Healthcare Economy

ICD-10 codes and their associated new DRGs can have, almost certainly will have, a profound impact on the reimbursement rates for many hospitals and other care-delivery organizations, which could result in a significant shift in overall revenue generation.  The proliferation of detail in the ICD-10 codes will allow CMS and commercial payers to set reimbursement rates that are much more closely related to the actual 'cost-to-serve' individual patients.  For hospitals that are unprepared for this change, they will be at a distinct disadvantage when it comes time to renegtiate contracts. 
Much preparation is required including understanding current and projected patient volumes under the new ICD-10 codes, better understanding how much it actually costs to serve patients classified under the new ICD-10 codes, and effectively simulating new reimubrsement rates in detail AND at the aggregate level.  Additionally, the process of choosing an ICD-10 code for billing purposes will rely much more heavily on the quality of clinical documentation and the hospital that does not understand how to optimally collect the necessary documentation prior to billing will certainly be left at the mercy of their payers.
 
But ICD-10 also impacts so much more than the Revenue Cycle.  Assuming that a hospital intends to remediate their internal IT systems, there is a either a massive undertaking required to migrate all applications, databases, reports, and business rules to ICD-10, or a complex environment wherein ICD-9 and ICD-10 codes are allowed to co-reside, which wiull create its own nightmares.  ICD-10 codes enable continued optimization of clinical workflows and order sets to move the needle on clinical qulity and safety, but in order for this to be realized, every single transaction, regulatory report, and embedded logic must be identified, re-engineered, and re-implemented to use ICD-10 codes.  Every hospital is different, but if we take a system of 3 hospitals with 50% package applications, 50% custom applications, three enterprise datawarehouses, 50,000 databases, 15,000 reports, with an unknown number of business rules as an example, then each of these must be throughly assessed and remediated to be able to completely operate that hospital using ICD-10. 
 
How long will this remediation take?  How much money will it cost?  When will the package vendors be ready?  What do we do with business partners that still operate using ICD-9 codes?  What is the staging of such an effort?  What do I need to be doing this year?  Next Year?  And the Year after that?  Do my physicians and department heads really understand all of this?  Are they prepared?  How will coders get the support they need for choosing ICD-10 codes?  Will I even have enough coders?  What is the role of a crosswalk solution?  Is there a work-around to operating as an ICD-10 enterprise?  Am I prepared to renogiate contracts?  Do I even know how many patients I am seeing under ICD-10? 
 
There are so many questions and too few ready-made answers at this point.  But what is certain is that ICD-10 is bottom-line, a Revenue Cycle concern, but if a hospital wants to do anything more than just satisfy the core regulation of transmitting claims under ICD-10, then these questions need asking right away.  Unfortunately, many hospitals won't.  And these will be the ones clamoring for an extension past October 2013.  And when they don't get it, my guess is that more than a handful are going to be blindsided by a permanent negative revenue wound and have no way to heal it.

Posted by Mark Brownlee at 11:29 AM | Permalink | Comments (0) | TrackBacks (0)

The need to take a serious look at backend operations of the providers to explore opportunities for optimization and cost savings was emphasized in my last blog. Supply Chain Management is one of the areas that have significant room for improvements and most industry thought leaders concur on this point. This is also evident from the published data points regarding provider supply chain management.

•Managing materials, supplies and the associated costs consumes 15 to 30 percent of net patient revenues. Hospital's supplies expenses alone represent 25 to 30 percent of spend.
•Hospitals overpay suppliers for contracted medical and surgical products from 2 to 7 percent of the available contract price.
•Purchasers spend approximately 40 percent of their time, and accounts payable spend more than 60 percent of their time, on manual processing of transactions.
•Approximately 35 to 40 percent of hospital supply related costs are devoted to handling, moving and processing materials/supplies as compared to other industries where it is less than 10 percent.
•5 to 15 percent savings in supply chain costs would equate to a 1 to 3 percent improvement in a hospital's operating margin.
•A single paper-based purchase order may cost anywhere from $75 to $140 to process. Process that transaction online and across the Internet, and it can be as low as $6 to $10
•Current use of EDI within hospitals only covers 30 to 40percent of transactions available for automated processing

Supply Chain Performance Management dashboard is required before hospitals begin planning their supply chain management strategy as they need to have complete visibility into the performance of various aspects supply chain operations. Equipped with the performance metrics data, provider CXOs will be able to spot quick-wins which they can target first to improve cash flow. The cost savings from quick wins can potentially be re-invested in strategic initiatives for long term supply chain management transformation. Supply Chain optimization strategy will vary for different providers based on their current performance levels on various supply chain management processes, organizational priorities and constraints. However, there are certain areas which hold upside opportunities for value realization for most of the providers.
 
An integrated clinical, financial and supply chain management dashboard is one such area. In the absence of integrated clinical and supply chain management solution, hospitals are unable to forecast demands at patient level based on the expected clinical pathway(s). Due to unreliable demand forecasting capability, hospitals end up hoarding 30-40% more pharmacy inventory which locks in the capital. On the other hand, physicians and nurses do not rely on automatic re-orders based on forecasted demands and place manual orders 'to be safe'.  This results in process gaps and stock-outs of critical items due to lapse in human judgment.  Suppliers are beginning to ask for access to future surgery bookings and a view into patient-level demand on products but hospitals not able to deliver demand forecasting at consistent levels. 

More attention needs to be paid to the financial performance of the supply chain. Supply chain management should be evaluated as an organizational asset and the return on investments needs to be closely monitored. Traditional performance metrics have focused on the transactional aspects of supply chain management. The new metrics need to be much more strategic, allowing cross-organizational comparisons as well as the assessment of performance of suppliers and the management supply chain costs.

Posted by Seema Pandey at 11:23 AM | Permalink | Comments (0) | TrackBacks (0)

Continuing our journey towards understanding the various aspects of interoperability in healthcare,  this post will develop a few thoughts on the final result for the provider sector.  Essentially, the end game will be the development of processes and electronic systems to truly support REAL patient centricity, to reduce the cost of healthcare through transparency AND  to provide a platform for actually developing meaningful  tools, techniques and solutions for preventive healthcare and disease management.  Without interoperability even with a sector, leave alone cross sector, these goals would be impossible to achieve.

It's been a while since my last post - blame it on too much work and too little time to have some fun.
However, the topic of interoperability and it's value in healthcare has always been a fun area to talk about.  It's so mundane, nuts and bolts related.  As the great actor Rex Harrison says in My Fair Lady - 'So deliciously ordinary' and yet..., yet...., there's  something there that seems VERY important!
It is that important end result of true interoperability that gives this area so much value, that is the reason why  the provider sector has scrambled to handle cost and efficiency issues and failed consistently, inspite of having some of the best minds in the business!!!

Seamless data flow and information availability is the absolute requirement for any productivity, efficiency or clinical quality gains.  Without cross organization data, then information and finally knowledge (wisdom being too far out to talk about right now!),  no real patient centricity, affordability or even prevention can be achieved.
Whether we use BI tools to analyze this data for knowledge or clinical decision support tools to develop and manage better clinical pathways  - interoperability is the real foundation of all this.  Thus, this notoriously  'uncool', 'ordinary' area is actually the basis of all those wonderful  'new' buzzwords such as 'meaningful use' ,  'patient homes', 'pay for performance' etc etc!

It would be very 'wise'  for both the provider sector and the vendors and organizations that serve them - including IT - to know and constantly remember this.

Then hold your breath, thinking of what  'cross-sector' interoperability could mean to the overall healthcare industry!  Wow! 

Ciao for now.  

Posted by Dr. R Balaji at 11:10 AM | Permalink | Comments (0) | TrackBacks (0)

"With wide spread ICD-10 knowledge available in public domain, Industry today has recognized that Crosswalk is the tactical means to comply with the mandate.

In this regard, healthcare organizations have considered the CMS provided GEMs as a finite crosswalk tool. But even with the GEM being the principle guide, the task of mapping the two coding systems is never simple.

Firstly, GEMs alone are not the crosswalk; they are just the guide to navigate the complexity in translating one code set to the other. It only aims to reflect the health status of the patient and the procedures performed as accurately as possible to formulate an equivalent code translation. There are majority instances of approximately mapped codes over the exactly mapped codes in the GEM. Even the GEM defined exact maps are debatable form a clinical perspective. For example- ICD-9 code "07812 - Plantar Wart" is an exact match to the ICD-10 code "B07 - Viral Warts".   From a clinical perspective, Plantar Wart is a type of Viral Wart caused by HPV, but there are other types of viral warts also. Therefore, additional clinical reference information, right governance & clinical decision are prerequisite to transform the GEM based code mapping to a meaningful crosswalk. 

A meaningful crosswalk should leverage GEMs, needs to be driven by a defined business purpose - either to map all alternatives, some of the valid alternatives, or a single "best" alternative and should be capable enough to appraise the clinical integrity in the entire translation exercise. It should ensure that medical concepts in the target code accurately represent the same in the source code and no information is lost in the translation exercise.

The decision on crosswalk development should not be made without considerable analysis of the existing coding practices, frequency of codes used in daily business operation and the financial impacts of those codes; so as to consider the mapping of those highest priority codes first that reflects organization's unique business, clinical and financial priorities. Moreover, an effective & early involvement of trading partners in the crosswalk development will be a best practice. A prior consensus on translated code values in advance of implementation and testing will prevent imperfections and debatable business consequences; reduce financial disputes and other operational bottlenecks.

So..... Payers/Providers have much to consider beyond the GEMs to develop a meaningful crosswalk".

Posted by Dr Suman De at 5:17 AM | Permalink | Comments (0) | TrackBacks (0)

I ask this question every time I get the opportunity to interact with a customer or an industry expert - when are you planning to, or when is the right time to negotiate I10 based contracts with your trading partners? And the response I invariably get is "after we've gathered adequate trending data on the I10 claims"!

I10 based claims (due to their increased specificity) can help health plans with some of the operational issues that they keep complaining about - providers up-coding the claims to get a higher reimbursement, and fraud and abuse being one of the major causes for the steep rise in insurance premiums. The question is - are you going to wait for the historical data to build up and negotiate contracts in a reactive mode, or are you going to jump the guna and set yourself as an industry leader?

HIPAA and similar standards are helping reduce the 13 cents of administrative cost for every healthcare dollar. Now is the time for health plans to leverage ICD-10 based contracting to control the remaining 87 cents.

The approach is simple - take your past claims, run financial simulations to evaluate how you'd pay the claims in the ICD-10 platform. Integrate the results into your ROI analysis and you might just realize that you're going to add tens of millions of dollars to your bottom-line the first year following the re-negotiation of contracts. You'd also have an edge over your competitors in the subsequent years, as you'd have more historical data than your competitors to tweak your claim pricing rules, as well as your premium calculation algorithm.

I'd recommend health plans start with the financial simulations right away. Based on the simulations you could start re-negotiating your contracts as early as 2013. Of course, you'd need to wait for CMS to publish the ICD-10 based DRG's before you can write the new contracts. CMS is bound to publish I-10 based DRG's sooner than later, as CMS itself is going to tremendously benefit from the ICD-10 based contracts with its providers.

Posted by Vijay Kumar B at 11:51 AM | Permalink | Comments (1) | TrackBacks (0)

Here’s more on ICD-10 crosswalks! Some payers I’m interacting with are asking if they’d ever need an I9-I10 crosswalk. They acknowledge that they’ll need an I10-I9 crosswalk, if they chose to tactically comply with the ICD-10 regulation, but they’re wondering “why I9-I10”? Some of them believe that if they did start processing I10 codes on October 1st 2013, they’d retain the ability to process I9 based claims. Obviously, not everyone has thought through the cost implications – about maintaining 2 adjudication rulesets (most likely based on “as-of-date” logic), adding complex new rules to an already complex adjudication platform, the cost of “lights-on” of two sets of rulesets etc.

Some health plans are talking about addressing the cost aspects by randomly mapping the I9 codes to I10 using GEM, and then processing the claims on I10 platform. Their argument: “to start with we’d not have negotiated contracts on I10 codes anyways, so why not just pay claims at the same rate as the corresponding I9 code?” Well, wasn’t streamlining claim payments based on the increased specificity of I10 codes, one of the main objectives of transitioning to ICD-10?

I agree that given the accuracy of an I9-I10 crosswalk, there are going to be concerns about processing an I9 based claim on I10 rulesets – but isn’t that at least better than randomly picking I10 codes?  On the other side, if you did choose to process an I9 based claim on I9 platform (by maintaining dual processing rules) wouldn’t it be wise to capture the corresponding I10 code(s) somewhere in your database – so your clinical areas like DM and UM can take advantage of the more granular data. Also, once you start capturing the I10 codes, you’ll have access to more historical data and so the upper hand in negotiating contracts with your provider – whenever that happens!

I’m not trying to force-fit a square peg in a round hole. For all we know, maintaining dual adjudication rules might turn out to be the best way forward in terms of cost benefit analysis – in such cases there will be no need for an I9-I10 crosswalk in claims processing. But discarding the crosswalk as a lousy idea is not something I’m going to buy into – at least not yet!

Posted by Vijay Kumar B at 11:56 AM | Permalink | Comments (0) | TrackBacks (0)