Patient Noncompliance May Be Grounds to Overturn Readmission Denials

Nina Youngstrom | June 27, 2022

Report on Medicare Compliance, Volume 31, Number 23, Published by the Health Care Compliance Association, Eden Prairie, MN • 888.580.8373 •

Medicare Advantage (MA) plans and commercial payers may deny claims for what seem like preventable readmissions, but hospitals may be able to overturn them when patient noncompliance is the driver, an appeals expert said. It’s one of the variations on the theme of readmission denials that could be ripe for appeals and possibly won’t be the uphill battle they sometimes are.

One hospital recently changed a payer’s mind about a readmission after proving it had done everything it could to help a noncompliant patient, said Denise Wilson, senior vice president of Denial Research Group/AppealMasters in Towson, Maryland. She cautioned, however, that these appeals are iffy. “It’s a tough nut to crack,” Wilson said. “You can say, ‘We did everything possible to make sure the patient had all the support and resources when they went home and gave them a good discharge plan,’ but it’s not always in your control and sometimes not easy to prove they were not compliant.”

In this case, a 34-year-old patient was discharged March 8, 2022, from an inpatient hospital stay with a diagnosis of osteomyelitis and dry gangrene of the left foot that had caused the amputation of his fourth toe. Before his admission, the patient had been treated for the osteomyelitis with IV antibiotics at home, but the home health agency said he wasn’t compliant with the treatment plan and had “a long history of medical noncompliance and poorly controlled diabetes,” Wilson said at a webinar sponsored by the Association for Healthcare Denial and Appeal Management.1 The MSDRG for this admission was 617 (amputation of lower limb for endocrine, nutritional and metabolic disorders with complications and comorbidities).

To help the patient after discharge with home IV antibiotics and wound care, home health was arranged and follow-up visits were set for primary care, endocrinology, surgery and infectious disease, Wilson said. The care team decided to switch the patient’s home IV antibiotic from vancomycin to Daptomycin, which could be administered less frequently because of his “noncompliance with frequency of home IV dosing.”

Patient Requested the Amputation

On March 22, the patient showed up at the emergency room with worsened left foot swelling, redness, and discharge, and asked for an amputation below his knee. The patient was readmitted as an inpatient with osteomyelitis at the 4th and 5th metatarsal remnants, worsened gangrene and cellulitis. This time, the MS-DRG was 616 (amputation of lower limb for endocrine, nutritional and metabolic disorders with major complications and comorbidities).

After the claim for the readmission was denied, the hospital appealed, arguing it was not preventable because of the patient’s history of noncompliance, Wilson said. She noted that when the patient was discharged from the hospital the first time around, there was an effective discharge plan in place. “There’s nothing else we could have done to set up the patient for success,” Wilson noted.

Apparently the payer agreed with the reasoning. “We got an appeal decision back on this saying all discharge planning was appropriate and completed and the second inpatient stay was not preventable,” Wilson said. The two admissions were considered separate and unrelated, and therefore the payer reimbursed the hospital for the readmission.

Medicare Penalties vs. Commercial Payer Denials

Readmission denials and payment penalties continue to be a source of frustration for hospitals. With commercial and MA plans, hospitals take a direct payment hit, although most payers will either pay the higher-paying DRG from the two admissions or will combine the diagnosis and procedure codes from the two admissions and assign one DRG that covers both, Wilson said. That’s different from original (fee-for-service) Medicare, which has two policies: (1) When a patient is discharged from the hospital and readmitted on the same day for symptoms related to the evaluation and management of the condition treated earlier, the two stays must be combined on a single claim; and (2) under the Hospital Readmission Reduction Program, CMS penalizes hospitals with excess readmissions for six conditions/procedures by reducing their total MS-DRG reimbursement up to 3% based on data from prior years.

Readmissions are defined as a second admission for any diagnosis within 30 days of the “index” admission. The program only applies to acute myocardial infarction, chronic obstructive pulmonary disease, heart failure, pneumonia, coronary artery bypass graft surgery and total hip arthroplasty/total knee arthroplasty.

For fiscal year 2022, Medicare penalized 47% of hospitals for readmissions, according to Kaiser Health News.2 The average penalty is a 0.64% reduction in payment for every Medicare patient stay from Oct. 1, 2021, through September 2022.

With MA plans and commercial payers, the reasons for denials are readmissions (usually within 30 days) that are clinically related to the first admission, that are potentially preventable, or that result from the patient’s early discharge, Wilson said.

For example, Anthem Blue Cross Blue Shield’s MA plan doesn’t permit separate payment for readmissions to the same hospital for the same, similar or a related condition, she said. “Typically, commercial payers will look at two admissions and if they are similar conditions, they combine and will pay the higher-weighted DRG for two admissions.”

On the flip side, Anthem’s MA plan considers readmissions appropriate for the treatment of cancer, rehabilitation, obstetrical deliveries, behavioral health, transplants, sickle cell anemia and neonatal/newborns. Also, Anthem’s MA plan doesn’t consider it a readmission when patients are transferred from one acute care hospital to another or leave against medical advice, Wilson noted.

She advised hospitals to be on alert for situations where payers don’t follow their own policy. For example, they may deny claims for readmissions for conditions (e.g., sickle cell anemia) that are always covered. Or if the payer policy doesn’t cover readmissions within 30 days but the patient wasn’t readmitted until 32 days from the initial admission, “that would be against their policy.”

Keep in mind that most readmission denials by commercial payers are indicated on explanation of benefits (EOB) forms or remittance advices with the reason code 249, which means they’re essentially an automatic denial, Wilson said. “It’s not like they’re reviewing the medical records,” she explained. The payers are making the decision that the readmission was clinically related or potentially preventable based on the little information they have and that the patient wasn’t transferred and didn’t leave against medical advice or have one of the delineated conditions that always qualify for readmissions. “It puts the burden of proof on the provider” to show otherwise, Wilson said.

Proving Readmissions Are Clinically Unrelated

For one thing, when readmissions are denied for being clinically related, hospitals can appeal on the grounds that, for example, the MS-DRG of the readmission was different or, if the MS-DRG is the same, the focus of care was different.

Wilson described a successful appeal of a claim that was denied because the payer said the admissions were clinically related. The patient was discharged with a diagnosis of exacerbation of chronic obstructive pulmonary disease (COPD) on Sept. 10, 2021, and the hospital billed for MS-DRG 192 (COPD exacerbation without CC/MCC).

Ten days later, an ambulance brought the patient to the emergency room because she had chest pain, palpitations and shortness of breath. Her heart rate was critically high and she was supported with assisted ventilation. The patient was diagnosed with acute hypoxemic respiratory failure, respiratory acidosis, hypotension, tachycardia, COPD with exacerbation, chest pain, and chronic combined systolic and diastolic heart failure. She was admitted and treated for these conditions, but in terms of the  readmission, what made the difference was the patient’s treatment for supraventricular tachycardias (SVT). “The SVT worsened her oxygenation status and led to her
acute on chronic respiratory failure with hypoxia and hypercapnia as the main reason for her admission,” Wilson said. “SVT was not part of her prior admission.” This time, the DRG was 189, pulmonary edema and respiratory failure.

Payers also deny claims for readmissions because they are potentially preventable, but Wilson said that’s not true when documentation supports the hospital took important steps (e.g., made an appointment for the patient shortly after discharge from the first admission; gave the patient required prescriptions and explained
how to take them). “Discharge planning starts as soon as the patient is admitted,” Wilson said. “That can speak to how you have active care management going on. It helps support you are doing everything you can to support the patient.”

Finally, payers may deny claims for readmissions if they think patients were discharged early. Hospitals can argue on appeal that patients were asymptomatic and their comorbidities stable when discharged from the first admission if that was the case, Wilson said. Contact Wilson at [email protected].

1. Denise Wilson, “Fighting Readmission Denials,” Association for Healthcare Denial and Appeal Management, June 22, 2022,
2. Jordan Rau, “Medicare Punishes 2,499 Hospitals for High Readmissions,” Kaiser Health News, October 28, 2021,