ICD-10 Readiness Compromised by ICD-10 Revenue Cycle, Analytics Vendors

ICD-10 Will Force Clinical and Organizational Integration

The ICD-10 transition in the U.S. (World Health Organization,( or WHO) international classification of diseases, ICD-10 version CM for diagnosis codes and related ICD-10 PCS for procedure coding) will have the effect of forcing coders, nursing staff, case management, as well as physicians upon each other in ways that most organizations have yet to consider.  And, for health plans and hospital systems to have any chance of keeping reimbursements  somewhat neutral, they will have to talk about the intersection between the revenue cycle of the hospital and the medical policy and business rules of the health plan under ICD-10.

True ICD-10 readiness in a health care provider or health plan is dependent on all parties being aligned at the same go live date.  Coordinating the ICD-10 transition requires a sharp eye in the project management office (PMO) as well as experienced analytics and revenue cycle professionals who work closely with the clinical and operations departments.   One of the things that has not been highly regarded in the past is the role of the coder.

RAC View vs. Clinical Documentation and ICD-10

In our recent review of hospital revenue cycle and analytics companies, we find that many are focused on marketing their solutions for “RAC” or recovery audit trails.  RAC was mandated by Congress through the 2003 Medicare Modernization Act and uses auditors to review Medicare Part A and B provider reimbursement claims for billing errors.    The interoperability between administrative, clinical, and financial systems has in the past been the nexus of the  revenue cycle management process.  That is because clinical integration minimizes the likelihood of future claims being flagged for review.   An underlying area that supports this is proper documentation to support medical necessity and avoid utilization management reviews by contracted health plans.

We find that most analytics and revenue cycle companies are ignoring or underestimating the future role coordinated medical coding will have, the transition to ICD-10, and the clinical documentation and processes on the revenue cycle.  The ICD-10 transition will re-write the book on revenue cycle management (RCM).  RAC audits and Electronic Medical Records (EMRs) will be subject to a new paradigm with ICD-10.

Re-Aligning the Organization Away from ICD-9 to ICD-10

If a health care provider is having difficulty with RAC audits under ICD-9, we can predict that their clinical documentation challenges in the transition to ICD-10 will be harder for them.  Consequently, case management staff may be challenged with review of medical records for medical necessity because auditors will randomly select clinical rationale (criteria) for justification of the level-of-care.  The risk is that claims may be revisited and denied going back many years.  Health care provider staff must ensure that the criterion for each year where there is a denial is being appealed are using the criteria for that year.   ICD-10 introduces a new wrinkle in RAC audits.  When the criteria shift from being expressed in ICD-9 to ICD-10, there will be new challenges to abstract the level of care policy used prior to October 1, 2013 and the policy used after that date.  Therefore a RAC that spans October 1, 2013 will force provider staff to navigate policy, diagnosis and procedures in two different coding systems.

Changes in Analytics, Medical Policy and Clinical Intelligence

“Evidence-based clinical decision support” will be revised under ICD-10, and staff will need to be prepared to support potential audits under ICD-9 prior to October 1, 2013 and under ICD-10 diagnosis and procedure coding after that date.  Health plans will be revising business rules for what to pay, pend, and deny.  Similarly hospital systems will need to change their health-information technology approach to admit / discharge / transfer (ADT).

Clinical Benchmarks will Change under ICD-10

Clinical benchmarking will also change under ICD-10.  Disparities in vendor systems and varying readiness for a shift in the diagnosis and procedure coding that drives the core reimbursement algorithm, or Diagnosis Related Groups (DRGs), as well as assumptions around level of care (LOC), inpatient rehabilitation services and skilled nursing will exacerbate this problem for unprepared RCM vendors and their hospital clients.  There are four to six significant organizations that publish quality measures for health care providers and health plans.  All of these measures will be reported using ICD-10.  This includes Medicare Advantage HEDIS 5-Star Ratings for health plans, and CMS Value Based Purchasing for Medicare Advantage patients at hospitals.   These quality measures will offer a carrot – increased CMS reimbursements of one to five percentage points.  Quality measures will also offer a stick – reduced payments from CMS for the lowest performing health plans and hospitals.  That alone re-defines what is important in measuring revenue cycle for providers since the shift of a percentage point in top line revenue could mean the difference between profit and loss for hospitals that already operate on thin margins.

Multi-site Hospital Systems Have Additional Need for Integration

In particular, multi-site hospitals that do not have a clinically integrated revenue cycle system, or that use disparite multi-vendor systems will be exposed to more risk in RAC.  This is because the need to aggregate, report, and analyze claims data across multiple years of history to defend audits across the health system’s data and the continuum of care creates more complexity across multiple systems.

Vendor Independent ICD-10 Assessments

Organizational readiness and clinical alignment should be assessed by a competent third party ICD-10 consulting services vendor, and tested prior to October 1, 2013 to provide adequate attestation of readiness under HIPAA.  A credible ICD-10 assessment should include the clinical documentation and supporting processes for hospitals, and for health plans a review of medical policy.  Clinically integrated documentation and medical policy will drive Accountable Care in the future and must be a cornerstone of a successful ICD-10 implementation.  ICD-10, Accountable Care, and Payment Reform supported by quality measures will drive change in the Revenue Cycle Management and Health Care Analytics business.  An ICD-10 assessment using clinical scenarios and thorough testing will be the best way to ensure that health care providers and health plans are prepared.  Vendors who are prepared will thrive.  Vendors who are not will struggle.

– Michael Arrigo is Managing Partner of No World Borders.  We welcome your comments to this blog

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Michael F. Arrigo

Michael Arrigo, an expert witness, and healthcare executive, brings four decades of experience in the software, financial services, and healthcare industries. In 2000, Mr. Arrigo founded No World Borders, a healthcare data, regulations, and economics firm with clients in the pharmaceutical, medical device, hospital, surgical center, physician group, diagnostic imaging, genetic testing, health I.T., and health insurance markets. His expertise spans the federal health programs Medicare and Medicaid and private insurance. He advises Medicare Advantage Organizations that provide health insurance under Part C of the Medicare Act. Mr. Arrigo serves as an expert witness regarding medical coding and billing, fraud damages, and electronic health record software for the U.S. Department of Justice. He has valued well over $1 billion in medical billings in personal injury liens, malpractice, and insurance fraud cases. The U.S. Court of Appeals considered Mr. Arrigo's opinion regarding loss amounts, vacating, and remanding sentencing in a fraud case. Mr. Arrigo provides expertise in the Medicare Secondary Payer Act, Medicare LCDs, anti-trust litigation, medical intellectual property and trade secrets, HIPAA privacy, health care electronic claim data Standards, physician compensation, Anti-Kickback Statute, Stark law, the Affordable Care Act, False Claims Act, and the ARRA HITECH Act. Arrigo advises investors on merger and acquisition (M&A) diligence in the healthcare industry on transactions cumulatively valued at over $1 billion. Mr. Arrigo spent over ten years in Silicon Valley software firms in roles from Product Manager to CEO. He was product manager for a leading-edge database technology joint venture that became commercialized as Microsoft SQL Server, Vice President of Marketing for a software company when it grew from under $2 million in revenue to a $50 million acquisition by a company now merged into Cincom Systems, hired by private equity investors to serve as Vice President of Marketing for a secure email software company until its acquisition and multi $million investor exit by a company now merged into Axway Software S.A. (Euronext: AXW.PA), and CEO of one of the first cloud-based billing software companies, licensing its technology to Citrix Systems (NASDAQ: CTXS). Later, before entering the healthcare industry, he joined Fortune 500 company Fidelity National Financial (NYSE: FNF) as a Vice President, overseeing eCommerce solutions for the mortgage banking industry. While serving as a Vice President at Fortune 500 company First American Financial (NYSE: FAF), he oversaw eCommerce and regulatory compliance technology initiatives for the top ten mortgage banks and led the Sarbanes Oxley Act Section 302 internal controls I.T. audit for the company, supporting Section 404 of the Sarbanes Oxley Act. Mr. Arrigo earned his Bachelor of Science in Business Administration from the University of Southern California. Before that, he studied computer science, statistics, and economics at the University of California, Irvine. His post-graduate studies include biomedical ethics at Harvard Medical School, biomedical informatics at Stanford Medical School, blockchain and crypto-economics at the Massachusetts Institute of Technology, and training as a Certified Professional Medical Auditor (CPMA). Mr. Arrigo is qualified to serve as a director due to his experience in healthcare data, regulations, and economics, his leadership roles in software and financial services public companies, and his healthcare M&A diligence and public company regulatory experience. Mr. Arrigo is quoted in The Wall Street Journal, Fortune Magazine, Kaiser Health News, Consumer Affairs, National Public Radio (NPR), NBC News Houston, USA Today / Milwaukee Journal Sentinel, Medical Economics, Capitol ForumThe Daily Beast, the Lund Report, Inside Higher Ed, New England Psychologist, and other press and media outlets. He authored a peer-reviewed article regarding clinical documentation quality to support accurate medical coding, billing, and good patient care, published by Healthcare Financial Management Association (HFMA) and published in Healthcare I.T. News. Mr. Arrigo serves as a member of the board of directors of a publicly traded company in the healthcare and data analytics industry, where his duties include: member, audit committee; chair, compensation committee; member, special committee.

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