PwC. ICD-10 Implementation Strategies. A Huge Expense or a Catalyst for Competitive Advantage. September 17, 2009

Transcription

1 ICD-10 Implementation Strategies A Huge Expense or a Catalyst for Competitive Advantage September 17, 2009 PwC 2009 PricewaterhouseCoopers LLP. All rights reserved. "PricewaterhouseCoopers" refers to PricewaterhouseCoopers LLP (a Delaware limited liability partnership) or, as the context requires, other member firms of PricewaterhouseCoopers International Ltd., each of which is a separate and independent legal entity. Slide 0

2 Agenda Overview of ICD-10 ICD-10 Impacts ICD-10 Approach: Compliance, Leverage, Strategic Value Approach to ICD-10 Some choices that drive Competitive Advantage - Use of Crosswalk v. Remediation - Provider Coding efforts to capture data - Investments in Analytics to generate value compared to competitors Closing Slide Contact information Slide 1

3 ICD-10 and HIPAA 5010: A Regulatory Update and Background On January 15, 2009, Health and Human Services (HHS) released the final 5010 and ICD-10 regulations and final compliance dates are: Level 1 (can create and receive compliant transactions, ready for testing) by 12/31/ Level 2 (completed testing with trading partners, ready for production mode) by 12/31/2011 ICD-10 full compliance by 10/1/2013 Challenges: Approximately 7 times more ICD-10 codes than ICD-9 codes (24,000 ICD-9 codes and 150,000 ICD-10 codes) Restructured code logic and length of the codes Most major business processes will be impacted: - Reimbursement (Claims) - Medical Management - Provider Contracting - Finance - Actuarial / Underwriting - Reporting / Data Management

4 ICD-10 Proposed Conversion Benefits Greater level of specificity and clinical detail Medical terminology and disease classification updated for consistency with clinical practice Comparability between mortality and morbidity data Up-to-date classification information sources will provide much better data for: Measuring the quality, safety, and efficacy of care Designing payment information sources and processing claims for reimbursement Setting health policy Operational and strategic planning and designing healthcare delivery systems Monitoring resource utilization Preventing and detecting healthcare fraud and abuse Improved ability to measure outcomes, efficacy, and costs of new medical technology Reimbursement: More accurate and fair reimbursement Better justification of medical necessity Increased sensitivity when making refinements grouping and reimbursement methodologies

5 ICD-10 Impacts Cost of Implementation Industry Impact - Health & Human Services estimated the cost to address technology and business process change is $1.6 Billion (range of $0.9B to $3.1B) - The Nolan Group in a study sponsored by the Blue Cross & Blue Shield Association estimated the cost to implement is within the range of $5.5 B to $13.5 B. Individual Plan impact - Based on our assessments of numerous payers, the typical range of impact is $40 million to $65 million for a health plan operating in a single state that will remediate systems and processes to generate ongoing business value. - Costs for multi-state plans scale upwards from those figures, based on the degree of integration within the people, process, and technology.

6 Industry Progress Progress of other Plans Blues 2 Large Public Plans ~10 Blues 2 Large Public Plans 1 Large Multi State Blue 2 Blues Plan Impact Assessment Not Started Impact Assessment In-progress Detailed Planning & Requirements Impacted Plans ICD-10 Current state Current Strategies Multi state Blues Plan Large Public Plan Large Public Plan Single state Blues Plans (3) Completed impact assessment; in progress of planning & detailed requirements Completed impact assessment; in progress of planning & detailed requirements Impact assessment not started Impact assessment in progress, plan to begin planning and detailed requirements no later than January 1, 2010 Mostly native / dual processing with crosswalk as needed Strategy unclear but we believe that they will settle on native / dual processing Mostly native / dual processing with crosswalk as needed A single state Blues Plans (1) Impact assessment completed Planning to crosswalk as a primary strategy Other single state Blues Plans (7) Impact assessment not started Planning to crosswalk as a primary strategy Other single state Blues Plans (8) Impact assessment not started Mostly native / dual processing with crosswalk as needed

7 Approach to compliance Given the need for compliance, the far reaching implications of ICD-10, and the current operating environment: How do you implement ICD-10 to minimize remediation costs and create strategic advantage?

8 Our Point of View ICD-10 can be More than Compliance Critical Success Factors Early identification of high impact areas to properly size and sequence required activities while there is still time Alignment of ICD-10 with strategic initiatives, both at the enterprise and high impact business & IT unit levels Integrate ICD-10 requirements with existing projects to reduce long-term costs and avoid rework Provide focused education for better strategic and management decision-making in advance of ICD-10 Creation of an internal ICD-10 center of excellence to reduce longer term dependence on external resources By starting early, organizations can enhance their strategic objectives, achieve compliance and reduce overall costs

9 Our Point of View Project Lifecycle Program approach should address the major issues and challenges faced by health plans: - Compartmentalizes a long-term effort to ensure continuous progress - Allows for flexibility in service delivery - The significance and required timeline for testing will compress this timeline PMO People Process Technology Mobilization Impact assessment Strategy definition Implementation plan development Implementation plan execution & testing 10/1/2013 Compliance Date Post Compliance Monitoring Activities Strategy Review Business Process assessment Technology Assessment Program Management for ICD-10 initiatives Business Process Change Technology Services Implementation Planning Resource plan Financial impact assessment PMO design and plan Project execution Vendor coordination Business Process remediation Testing Internal Project Monitoring Corrective Action Plan Development Crisis Management External Compliance ICD-10 Timeframe: 4 months 4 months 40 months 6-8 months

10 Approach & Methodology Strategic Themes and Business Decisions (Case Study) Ten main cross-functional enterprise themes that will require strategic business decisions to address Data Infrastructure Actuarial & Pricing Process Redesign & Training Communications Modernization Vendor Strategy Budget Competitive Advantages Provider Community Cross-walk Sample Strategic/Business Decisions: How will a crosswalk be utilized in ICD-10 implementation? Will your plan carry both ICD-9 and ICD-10 codes in parallel or utilize a crosswalk (automated) solution? Will your plant look to enhance current incentivebased programs with the increased granularity of ICD- 10 codes? As health plans strive to set their health management strategies, will you use ICD-10 convergence as a catalyst to enhance disease management, wellness and other supporting initiatives to improve quality and reduce cost of care? When, and to what degree will the current major impacted projects be integrated with ICD-10 change requirements in order to leverage future cost savings and enhance ROI? Will your plan use ICD-10 convergence as an opportunity to improve current reporting functions with external data exchange partners? Will your plan leverage ICD-10 as an opportunity to modernize its IT portfolio? How much does your plant want its constituents to know about its ICD-10 strategy and when should that information be communicated? Will your plan leverage ICD-10 to improve some of its business processes and/or support process standardization integration initiatives? Will product design, pricing and reserving policies need to change during the initial transition to ICD-10? How will your plan use ICD-10 as a lever to enhance and execute the overall IT Architecture and data management strategy? Slide 9

11 ICD-10 Case Study Business Impact Example Provider Payment Policy Provider Community Overarching Impacts Provider Payment Policy is impacted by the shift to ICD-10 for payment programs that are driven by clinical information - DRG Driven by diagnostic and procedure information in ICD-10 format. - APG/APC Lesser extent than inpatient services, but some reimbursement driven by ICD-10 diagnostic information. The increased granularity of ICD-10 coding is likely to expand the reimbursement options for plans that have access to the information (e.g. Expanded DRG groupings, carve-out contracts). Crosswalk Option Minimizes impact on current plan operations. May create challenges when new reimbursement scenarios are released that rely on ICD-10 coding. (e.g. Medicare DRG Grouper for FY 2014.). May require contract changes to support legacy grouper versions. May require effort to minimize payment distortions. Remediation Option Increases impact on current plan operations and resources. Permits the plan to adopt future state reimbursement structures that are based on ICD-10 coding. May create competitive reimbursement advantage compared to other plans that choose the crosswalk option.

12 ICD-10 Case Study IT Impact Example - Crosswalk Cross-walk Key Finding: At the most basic level crosswalk is not difficult concept; however, there are many important considerations and decisions that will ultimately dictate the relative simplicity or complexity of crosswalk. Key Considerations Crosswalk Mappings What mapping will be used to crosswalk from ICD-10 to ICD-9 and ICD-9 to ICD-10 (e.g. GEMS)? Crosswalk Methodology What will be the guiding principles behind crosswalk of data? To what degree will crosswalk be limited versus being called at multiple steps in transaction processing? Exceptions to the Rule What areas or processes will still require ICD-10 or both ICD10 and ICD-9 codes from the outset (e.g. Customer service applications, portals, actuarial and underwriting, pricing)? At what point do the exceptions become the rule? Buy vs. Build Will the organization purchase this component or build it in-house? Is there a competitive advantage to be gained by building this component? Placement of Crosswalk Where will the crosswalk sit within the infrastructure, at what step in processing will mapping occur, and will this be a central service? Technical Interface How will applications interface with the crosswalk, both to convert codes and to determine original codes already converted? User Interface How will users access crosswalk decisions and mapping data?

13 ICD-10 Case Study IT Impact Example Data Infrastructure Data Infrastructure Key Finding: Data and its supporting infrastructure will be significantly impacted regardless of preferred remediation approach (crosswalk or full remediation). Key Considerations Current Infrastructure How is data currently stored and archived across the organization? Will there be fundamental infrastructure requirements such as additional disk space required to handle the new codes, storage of multiple codes (ICD-9 and ICD-10 concurrently) for a period of time? Current Data Model Does the current data model for systems and warehouses currently support ICD-10 (e.g. field lengths & composition)? What will it require for them to support and store ICD-10 and ICD-9 concurrently? Data Sources What internal and external data is feeding the data infrastructure? What does this data look like currently and how might it change? What are external parties plans? Data Consumers and Feeds Who currently leverages data containing ICD-9 codes? How are reports and feed driven off of ICD-9 codes? What outbound feeds contain ICD-9 codes that may be used downstream? What data is fed outside the organization and how might it be impacted? Converting Historical Data Will historical data be mapped from ICD-9 to ICD-10? How and for how long will ICD-10 to ICD-9 information be retained for reporting and analytical purposes?

14 Contact information Jeff Fusile Partner Mark Williams Partner PwC