When it Comes to ICD-10, Preparation is Everything

When it Comes to ICD-10, Preparation is Everything Addressing ICD-10 s negative revenue impacts before they happen Steven R. Gerst, MD, MBA, MPH, CHE Jvion Senior Medical Advisor Atlanta, GA Darien, CT Phone: 203.202.1616 Fax: 203.621.3365 E-mail: contact@jvion.com Web: www.jvion.com Copyright 2012 Jvion LLC All rights reserved

If you thought Y2K was a big project for hospital CIOs, it pales in comparison to the scope and dimensions of the upcoming ICD-10 conversion.

Introduction The Centers for Medicare & Medicaid Services (CMS) expects the 2010 Patient Protection and Affordable Care Act to reduce Medicare expenditures by $418 billion over the next 10 years. 1. Part of this savings includes the mandated conversion from ICD-9 to ICD-10. The shift to value-based purchasing models and electronic medical record systems, including accountable care, bundled payments, and episode of care reimbursements requires the level of detail only ICD-10 can provide. Studies performed by Jvion indicate that ICD-10 could reduce hospital and physician reimbursement by from 5% to more than 16%, depending on the payer mix. This can result in revenue reductions in the tens of millions of dollars for large hospital systems. A revenue-focused claims analysis can maximize reimbursements, thus limiting reductions to only 4%-8%. This can save providers millions of dollars over time. How big and important is this required ICD-10 conversion? ICD-10 conversion is a huge and absolutely critical component to the future of the U.S. healthcare system. Under the Affordable Care Act, Medicare is charged with bending the cost curve to better align U.S. Healthcare expenditures with other first world nations. ICD-10 provides the level of detail that will help drive more accuracy and accountability within the industry. By adding two decimals to the ICD-9 codes, ICD-10 increases coding specificity nearly 8x from approximately 17,000 codes to 157,000 codes 4. Hospitals and healthcare providers will spend millions of dollars on conversion, training, documentation, and ongoing support costs. For a typical $5 to $10 billion hospital system in which at least 50% of revenues are based on Medicare reimbursement, this difference can represent close to $250 million to $700 million in decreased reimbursement from current levels, if not more. One study suggested the need for 30% 5 more clinical coders. This could cost roughly $1.2 billion in additional labor costs across the U.S. healthcare industry 6. With hospital and physician ICD-10 Mechanics ICD-10-CM codes are hospital inpatient diagnostic billing codes. While ICD-9- CM diagnosis codes are 3-5 digits in length and number more than 14,000, ICD-10 expands the ICD-9 code set to 3-7 characters in length and total 69,000 2. ICD-10-PCS codes are alphanumeric procedure codes. Whereas ICD-9- CM procedure codes are only 3-4 numbers in length and total approximately 4,000 codes, ICD-10 are 7 characters in length, and total approximately 87,000. The Current Procedural Terminology (CPT) and Healthcare Common Procedure Coding System (HCPCS) will continue to be used to report services and procedures in outpatient and office settings 3. However, payers will require that outpatient claims include an ICD-10- CM diagnostic code for reimbursement. 1

reimbursements dropping, an increase in labor costs for manual coders will squeeze hospitals and physicians even more. How are hospital systems reacting? One of the nation s most highly respected hospital Chief Information Officers from a $10 billion health system said, If you thought Y2K was a big project for hospital CIOs, it pales in comparison to the scope and dimensions of the upcoming ICD-10 conversion. Another large hospital system interviewed has dedicated more than 100 people to their ICD-10 conversion. Despite the new October 2014 conversion date, many hospitals have opted to maintain the momentum of their conversion teams. At the 2012 HIMSS Conference, 7 AHIMA s Director of Coding Policy and Compliance urged attendees to stay vigilant, stay the course in your ICD-10 planning and implementation. 8 This is a huge undertaking for most hospitals and providers. by Congress, the adoption of ICD-10-CM will not be impacted. 9 Hospitals that are not currently assessing and preparing for the ICD-10 transition will lose the important advantage of being able to spread the work and training across nearly two years and maintaining focus on high quality patient care. Forward thinking hospital executives recognize the enormity of the requirement and the significant financial consequences of being unprepared. They also understand that ICD-10 conversion is not simply a coding issue, it is a critical revenue cycle management function that can significantly impact profitability. These organizations are taking steps to ensure that ICD-10 is a strategic business initiative and are including key financial metrics in their measures of success. While ICD-10 poses a significant cost to hospitals, payers, and physician practices, the code set also offers new opportunities to evaluate patient trends and outcomes as well as integration with new, value-based purchasing models. According to the North Carolina Healthcare Information and Communications Alliance, Inc., Even if portions of Healthcare Reform are repealed 2 Financial losses can represent anywhere from -5% of current Medicare reimbursement to approximately -14% or more. For a $5 billion to $10 billion hospital system in which at least 50% of revenues are based on Medicare reimbursement, this difference can represent close to $250 million to $700 million in decreased reimbursement *Estimates assume that 50% of revenues are based on Medicare reimbursement Estimated Decrease in Revenues $0 -$50,000 -$100,000 -$150,000 -$200,000 -$250,000 -$300,000 -$350,000 Small Provider Impact by Revenues* -$400,000 $1,000,000.00 $5,000,000.00-5% -$25,000 -$125,000-14% -$70,000 -$350,000 Estimated Decrease in Revenues $0 -$50,000,000 -$100,000,000 -$150,000,000 -$200,000,000 -$250,000,000 -$300,000,000 -$350,000,000 Large Provider Impact by Revenues* -$400,000,000 $1,000,000,000.00 $5,000,000,000.00-5% -$25,000,000 -$125,000,000-14% -$70,000,000 -$350,000,000

Perspectives on ICD-10 and Outpatient Claims Risks Outpatient claims have been viewed by many as an area unscathed by the impacts of ICD-10. However, this misconception puts clinics and hospitals at significant risk of increased denials and Accounts Receivable (AR) impacts. Even though outpatient organizations file claims against an entirely different code set (CPT and HCPCS codes) all diagnoses will have to be reported against ICD-10. Payers will use the new diagnosis codes to assess the validity of a claim. So, while ICD-10 s impact is less direct in an outpatient setting, there is still an increased risk of denials and negative reimbursement variations once all outpatient claims are required to report against the new ICD-10 diagnosis codes. Hence, it is vital that providers seek assessments and a revenuefocused claims analysis solution to minimize the impact of severe revenue reductions which may occur from improper ICD-10 coding. What does the hospital and physician practice need to do to minimize the effect of revenue uncertainty? Most providers are approaching ICD-10 conversion as a series of tasks. Planning, testing, training, system integration all require resources to ensure that they are completed on time. Prioritization of resources and efforts based on risk to revenue is paramount. Taking a revenue-focused approach starts with a detailed analysis of historical claims data. 12-24 months of information can identify the top Diagnosis Related Group (DRGs), Major Diagnostic Categories (MDCs), and procedure codes that pose the highest risk to revenues when mapped and translated to the new ICD-10 coding system. Inpatient organizations can use this information to identify the exact percentage impact that ICD- 10 will have on revenues. A detailed analysis of the outcomes will reveal areas of greatest risk and opportunity for revenue cycle and HIM execs to understand and take action on. Outpatient organizations can develop a risk profile across departments and codes. With this kind of detailed understanding, providers can better prioritize their conversion efforts including physician and coder training, documentation, and staffing while decreasing the risk to their revenues. How are hospitals addressing training, education, and documentation activities? Understanding which physicians use which high risk codes gives a provider the advantage of targeting training and support to avoid lost revenues. Additionally, this information helps prioritize coder training efforts and staffing plans. Practices may want to begin by reviewing their Super-Bill and assess the crosswalk and mapping between ICD- 9 and ICD-10 coding structures to begin assessing where the potential risks and staffing needs may lie. Under-documentation can be costly. CMS argues that if it isn t documented [correctly], it didn t happen. It is likely that CMS and commercial carriers will take every possible opportunity to deny claims or request post-payment recovery on omission errors. 3

With 10x as many codes and a huge number of discretionary opportunities to select the most appropriate codes for electronic reimbursement, detailed documentation is of the greatest importance. Having a clear idea of which codes impact the largest amounts of revenue will help prioritize and manage the daunting effort of updating and creating documentation. A code mapping and translation analysis based on the organizational data will not only uncover several areas of focus ICD-9 to 10 mapping but also highlight areas within the ICD- 9 environment that would be able to benefit from a Clinical Documentation Improvement initiative today. Jvion Jvion specializes in identifying and addressing ICD-10 s financial risks. Using RevCore a revenue-focused ICD-10 assessment solution Jvion quickly identifies highest risk DRG, MDC, and procedure codes to design a prioritized conversion plan that meets the needs of inpatient and outpatient provider organizations. In addition to defining revenue-neutrality crosswalks, Jvion includes a predictive modeler to identify actions that organization can take today to optimize current reimbursements and mitigate future ICD-10 financial impact. A free short on-line system demonstration, or an initial assessment using a provider s sample, data should be enough to identify the reimbursement risk and the quality insights and actionable intelligence that a historical claims analysis for ICD-10 impacts can produce. Providers are finding that with fewer resources and in a shorter time line, they can achieve the same if not more risk mitigation to their reimbursements and AR cycle For more information on Jvion s ICD-10 services and how we can deliver a 2 4 week assessment to determine ICD-10 s financial and operational risks to your organization, please visit www.jvion.com. 4 Atlanta, GA Darien, CT Phone: 203.202.1616 Fax: 203.621.3365 E-mail: contact@jvion.com Web: www.jvion.com

References 1 Department of Health and Human Services. Federal Register/Vol. 74, No. 11/Friday, January 16, 2009/Rules and Regulations. 45 CFR Part 162 [CMS 0013 F] RIN 0958 AN25. HIPAA Administrative Simplification: Modifications to Medical Data Code Set Standards To Adopt ICD 10 CM and ICD 10 PCS. 2 John Andrews, Healthcare IT News, Payors outpace providers on ICD -10. March 2012, p. 37. 3 HIMSS, AMA http://www.ama-assn.org/ama/pub/physician-resources/health-information-technology/implementinghealth-it.page? 4 Bernie Monegain, Editor, Healthcare IT News, ICD -10 Indecision. March 2012, p. 30. 5 Johnson, Kerry. (October 2004). Implementation of ICD-10: Experiences and Lessons Learned from a Canadian Hospital. Retrieved from www.ahima.org. 6 U.S. Bureau of Labor Statistics. Occupational Outlook Handbook, 2010-11 Edition. September 29, 2010. http://www. bls.gov/oco/ocos103.htm. 7 American Health Information Management Association. Founded in 1928 to improve the quality of medical records, AHIMA is the premier association of health information management (HIM) professionals. AHIMA s 51,000 members are dedicated to the effective management of personal health information needed to deliver quality healthcare to the public. 8 HIMSS Daily Insider, HIMSS, AHIMA Reassert Need for ICD-10 Vigilance. February 21, 2012. p. 3. 9 North Carolina Healthcare Information and Communications Alliance, Inc., ICD-10 Taskforce Bulletin, Sept 2011. Healthcare Reform & ICD-10-CM 5