Healthcare Economy

Healthcare Reform bill is poised to change the economics of US healthcare. Nearly 32 million of currently uninsured population will get insurance coverage and subsidies in healthcare insurance will be available to families with income up to 400% of federal poverty level. Total out-of-pocket expenses would be limited, and insurance companies would be prevented from denying coverage for pre-existing conditions. Insurers would be barred from canceling coverage for sick people, as well as charging higher premiums based on a person's gender or medical history. While this is a welcome step towards healthcare socioeconomic equity, it will throw up unique challenges for insurers and providers to tackle.

Focusing on the changes from healthcare provider’s perspective, they will now see increased utilization of healthcare services and at the same time the reimbursements will get lower in alignment with subsidized healthcare premiums. Hospitals have been operating at low margins of 3% to 4% and they have very little room, if any, to absorb the impact of financial imbalance created by high utilization and low reimbursements. Many individual physician practices have already closed down because they could not survive the administrative overhead of running a solo practice in tough economic times. It’s not surprising that according to Athenahealth and Sermo Physician Sentiment Index, 62% of physicians are pessimistic about their ability to practice independently or in small groups in future due to financial sustainability of small practices.

With mandatory migration to ICD 10 by the end of 2012, the provider contracts will be revised for ICD 10 based payments. New healthcare insurance plans will come up from state-based exchanges and also commercial payors which may lead to provider contract revisions. Most healthcare providers have a view of their costs and profitability at enterprise-level but they lack visibility into costs at service level. While insurers are likely to come to the contract negotiation table with lot of analytical data to guide them in decision-making, most providers will go blind as they have not invested in advanced clinical-operational-financial analytical and modeling systems. How will providers ensure profitability of their enterprise after contract revisions? Under the looming economic uncertainties, providers are forced to find IT budgets for E.H.R implementation, “Meaningful Use” demonstration and 5010/ICD10 migration. Where will the money come from to fund these initiatives?

To weather the winds of change the providers have no choice but to optimize their operational, clinical and ultimately financial performance. And the first step towards optimizing performance is an integrated Performance Management system that provides a clear line of sight into performance metrics and inter-relationship of performance levers. To support business decision-making that will help hospitals plug inefficiencies, the performance management system must have the ability to analyze performance issues, predict future performance and model /simulate the impact of business decisions. Macro-level performance management will not help in finding opportunities for cost savings; down-in-the-trenches approach for streamlining clinical, operational and financial performance as an integrated whole will be required.

In the zeal for their mission to improve care delivery and clinical outcomes, backend operations for providers tend to take a back-seat.  There continues to be significant opportunity to improve cash flow by tweaking backend operations like supply chain management. Provider executives are yet to be convinced that investment into improving backend operations is not really a distraction from their primary vision of improving quality of care. A case in point is Aravind Eye Hospital, an ophthalmological hospital that have fine-tuned their processes and reduced cost-per-surgery thereby increasing access to high quality eye care.  On the clinical side as well, hospitals lack ability to do activity-based costing, demand forecasting and other insights that can help them do more with less. At this point, providers need to take a hard look at what is their strategy to flourish in the tough times ahead. I believe leveraging informatics for aggressive micro-management of performance must be a part of it.

Posted by Seema Pandey at 2:57 PM | Permalink | Comments (0) | TrackBacks (0)

You’ve read about why ICD-9 to ICD-10 crosswalk is going to be needed during the dual processing period! You are probably also aware that any crosswalk will require additional data to be able to zero in on a single ICD-10 code corresponding to an ICD-9 code. So, what is this additional data? Where will you get the data from? Will whatever you are able get, be sufficient for effective crosswalk?

To answer the first question, even payers will need to look at the provider’s billing and coding department. That’s the place where the ICD codes are captured after an episode. Certified coders look at the physician’s notes, prescriptions and clinical documents to determine the ICD codes that need to be assigned to a claim. It’s not a straightforward job – the coders make it look simple, because they’re able to leverage their past experience. And even with experienced coders, there are errors… many of them.

Now you know more about the additional data you require to be able to map to ICD-10 codes accurately – you need all or significant part of the data that the coder at the hospital references to make that determination.

But where do you get that data from? The closest source you got is the PWK segment on the EDI file – that’s optional, but by enforcing that data in PWK be filled if the provider continues to send ICD-9 codes beyond compliance date, you MIGHT get some success.

5010 allows additional paperwork to be sent to the payer, by the provider’s office. For example, the administered drugs paperwork can be sent on a 5010. Also, on a 5010, the provider can indicate if there’s additional paperwork available at their office. Payers can request the additional paperwork if required to resolve crosswalk issue for a claim.

There are other details on the claim file that can also be utilized for this purpose (for example the provider type and specialty). Past data (like past claims for the member) and past experience in mapping similar ICD-9 codes can also be leveraged (just the way the coder at provider’s office will do it).

Will whatever additional information you are able to get be sufficient? Well, that’s what you got to find out. You don’t have to wait till the last minute. PWK segment is probably available on many of your current claims – so test it out. Find out how effective a crosswalk is.

Let me set the expectation right… any automated crosswalk is going to be only as effective. In some cases, the crosswalk might just limit the number of choices to select from – that’s where your staff will need to intervene and manually select the right code. The experience with manual intervention will constantly need to be fed back to the crosswalk to improve effectiveness.

Posted by Vijay Kumar B at 10:48 AM | Permalink | Comments (0) | TrackBacks (0)

As of now CMS is sticking with the concept of clubbing all the corresponding I10 codes for a given I9 code under the same DRG group that was associated with the I9 code. Basically leading to a payment neutral scenario. The large payers also seem to be following the same pattern. But I wonder how long that will last?

The two primary reasons for the I10 transition are 1) improved quality of care, and 2) reduced cost of care. Currently the CMS focus seems to be on the first while keeping the payments neutral, thereby maintaining the cost of care. But how long will that last? How long, before CMS breaks down the I10 codes for the one I9 code into multiple DRG groups and associated different prices/rates for each of those groups?
 
Obviously it makes sense. A procedure that had drastically different execution variations had only one code in I9 and hence one could not really distinguish from one variation to the other on the payer side. Given that, there was no choice for payers but to pay up for the procedure using some kind of average rate, which invariably used to lean towards the highest common factor (HCF) of all the variants. Now they don’t have to do that if the granular procedure codes as captured through I10 lists, could be summarized under different (and more granular) DRG groups. So two variants of the same procedure, one using a cheaper stent and smaller length of stay could be paid at a lower rate compared to the variant of the same procedure that requires a more expensive stent and a longer stay in the hospital.

Now that will make too much sense, wouldn’t it?
Large payers have already started thinking on these lines and hence a lot of interest in tools that model payouts based on I10 DRG groups compared to similar payouts from historical records that had used I9s. We have been seeing a slew of requests for our payout simulator tool that works on those lines. Unfortunately the requests are primarily coming from payers. Rightly so because the payers are already in some stage or other with their assessment and remediation strategy for I10 and hence can focus more on value-add exercises such as payout simulations/models. What is going to happen to providers who have yet to realize that there is a tsunami moving towards them, and are still running around like headless chickens to figure out what they want to do for meaningful usage. Maybe the administration needs to help them a bit here by converging the I10 requirements with meaningful requirements (first step towards which might have been taken when rumors started floating that 2015 meaningful usage matrices will require the EMRs to be using I10 to be considered compliant). That way I10 will become a part of the overall meaningful usage exercise, possibly focusing more attention on I10 from the provider community perspective.

So, if not on October 1st, 2013, pretty soon after it, the I10 based DRGs are going to split to accurately represent the cost of the procedure variant and if you are not ready for it, be prepared to take a hit on payout and/or reimbursement, depending upon whether you are a payer or provider.

Posted by Rajiv Sabharwal at 7:57 AM | Permalink | Comments (0) | TrackBacks (0)

Many of you will find it surprising that I am not putting together a status report but rather blogging about my observations from the Infosys booth at HIMSS. Well for starters the blogs are easier to write and are just my own opinions. This time the HIMSS was all about complex ideas about making  healthcare simpler, cheaper and better. But looking at the X-ray machines which some of our co exhibitors were presenting and the cost of the same for so little additional benefit was kind of counter intuitive – in the name of connectivity and at the cost of adding a chip to the machine we are probably going to end up making the diagnostic process so complex that it would be hard to counter argue about the cost reduction and at the end of the day can even end blaming the machine or the user for a wrong decision. This I believe the providers are learning well from the Payers and the politicians!

Let me explain with a scenario:

“ Hi Welcome to the automated self service heart bypass surgery station. Your provider has the latest technology available to make this as painless and cheap as possible. Select your choice of options:
A – for Bypass surgery
B – for bypass surgery with assistance
….well you get picture and the capabilities that technology is going to bring to the table! Unfortunately most of us who would get into that machine will probably not walk out of that again.

About 40 years back my grandfather was told by his doctor walk 5 miles a day to help  keep away from diabetes. He lived to be 80 by doing it. He just did that. Now my doctor gives me a medication with a page of side effects and sets up daily monitoring calls about compliance and also tells me to exercise, which I know I don’t need to if I take the pills! I know I won’t reach the 8th decade if I was on my own without the complex medical technology to support me.  At the age of 40 , my grandfather acknowledged that he would  become sicker and weaker as he grew older and took the steps necessary – so did his doctor; I don’t think I will even acknowledge that issue!

Essentially I am making a case for simplification, let’s just simplify the process and the cure. Preventive treatment is often cheaper than curative treatment and much more simpler to administer. We should start with one patient at a time!

Posted by Anirban Majumder at 10:18 AM | Permalink | Comments (0) | TrackBacks (0)