepsis awareness, screening, and recognition are leading to more patients being labeled with sepsis. At the same time, mortality rates and lengths of stay for sepsis have been steadily decreasing.

    Commonly cited explanations for the increase in sepsis incidence include an aging population with more predisposing comorbidities, more frequent use of immunosuppression, more invasive procedures and medical devices, and the spread of multi-drug resistant pathogens. Declining sepsis-associated mortality rates are generally attributed to better sepsis recognition, faster treatment, increasing uptake of sepsis bundles, and general improvements in the care of critically ill patients.

    Lacking consensus

    There remains, however, considerable controversy over the degree to which these observed trends represent true increases in disease incidence and improvements in outcomes versus artifacts of changing sepsis diagnosis and coding practices over time.

    Hospitals are continually engaging in efforts to improve physician documentation and coding to better record patients’ clinical conditions, improve risk-adjusted mortality estimates for benchmarking, and optimize reimbursement. This is particularly relevant since sepsis is assigned a high severity-of-illness rank, and thus reimbursement, as compared to the severity rank of the underlying infection without the diagnosis of sepsis being made. Underscoring the potential influence of policies and reimbursement on sepsis trends, numerous studies have found that increases in sepsis incidence were temporally correlated with new federal coding guidance and the introduction of medical severity diagnosis-related groups (MS-DRG) in 2007.

    In 2005, sepsis was not even in the top five diagnostic categories for inpatient stays in the U.S. That year, the total number of inpatient stays attributed to sepsis totaled approximately 518,000. By 2014, that number had tripled to more than 1.5 million, making sepsis the second leading cause of hospital stays for people aged 45-64 and the third leading cause for adults aged 18-44. During the same time period, the only other disease category for which hospital stays increased was mental health. All other causes of inpatient hospitalization, including such common culprits as heart disease and pneumonia went down.

    While the incidence of hospitalizations with sepsis diagnosis codes increased dramatically from 2003–2012, there was no concurrent increase in number of patients with bacteremic shock. Studies have also found that the sensitivity of sepsis codes for identifying hospitalizations with bacteremic shock increased over time. Furthermore, coding for septicemia, which has traditionally implied bacteremia with clinical signs of sepsis was increasingly applied to patients without documented positive blood cultures. These findings provide evidence that sepsis diagnosis codes are becoming increasingly sensitive over time and are being extended to broader populations.

    In February 2021, the HHS Office of the Inspector General (OIG) issued a data brief entitled, Trend Toward More Expensive Inpatient Hospital Stays in Medicare Emerged Before COVID-19 and Warrants Further Scrutiny. The report identified trends in billing and payments for inpatient hospital stays at the highest severity levels, as determined by the Medicare Severity Diagnosis Related Group (MS-DRG). To perform its research, the OIG analyzed Medicare Part A claims for hospital stays for the six-year period from FY 2014 through FY 2019.

    The OIG investigation revealed the following:

    • The most frequently billed MS-DRG was severe sepsis with a major complication (MS-DRG 871).
    • Stays billed at the highest severity level accounted for nearly half of Medicare’s total spending for all inpatient hospital stays in FY 2019.
    • Stays billed at the highest severity level increased substantially in both number and cost, while stays billed at lower levels decreased.
    • At the same time, the average length of stays at the highest severity level decreased, while the average length of all stays remained largely the same.
    • Over half of the stays billed at the highest severity level reached that level because of only one diagnosis.
    • Hospitals varied significantly in their billing of stays at the highest severity level, with some billing far differently than most.

    Upcoding suspected

    According to the OIG, these findings indicate a pattern suggesting the presence of inappropriate billing practices, such as upcoding. Specifically concerning to the OIG is that nearly a third of high severity stays lasted a surprisingly short amount of time and that over half of them had only one diagnosis qualifying them for payment at the highest severity level. Hospitals also varied significantly in their billing of these stays. For example, 5 percent of hospitals billed between 80 and 100 percent of their stays at the highest severity level with only one major complication.

    The OIG pointed out that the severity of an inpatient stay depends on a patient’s secondary diagnoses, and that it may only take one secondary diagnosis to propel a patient into the highest severity level. The OIG determined that if that diagnosis was inaccurate or inappropriate, higher payments would not be warranted.

    The OIG reported that Medicare spent $109.8 billion for 8.7 million hospital stays in 2019, and that approximately 3.5 million (or 40%) of those stays were billed at the highest severity level, as determined by the MS-DRG. In addition, nearly half of the $109.8 billion spent, or $54.6 billion, was for stays billed at the highest severity level for which Medicare paid an average of $15,500 per stay.

    OIG to increase scrutiny

    The OIG appears determined to find out what’s driving the increase in the severity of coding, whether it’s due to patients being sicker or because the coding protocols are getting more sophisticated and hospitals are devoting more resources to trying to optimize a reimbursement. If the latter is true, it could mean that significant taxpayer dollars are funding inappropriate billing schemes.

    In 2019, Medicare paid hospitals approximately $14.5 billion for stays that lasted a relatively short amount of time. This equates Medicare paying about $5 billion more than it would’ve paid between FY2014 and FY2019 if those cases had been billed at the next lower severity level.

    On the one hand, hospitals contend that they have been undercoding for years and that the increased billing is the result of rising patient acuity and more accurate coding protocols to capture severity levels with the implementation of ICD-10 coding system. They also point to the aging patient population as a contributing factor. At the same time, the OIG and other industry watchdogs continue to have strong suspicions that some hospitals may be coding at higher severity levels to get more bang for their buck.

    “The increase in the number of stays billed at the highest severity level implies that beneficiaries were sicker overall. However, the decrease in the average length of stays at the highest severity level potentially undermines that idea because it is not consistent with sicker beneficiaries. Length of stay generally has a positive relationship to severity of stay; sicker beneficiaries stay in the hospital longer.” -U.S. Department of Health and Human Services, Office of Inspector General, Data Brief, February 2021, OEI-02-18-00380

    Hospitals face steep fines for upcoding

    Lending credibility to the concerns of the OIG and other watchdog agencies is the successful prosecution of numerous upcoding cases initiated by health system whistleblowers. Here are just a few:

    • In 2021, Sacramento-based Sutter Health and its Affiliates agreed to pay $90 million to settle false claim of mischarging the Medicare Advantage Program.
    • A Medicare audit in 2012 found that emergency departments in Texas and Oklahoma overbilled about $45 of every $100 paid for emergency department services.
    • In 2017, Envision Health agreed to pay about $30 million to resolve claims that they had admitted patients to the hospital when they should have been placed under observation or referred to an outpatient facility.
    • In 2018, Prime Healthcare paid $65 million to resolve Medicare upcoding allegations.

    Not all cases of alleged upcoding are settled in favor of the plaintiff. The Baylor Scott and White Medical Center case from 2020 seems to justify hospital’s recent billing practices. While the whistleblower reported that a particular physician was telling other doctors how to use secondary codes to increase reimbursement, a federal court judge ruled that the health system’s alleged upcoding scheme was consistent with the government’s own encouragement of hospitals to use the billing codes to get as much reimbursement as possible. Moreover, the judge quoted an old CMS regulation stating that the agency does not believe there’s anything inappropriate, unethical, or otherwise wrong with hospitals taking full advantage of coding opportunities to maximize Medicare payments as long as they are supported by documentation in the medical record.

    The last part of this statement is perhaps the most important takeaway from the ruling in this case – which is that claims must be adequately documented in the medical record to warrant reimbursement. With respect to documenting, coding, and billing for a diagnosis of sepsis, that means using the correct criteria to ensure consistency and compliance with the Sepsis-3 definition per The Third International Consensus Definitions for Sepsis and Septic Shock (Sepsis-3) as published in the Journal of the American Medical Association (JAMA), February 23, 2016.

    Clinical validation and claims reviews more important than ever

    To ensure compliance and protect against coding irregularities, the OIG recommends targeted clinical reviews for high-severity hospital stays. For payors, implementing a modern, AI-driven payment integrity solution featuring physician-led clinical reviews is essential. Comprehensive payment integrity solutions can save payors hundreds of millions of dollars annually.

    Adding yet another layer of complexity is that some states have passed their own legislation regarding sepsis definitions and protocols. In 2018, the state of New York passed legislation that rolled the definition of sepsis all the way back to what it was in 1991, when a consensus conference initially defined sepsis as systemic inflammation response syndrome (SIRS) in the presence of an infection. Despite widespread criticism of the SIRS criteria due to its low specificity, the state of New York further mandated that health plans allow payments to be calculated using this sepsis diagnosis in cases where the outdated criteria are met.

    According to a 2015 study published in the American Journal of Respiratory Critical Care Medicine, 15% of patients admitted to a general inpatient ward met SIRS criteria on admission and 47% met SIRS criteria at least once during their hospitalization. The cost implications of the New York ruling may be astronomical.

    The current definition of sepsis was nearly 30 years in the making. The 1991 definition of sepsis was revised in 2001 to incorporate the threshold values for organ damage. The definition changed again in 2016 and is now defined as life-threatening organ dysfunction caused by a dysregulated host response to infection. The new consensus definition describes organ dysfunction as an acute increase in total Sequential Organ Failure Assessment (SOFA) score of two points when being tracked regularly and deemed to be consequent to the infection. A significant change in the new definitions is the elimination of any mention of SIRS. The Sepsis-3 Task Force also introduced a new bedside index, called the qSOFA, to identify patients outside of critical care units with suspected infection who are likely to develop sepsis. These recently updated consensus definitions have improved specificity compared with the previous descriptions.

    Clearly, the sepsis rollercoaster ride is long from over, and the issue of hospitals overbilling by improperly coding for the most severe diagnoses will continue to be a moving target. While decreasing length of stays can probably be attributed to streamlined operations and the adoption of new best practices for treating more serious health conditions, it remains difficult to pinpoint the degree to which these improvements account for the coding and billing changes being observed. There is plenty of evidence and precedent to support further investigation by U.S. regulatory agencies to help distinguish between proper coding and reimbursement optimization versus fraud and abuse. Whistleblower cases such as those listed herein may shine additional light on the issue through the discovery process.

    Protect against upcoding with physician-led payment integrity

    To protect payors and patients against upcoding or otherwise paying for the treatment of sepsis in error, New York-based MedReview performs independent clinical validation reviews. Using proprietary methods and industry-accepted criteria to determine when providers might be playing fast and loose with the codes or when their documentation is insufficient to warrant the diagnoses indicated, MedReview’s board-certified physicians conduct comprehensive clinical reviews that deliver industry-leading results and save our clients millions of dollars annually. Diagnoses that are not validated are either removed from the list or replaced by more appropriate ones. The DRGs are then recalculated, which typically results in lower-weighted DRGs being assigned with reduction in the amount payable to the hospital.

    With coding guidelines in a state of flux, financial incentives aligned to reward the most severe diagnoses and the rapid adoption of new technologies keeping providers in a perpetual mode of playing catch-up, it is likely that upcoding and other billing irregularities associated with sepsis and other severe conditions are here to stay – at least for the foreseeable future. As such, payors must continue to be vigilant and protect against overpayments by implementing and maintaining a robust payment integrity strategy featuring physician-led clinical validation reviews and AI-powered analytics.