The Biggest Challenge with Outpatient Coding: ‘You Don’t Know What You Don’t Know’

September 8, 2020 Streamline Health

By Nancy Hirschl, BS, CCS, AHIMA-Approved ICD-10 Trainer
Vice President, HIM & Product Strategy
Streamline Health

Despite the relatively lower per-encounter reimbursements involved, outpatient (OP) coding can be more challenging than inpatient (IP) coding. OP coding often has more moving parts, unique constraints, and can require highly specific skillsets to support certain service lines. And just as with IP coding, most providers only perform audits on a small percentage of OP encounters, despite the much higher volume. This forces many providers to settle for a ‘good enough’ mindset that undercuts financial performance at a time when every penny counts.

The Biggest Challenge with Outpatient Coding

“As hard coding often drives the lion’s share of revenue for outpatient care,
it’s also where you can find the greatest opportunities and risks.”

OP coding is often broken down into two categories: ‘hard’ and ‘soft’ coding. Soft coding in OP care occurs when trained HIM/code staff review physician documentation and translate the data into CPT and ICD-10-CM diagnosis codes for that encounter— very similar to what happens in IP coding. While the coder’s knowledge level and skillsets can vary, it’s still a relatively straightforward process.

Hard coding, on the other hand, can be more complex to consistently optimize. Even the definition of hard coding presents challenges. Many folks think hard coding is anything covered or assigned by a Chargemaster (often calling it ‘charge coding’), but hard coding can include any coding being managed or assigned by someone other than an experienced coding professional with the necessary training and familiarity with coding guidelines. As hard coding often drives the lion’s share of revenue for outpatient care, it’s also where you can find the greatest opportunities and risks.

OP coding is also challenging by virtue of the wide variety of potential medical scenarios and procedures involved. For instance: an ambulatory surgery encounter can entail multiple elements and variables that influence how it can be coded. Unless the provider has specialist coders to handle each unique procedure type, then the chances of the coder being able to accurately convert the complex documentation into a correctly coded claim are reduced. Spinal, certain orthopedic and ocular procedures are great examples of where expert coder understanding is required to properly assess and convert the procedure’s details into correct and compliant coding.

Another factor is that each organization has its own strategy regarding which resources are responsible for managing outpatient coding. One provider may assign coding responsibility for all interventional radiology and cardiology services to the technicians or clerks in that department. Perhaps those staff members have relevant training and can assign the appropriate codes efficiently and effectively. If not, then they rely exclusively on the charge coder and a brief description of the procedure. In these cases, unless the organization has a quality control (QC) process such as routing to an HIM professional for review and confirmation, then potential issues can go unchecked and the result is revenue leakage or compliance risk. And again; without large sample audits or reviews to identify the scale of negative impact, major shortcomings (staffing or procedural) can go unresolved indefinitely.

With so much variability and so little visibility with regards to accuracy, it’s no wonder providers are increasingly concerned about the level of revenue leakage and compliance exposure from their OP coding. Some look to claims scrubbers to provide insight, but scrubbers typically only check to see if any data is present or not. They lack the capacity to consider the greater context of the claim to confirm the appropriateness of the code. In fact, scrubbers can often give a false sense of security by continually confirming ‘accuracy’, when in fact they simply reinforce the same type of errors over and over.

Auditing outpatient encounters is obviously a great way to optimize revenue integrity, but there are limits to the benefits. In a traditional audit of outpatient coding, the auditor reviews the ICD-10 diagnosis codes as assigned by the HIM staff. But who assigned the CPT codes? Is it someone at the Point of Service? If so, how is their performance being managed? Is there a process in place to track the recurrence of issues—soft and hard-coded—and compile the results in a manner that generates actionable insights? For that matter, is the percentage of encounters being reviewed even sufficient to yield meaningful results? With most providers auditing less than 10% of outpatient cases, the opportunity for root cause analysis is slim at best.

Fortunately, more providers are leveraging technology to proactively address these issues. Automated coding analysis enables providers to review all coding, including hard-coded elements, from a more sophisticated perspective. A key aspect of automated coding analysis is establishing a Coding Responsibility Matrix, which maps out how/where/by whom all codes are applied to an outpatient encounter. By establishing the source of all coded data, potential issues are categorized and compiled accordingly. More robust types of analyses will even gauge issues by Likelihood of Change and Financial Impact, which assists in stratifying cases for review (micro) and prioritizing corrective actions (macro).

“Automated coding analysis enables providers to review all coding,
including hard-coded elements, from a more sophisticated perspective.”

With such a system in place, organizations can see substantial benefits immediately in terms of identifying and addressing issues with current cases, which enable them to proactively address revenue leakage and risk exposure. The net result is increased compliant revenue, which is always the desired outcome.

The long-term benefit of automated outpatient coding analysis is that, by analyzing all encounters (not just a small percentage), an organization gets a more accurate assessment of how each element is performing. Whether soft- or hard-coded, all potential issues are identified, quantified and categorized. This aggregated view provides tremendous visibility into the root cause of issues impacting financial performance, and exactly how much impact it’s having. Using these insights, one can approach the necessary stakeholders with definitive data to inform corrective measures such as staff training and process improvements. All of which ultimately contributes to sustainable improvements in operational and financial performance.

Virtually all providers struggle with outpatient coding accuracy to some degree. By utilizing pre-bill technology to assist with identifying and addressing coding issues, an organization can discover what they don’t know with regards to what issues are hurting its financial performance, and by how much. And like all knowledge, it’s very empowering.

See for Yourself

To learn firsthand how this new normal can impact your revenue integrity and financial results, Streamline Health will perform a projected impact assessment to identify and address your organization’s greatest opportunities and risks. For a more in-depth assessment, we can also provide a comprehensive financial impact analysis based on a simple data feed from your current coding operations that will include summary details as well as specific cases for stakeholder review. Contact us at  to learn more.

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