When it Comes to ICD-10, Preparation is Everything

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Atlanta, GA | Darien, CT Phone: 203.202.1616 | Fax: 203.621.3365 E-mail: contact@jvion.com | Web: www.jvion.com

When it Comes to ICD-10,

Preparation is Everything

Addressing ICD-10’s negative revenue

impacts before they happen

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Introduction

T

he 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?

I

CD-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 codes4_.

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 industry6_{. With hospital and physician}

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.

ICD-10 Mechanics

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reimbursements dropping, an increase in labor costs for manual coders will squeeze hospitals and physicians even more.

How are hospital systems reacting?

O

ne 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.

According to the North Carolina Healthcare Information and Communications Alliance, Inc., “Even if portions of Healthcare Reform are repealed

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.

$1,000,000.00 $5,000,000.00 -5% -$25,000 -$125,000 -14% -$70,000 -$350,000 -$400,000 -$350,000 -$300,000 -$250,000 -$200,000 -$150,000 -$100,000 -$50,000 $0 Estimated Decrease in Revenues

Small Provider Impact by Revenues*

-$350,000,000 -$300,000,000 -$250,000,000 -$200,000,000 -$150,000,000 -$100,000,000 -$50,000,000 $0 Revenues

Large Provider Impact by Revenues*

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

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What does the hospital and physician

practice need to do to minimize the

effect of revenue uncertainty ?

M

ost 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?

U

nderstanding 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.

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

revenue-focused claims analysis

solution to minimize the

impact of severe revenue

reductions which may occur

from improper ICD-10

coding.

Perspectives on ICD-10 and Outpatient Claims Risks

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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

J

vion 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. 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.

Atlanta, GA | Darien, CT

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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/implementing-health-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 mem-bers 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

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