In March 2024, the Office of Inspector General (OIG) added a work plan item specifically targeting Medicare inpatient hospital billing for sepsis, with an expected report release in fiscal year 2025. This development creates immediate compliance implications for hospitals nationwide.
Sepsis represents one of the most frequently billed diagnoses in Medicare, with Medicare Severity Diagnosis Related Group (MS-DRG) 871 accounting for billions in annual payments. The OIG’s stated concern centers on whether hospitals are taking advantage of conflicting sepsis definitions to maximize reimbursement.
The Definition Dilemma
Two competing definitions of sepsis exist simultaneously in healthcare, creating the core problem behind OIG scrutiny.
Sepsis 2, established in 2001, relies on Systemic Inflammatory Response Syndrome (SIRS) criteria. A patient with infection plus two SIRS criteria, such as fever and elevated heart rate, meets the threshold for sepsis. The Centers for Medicare and Medicaid Services (CMS) and Centers for Disease Control and Prevention (CDC) currently recognize this broader definition.
Sepsis 3, introduced in 2016 and widely recognized by the World Health Organization, defines sepsis as life threatening organ dysfunction caused by a dysregulated host response to infection. It uses the Sequential Organ Failure Assessment (SOFA) score to identify organ dysfunction rather than SIRS criteria.
The practical difference is substantial. A patient with urinary tract infection, fever, elevated white blood cell count, and tachycardia qualifies for sepsis under Sepsis 2. Under Sepsis 3, that same patient would not be classified as septic unless demonstrable organ dysfunction exists.
This creates a billing paradox. Hospitals following CMS guidance appropriately code sepsis using Sepsis 2. Commercial payers increasingly apply Sepsis 3 during claim review and deny payment. The OIG’s work plan suggests federal scrutiny may now align with the narrower definition.
Financial Magnitude and Audit History
The financial stakes are substantial. Medicare paid over $7.4 billion for MS-DRG 871 in fiscal year 2019 alone, making it consistently one of the highest volume and cost Diagnosis Related Groups (DRGs).
A February 2021 report from the OIG highlighted sepsis as the most frequently billed MS-DRG. Livanta findings have consistently shown sepsis DRGs 871 and 872 comprise the largest percentage of cases found to be in error.
The new work plan item makes explicit what previous reports implied. The OIG intends to analyze 2023 Medicare claims to assess billing patterns, describe variation among hospitals, and critically, estimate the costs to Medicare associated with using the broader Sepsis 2 definition rather than Sepsis 3. This cost estimation signals potential future policy changes.
Documentation Gaps That Trigger Audit Failures
When sepsis cases fail audits, the root cause typically traces to documentation deficiencies rather than intentional miscoding. Understanding these common gaps is essential for developing effective mitigation strategies.
The most frequent problem involves sepsis diagnoses lacking clear evidence of organ dysfunction. A provider documents “sepsis” based on SIRS criteria alone, without explicitly documenting which organs are affected and how. The medical record shows fever, tachycardia, and infection but contains no documentation of respiratory failure, acute kidney injury, altered mental status, coagulopathy, or other specific manifestations of organ dysfunction. When auditors apply Sepsis 3 criteria or scrutinize the diagnosis more carefully, these cases become vulnerable.
Another common documentation failure occurs with chronic conditions misidentified as acute sepsis related organ dysfunction. A patient with pre existing chronic kidney disease may have elevated creatinine on admission, but the record does not clearly distinguish between baseline renal function and acute worsening due to sepsis. Without explicit documentation that the kidney injury represents acute deterioration from baseline attributable to the current septic episode, auditors question whether true sepsis related organ dysfunction exists.
Timing documentation also creates audit exposure. Sepsis evolves over time, and organ dysfunction may develop hours into the hospital stay rather than being present on arrival. When documentation fails to establish the timeline clearly, showing when infection was suspected, when SIRS criteria or organ dysfunction manifested, and how the clinical picture evolved, auditors struggle to validate the sepsis diagnosis. The lack of temporal clarity makes it difficult to determine whether the coded severity level accurately reflects the patient’s condition.
Finally, many denials stem from insufficient linkage between the infection source and the systemic response. The medical record documents pneumonia and documents acute respiratory failure, but nowhere does the provider explicitly state that the respiratory failure resulted from or was exacerbated by the pneumonia. Without this clear causal relationship documented, auditors may view these as separate conditions rather than sepsis with organ dysfunction.
Proactive Audit Strategies for Sepsis
Organizations cannot wait for external audits or denials to address sepsis coding accuracy. The OIG’s focus makes internal audit programs targeting sepsis cases an immediate priority. Technology platforms that enable risk based auditing strategies allow organizations to identify sepsis cases requiring review before claims leave the building.
Audit Workflows that specifically target sepsis DRGs can be configured to automatically sample cases meeting defined risk criteria. These might include sepsis diagnoses without documented major complications, cases where organ dysfunction codes appear absent or incomplete, admissions with short lengths of stay relative to sepsis severity, or patterns where individual providers code sepsis at rates significantly different from their peers.
The power of prospective auditing becomes especially apparent with sepsis. Catching documentation gaps while the patient remains in the hospital allows Clinical Documentation Improvement (CDI) specialists to query providers for clarification before discharge. A simple query asking the provider to specify which organ systems were affected by sepsis and document the clinical evidence supporting that determination can transform an audit vulnerable case into a defensible one.
Charge Analyzer capabilities that benchmark sepsis coding patterns against both national data and community peers provide early warning of potential problems. When a hospital’s sepsis DRG utilization rate exceeds expected norms by significant margins, or when certain providers code sepsis far more frequently than colleagues treating similar patient populations, these outliers merit investigation. The goal is not to suppress appropriate sepsis diagnosis but to ensure coding accuracy and documentation quality support the billed diagnoses.
Retrospective audits remain valuable even with strong prospective programs. Analyzing denied sepsis claims to identify common denial reasons creates focused targets for education and process improvement. If denials consistently cite lack of organ dysfunction documentation, the organization knows where to direct CDI efforts.
Clinical Documentation Improvement Integration
Effective sepsis audit programs cannot operate in isolation from CDI efforts. The disconnect between clinical diagnosis and documentation quality represents the primary source of sepsis audit failures. Bridging this gap requires systematic approaches that connect real time clinical care with compliant documentation practices.
CDI specialists need clear criteria for sepsis diagnosis that align with current standards while acknowledging the definition controversy. Rather than rigidly adhering to Sepsis 2 or Sepsis 3 exclusively, many organizations have adopted hybrid approaches that emphasize documentation of infection source, systemic response indicators, and critically, specific organ dysfunction. This “Sepsis 2.5” framework, which some organizations have developed collaboratively with payers, provides practical guidance that satisfies both clinical reality and audit requirements.
Query templates specific to sepsis scenarios help ensure consistency in how CDI specialists approach potential sepsis cases. When a patient has infection and SIRS criteria but documentation of organ dysfunction is vague, a structured query prompts the provider to specify affected organs, describe clinical manifestations of dysfunction, and link these findings to the infectious process. The query should offer common examples such as acute respiratory failure requiring supplemental oxygen, acute kidney injury with rising creatinine, altered mental status not attributable to other causes, or coagulopathy reflected in abnormal coagulation studies.
Education for providers must address not just what to document but why it matters. Many physicians understand sepsis clinically but do not recognize that diagnosis alone is insufficient for coding purposes. They need education about the specific documentation elements required to support sepsis codes, including explicit statements of organ dysfunction, clear causal relationships between infection and systemic effects, and differentiation between acute changes and chronic baseline conditions. This education becomes more effective when backed by data from internal audits showing common documentation failures and their financial impact.
Leveraging Predictive Analytics
Moving beyond reactive approaches to sepsis audit readiness requires predictive capabilities that identify risk before claims are filed. Predictive analytics examine patterns across clinical, coding, and billing data to forecast which sepsis cases face the highest probability of audit or denial.
Models can analyze factors such as combinations of diagnosis and procedure codes that frequently appear together in denied sepsis claims. When a current case exhibits similar code patterns, the system flags it for review. The analysis might reveal that sepsis cases lacking certain supplementary diagnosis codes for specific organ dysfunctions have substantially higher denial rates. This insight allows CDI specialists to focus their concurrent review efforts on identifying and documenting organ dysfunction more completely.
Provider variation analysis contributes another dimension to predictive models. If certain providers consistently document sepsis in ways that withstand audit scrutiny while others face frequent denials despite treating similar populations, examining documentation differences between these groups reveals best practices. The high performing providers likely include specific documentation elements that audit resistant providers omit. Identifying these elements and spreading them through targeted education improves documentation quality system wide.
Length of stay and resource utilization patterns also provide predictive signals. Sepsis cases with very short lengths of stay or without certain treatment interventions expected in septic patients may indicate over diagnosis. Not every short stay represents inappropriate coding, but statistical outliers warrant review to ensure the documented sepsis diagnosis aligns with the intensity of care provided.
Building Sepsis Compliance Infrastructure
Organizations facing heightened sepsis scrutiny need dedicated infrastructure that makes sepsis coding accuracy sustainable rather than episodic. This infrastructure includes standardized documentation templates, automated audit sampling, integrated CDI workflows, and continuous monitoring with executive visibility.
Standardized templates for sepsis documentation guide providers toward including required elements. The template might include structured fields for infection source, SIRS criteria present, specific organ systems affected, clinical manifestations of each organ dysfunction, and temporal progression. While templates alone cannot ensure quality, they reduce the cognitive burden on busy providers trying to remember every required documentation element during patient care.
Risk Area Worksheets specific to sepsis help auditors apply consistent evaluation criteria across all reviewed cases. Rather than each auditor developing their own approach to assessing sepsis documentation adequacy, standardized worksheets walk them through verification of each required element based on current OIG concerns and payer denial patterns. This consistency improves inter rater reliability and ensures the organization identifies documentation problems uniformly.
Regular reporting to leadership about sepsis coding trends, audit findings, and denial rates keeps the issue visible at levels where resources can be allocated to address problems. Executive dashboards should show metrics such as sepsis DRG volume trends, internal audit failure rates for sepsis cases, denial rates and financial impact for sepsis claims, comparative sepsis coding rates by provider or facility, and progress metrics for CDI initiatives. When leadership sees these metrics regularly, sepsis coding quality remains a strategic priority rather than fading once initial attention wanes.
Managing Sepsis Denials
Even with robust internal programs, sepsis denials will occur. How organizations manage external payer audits and appeals determines whether denied claims become write offs or recovered revenue.
When a payer denies a sepsis claim, the first step involves detailed review by clinicians who understand both the clinical aspects of sepsis and the documentation requirements driving denials. The review should identify specifically what the payer states as the reason for denial, determine whether the medical record contains documentation supporting the sepsis diagnosis that the payer may have overlooked, assess whether the case truly met clinical criteria for sepsis, and decide whether appeal is appropriate or if the denial was justified.
For cases warranting appeal, the appeal letter needs clinical depth. Generic appeals stating “sepsis was present” without specific clinical details fail. Effective appeals walk the reviewer through the medical record chronologically, identifying when infection was suspected based on specific clinical findings, documenting SIRS criteria or systemic inflammatory markers present, detailing each organ system affected with objective clinical data supporting dysfunction, and explaining how these elements meet sepsis diagnostic criteria. Including specific vital signs, laboratory values, physical examination findings, and treatment interventions provides the concrete evidence payers need to overturn denials.
External Audit Workflow tools centralize sepsis denial tracking and appeal management. Rather than managing each denial in isolation through email chains and spreadsheets, these platforms provide a structured process for intake, clinical review, appeal preparation, submission, and outcome tracking. The centralization enables pattern analysis that reveals which payers deny sepsis most frequently, which denial reasons appear most often, which types of sepsis cases face highest denial risk, and which appeal strategies succeed most consistently. These insights inform both appeal approach and upstream prevention efforts.
Preparing for the OIG Report
The OIG’s upcoming report will likely catalyze additional scrutiny. The most straightforward preparation involves ensuring sepsis documentation practices align with Sepsis 3 principles. This means emphasizing organ dysfunction documentation, not coding sepsis without clear evidence of systemic organ effects, documenting specific affected organs and clinical manifestations, and ensuring clinical severity matches coded severity.
Internal audits should target the same analysis the OIG is conducting. Review sepsis cases to determine what percentage would meet Sepsis 3 versus only Sepsis 2, analyze whether documentation supports the coded diagnosis, identify providers with unusually high sepsis coding rates, and assess whether DRG assignments accurately reflect clinical severity.
Education campaigns preparing providers for potential shifts in sepsis expectations help smooth transitions if new guidance emerges. Organizations should also document their rationale for sepsis coding decisions, demonstrating good faith efforts to balance competing standards.
Addressing Sepsis Within Broader Compliance Strategy
Sepsis exists within the broader context of increased federal oversight of hospital billing practices. The OIG has expanded focus across multiple high cost, high volume diagnoses where documentation subjectivity creates coding variability. Organizations that improve documentation quality and coding accuracy for sepsis often find those improvements transfer to other scrutinized diagnoses.
MDaudit’s continuous risk monitoring platform provides the infrastructure organizations need to address sepsis audit readiness within their overall compliance strategy. By unifying billing compliance, coding quality oversight, and revenue integrity analytics in a single platform, it enables the cross functional collaboration essential for sustainable sepsis documentation and coding accuracy.
The heightened scrutiny of sepsis billing creates both risk and opportunity. Organizations that view the OIG’s focus as a catalyst for improving clinical documentation and coding accuracy will strengthen their compliance posture broadly. With the OIG report expected in fiscal year 2025, organizations have limited runway to implement systematic improvements. Starting with comprehensive internal audits of sepsis cases, implementing prospective audit programs that catch problems before billing, strengthening CDI processes, and using technology to enable continuous monitoring positions organizations to weather the coming scrutiny successfully.
