the financial implications of icd-10 implementation · or recertification in the american college...

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The Financial Implications of ICD-10 Implementation

CHA WebinarJanuary 21, 2014

Welcome

Liz MekjavichCalifornia Hospital Association

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Continuing Education Offered for this Program

• Compliance — This program has been approved for 2.4 Compliance Certification Board (CCB) Continuing Education Units. Granting of prior approval in no way constitutes endorsement by CCB of the program content or the program sponsor. CCB program code # CAHA-043. (Note: CE recipients are solely responsible for retaining a copy for their records and for reporting credits to CCB)

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• Health Care Executives — CHA is authorized to award 2 hours of pre-approved Qualified Education Credit (non-ACHE) for this program toward the advancement, or recertification in the American College of Healthcare Executives. Participants in this program wishing to have the continuing education hours applied toward ACHE Qualified Education credit should indicate their attendance when submitting application to the American College of Healthcare Executives for advancement or recertification.

• Nursing — Provider approved by the California Board of Registered Nursing, CEP #11924 for 2.2 contact hours.

Continuing Education Offered for this Program

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• Full attendance, completion of online survey, and attestation of attendance is required to receive CEs for this webinar. CEs are complimentary for registrant. If additional participants under the same registration would like to be awarded CEs, a fee of $20 per person, will apply. Post-event survey will be sent to registrant and provide information on how to apply online for additional CEs.

Continuing Education Requirements

Program Overview and Introductions

Amber OttCalifornia Hospital Association

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Faculty: Rajeev Desai

Rajeev Desai is a client partner at Syntel for their healthcare and life science business unit. As a client partner, Mr. Desai is responsible for managing Syntel’s healthcare provider sub-vertical. In addition, he serves as the practice leader for Syntel’s ICD-10 practice. Mr. Desai has over 27 years of experience and has worked across many industries including banking, manufacturing, energy and utilities and healthcare. He has spent the last 12 years engaged in the healthcare field.

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The Financial Implications of ICD-10 Implementation

Presented by:

Rajeev DesaiSyntel – Client Partner – Healthcare & Life Sciences

(Provider Sub-vertical and ICD-10 Practice)

January 21, 201410:00 a.m. – 12:00 p.m., Pacific Time

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Confidential ©2014 Syntel, Inc.

Agenda

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ICD-10 end-to-end testingICD-10 end-to-end testing

11 Financial impact of ICD-10 on providersFinancial impact of ICD-10 on providers

Putting it all together — external partner testingPutting it all together — external partner testing

Risk analysis — working toward budget neutralityRisk analysis — working toward budget neutrality22

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Financial key considerations

What is the impact on reimbursements?

How do we ensure no increase in denial % and minimal impact to cash flow?

Do we have the risk of losing patient volume? If so, how do we mitigate this risk?

Can we equip our payer relationship team with better data and insights for effective payer contract negotiations?

Will our operations be ready when change happens?

How efficiently will our operations be running after the change?

How do we get a good return on investment? 10

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Section-1

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11 Financial impact of ICD-10 on providersFinancial impact of ICD-10 on providers

Impact on reimbursements, denials, cash flows, productivity

Risk identification and analysis

Various approaches to mitigate financial risks


Financial impacts on provider process(Denials, productivity, cash flows and reimbursements)

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SchedulingPre

RegistrationFin.

Counseling Registration Coding Charge Capture

Billing Claims processing

Accounts Receivables

Payment Posting

Patient Access Medical Coding Financial Services

Eligibility verification

Enterprise scheduling

ABN notifications

Bed Mgt.

Transfers & referrals

Discharge documentation

Abstraction Rules

Coding guidelines

Code assignment

Charges,authorizations

Charge master maintenance

EDI enablement (837, 835,etc.)

Claims tracking and denials management

Payment options

Schedules, Co-pays

Medicare/Medicaid eligibility

Authorization

Payer Provider Contracts

AR days

AR aging

Payments & adjustments

835 RA

COB’s

Billing edits

Medical necessity

Contractual adjustments

Pro

cess

• Redesign system interfaces

• 6-10% Increase in claim error rates

• Reject / denial rates may increase by 100% to 200%

• Provider-payer processing errors

• Increased billing enquiries

Fin

anci

al I

mp

acts

• Shortage of experienced coding professionals

• Expected 50% drop in coding productivity due to learning curve

• New Coder hiring• Dual coding

• Spike of 10 to 20 days to accounts receivable.

• 20-40% increase in AR days, aged accounts

• Delayed payments

• Coding Backlogs• Changes in DRG

weights• Changes in Case Mix

Index• Changes in

Reimbursement Schedules

• Changes in Payment Policies

• Delayed Payment and Claims Adjudication

ReimbursementsDenials Cash FlowsProductivity

Denials Productivity Cash Flows Reimbursements Legends

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Reimbursement impacts in real world

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Reimbursement Type and Risk Adjusted Payment method

High or Direct Impact

No Impact or Low Impact

Medium or Indirect ImpactKey

• Per Receipt (Capitation)

• Per Eligible Person

• Per Dollar of Charges

• Per Dollar of Cost

• Per Service(FFS)

• Per Day(per diem)

• Per Time Period

• (APGs) Ambulatory Patient Group

• (APCs) Ambulatory Patient Classification

• (MS-DRGs) Medicare Severity DRGs

• (AP-DRGs) All Patient Diagnosis Related Group

• (APR-DRGs) All Patient Refined DRGs

• Case Rates

ICD-10 Impact on Provider PracticeICD-10’s impact on the payment process varies according to the method of reimbursement used by Health Plan

Standard Methods Risk Adjustments

• (RUG-III) Resource Utilization Group

• (HHRGs) Home Health Resource Groups

• Inpatient rehabilitation Group

• (ACGs) Adjusted Clinical Groups

• (CDPS) Chronic Illness and Disability payment System

• (DCGs) Diagnostic Cost Group

• (MEG. ECG, ETC) Episodic Groupers called as Case Rate


Reimbursement impacts in real world (cont.)

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Reimbursement impacts in real world (cont.)


Risk identification and analysis

What risks exist?

What steps do you take to address the variance?

What do you monitor to know when the risk has been realized?

What reporting capabilities do you need to monitor?

How do you determine exposure?

How do you mitigate the risk?

How much exposure remains?

Controllable Uncontrollable

Identify Risk Scenarios

Assess Risk Scenarios

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2Are the risks real and material?

3a

4a

5a

3b

4b

5b

Define Threshold

Model Risks

Implement Levers

Prepare Contingency

Reassess Risk

Reporting Capabilities

Note: Triggers such as regulatory updates (e.g. GEMs or DRG grouper upgrade) and new internal business rules (e.g. contract updates) may require a new round of scenario modeling

Scenarios are the cornerstone to uncovering the rest of the components in the risk management strategy

Proactive Measures Detective MeasuresOct 2014 16

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Modeling financial risk analysis is an iterative process

As time progresses, the financial analysis will be refined to include the most up-to-date intelligence regarding provider coding behavior and clinically correct ICD-10 business policies.

Define Scenarios

Model Scenarios

Quantify the

Financial Impact

Implement Levers

Refine Mappings,

Remediation

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The ICD-10 Modeling

Cycle


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Modeling financial risk analysis is an iterative process (cont.)

Risk is reassessed via multiple iterations

The initial iterations of modeling, will be used to prioritize and inform mapping decisions, which will in turn create new mapping inputs for future modeling iterations.

Initial modeling iterations may also allow for refinement of Financial Analysis performed and refinement of risk scenarios to tailor financial analysis to the areas of ICD-10 risk specific to client’s business (and de-emphasize some areas of industry risk that may not apply to client’s payer contract or payment policies)

External decisions will also impact the modeling and need to be incorporated as data becomes available (examples include, revisions to the GEMs by CMS, release of new DRG grouper software, release of ICD-10 based HCC definitions, etc)

The availability of predictive data will impact the accuracy of financial modeling, it is expected that modeling accuracy will improve based on the availability of certain types of data (illustrated below)

CMS GEMsClient Selected

Maps

Provider Coding

Intelligence

Computer-Based Coding

As industry intelligence increases, modeling accuracy will follow

BestBestBetterBetterGoodGoodMinimumMinimum

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Various approaches to mitigate financial risks

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Leverage historical ICD-9 claims data and create ICD-10 claims data using CMS GEMs mapping

Allows the organization to immediately understand the first hand financial impact

Less time consuming, if data is made readily available

Leverage historical ICD-9 claims data and create ICD-10 claims using custom code maps (ICD-9 to ICD-10)

Using the best clinically equivalent codes (from ICD-9 to ICD-10) providers will get critical insights in cases which will potentially disrupt their reimbursement revenues

Low to medium risk clinical scenarios can be considered using this approach


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Medical coders to natively code the charges in ICD-10 using the already existing clinical charts in ICD-9

By far the best approach to mitigate financial risk by appropriately sampling and prioritizing the high risk scenarios

Additional effort needs to be spent to dual code the inpatient charges

Various approaches to mitigate financial risks (cont.)

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Section-2

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22 Risk analysis — working toward budget neutralityRisk analysis — working toward budget neutrality

Reimbursement structured model and framework

Operational key performance indicators


Reimbursement structured model and framework

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Tes

t D

eliv

ery

Iterations….nIterations 2

Initiation Risk Pooling Test Planning

Test DesignTest Closure

Key Activities: Finalized Risk ThresholdsReport formats Tool Customization Tool Deployment

Key Activities: Finalize Risk Pool Parameters Prioritized Data Defined Risk Pools

Key Activities: Test Methodology Test Data management

Key Activities: Test Suite (Test Scenario,

Test Case and Test data) for Risk Analysis

DiscoveryTool

Customization& Deployment

Finalize Risk Thresholds

Understand Requirements

Test Methodology

Test Scenario

Mapping

Test Case and Data Creation

Test Execution

Key Activities: Variance Reports

(Variance by DRG, LOB, Payer, etc.) Test Coverage Report Trend Analysis Report

Key Activities: ICD-10 Risk Analysis

Reports Test Summary Report

Analysis and Metrics Reporting

PrioritizationDefine Risk

Pools

Iterations….n

Iterations 2

Estimation

Scheduling

Init

iati

on

Data Assimilation

Execution

Defect Retesting

Metrics Reporting

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Operational Key Performance Indicators (KPIs)

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Number of queries to physicians

Response time to queries

Query response type

Aged backlog queries

Percent of queries v/s Chart reviews

User Experience


Operational KPIs

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A/R days by payers – avg. time from billing to reimbursement

Aging of open AR by payer in days and dollars

First pass resolve

Number and type of rejects / denials by payer

Number of pendings for additional information

Liability insurance rejects

Discharged not final billed (DNFB)

Accounts Receivable

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Operational KPIs (cont.)

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Coder productivity rates

Coding accuracy

Mismatch between hospital and physician data

Accuracy and quality of documentation

Coding & Documentation


Operational KPIs (cont.)

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Case Mix Index (CMI)

DRG Shift

Trending

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Section-3

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33 Putting it all together — external partner testingPutting it all together — external partner testing

Risks and challenges

Mitigation approaches

Who you should test with, what to test now

Testing approaches and workflow details


Risks & Challenges

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1)Verify and validate the sending and receiving of transactions with various ICD-10 business partners (e.g., payers, vendors, clearing houses and federal agencies) ensuring interoperability amongst business partners

2)Ensure all external transactional and interface touch points are thoroughly tested individually before venturing into E2E testing thereby enabling maximum test coverage, minimum defect and highly accurate outcomes

Objective:

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Risks & Challenges (cont.)

What is the Risk if external partner testing is not performed before E2E testing ?

• Claims Management – Incapability to send ICD-10 claims and claims-based information to business partners can delay reimbursements received and thereby impact the A/R days and stakeholder relations

• Contract Management – Without proper ICD-10 testing with business partners, providers will not be able to negotiate the contracts accurately and could eventually impact future reimbursement

• Inaccuracy in verification of clinical scenarios in ICD-10 can render incorrect pre-authorization, hampering the quality of care and coverage

• Security and Privacy – Protected Health information (PHI) in the transactions being sent still needs to be secured as the core of ICD-10 changes deals with the medical conditions of patients

• Readiness – Business Partners’ readiness needs to be confirmed without which there can be negative impact on revenues and overall ICD-10 Implementation Budget

• Data – Incongruity in data shared amongst partners will affect reporting and trending analyses

• Delay in reaching the steady state will impact post 2015 plans to take advantage of ICD-10 specificity


Risks & Challenges (cont.)

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• Requires collaboration between various business partners

o Significant number of partners and process combinations

o Not feasible for most organizations to test with all business partners in the chain (providers, payers, vendor systems, intermediaries and clearinghouses)

• ICD-10 External Testing Readiness

o Requires multiple companies to be “ready” and have resources committed to test at the same time

• Inherent challenges in testing with business partners

o Limited control over partner readiness, including their test schedules and ICD-10 remediation logic

o Each business partners processing path is unique and may branch to multiple paths based on systems, intermediary services, product lines, etc.

o Multiple data formats and fields – specific to each business partner (interoperability)

Challenges

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Mitigation approaches

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• Multi-phase approach to cover different test objectives and ensure predictable results

• Early involvement with high volume payers to identify, evaluate and predict the impact of

coding conditions that could generate an ICD-9 to ICD-10 DRG shift

• Conduct collaborative testing with a few strategically selected business partners and share

test findings and other key ICD-10 remediation information with other business partners

• Common understanding on coding process and coding values

• Automation based external testing

o Tool-based ICD-10 Testing Framework enabled with the ICD-10 test data preparation

o Leverage existing Interface Test Cases Repository (EMRs based, trading

partner related)

• Focused ICD-10 Governance and Program Management to de-risk the stakeholder

challenge

• Leverage lessons learned from 4010 to 5010 conversion

Mitigation Approach


Who you should test with, what to test now

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Various transactions, interfaces, data exchanges etc. needs to be tested first as a part of External partner testing with various entities or partners

1)Sequence – 1 to 6 involves all the testing that needs to be done in silo first before a legitimate claim is generated by Provider (like with labs, rad etc.)

2)Sequence – 7 involves testing with CMS, State, etc. after the process is completed (claims sent and response received, reconciled etc.) for quality reporting

3)Sequence – 8 involves testing with other care organizations present in the provider ecosystem

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Who you should test with, what to test now (cont.)

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LAB

RADADT

Medical Coding

MED

Billing

OR

Quality Reporting

HOSPITAL

External LAB

HL7 (New Order)

HL7 (LAB Results)

External RAD

EDI 270/271

DICOM

HL7 (Pharmacy Order)

Excel/ Flat File

Future Electronic TransmissionJHACO, PQRI, Other Quality

Measures

Payer #1

HOSPITALHOSPITAL

Referring Hospital

• CCD / CCR• HL7• Scanned

Documents• Flat File

Clearing House

HL7 (New Order)

EDI 278 -Authorize

EDI 837 - Claim

EDI 835 - Remittance

CCD / CCR

Insurance Eligibility

EDI 837 - Claim

EDI 835 -Remittance

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55

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22

55

66

77

88

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EDI 276/277Claim Status

Payer – Touch Points External – Ancillary SystemsGovernment Bodies Other Care Organizations

Note: The figure above has the list of few and generic types of vendors and partners of providers exchanging transactional data either in batch or real time, there could be more than these in the real world IT set up.


Section-4

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44 ICD-10 end-to-end testingICD-10 end-to-end testing

Sample test scenario and workflow

High level test approach

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Significance of end to end testing in ICD-10 program

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End-to-end testing need:

• ICD -10 changes impact across multiple systems. Even though integration touch point between systems have been tested during integration phase, testing scenarios that cut through multiple systems along with all stakeholder involvement is vital for E2E testing

•Need for a patient lifecycle testing as ICD-9 diagnosis and procedure code form a core information in a patient medical record.

•Switch and date based implementation design complexity presses for a need for end-to-end testing

•Dual coding remediation strategy adopted for implementation necessitates an end-to-end testing to ensure smooth transition from ICD-9 to ICD-10 in the go-live period

Note:- These are just few of the many significant reasons as to why E2E testing is must


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Significance of end-to-end testing in ICD-10 program (cont.)

Why is E2E important?

• Error in processes and workflow used for ICD code entry in encounter/registration forms, super bills can cascade negative impact to other supporting business areas

• Reporting logic – error in reporting logic based on ICD diagnosis and procedure codes can lead to flawed forecasting and analytics

• Inability of the ICD remediated products/applications to function with the seamless data communication throughout the entire business cycle will disrupt the process flow and outcome

• 3rd party vendor products – interfaces between ICD-10 impacted products and applications not functioning accurately can lead to lack of coordination

• Inability of the systems to handle claims and billing volume will affect the performance of the systems

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E2E testing – sample test scenario with workflow

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Pre-Condition:1) Planned visit for an existing patient2) Existing left foot radiograph results available

Test Scenario: 1) Outpatient visit for planned diabetic foot checkup


E2E testing – high level testing approach

Test Scenario:

A 50-year old female came to the Outpatient clinic for a planned foot check up the patient has a history of smoking, type II diabetes, two previous myocardial infarctions and a permanent pacemaker. Patient treated as an inpatient, claims filed and sent to payer.

Analyze Requirements

Identify & Create Test Scenario

Create Test Cases & Test data

Test Execution

Defect Management &

Status Reporting

Sample Test cases

Activities

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Requirement: Admit a patient, code the final diagnosis and file claim

• Confirm if the patient information can be submitted in the patient admission screen

• Confirm the final diagnosis coded • Confirm the claim has the correct

ICD-10 information

Validation of patient admission with the correct ICD-10 code and whether the claim file is generated with the appropriate ICD code

Business User responsibilityIT Team Responsibility

• Ensure interfaces for EMR, patient accounting and all downstream applications is established in test environment

• Perform smoke test to ensure stable environment• Execute the above test cases• EDI 837 created and sent to Clearing House/Payer• Raise the issues faced along with status

Test Case Test Data Expected Result

Capture patient encounter information &submit the details in admission screen

Patient ID, service type, admission date, clinicalconditions

Patient details should be captured successfully

Medical coding-validate the final diagnosis code entered

E11.621 Type 2 Diabetes mellitus with foot ulcer

The diagnosis code entered should be medically correct

E2E testing – high level testing approach (cont.)

• Validate the correctness of the test case & expected result • Validate test data – valid patient ID, diag/proc code

• Report the defects for the above failed test cases. Log the issues with development

• Track and communicate defect readiness for retest to business.• Generate the status for executed test cases & test metrics• Retest defects and ensure test cases generates the expected

result

• Sign off the status reports and provide go/no-go decision.

Identification of scenarios

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Thank you

Rajeev Desai(678) [email protected]

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Faculty: Catherine Mesnik

Catherine Mesnik is the finance director at St. Joseph Health, a 14-hospital integrated delivery system based in Irvine, Calif. In this role, she leads the ICD-10 finance team, as part of the Revenue Cycle Optimization division. She has over 15 years of experience in the health care industry, providing financial operations, business analytics and revenue cycle expertise to hospitals and medical groups. Ms. Mesnik is actively involved in the health care industry serving on the board of directors at WEDI (Workgroup for Electronic Data Interchange) and as the provider co-chair of the California ICD-10 Collaborative.

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Leveraging ICD-10 to Improve Quality and Decrease Cost

Catherine Mesnik

Finance Director, St. Joseph Health

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Degrees of Separation

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Agenda

Industry Scan

The Holy Grail of

Healthcare Finance

Leveraging ICD-10 Codes

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Where Should the Industry be Today?

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Source: http://www.cms.gov/Medicare/Coding/ICD10/Downloads/ICD10SmallHospitalsTimelineChart.pdf

Financial Focus Today

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Contract Remediation and Auditing Process• Understand how proposed contract language will impact revenue cycle

operations

Payer Partnerships• Plan for the financial and operational impact of clinical policy changes

o Benefit changes (Refer to payer’s clinical policies)

o Pre-Authorization process

• Plan for the financial and operational impact of contract changes

o Billing and follow up

o Denials and pending

• Leveraging payer relationships for outreach and support to physician groups

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The HHS Call to Action

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Source: https://www.federalregister.gov/articles/2009/01/16/E9-743/hipaa-administrative-simplification-modifications-to-medical-data-code-set-standards-to-adopt

The Holy Grail of Healthcare Finance

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Decrease Cost

Increase Quality

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Leveraging the Use of ICD-10 Codes

Analytics Population Management

Operational Workflow

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- Big data- Discrete data fields

- Risk stratification- Referral process

- Analytics to action- Pull instead of push

Examples of Leveraging the Codes

• Capital expenditure requestso Robotic surgeries now have their own codes

• Service line analysiso Evaluating for current performance and future growth

• Readmissions analysiso Initial, subsequent and sequella

o Z codes = the reason for encounter

• Quality analysiso Specificity in fractures

o Complication codes50

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ICD-10 Business Use Grid

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ICD-10-CM Code ICD-10-CM Description Business Use

Z41.1 Encounter for cosmetic surgery

Ensure billing guidelines are followed

Z91.120 Patient’s intentional under-dosing of medication regimen due to financial hardship

Automate a social work referral for non-compliance due to financial hardship

Z68 Body Mass Index (BMI) Identification of high risk,potentially requiring additional outpatient services and referrals

Quick Tip: Review billing edits that point to ICD-9 codes today! The business use of these codes may be better quantified in ICD-10 codes.

Closing Thoughts

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I skate to where the puck is going to be, not where it has been.

- Wayne Gretsky

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Website References

WEDI http://wedi.org/

HIMSS ICD-10 Playbookhttp://www.himss.org/library/icd-10/playbook?navItemNumber=13480

Federal Registerhttps://www.federalregister.gov/articles/2009/01/16/E9-743/hipaa-administrative-simplification-modifications-to-medical-data-code-set-standards-to-adopt

CMS

http://www.cms.gov/Medicare/Coding/ICD10/ICD-

10ImplementationTimelines.html

CA ICD-10 Collaborative http://www.caicd-10.org/

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Thank you

Catherine Mesnik(949) [email protected]

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Questions

Online questions:Type your question in the Chat Box, hit enter

Phone questions:To ask a question hit *1To remove a question hit *2

Upcoming Programs

• Post-Acute Care ConferenceJanuary 30 – 31, Huntington Beach

• Hospital Compliance SeminarFebruary 13, Sacramento, February 19, Long Beach

• Rural Health Care SymposiumFebruary 26 – 28, San Diego

• California Congressional Action ProgramMay 4 – 7, Washington, D.C

• Hospital Finance & Reimbursement SeminarsJune, three programs

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Thank You and Evaluation

Thank you for participating in today’s program. An online evaluation will be sent to you shortly.

Reminder: evaluation completion is required to receive continuing education credits.

For education questions, contact Liz Mekjavich at (916) 552-7500 or [email protected].

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