Assessing ICD-10 Financial Risk by Service Line

Health care service line management (SLM) began to evolve in the 1980s to help organizations increase their market share as an off set to losses in revenue due to implementation of DRGs (Diagnostic Related Groups). Due to the focus of service line management, it was originally not successful. There is now a resurgence of the SLM model with a focus on improvement of clinical performance, financial performance, and patient satisfaction.

Assessing ICD-10 financial risk is a multi-faceted challenge. ICD-10 introduces financial risk that should  be assessed using a variety of tools.  Since ICD-10 is the data standard that will be used to express the condition of the patient, the procedure to treat the patient, and the reimbursement for the procedure it is essential that information systems supply data to the service line managers that support ICD-10. The service line team must be able to analyze actionable data in order to make changes as needed.  Cost accounting, variance reports, flexible budgeting, reimbursement modeling, clinical productivity, case mix and severity, quality assurance, and marketing management.

If your organization uses EDI x12 transaction standard 837 claims files to perform your assessment on inpatient encounters? Are you using a data warehouse?  Consider data quality issues as well as non-standard patient identifier schemes which may be used to map to service lines.  Some organizations use DRGs or APR DRGs as part of their service line definitions.

However, without support from physicians it will be difficult to make clinical changes that can improve patient care.  And that creates the challenge.  If you are using an analytics tool to perform part of a component of an ICD-10 financial risk assessment, your ICD-10 clinical documentation improvement efforts can be led by indicators developed in analytics. Those analytics should be broken out in the way the healthcare provider measures its performance, which may be as a service line.  The ICD-10 assessment including ICD-10 reimbursement risk analysis can guide you to specialties and even individual providers (physicians, nurses, and other clinicians) who may create a greater reimbursement risk based on incomplete documentation in ICD-9.

There is an important strategy that should be used in auditing charts and communicating the results with physicians. In our practice we feel we’ve perfected some approaches that were guided by a physician, for physicians.  Please contact us for more information.

Physician engagement, combined with chart audits and analytics must be used carefully in a balanced method to ensure that the ICD-10 transition works smoothly across service lines, physician groups, and financial management.

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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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