Appeal type: Inpatient Hospital
Decision: Unfavorable

 
We decided that the Plan does not have to pay for inpatient hospital services provided on July 7, 2021, to July 
10, 2021, at the Diagnosis Related Group (DRG) originally billed. 
 You asked the Plan to pay for the inpatient hospital services at the DRG originally billed. You say that the 
diagnosis of J96.01 (acute respiratory failure with hypoxia) was billed appropriately. The Plan denied your 
request. The Plan says the diagnosis of J96.01 (acute respiratory failure with hypoxia) is not supported in the 
medical record, resulting in a lower DRG being paid. 
 
The Plan must follow Medicare rules. Medicare rules say that providers must report services correctly. 
Providers must report inpatient hospital services with the appropriate DRG, which is based, in part, on the 
reported principal and secondary diagnosis codes.   
 
In this case, you billed the inpatient services provided with the diagnosis of J96.01 (acute respiratory failure 
with hypoxia). We asked our physician reviewer to carefully review the case file and apply the relevant 
Medicare rules to determine if the Plan was correct in denying the request to pay for the inpatient hospital 
services at the DRG originally billed. Our reviewer says that the diagnosis of J96.01 (acute respiratory failure 
with hypoxia) is not supported in the medical record. Our physician reviewer found per the documentation 
received, the patient did not require 5L or greater of supplemental oxygen and/or did not require invasive/non-
invasive mechanical ventilation. Patient's respirations in the emergency room were noted to be 18 pm with an 
SpO2 of 99% on 3LPM of oxygen with wheezing and a cough. This is in the setting of diagnosed asthma 
exacerbation which improved with solumedrol and nebulizer treatments. The patient was admitted due to 
pneumonia and abnormal electrocardiogram. Respiratory failure is a syndrome in which the respiratory system 
fails in one or both of its gas exchange functions: oxygenation and carbon dioxide elimination. In practice, it 
may be classified as either hypoxemic or hypercapnic. Hypoxemic respiratory failure (type I) is characterized 
by an arterial oxygen tension (PaO2) lower than 60 mm Hg with a normal or low arterial carbon dioxide 
tension (PaCO2). This is the most common form of respiratory failure, and it can be associated with virtually 
all acute diseases of the lung, which generally involve fluid filling or collapse of alveolar units. Some examples 
of type I respiratory failure are cardiogenic or noncardiogenic pulmonary edema, pneumonia, and pulmonary 
hemorrhage. Hypercapnic respiratory failure (type II) is characterized by a PaCO2 higher than 50 mm Hg. 
Hypoxemia is common in patients with hypercapnic respiratory failure who are breathing room air. The pH 
depends on the level of bicarbonate, which, in turn, is dependent on the duration of hypercapnia. Common 
etiologies include drug overdose, neuromuscular disease, chest wall abnormalities, and severe airway disorders 
(eg, asthma and chronic obstructive pulmonary disease [COPD]). Respiratory failure may be further classified 
as either acute or chronic. Although acute respiratory failure is characterized by life-threatening derangements 
in arterial blood gases and acid-base status, the manifestations of chronic respiratory failure are less dramatic 
and may not be as readily apparent. In this case, there was no clinical evidence for acute respiratory failure with 
hypoxia.  
 
We looked at this physician's review, the file, and Medicare rules. Based on this information, we decided the 
medical records do not substantiate the DRG as billed. Therefore, we decided that the Plan does not have to pay 
for inpatient hospital services provided on July 7, 2021, to July 10, 2021, at the Diagnosis Related Group 
(DRG) originally billed.