ICD-10 Benefits Pharmaceutical and Medical Device Companies

ICD-10 (International Classification of Diseases version 10 developed by the World Health Organization or WHO) code set has the potential to bring new analytical capability to pharmaceutical and medical device companies eager to improve efficiency and to differentiate themselves in the new regulatory economy.

Today’s pharmaceutical and medical device company analytic capabilities are not sufficient for the quickly developing world of drug development, device innovation, and health care. Pharmaceutical and med device companies lack the tools and capability to use data to measure the cost and clinical effectiveness of drug products.  Going forward under ICD-10, both negative impacts such as reduced reimbursement and opportunities such as improved population health management lie ahead.  The data to guide DME and Pharma R&D budgets may lie in part in this new coding and reimbursement paradigm.

Historically, managed care organizations (health plans or payors) did not always require detailed diagnosis data before a prescription drug claim was paid.  Similarly, medical device costs were reimbursed without tight linkage to the condition of the patient and the indications for use of the device.

Let’s examine why ICD-10 is going to impact not only health plans and health care providers but DME and pharmaceutical companies and how the ‘Perfect Storm’ of laws work together to create new responsibilities for DME and pharmaceutical products used in healthcare.

  • The 2009 HHS HIPAA Code Set Rule requires use of ICD-10 on all claims on or after October 1, 2014.
  • In ICD-10, characters to the right of the decimal introduce additional “specificity” or components of the patient condition  (meaning complications, comorbidities, discrete parts of the anatomy such as which bone, which side (‘laterality’) etc.).
  • DME providers get codes on their orders from doctors.  They will need to know that they are getting the right codes and documentation from referring physicians.  In particular,   ICD-10 CM diagnosis specificity, especially for Orthopedic and Cardiology DMEs is significantly different. Orthopedic procedures would need to be billed (inpatient) under Medicare Part A and DME under Medicare Part B and this would have to be comprehended in test plans including coordination with Medicare MACs.  Because of the greater specificity in ICD-10 there will be more opportunities for improved disease management.
  • The American Recovery and Reinvestment Act (ARRA) and the HITECH Act of 2009 which is part of ARRA requires use of an electronic health record and ‘discrete data’ storage.  No longer is it acceptable for a physician’s handwritten note to be used.  The specific typewritten documentation including not only the diagnosis but procedures will then be translated into ICD-10 codes.
  • ICD-10 provides more specific information, and the electronic health record needs to show documentation such as which side of the patient’s body is involved, whether this was the first or a subsequent encounter for the problem, what conditions gave rise to a sequela, whether healing is progressing as expected, and other potential documentation that might be needed to code the encounter to its greatest specificity.
  • This creates an audit trail of the documentation of medical necessity back to the device, pharmaceuticals, etc. used.  There will be increased opportunities and imperatives to ensure that the quality of the data and outliers (which may be useful in detecting fraudulent DME and Pharmaceutical claims) are evaluated.  This will require upgrading technology platforms and refreshing policies and procedures to ensure best practices are being used.
  • In certain circumstances, care settings, and medical specialties such as Behavioral health, certain prospective payment systems are used that include a requirement to note whether the patient is on specific types of medications.
  • Therefore, all of these components come together, leading us to believe that ICD-10 will have both favorable and unfavorable consequences for the DME and Pharmaceutical supply chain.

No World Borders has identified data analysis as a key capability for pharmaceutical companies dealing with the rapid and ongoing changes in health care. The upcoming transition to the broader and more detailed ICD-10 code sets offers pharmaceutical and medical device companies a number of benefits including:

  • Reduction of payment errors to providers for pharmaceutical and medical device products used in medical procedures.
  • Increased competitive advantage through the creation of comparative effectiveness analytics programs.
  • Improved understanding of payer strategies.
  • More profitable pricing strategies as a result of data mining more accurate information.
  • Access to population health data to guide future R&D efforts focused on either high volume low dollar or high dollar low value diagnosis groups.

To learn more about how your organization can use ICD-10 migration to improve your efficiency and operational processes, contact us.

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Michael F. Arrigo

Michael is Managing Partner & CEO of No World Borders, a leading healthcare management and IT consulting firm. He serves as an expert witness in Federal and State Court and was recently ruled as an expert by a 9th Circuit Federal Judge. He serves as a patent expert witness on intellectual property disputes, both as a Technical Expert and a Damages expert. His vision for the firm is to continue acquisition of skills and technology that support the intersection of clinical data and administrative health data where the eligibility for medically necessary care is determined. He leads a team that provides litigation consulting as well as advisory regarding medical coding, medical billing, medical bill review and HIPAA Privacy and Security best practices for healthcare clients, Meaningful Use of Electronic Health Records. He advises legal teams as an expert witness in HIPAA Privacy and Security, medical coding and billing and usual and customary cost of care, the Affordable Care Act and benefits enrollment, white collar crime, False Claims Act, Anti-Kickback, Stark Law, physician compensation, Insurance bad faith, payor-provider disputes, ERISA plan-third-party administrator disputes, third-party liability, and the Medicare Secondary Payer Act (MSPA) MMSEA Section 111 reporting. He uses these skills in disputes regarding the valuation of pharmaceuticals and drug costs and in the review and audit of pain management and opioid prescribers under state Standards and the Controlled Substances Act. He consults to venture capital and private equity firms on mHealth, Cloud Computing in Healthcare, and Software as a Service. He advises ERISA self-insured employers on cost of care and regulations. Arrigo was recently retained by the U.S. Department of Justice (DOJ) regarding a significant false claims act investigation. He has provided opinions on over $1 billion in health care claims and due diligence on over $8 billion in healthcare mergers and acquisitions. Education: UC Irvine - Economics and Computer Science, University of Southern California - Business, studies at Stanford Medical School - Biomedical Informatics, studies at Harvard Medical School - Bioethics. Trained in over 10 medical specialties in medical billing and coding. Trained by U.S. Patent and Trademark Office (USPTO) and PTAB Judges on patent statutes, rules and case law (as a non-attorney to better advise clients on Technical and Damages aspects of patent construction and claims). Mr. Arrigo has been interviewed quoted in the Wall Street Journal, New York Times, and National Public Radio, Fortune, KNX 1070 Radio, Kaiser Health News, NBC Television News, The Capitol Forum and other media outlets. See https://www.noworldborders.com/news/ and https://www.noworldborders.com/clients/ for more about the company.

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