ICD-10 Conversion - The Three Top Risks

Transcription

1 De-Risking the Impacts to Payer Organizations from ICD-10 Conversion De-Risking the Impacts to Payer Organizations from ICD-10 Conversion Top Three Risks CMOs, CFOs, and CIOs Need to Eliminate White Paper In totality, the three top risks create an inability to adequately manage the business risks and impacts that will occur in payer organizations as a result of the code conversion. August 2011

2 De-risking Impacts to Payer Organizations from ICD-10 Conversion 1 De-Risking the Impacts to Payer Organizations from ICD-10 Conversion Top Three Risks CMOs, CFOs, and CIOs Need to Eliminate Executive Summary The conversion from ICD-9 diagnostic codes to ICD-10 is a significant disruption that requires business transformation. As healthcare payers begin using various solutions for testing for ICD-10 compliance, many find that the disruption becomes even more profound. The principal cause of the disruption is the need to change IT systems to support the new business requirements as a result of the code conversion. Identifying and defining those requirements depends on being able to predict the future in ICD-10 to determine financial modeling, business impact, and actuarial analysis needed in health plans. But the definitions in ICD-9 are substantially different from ICD-10, making it too complex to predict the future. Most payers have yet to define their requirements because they lack the critical understanding of how ICD-10 codes will be used. Consequently, they lack understanding in how to change their policies and business rules up front so that they can define how to change the configuration and file structures in their IT system. Early definition of a payer s business requirements is critical if needed system changes and compliance testing are to be accomplished prior to the mandated compliance date of October 1, This paper identifies the top three risks to payer organizations in their approach to ICD-10 compliance. In totality, the three top risks create an inability to adequately manage the business risks and impacts that will occur in payer organizations as a result of the code conversion. Among other issues, the consequences will include soaring business costs, inaccurate clinical data, and lost opportunities for competitive advantages. The paper also identifies Key issues associated with differing perspectives of medical, financial, operational, and marketing stakeholders Challenges and payer vulnerabilities in various planning and business testing solutions Risks and business impacts from inadequate management of the ICD-10 conversion Most payers currently are unable to define their business requirements in ICD-10. Early definition of the requirements is critical for completing IT system changes and compliance testing by the deadline. Finally, the paper describes a solution for overcoming the risks and gaining competitive advantages from the ICD-10 code conversion.

3 De-risking Impacts to Payer Organizations from ICD-10 Conversion 2 Risk #1: Taking an IT Approach Rules, categorizations, and a variety of algorithms that support many different business functions use the diagnostic codes either as table look-ups or as hard-coded logic in existing IT systems. However, ICD-10 is much more granular than ICD-9, and many definitions have been altered and categories reorganized. Large groups of treatment types of codes were buried in ICD-9 but will be coded separately in ICD-10 and thus will require reconfiguring the business rules for ICD-10 so that information passing through a set of rules will cause an application to produce the expected result. Traditionally, companies test IT systems after they finish the technical work on the system, testing to determine if it performs as expected. Although there may be some business testing, it tends to be deep in the organization. Thus, initially in most organizations, the IT group owned the testing for ICD-10. Although remediating the IT system to support new business rules appears to be a technical problem, it is actually a business problem. Testing needs to test the business processes and policies and, therefore, needs to be undertaken from a business approach. The diagnostic codes are ingrained in most business processes and play a significant role in many mission-critical functions. In order to do this, testers must build common scenarios that are valid and that reflect the business rules and policies that must control the outcome. In addition, the solutions must be easily usable for all covered entities without the need for purchasing and installing tools, increasing headcount, and trying to code all the files internally. Although remediating IT systems to support new business rules for ICD-10 appears to be a technical problem, it s actually a business problem with significant impacts on: Actuarial / financial risk Health plan design Contracting scope and pricing Payment rules Medical policies and clinical guidelines Quality and efficiency assessment Fraud/waste/abuse analysis Comparative effectiveness research Population health analysis Network adequacy assessment Clinical history Regulatory reporting and more Therefore, to be successful in an ICD-10 conversion, payers must begin by making a conscious decision to expand their normal system testing to also test the business rules and configurations that control the outcome from the systems. It is not just did the claim pay? but, also did the claim pay correctly? Payers must conduct ICD-10 testing and business analysis up front before the system can be remediated in order to determine what to expect regarding the business processes, policies, and procedures as a result of the code conversion and then translate that expectation in the business rules in the IT system. Identifying and defining those requirements depends on being able to understand how their current business would look in an ICD-10 world and to build financial models, understand business impact, and execute actuarial analysis. The use of medical care has always been predicted by looking at what happened in the previous year or two. While the practice of medicine will not change dramatically as the industry transitions from ICD-9 codes to ICD-10 codes, the definitions in ICD-10 that are substantially

4 De-risking Impacts to Payer Organizations from ICD-10 Conversion 3 different and more sophisticated than ICD-9 and make it too complex for direct mapping. Analytics will change as well. In addition to this dilemma, a key element of the requirements in the testing process is that the test data needs to be accessible and pertinent across the entire supply chain. Trading partners must be able to test the same conditions at the same time as the payer and use the same ICD-10 transactions and definitions. Risk #2: Not Using Clinical Scenarios for Test Data Another mistaken approach to ICD-10 testing that creates business risks is having the IT team create the test files. Real business test cases must be defined, clinical events chosen and coded in ICD-10, and then built into the EDI transactions. This is the only means of ensuring qualitative, accurate data for business test execution. Going back to clinical records and coding them into both ICD-9 and ICD-10 also solves the dilemma payers are currently dealing with; it enables predicting the future. It allows analyzing large amounts of data to understand what their current business will look like as coded in ICD-10. Risk #3: Allowing a Siloed Approach Historically, diagnostic codes were handled differently at every level of payer organizations, and most initially continued that practice in their current ICD-10 code conversion. In the past, it was not unusual to make decisions about business rules in the system on an ad hoc and siloed basis. But some payers traveling that path for ICD-10 have discovered that a siloed approach is problematic and understand that it will lead to negative impacts on various areas of the business. With ICD-10, all stakeholders procedures will need to change. Consider the following examples: Chief Medical Officer or Medical Director: Responsible for medical policies and care standards Needs to ensure the new ICD-10 business rules and definitions are built into the system so it will interpret and act on the new rules and will produce the right reports at the right time Dilemma: Needs to be able to predict the future (ICD- 10) in order to determine new policies and definitions but cannot do so because ICD-10 codes are substantially different from ICD-9 codes ICD-10 testing goes beyond normal system testing and must test the business processes, policies, and procedures across all stakeholders and trading partners.

5 De-risking Impacts to Payer Organizations from ICD-10 Conversion 4 Chief Information Officer: Responsible for system configuration, system performance, and data accuracy Needs to ensure the system will recognize and understand ICD-10 codes to handle transactions Dilemma: Needs to change system now to be able to handle future transactions and be able to complete compliance testing by the deadline but cannot understand the future yet and cannot change the system until the new business rules, policies, and definitions are determined Chief Financial Officer: Responsible for financial modeling Needs to understand where there are opportunities for improving revenue (for example, ensuring claims that were overpaid in ICD-9 will not be overpaid in ICD-10) Dilemma: Cannot conduct financial analysis and modeling without first being able to predict the future based on new policies, procedures, and processes In addition, the chief actuary cannot determine risk assessments and the marketing group cannot develop new products until new policies are determined. The CEO and COO are concerned about business disruption during ICD-10 testing including such issues as handling claims transactions if the system goes down, the cost of tripling the workforce to handle the testing, and taking people away from their normal responsibilities. The impact of inaccurate configuration is also critical, with claims edits and pended claims potentially increasing, resulting in a return to a more manual, costly process. From the above overview of major stakeholders perspectives, it is clear that a thorough understanding of ICD-10 s impact on different areas of the business and the subsequent business requirements is essential for successful code conversion and testing. But coming together and collaborating on decisions around what the requirements should be is difficult and disrupting for organizations accustomed to operating in silos and unaccustomed to effecting holistic change management across the entire business. Risks in ICD-10 Testing Solutions In combination, the three top risks of taking an IT approach to testing rather than a business approach, not using clinical scenarios for test data, and taking a siloed approach lead to an inability to adequately manage the business risks and impacts from ICD-10. Significant additional risks exist in the ICD-10 solutions many payers have adopted or are considering. The top two solutions are as follows: 1. Regression to ICD-9. In this scheme, payers have decided they will accept providers claims in ICD-10, aggregate them back to ICD-9 and pay claims based on old contracts and policies in ICD-9, then send reports back to providers in ICD-10. While this plan would enable the mandated

6 De-risking Impacts to Payer Organizations from ICD-10 Conversion 5 ICD-10 compliance, it is fraught with known and unknown business risks. (See Table 1, p.6) Payers planning on this solution believe there is no other option since they do not know how to redefine their business without amassing years of ICD-10 information to know how to change the business. 2. Using crosswalks and GEMs. Spurred by the ICD-10 compliance deadline of October 1, 2013, and recognizing the complexities in translating codes from ICD-9 to ICD-10, many payers to date have turned to crosswalks and GEMS as a solution. However, the Medicare and Medicaid Services warned healthcare payers and providers not to use these technology solutions because they will result in inaccurate data. Payers planning on a solution of not changing their systems until they can collect years of ICD-10 information still must invest in changing their systems to switch back and forth from ICD-10 to ICD-9 in order to be compliant. Although crosswalks and GEMs can provide a foundation, they are insufficient and only resolve about 60 percent of the issue. Payers and providers alike jumped on the crosswalk or GEM solutions early on in ICD-10 conversion and are now struggling with the fact that these are not real solutions and, instead, will lead to substantial business problems. These code translator tools are not able to map, on a one-to-one basis, the 25,000 ICD-9 codes to the 175,000 ICD-10 codes. In addition, crosswalk tools vary among the software vendors, creating yet another source of variability. Some payers are considering plans for enabling their IT systems to choose a code where there is not an exact map from ICD-9 to ICD-10. As with the plan to regress to ICD-9 temporarily, as described above, this plan will lead to major business risks. Achieving a revenue-neutral position is a top priority among payers in the migration to ICD-10. In fact, some are approaching their ICD-10 testing primarily from a perspective of determining whether ICD-10 coding will generate the same amount of claims payouts as ICD-9. This is understandable but must be executed carefully. Because definitions are changing, force-fitting all ICD-9 rules into ICD-10 categories is a risk-filled approach that may result in: Lost quality Adverse provider reactions Sanctions for Medicare and Medicaid for falling quality outcomes Table 1 summarizes the risks and vulnerabilities in the ICD-10 testing approaches many payers have adopted or are considering.

7 De-risking Impacts to Payer Organizations from ICD-10 Conversion 6 Table 1: Risks and vulnerabilities in payers ICD-10 testing solutions and plans Insigma s ICD-10 Services Solution Insigma s solution is the healthcare industry s most advanced ICD-10 testing approach, using the same complex data to first define the business requirements, then establish the system remediation needs, then test the system for both system and business outcomes. It enables understanding how to execute in a future ICD-10 world so payers can make appropriate changes up front to policies, processes, procedures, and IT systems. How the Solution Addresses Payers Business Risks Insigma s ICD-10 testing solution uses a distinctive method for creating accurate clinically based test cases. It supplies large amounts of ICD-10 transactional data required for: Making accurate decisions on IT system remediation Analyzing and performing business-outcomes modeling on a company s health plan business and policy rules Identifying trends and patterns against current and proposed ICD-10 business rules Based on clinical records. Our ICD-10 test data is based on clinical records that have been coded in ICD-9 and ICD-10. This database becomes the gold standard for payers and providers. It is the source of truth at the event level, which then can be used to predict what the current business will look like in the future as coded in ICD-10.

8 De-risking Impacts to Payer Organizations from ICD-10 Conversion 7 The testing platform uses business test cases that are applicable for all healthcare stakeholders within any given supply chain. It tests the business of healthcare in such areas as claims adjudication, and practice management systems. Shares test data. The platform provides the ability to test the implementation of policies with the payer s trading partners, no matter how many there are. This can result in saving a payer millions of dollars in lost revenue due to incorrect reimbursement or manual claims and the massive manual effort in claims adjudication. Solutions that lack a methodology for aligning HIPAA 5010 and ICD-10 will disrupt payers internal and trading partners testing and will also increase production defects. Virtual system remediation plan. A key benefit of the solution is the identification of business risks and the ability to conduct business modeling. Insigma works collaboratively with payers to determine their business requirements. Through business modeling, a virtual system enables testing various options, which allows payer to develop the right remediation plan before investing millions of dollars into the system. Choosing the right scenarios. As time and capital constraints prohibit modeling all 175,000 ICD-10 codes, it is crucial that payers focus their efforts on the clinical areas that are most critical to their business. The Insigma methodology identifies a payer s risks and thus where the modeling should begin. The methodology begins with codes and areas of care that are characterized by one of the following: High volume High cost High complexity Likely points of logic failure based upon the change and definitions of codes For example, the definition of heart attack in ICD-10 is dramatically different from that of ICD-9. This is also an area of high cost and, therefore, should be including in the modeling scenarios. The service includes up front consulting with the medical director or CMO to determine areas of interest for control, which also ensures the right scenarios are modeled and tested. How the Solution Addresses Stakeholders Needs Insigma s ICD-10 consulting services include renowned expertise in collaborative approaches across an entire organization, comprehensive change management, attaining stakeholder buy-in, and large-scale business transformation. Creating and maintaining a fully functional and diverse test bed in house at payer organizations is costly, time consuming, requires high levels of expertise, and strains valuable internal resources by taking them away from current job responsibilities. Bringing in contractors or new resources to manage the process requires ramp-up time and detailed knowledge transfer. The purchase of tools and conducting training also adds to the time line and budget.

9 De-risking Impacts to Payer Organizations from ICD-10 Conversion 8 In contrast, Insigma s solution slashes costs and eliminates business disruption through the following aspects: No additional headcount required No knowledge transfer required No need to take people away from current job responsibilities No software, tools, or hardware to purchase or install Prebuilt data repository and test accelerators so test data is ready on day one No ramp-up time No software training Robust project management tools that: Analyze trading partner needs and readiness Manage the provisioning of business and system test data and assessment of test results Ensure end-to-end transactions Conclusion ICD-10 compliance testing and business planning up front for revised policies, processes, procedures, and for system remediation are critical to the healthcare industry. Severe delays or failure in meeting the compliance deadline will have dramatic negative impacts to a payer s business. However, to date, many payers have been unable to define their business requirements for ICD-10 codes because they lack the critical clinical information in ICD-10 to help them understand how to change their policies and business rules. Most payers are also at risk because they are undertaking the testing from an IT approach rather than a business approach, are taking siloed perspectives, and are not using clinical scenarios for testing. Others are at risk because of their plans for temporary solutions such as switching back and forth between ICD- 10 and ICD-9 codes or allowing the system to randomly choose codes. In addition, the cost of ICD-10 testing is high. Insigma s ICD-10 unique consulting services-based solution solves all of these challenges, delivering reliable test results at low risk and low cost.

10 De-risking Impacts to Payer Organizations from ICD-10 Conversion 9 About Insigma Insigma US is a global IT and BPO service provider with a proven track record as a great partner for organizations looking to innovate and transform their business. We are especially known for creative thinking and innovation around complex IT and business issues, our business-transformation capabilities, and our change management expertise. We help our clients move beyond their operational constraints, differentiate their products and services, and build business solutions that enable them to adapt to changing market dynamics. Our healthcare consulting expertise includes: ICD-10 migration/compliance HIPAA compliance Reporting and analysis systems Process improvement in automated claims processing Designing payment systems Conducting clinical trials and epidemiological research for Life Sciences Enabling Medicare and Medicaid fraud and abuse monitoring and enforcement Designing healthcare delivery systems Implementation of packaged healthcare software We have deep expertise in all aspects of IT infrastructure and applications as well as the current market demands of IT systems in healthcare. We recognize the challenges of the changing healthcare arena and understand the business issues as well as the technology enablers in bringing about change. For more information Contact Veronica Dunleavy at ICD10@insigmaus.com.