Settlement Intelligence co-founders wrote the book on insurance claim software, and have consulted with lawyers on demand letters for over 20 years. This expertise is built into the Settlement Intelligence AI demand letter workflow.
Over the past 20 years, we've seen many lawyers make fundamental errors that negatively impact their settlement offers. With injuries being the #1 factor in creating claim value in insurance claim software, and “trigger” the insurance claim software to seek additional claim data from the insurance adjuster, a client’s diagnoses is the single most important determinant of settlement offers. As such, errors in a demand letter pertaining to the injuries can negatively impact settlement offers more than any other section of the demand letter.
This article discusses the most common errors and misunderstandings in the injury / diagnosis section of a demand letter that can impact the settlement offer.
What is a diagnosis and ICD code?
First we start with boring but fundamental issues for those who are not familiar with physician billing and coding matters. These impact both the economic / special and noneconomic / general damage amounts applied in a settlement offer.
Starting in the late 19th Century, the European medical community recognized the need for standardized classification of disease and medical terminology. This was in part to ensure that medical literature from one part of the world would call a singular condition the same thing, regardless of where the research was conducted. It was, in essence, to ensure that all doctors in the international community could understand each other.
As a result, the World Health Organization (“WHO”) published a set of numeric codes, starting in 1900 called the International Classification of Disease (“ICD”) Codes. While these codes were initially intended to provide data to standardize disease names and classification, the national and international health agencies soon adopted the codes to track morbidity and mortality on a national and international basis.
The ICD codes have been updated about once every ten years since 1900 with the exception of the 20 year period between the ICD-9 and ICD-10 set adopted in 1999. The reason for the regular revisions to the ICD codes, is so that the codes reflect advances in medical science and changes in diagnostic terminology.
The present codes, called ICD-10, uses an alphanumeric code rather than the 4 digit numeric codes used in ICD-9. The number of diagnoses has also increased substantially. The ICD-9 codes used in the United States before October 2015 contained approximately 17,000 diagnoses, while the ICD-10 codes used today contains over 68,000 distinct diagnoses.
With such an international standard available, the ICD codes became an easy way for the insurance industry to track information on patients, and determine what condition it is that they are paying to have treated. This becomes relevant as discussed below in regard to the calculation of economic damages in a personal injury case.
In terms of the calculation of noneconomic damages, insurance bodily injury claim software such as Colossus, ClaimIQ and Liability Navigator, use the ICD codes to demonstrate the injuries sustained by a claimant, and attaches a noneconomic damage value system to those injuries. These insurance programs then seek additional information from adjusters based upon the ICD codes. Without the correct ICD codes being entered, an injured party will not receive an appropriate evaluation of their personal injury claim.[1]
What is Necessary for Reporting the Diagnosis in the Demand Letter?
For a demand letter, you need to have the following for every injury sustained by the client:
- A short text description of the diagnosis (e.g. “Lumbar Disc Protrusion L4-5”)
- The ICD-10 Code
- Diagnosing Doctor
- Date of the initial diagnosis
Over the past 20 years, we’ve seen a number of problems with accomplishing this rather obvious requirement of a demand letter.
Missing Diagnoses:
The first problem is missing diagnoses. This can happen in a variety of ways.
A failure to diagnose
Insurance bodily injury claim adjusters are instructed to never enter an allegation by a lawyer that is not substantiated in the records. This includes allegations of an injury or diagnosis that is not substantiated by the medical records and bills.
As discussed below, a health care provider’s failure to fully diagnose is most common where there is no insurance requiring formal billing. But, this will impact both economic and noneconomic damage settlement values in your personal injury cases.
Even if a client complains about a problem and the doctor notes it in the chart notes, the injury will not be counted for a claim software evaluation unless the doctor formally diagnoses the condition. This means the correct ICD code must also be in the medical records or bills to get the best settlement offer.
A failure to have space for all the diagnoses in the billing documents
The standard HCFA billing form sent out from a physician’s office contains a space for four (4) ICD codes or diagnoses. This means, if your client has more than four diagnoses, it may not be contained within the standard billing forms. This will cause problems in the noneconomic damage analysis by the insurer because if the ICD codes are not contained elsewhere in the records or a billing summary, not all diagnostic codes will be present.
Problems in cases without coverage for medical care
Most frequently, we see problems in getting all injuries diagnosed in cases without insurance coverage for health care services. The following are common scenarios:
ICD Codes in Auto cases without PIP and MedPay
In auto cases in states that do not have mandatory PIP or MedPay, or the cases of clients that do not purchase PIP or MedPay, it is somewhat common to see health care facilities that do not fully diagnose. In part this is because they are not formally billing for their services.
ICD Codes in Premises Liability
In premises liability cases where the defendant is not legally required to pay for the injured party's medical care, it is common to see health care facilities that do not fully diagnose. In part this is because they are not formally billing for their services, and all care may be paid by cash.
ICD Codes in care rendered on a lien or Letter of Protection
In cases where a provider renders care on a lien, or on the basis of a letter of protection, some providers are not aware that they need to provide a formal diagnosis on all injuries.
Health Insurance is Paying
In personal injury cases in which the client receives care under a large health care system or the client's own insurer is paying, it is somewhat common to see health care facilities that do not fully diagnose. Providers that are not accustomed to doing personal injury work, often do not understand the importance of detailed records and billing.
Medicare or Medicaid is Paying
In personal injury cases in which the client receives care under Medicare or Medicaid, it is common to see health care facilities that do not fully diagnose. This may in part be due to limitations on what providers can be reimbursed for under these public health care plans.
The solution:
In any case where you see injuries in your intake documents and/or medical records that do not have a formal diagnosis, you must request a narrative report from one or more of the client's doctors to get a formal diagnosis with an ICD code from those providers. Or, you could hire an expert witness to evaluate the client and render all diagnoses based upon a forensic review of the records and an examination.
A case study:
- We advised the lawyer to seek a narrative report from the primary doctor seeking a diagnosis of all injuries and the ICD code and prognosis for each injury;
- We suggested the lawyer seek a psychological evaluation for what was a clear case of PTSD that had not been evaluated or treated. The diagnosis was evaluated and confirmed;
- We suggested an AMA Impairment Rating for the physical and psychological impairment;
- Once we had this additional support, we rewrote the demand letter using the format now available through Settlement Intelligence for the insurer's claim software.
Incorrect Ordering of Diagnoses:
Historically, at least one of the major claim software systems could only accept seven diagnoses. For over 20 years we have recommended putting your diagnoses in your demand letter starting with the most severe, and ending with the least severe.
You do not want to start the Injuries section of your demand letter with several diagnoses that are small injuries if you have ones that are much more serious. List the diagnoses, starting with the most serious at the top and the least serious at the bottom.
Inclusion of ICD codes that aren't diagnoses.
The ICD codes do include some causation codes. While you could include them in the liability and causation sections of your demand letter, you do not want to put them in the Injuries / Diagnoses section of your demand letter. Particularly not at the top. We continue to see lawyers and legal staff make this error and it damages the settlement offers.
Failing to correctly discuss the injuries not evaluated by claim software
This issue is slightly different from the rest in this article. Given our extensive research into insurance claim software we suggest writing narrative text on 22 specific injuries. The reason why is these injuries are evaluated "traditionally" outside of the insurance claim software and then added into the settlement offer generated by the claim software. The reason for this is that with these 22 types of injuries, the variability of expected verdict size is too large for an insurer to safely assume an average value. These 22 types of injuries are listed in the Settlement Intelligence FAQ.
How ICD codes impact Economic Damages
Insurers almost always use a separate software system or review service for the past medical bills (economic damages) than they do for the determination of economic damages. These programs review multiple aspects of the client's treatment in light of the diagnoses, and substantially reduce what the insurer then deems to be "reasonable and necessary" charges. Again, Settlement Intelligence co-founder, Aaron DeShaw, wrote a book on medical bill review software and we implement this knowledge in the consulting and learning center resources provided to Settlement Intelligence licensees.
The basics are this; Over time, insurers started to use ICD diagnosis codes to their advantages as a way to track and limit payments to health care providers. Sometimes, they even limit the amount of treatment deemed to be “reasonable and necessary” for a patient based solely upon the ICD codes listed on the billings. This makes the doctor’s ability to code fully, and correctly, very important to your settlement offers.
To discuss how this works in determining economic damage calculations for settlement offers, we have to briefly address another important part of medical billing; the CPT codes. Unlike the ICD codes that address the diagnosis, the Current Procedural Terminology ("CPT") codes address health care treatments and procedures. The CPT codes are created by the American Medical Association. These codes, now adopted within HIPAA, provide a standardized coding set for physician and other health care professional services and procedures. The CPT Codes are typically a 5 digit numerical code for a specific health care procedure.
Turning back to medical bill review software, by using the ICD codes insurers have limited payments on PIP/Med pay. There must be an ICD diagnostic code to justify a CPT procedure charge. Billings will not be paid if the injury for which it is rendered hasn't been diagnosed.
In terms of the settlement offer, insurers also use the ICD and CPT codes in their determination about the amounts of “reasonable and necessary” treatment used for the economic damages in a settlement offer in a third party or first party claim. If the ICD code doesn't exist for treatments that are rendered to the client, then those charges will not be deemed to be "reasonable and necessary" for the calculation of past economic damages.
Again, one of the problems with this, is that the physician billing forms (HCFA) are limited to 4 ICD codes or diagnoses at maximum. This means that if you have a serious case where there are multiple diagnoses, not every diagnosis code will be included on the standard billing form, and some medical procedures will be considered “unnecessary” by insurers because the ICD code doesn’t fit with the medical procedure code (CPT code) for that injury.
One solution for this, used by some health care facilities, is to use “diagnosis checklists” within the file to document all of the diagnoses associated with a case. The problem that arises, is that apparently many of the major insurers are educating adjustors to ignore any of the checklist type forms in the file including diagnosis check lists. So, despite physician’s best attempts to do the best job possible, insurers often train adjustors to ignore the information. For this reason, it is best that health care providers place the diagnosis in the "A" section of their SOAP notes, in any narrative report, as well as a summary in a complete accounting of the client's bill (as opposed to only the four in a HCFA billing form submission).
Conclusion
Ensuring all of the clients injuries are diagnosed and have an ICD code in the medical records and / or medical bills, and that all diagnoses are correctly ordered in your demand letter is critical to getting full economic and noneconomic damages in your settlement offers.
[1] As noted elsewhere on the Settlement Intelligence site, no claim run through bodily injury software will accurately reflect full bodily injury claim value because they are intentionally set to underpay claims by the insurers. The only way you can get full value on personal injury cases is by going to trial regularly. Want to learn more? Visit Trial Guides to improve your litigation and trial skills.