Contents. Edifecs Keys to A Risk-Balanced Approach for a Smooth Transition to ICD-10. Executive Summary Background... 2

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1 Edifecs Keys to A Risk-Balanced Approach for a Smooth Transition to ICD-10 WHITE PAPER Executive Summary... 2 Table of Contents Background... 2 Imperatives for a Successful ICD-10 Transition... 3 Understanding Business Impact... 4 ICD-10 Transaction Monitoring & Control Summary (continued)

2 Executive Summary The migration from ICD-9 to ICD-10 represents one of the most wide-ranging impacts to healthcare provider business processes and policies. This paper outlines a prioritized, risk-based approach to ICD-10 migration, broken down into four distinct phases. For the two most critical phases out of the four business risk assessment and transaction monitoring and control this paper identifies key issues, recommends solutions, and outlines how specialized technology solutions can minimize risk and reduce manual efforts. Background Migrating from the ICD-9 to ICD-10 code sets impacts a broad range of key business processes and policies across healthcare provider organizations, such as scheduling, care delivery, diagnostics, billing, revenue cycle management and analytics. Given the wide-ranging implications of the ICD-10 mandate and other critical initiatives such as Meaningful Use all of which are likely compete for the same resources the consequences of starting late or defining the problem too narrowly are substantial. While crosswalks and code management systems could be key ingredients for a successful transition, a plan that focuses exclusively on these capabilities may not yield desired results. The migration from ICD-9 to ICD-10 represents one of the most wideranging impacts to healthcare provider business processes and policies. This paper summarizes a more pragmatic approach to the ICD-10 transition, based on a comprehensive analysis of financial risk and utilization of diagnostic codes in historical data. It suggests utilization of the results of such analysis to prioritize remediation measures such as upgrading systems, modifying processes, integrating technology tools and training personnel, as the most reliable method to balance the business imperatives of limiting expenditure associated with the ICD-10 transition, and reducing the probability of negative financial impact. Post-production, this paper recommends ongoing tracking of key performance metrics and making course corrections where necessary. 2

3 Imperatives for a Successful ICD-10 Transition Healthcare provider organizations should initiate the ICD-10 transition process by recognizing that a successful migration requires a sustained investment over time. While the long-term goal is to maximize business value through appropriate encoding of clinical information in ICD-10, a near-term goal for most providers is achieving financial neutrality, i.e., minimizing or eliminating the risk to the revenue cycle. A successful transition to ICD-10 comprises four phases (see Figure 1): Goal: Neutrality Impact Assessment Remediation Testing Operationalization Consulting Services Understand impacts Prioritize efforts Heterogeneity in payer environment Define scope Remediation plans for each department Real-time: Integrate with On Demand mapping tool Historical Data: create pre-defined maps Test Integration and performance Iterative interface deployments Post-deployment verification Monitor and track revenue cycle Monitor high-risk reimbursements Transaction visibility across enterprise Figure 1: Key steps towards achieving a successful transition to ICD Phase I - Analyze and Assess: During this phase of the process, healthcare organizations analyze their historical data, to gain a thorough understanding of the business impact of migrating to ICD-10. As part of this phase, organizations need to define the scope of the analysis, including departments (e.g., in-patient, ER, and ambulatory) and type of data (e.g., administrative and/or clinical) to be included. By analyzing historical data healthcare organizations can more easily achieve the primary goals of the impact assessment phase, which are: a. Identify and prioritize ICD-10 code categories for training clinical personnel b. Identify and prioritize remediation tasks, such as identification of the systems and workflows that should be prioritized for upgrades, and those that should be remediated via mapping or translation arrangements. c. Develop a plan for processing historical data, including a way to identify requirements for clinical diagnosis data and associated workflows (e.g., clinical quality reporting and claims-based reporting) 3

4 2. Phase II - Remediate: Healthcare organization should use the results of Phase I to define the scope and prioritization of remediation work across the care delivery enterprise. The scope of remediation should include: a. Upgrading departmental information systems that provide the capability to encode and store patient diagnosis information in ICD-10 format. b. Training clinical personnel on subsets of the ICD-10 code set, based on their specialty and clinical focus areas, and defining policies that will guide code assignment c. Modifying workflows, where necessary, to use specialized systems and tools to code in ICD-10, especially during the period of transition. d. Managing clinical history information, especially where problem lists and other areas of clinical systems contain historical information coded in ICD Phase III - Test & Operationalize: In this phase, healthcare organizations evaluate their remediated systems for performance and subject them to integration testing before placing them in a production environment. The testing system needs to generate and manage test data that closely resemble production transactions. Those systems that pass evaluation are then deployed to production environments, which are monitored and tracked to specific measurements. 4. Phase IV - Monitor & Control: This is a critical phase in the ICD-10 transition process since the outcome will determine if the remediation process has yielded expected results. Healthcare organizations need to monitor and audit transaction traffic between the enterprise and its trading partners to measure specific outcomes, such as: a. Determine accuracy of reimbursements on a sample set of high-risk codes b. Analyze reimbursements by payer to identify and isolate any trading partner issues c. Monitor impact to revenue cycle times, especially for high-priority diagnostic areas The following sections of this paper elaborate on the two most critical phases Phases I and IV of the ICD-10 transition process. Understanding Business Impact Given the wide divergence in the level of medical concept granularity between ICD-9 and ICD-10 coding standards, it is clear that the probability of a code in ICD-9 mapping directly to a single ICD-10 is low (Figure 2) Diagnosis 69,369 Procedure 72,082 Figure 2: Differences in payments resulting from coding in ICD-9 and ICD ,400 ICD-9 ICD-10 3,824 ICD-9 ICD

5 This disparity between the ICD-9 and ICD-10 code triggers a substantial business risk for provider organizations. Since many payers adjudicate and pay medical claims based on the Medicare-DRG (Diagnosis Related Group) that maps to codes specified in the claims, provider organizations face the risk of lower payments if the codes in claims under ICD-10 map to lower-reimbursement MS-DRGs (see example in Figure 3). Consequently, a provider organization must have the capability to assess risk, based on potential financial impact, and have capabilities to quantify and mitigate that risk at an actionable level of granularity. Figure 3: Differences in payments resulting from coding in ICD-9 and ICD-10. Billable clinical procedure 1 2 Clinician/Coder uses ICD.9 Clinician/Coder uses ICD ICD-10 Code: A3689 Diphtheritic peritonitis Other operation of other diphtheritic complications Trachea ICD-9 MS-DRG DRG 373; MDC: 06 Major gastrointestinal disorders & peritoneal infections without CC/MCC CMS Weight ICD-10 MS-DRG DRG 869; MDC: 18 Other infectious & parasitic diseases diagnoses without CC/MCC CMS Weight No Change from Current Payment 16% Reduction in Payment Healthcare organizations can analyze their own historical data (see Figure 4) to study usage patterns of ICD-9 codes and categorize relationships between ICD-9 and ICD-10 codes. It is particularly useful to incorporate multiple levels of categorization to understand the risk and complexity at an actionable level of granularity. The assessment of risk is based on the volume of transactions for each code and financial value of transactions in each risk category Analyze historical data Identify ICD-9 usage patterns Identify AR and financial risks Prioritize payer relationships for recontracting Prioritize remediation tasks Build remediation project plan Figure 4: Understanding Business Impact & Risk. Stratification and analysis of data within the provider organization helps identify usage patterns for specific departments, systems, workflows, transaction types, and individual providers so that healthcare organizations can assess financial risk 5

6 at an actionable level of granularity. Organizations can then derive the optimum prioritization of departments and systems, based on financial risk posed to the revenue cycle by these entities. A second level of analysis focuses on trading partners. Healthcare organizations can use the analysis results to identify the business relationships with payers and other trading partners that would be most affected by the transition to ICD-10. They can rank and sequence each trading partner, based on the risk level of codes in transactions they send to or receive from the provider organization. Healthcare organizations should also use the information derived from the analysis described above to identify and prioritize ICD-10 training programs for clinical personnel across the enterprise. They can engage with their payers and other trading partners to identify the potential for heterogeneity (varying levels of ICD-10 preparedness) to support ICD-10 during the transition period. A heterogeneous environment requires remediated systems to support ICD-9 and ICD-10 during the transition period. ICD-10 Transaction Monitoring & Control Another critical asset for managing a smooth transition to ICD-10 is the ability to monitor and track Key Performance Indicators across the provider organization. The requirement to measure and track these KPIs is likely to transcend the transition date of October KPIs will need to be measured for a few years until a greater level of predictability is achieved in the revenue cycle through an increase in organizational knowledge on coding practices while encoding claims and other clinical data in ICD-10. Downstream operations such as billing and claim submission, TPG follow-up, and Payment Posting and Account Receivables are likely to experience substantial impact as summarized below: 1. Billing and Claim submission: Given the substantial increase in the number of coding options available for a given case, case managers, billing analysts and coders are likely to take longer to reach consensus in their workflow on the assignment of a diagnosis or procedure code to a claim. Therefore, the KPI DNFB (Discharged But Not Final Billed) count is expected to increase, commensurate with a decrease in productivity in billing and claim submission operations 2. TPG Follow-up and Payment Posting: Given the potential cumulative effect of a decrease in productivity in the Billing & Claims submission operations in the provider environment, and corresponding delays in the payer environment, Account Receivables (measured by KPI - AR Days) is expected to incur impact due to the transition. Denials and denial volume are key metrics to measure as well and correspond to a similar increase in AR. Edifecs recommends that provider organizations implement systems and processes that provide for benchmarking these KPI values prior to the transition to ICD-10, followed by measurement of actual KPI values compared with the established benchmark. A credible benchmark value for each KPI is established by review of at least 6 months of provider claims data. An efficient transaction monitoring system provides a single point of visibility of transactions flowing into and out of an enterprise and across enterprise systems. 6

7 Healthcare organizations need the ability to generate real-time reports and alerts based on the KPIs (see Figure 5) and their deviations from historical benchmarks. It is particularly important that healthcare organizations configure their transaction monitoring system to track specific, prioritized high-risk ICD-10 transactions (i.e., those transactions identified during the analysis phase to pose the most risk to the revenue cycle.) By measuring and classifying revenue cycles based on chronic condition categories, healthcare organizations can gain an even broader financial impact picture, especially when viewed in comparison with historical benchmarks for chronic condition reimbursements. Moreover, by further stratifying revenue cycle data by payer or trading partner, healthcare organizations can pinpoint delay and denial ratios related to specific trading partners, and then use them to target remediation actions effectively Monitor and Audit Transactions Analyze Transaction Information Calculate key performance measures Setup measure computation for high-risk codes Monitor and report performance measures Figure5: Monitoring & Control of ICD-10 Transactions. Summary Migration from the ICD-9 to ICD-10 code sets greatly impacts key business processes and policies across many areas of a healthcare provider organization. A migration plan exclusively focused on Crosswalking or Code Management may not yield desired business results. Provider organizations need to consider a balanced, risk-based remediation plan that limits capital expenditure and minimizes financial risk. They need to carefully choreograph numerous system changes, process modifications and personnel training to successfully manage the migration process. Specialized impact analysis and transaction monitoring tools can help provider organizations navigate their ICD-10 migration and mitigate financial risk with fewer manual resources. An industry leader since 1996, Edifecs provides healthcare software solutions that improve operational performance by streamlining the exchange of information among health plans, hospitals, and other healthcare organizations, while enabling compliance with current mandates such as HIPAA, Operating Rules and ICD-10. Today, more than 250 healthcare customers use Edifecs technology to unify transactions from any information channel source and input mechanism, while automating manual business processes such as enrollment, claims and payments management. Edifecs is currently recognized as one of the 100 Fastest Growing Private Companies in the state of Washington, 100 Best Places to Work in the state of Washington, an Inc fastest-growing private company and one of the 500 Fastest Growing Companies in North America by Deloitte. Edifecs is headquartered in Bellevue, WA. For more information, please visit Edifecs Corporation. All rights Reserved. May, 2013