The Financial Implications of ICD-10 Implementation

The Financial Implications of ICD-10 Implementation CHA Webinar January 21, 2014 Welcome Liz Mekjavich California Hospital Association 1

Continuing Education Offered for this Program Compliance This program has been approved for 2.4 Compliance Certification Board (CCB) Continuing Education Units. Granting of prior approval in no way constitutes endorsement by CCB of the program content or the program sponsor. CCB program code # CAHA-043. (Note: CE recipients are solely responsible for retaining a copy for their records and for reporting credits to CCB) 3 Continuing Education Offered for this Program Health Care Executives CHA is authorized to award 2 hours of pre-approved Qualified Education Credit (non-ache) for this program toward the advancement, or recertification in the American College of Healthcare Executives. Participants in this program wishing to have the continuing education hours applied toward ACHE Qualified Education credit should indicate their attendance when submitting application to the American College of Healthcare Executives for advancement or recertification. Nursing Provider approved by the California Board of Registered Nursing, CEP #11924 for 2.2 contact hours. 4 2

Continuing Education Requirements Full attendance, completion of online survey, and attestation of attendance is required to receive CEs for this webinar. CEs are complimentary for registrant. If additional participants under the same registration would like to be awarded CEs, a fee of $20 per person, will apply. Post-event survey will be sent to registrant and provide information on how to apply online for additional CEs. 5 Program Overview and Introductions Amber Ott California Hospital Association 3

Faculty: Rajeev Desai Rajeev Desai is a client partner at Syntel for their healthcare and life science business unit. As a client partner, Mr. Desai is responsible for managing Syntel s healthcare provider subvertical. In addition, he serves as the practice leader for Syntel s ICD-10 practice. Mr. Desai has over 27 years of experience and has worked across many industries including banking, manufacturing, energy and utilities and healthcare. He has spent the last 12 years engaged in the healthcare field. 7 The Financial Implications of ICD-10 Implementation Presented by: Rajeev Desai Syntel Client Partner Healthcare & Life Sciences (Provider Sub-vertical and ICD-10 Practice) January 21, 2014 10:00 a.m. 12:00 p.m., Pacific Time 4

Agenda 1 Financial impact of ICD-10 on providers 2 Risk analysis working toward budget neutrality 3 Putting it all together external partner testing 4 ICD-10 end-to-end testing 9 Financial key considerations What is the impact on reimbursements? How do we ensure no increase in denial % and minimal impact to cash flow? Do we have the risk of losing patient volume? If so, how do we mitigate this risk? Can we equip our payer relationship team with better data and insights for effective payer contract negotiations? Will our operations be ready when change happens? How efficiently will our operations be running after the change? How do we get a good return on investment? 10 10 5

Section-1 1 Financial impact of ICD-10 on providers Impact on reimbursements, denials, cash flows, productivity Risk identification and analysis Various approaches to mitigate financial risks 11 Financial impacts on provider process (Denials, productivity, cash flows and reimbursements) Patient Access Medical Coding Financial Services Pre Fin. Scheduling Registration Counseling Registration Coding Charge Capture Billing Claims Accounts Payment processing Receivables Posting Process Eligibility Bed Mgt. verification Transfers & Enterprise referrals scheduling Discharge ABN documentation notifications Payment options Schedules, Co-pays Medicare/Medi caid eligibility Authorization Abstraction Rules Payer Provider Contracts Coding guidelines Code assignment Charges, Billing edits authorizations Medical necessity Charge master maintenance Contractual adjustments EDI enablement (837, 835,etc.) Claims tracking and denials management AR days AR aging Payments & adjustments 835 RA COB s Denials Productivity Cash Flows Reimbursements Financial Impacts Redesign system interfaces 6-10% Increase in claim error rates Reject / denial rates may increase by 100% to 200% Provider-payer processing errors Increased billing enquiries Shortage of experienced coding professionals Expected 50% drop in coding productivity due to learning curve New Coder hiring Dual coding Spike of 10 to 20 days to accounts receivable. 20-40% increase in AR days, aged accounts Delayed payments Coding Backlogs Changes in DRG weights Changes in Case Mix Index Changes in Reimbursement Schedules Changes in Payment Policies Delayed Payment and Claims Adjudication Legends Denials Productivity Cash Flows Reimbursements 12 6

Reimbursement impacts in real world ICD-10 Impact on Provider Practice ICD-10 s impact on the payment process varies according to the method of reimbursement used by Health Plan Reimbursement Type and Risk Adjusted Payment method Standard Methods Risk Adjustments Per Dollar of Charges Per Dollar of Cost Per Service(FFS) Per Day(per diem) Per Time Period (APGs) Ambulatory Patient Group (APCs) Ambulatory Patient Classification (MS-DRGs) Medicare Severity DRGs (AP-DRGs) All Patient Diagnosis Related Group (APR-DRGs) All Patient Refined DRGs Case Rates Per Receipt (Capitation) Per Eligible Person (RUG-III) Resource Utilization Group (HHRGs) Home Health Resource Groups Inpatient rehabilitation Group (ACGs) Adjusted Clinical Groups (CDPS) Chronic Illness and Disability payment System (DCGs) Diagnostic Cost Group (MEG. ECG, ETC) Episodic Groupers called as Case Rate Key No Impact or Low Impact Medium or Indirect Impact High or Direct Impact 13 Reimbursement impacts in real world (cont.) 14 7

Reimbursement impacts in real world (cont.) 15 Risk identification and analysis Scenarios are the cornerstone to uncovering the rest of the components in the risk management strategy What risks exist? Are the risks real and material? 1 2 Identify Risk Scenarios Assess Risk Scenarios Note: Triggers such as regulatory updates (e.g. GEMs or DRG grouper upgrade) and new internal business rules (e.g. contract updates) may require a new round of scenario modeling Controllable Uncontrollable How do you determine exposure? 3a Model Risks Define Threshold 3b What do you monitor to know when the risk has been realized? How do you mitigate the risk? 4a Implement Levers Prepare Contingency 4b What steps do you take to address the variance? How much exposure remains? 5a Proactive Measures Reassess Risk Reporting Capabilities 5b What reporting capabilities do you need to monitor? Oct 2014 Detective Measures 16 16 8

Modeling financial risk analysis is an iterative process As time progresses, the financial analysis will be refined to include the most up-to-date intelligence regarding provider coding behavior and clinically correct ICD-10 business policies. Refine Mappings, Remediation Define Scenarios Implement Levers The ICD-10 Modeling Cycle Model Scenarios Quantify the Financial Impact 17 Modeling financial risk analysis is an iterative process (cont.) Risk is reassessed via multiple iterations The initial iterations of modeling, will be used to prioritize and inform mapping decisions, which will in turn create new mapping inputs for future modeling iterations. Initial modeling iterations may also allow for refinement of Financial Analysis performed and refinement of risk scenarios to tailor financial analysis to the areas of ICD-10 risk specific to client s business (and de-emphasize some areas of industry risk that may not apply to client s payer contract or payment policies) External decisions will also impact the modeling and need to be incorporated as data becomes available (examples include, revisions to the GEMs by CMS, release of new DRG grouper software, release of ICD-10 based HCC definitions, etc) The availability of predictive data will impact the accuracy of financial modeling, it is expected that modeling accuracy will improve based on the availability of certain types of data (illustrated below) CMS GEMs Minimum As industry intelligence increases, modeling accuracy will follow Client Selected Maps Good Computer- Based Coding Better Provider Coding Intelligence Best 18 9

Various approaches to mitigate financial risks Leverage historical ICD-9 claims data and create ICD-10 claims data using CMS GEMs mapping Allows the organization to immediately understand the first hand financial impact Less time consuming, if data is made readily available Leverage historical ICD-9 claims data and create ICD-10 claims using custom code maps (ICD-9 to ICD-10) Using the best clinically equivalent codes (from ICD-9 to ICD- 10) providers will get critical insights in cases which will potentially disrupt their reimbursement revenues Low to medium risk clinical scenarios can be considered using this approach 19 Various approaches to mitigate financial risks (cont.) Medical coders to natively code the charges in ICD-10 using the already existing clinical charts in ICD-9 By far the best approach to mitigate financial risk by appropriately sampling and prioritizing the high risk scenarios Additional effort needs to be spent to dual code the inpatient charges 20 10

Section-2 2 Risk analysis working toward budget neutrality Reimbursement structured model and framework Operational key performance indicators 21 Reimbursement structured model and framework Initiation Risk Pooling Test Planning Initiation Discovery Finalize Risk Thresholds Tool Customization& Deployment Understand Requirements Key Activities: Finalized Risk Thresholds Report formats Tool Customization Tool Deployment Prioritization Define Risk Pools Key Activities: Finalize Risk Pool Parameters Prioritized Data Defined Risk Pools Iterations.n Iterations 2 Test Methodology Scheduling Key Activities: Test Methodology Test Data management Iterations.n Iterations 2 Estimation Test Closure Test Execution Test Design Test Delivery Analysis and Metrics Reporting Key Activities: ICD-10 Risk Analysis Reports Test Summary Report Data Assimilation Metrics Reporting Execution Defect Retesting Key Activities: Variance Reports (Variance by DRG, LOB, Payer, etc.) Test Coverage Report Trend Analysis Report Test Scenario Test Case and Data Creation Mapping Key Activities: Test Suite (Test Scenario, Test Case and Test data) for Risk Analysis 22 11

Operational Key Performance Indicators (KPIs) User Experience Number of queries to physicians Response time to queries Query response type Aged backlog queries Percent of queries v/s Chart reviews 23 Operational KPIs Accounts Receivable A/R days by payers avg. time from billing to reimbursement Aging of open AR by payer in days and dollars First pass resolve Number and type of rejects / denials by payer Number of pendings for additional information Liability insurance rejects Discharged not final billed (DNFB) 24 12

Operational KPIs (cont.) Coding & Documentation Coder productivity rates Coding accuracy Mismatch between hospital and physician data Accuracy and quality of documentation 25 Operational KPIs (cont.) Trending Case Mix Index (CMI) DRG Shift 26 13

Section-3 3 Putting it all together external partner testing Risks and challenges Mitigation approaches Who you should test with, what to test now Testing approaches and workflow details 27 Risks & Challenges Objective: 1)Verify and validate the sending and receiving of transactions with various ICD-10 business partners (e.g., payers, vendors, clearing houses and federal agencies) ensuring interoperability amongst business partners 2)Ensure all external transactional and interface touch points are thoroughly tested individually before venturing into E2E testing thereby enabling maximum test coverage, minimum defect and highly accurate outcomes 28 14

Risks & Challenges (cont.) What is the Risk if external partner testing is not performed before E2E testing? Claims Management Incapability to send ICD-10 claims and claims-based information to business partners can delay reimbursements received and thereby impact the A/R days and stakeholder relations Contract Management Without proper ICD-10 testing with business partners, providers will not be able to negotiate the contracts accurately and could eventually impact future reimbursement Inaccuracy in verification of clinical scenarios in ICD-10 can render incorrect preauthorization, hampering the quality of care and coverage Security and Privacy Protected Health information (PHI) in the transactions being sent still needs to be secured as the core of ICD-10 changes deals with the medical conditions of patients Readiness Business Partners readiness needs to be confirmed without which there can be negative impact on revenues and overall ICD-10 Implementation Budget Data Incongruity in data shared amongst partners will affect reporting and trending analyses Delay in reaching the steady state will impact post 2015 plans to take advantage of ICD-10 specificity 29 Risks & Challenges (cont.) Challenges Requires collaboration between various business partners o Significant number of partners and process combinations o Not feasible for most organizations to test with all business partners in the chain (providers, payers, vendor systems, intermediaries and clearinghouses) ICD-10 External Testing Readiness o Requires multiple companies to be ready and have resources committed to test at the same time Inherent challenges in testing with business partners o Limited control over partner readiness, including their test schedules and ICD-10 remediation logic o Each business partners processing path is unique and may branch to multiple paths based on systems, intermediary services, product lines, etc. o Multiple data formats and fields specific to each business partner (interoperability) 30 15

Mitigation approaches Mitigation Approach Multi-phase approach to cover different test objectives and ensure predictable results Early involvement with high volume payers to identify, evaluate and predict the impact of coding conditions that could generate an ICD-9 to ICD-10 DRG shift Conduct collaborative testing with a few strategically selected business partners and share test findings and other key ICD-10 remediation information with other business partners Common understanding on coding process and coding values Automation based external testing o Tool-based ICD-10 Testing Framework enabled with the ICD-10 test data preparation o Leverage existing Interface Test Cases Repository (EMRs based, trading partner related) Focused ICD-10 Governance and Program Management to de-risk the stakeholder challenge Leverage lessons learned from 4010 to 5010 conversion 31 Who you should test with, what to test now Various transactions, interfaces, data exchanges etc. needs to be tested first as a part of External partner testing with various entities or partners 1)Sequence 1 to 6 involves all the testing that needs to be done in silo first before a legitimate claim is generated by Provider (like with labs, rad etc.) 2)Sequence 7 involves testing with CMS, State, etc. after the process is completed (claims sent and response received, reconciled etc.) for quality reporting 3)Sequence 8 involves testing with other care organizations present in the provider ecosystem 32 16

Who you should test with, what to test now (cont.) Government Bodies Payer Touch Points Insurance Eligibility EDI 270/271 1 EDI 278 - Authorize ADT External Ancillary Systems RAD 2 Other Care Organizations HL7 (New Order) DICOM External RAD EDI 837 - Claim Payer #1 EDI 276/277 Claim Status EDI 835 - Remittance CCD / CCR 5 6 Billing OR HOSPITAL LAB MED 3 4 HL7 (New Order) External LAB HL7 (LAB Results) HL7 (Pharmacy Order) Clearing House EDI 837 - Claim EDI 835 - Remittance Referring Hospital 5 HOSPITAL Medical Coding Quality Reporting 8 CCD / CCR HL7 Scanned Documents Flat File 7 Excel/ Flat File Future Electronic Transmission JHACO, PQRI, Other Quality Measures Note: The figure above has the list of few and generic types of vendors and partners of providers exchanging transactional data either in batch or real time, there could be more than these in the real world IT set up. 33 Section-4 4 ICD-10 end-to-end testing Sample test scenario and workflow High level test approach 34 17

Significance of end to end testing in ICD-10 program End-to-end testing need: ICD -10 changes impact across multiple systems. Even though integration touch point between systems have been tested during integration phase, testing scenarios that cut through multiple systems along with all stakeholder involvement is vital for E2E testing Need for a patient lifecycle testing as ICD-9 diagnosis and procedure code form a core information in a patient medical record. Switch and date based implementation design complexity presses for a need for end-to-end testing Dual coding remediation strategy adopted for implementation necessitates an end-to-end testing to ensure smooth transition from ICD-9 to ICD-10 in the go-live period Note:- These are just few of the many significant reasons as to why E2E testing is must 35 Significance of end-to-end testing in ICD-10 program (cont.) Why is E2E important? Error in processes and workflow used for ICD code entry in encounter/registration forms, super bills can cascade negative impact to other supporting business areas Reporting logic error in reporting logic based on ICD diagnosis and procedure codes can lead to flawed forecasting and analytics Inability of the ICD remediated products/applications to function with the seamless data communication throughout the entire business cycle will disrupt the process flow and outcome 3 rd party vendor products interfaces between ICD-10 impacted products and applications not functioning accurately can lead to lack of coordination Inability of the systems to handle claims and billing volume will affect the performance of the systems 36 18

E2E testing sample test scenario with workflow Test Scenario: 1) Outpatient visit for planned diabetic foot checkup Pre-Condition: 1) Planned visit for an existing patient 2) Existing left foot radiograph results available 37 E2E testing high level testing approach Activities Analyze Requirements Identify & Create Test Scenario Sample Test cases Create Test Cases & Test data Test Scenario: A 50-year old female came to the Outpatient clinic for a planned foot check up the patient has a history of smoking, type II diabetes, two previous myocardial infarctions and a permanent pacemaker. Patient treated as an inpatient, claims filed and sent to payer. Test Execution Defect Management & Status Reporting 19

E2E testing high level testing approach (cont.) IT Team Responsibility Requirement: Admit a patient, code the final diagnosis and file claim Validation of patient admission with the correct ICD-10 code and whether the claim file is generated with the appropriate ICD code Test Case Test Data Expected Result Capture patient encounter information & submit the details in admission screen Medical codingvalidate the final diagnosis code entered Patient ID, service type, admission date, clinical conditions E11.621 Type 2 Diabetes mellitus with foot ulcer Patient details should be captured successfully The diagnosis code entered should be medically correct Ensure interfaces for EMR, patient accounting and all downstream applications is established in test environment Perform smoke test to ensure stable environment Execute the above test cases EDI 837 created and sent to Clearing House/Payer Raise the issues faced along with status Report the defects for the above failed test cases. Log the issues with development Track and communicate defect readiness for retest to business. Generate the status for executed test cases & test metrics Retest defects and ensure test cases generates the expected result Business User responsibility Identification of scenarios Confirm if the patient information can be submitted in the patient admission screen Confirm the final diagnosis coded Confirm the claim has the correct ICD-10 information Validate the correctness of the test case & expected result Validate test data valid patient ID, diag/proc code Sign off the status reports and provide go/no-go decision. 39 Thank you Rajeev Desai (678) 373-1281 rajeev_desai@syntelinc.com 40 20

Faculty: Catherine Mesnik Catherine Mesnik is the finance director at St. Joseph Health, a 14-hospital integrated delivery system based in Irvine, Calif. In this role, she leads the ICD-10 finance team, as part of the Revenue Cycle Optimization division. She has over 15 years of experience in the health care industry, providing financial operations, business analytics and revenue cycle expertise to hospitals and medical groups. Ms. Mesnik is actively involved in the health care industry serving on the board of directors at WEDI (Workgroup for Electronic Data Interchange) and as the provider co-chair of the California ICD-10 Collaborative. 41 Leveraging ICD-10 to Improve Quality and Decrease Cost Catherine Mesnik Finance Director, St. Joseph Health 21

Degrees of Separation 43 Agenda Industry Scan The Holy Grail of Healthcare Finance Leveraging ICD-10 Codes 44 22

Where Should the Industry be Today? Source: http://www.cms.gov/medicare/coding/icd10/downloads/icd10smallhospitalstimelinechart.pdf 45 Financial Focus Today Contract Remediation and Auditing Process Understand how proposed contract language will impact revenue cycle operations Payer Partnerships Plan for the financial and operational impact of clinical policy changes o o Benefit changes (Refer to payer s clinical policies) Pre-Authorization process Plan for the financial and operational impact of contract changes o Billing and follow up o Denials and pending Leveraging payer relationships for outreach and support to physician groups 46 23

The HHS Call to Action Source: https://www.federalregister.gov/articles/2009/01/16/e9-743/hipaa-administrative-simplification-modifications-to-medicaldata-code-set-standards-to-adopt 47 The Holy Grail of Healthcare Finance Decrease Cost Increase Quality 48 24

Leveraging the Use of ICD-10 Codes Analytics Population Management Operational Workflow - Big data - Discrete data fields - Risk stratification - Referral process - Analytics to action - Pull instead of push 49 Examples of Leveraging the Codes Capital expenditure requests o Robotic surgeries now have their own codes Service line analysis o Evaluating for current performance and future growth Readmissions analysis o o Initial, subsequent and sequella Z codes = the reason for encounter Quality analysis o o Specificity in fractures Complication codes 50 25

ICD-10 Business Use Grid ICD-10-CM Code ICD-10-CM Description Business Use Z41.1 Encounter for cosmetic surgery Z91.120 Patient s intentional underdosing of medication regimen due to financial hardship Ensure billing guidelines are followed Automate a social work referral for non-compliance due to financial hardship Z68 Body Mass Index (BMI) Identification of high risk, potentially requiring additional outpatient services and referrals Quick Tip: Review billing edits that point to ICD-9 codes today! The business use of these codes may be better quantified in ICD-10 codes. 51 Closing Thoughts I skate to where the puck is going to be, not where it has been. - Wayne Gretsky 52 26

Website References WEDI http://wedi.org/ HIMSS ICD-10 Playbook http://www.himss.org/library/icd-10/playbook?navitemnumber=13480 Federal Register CMS https://www.federalregister.gov/articles/2009/01/16/e9-743/hipaaadministrative-simplification-modifications-to-medical-data-code-setstandards-to-adopt http://www.cms.gov/medicare/coding/icd10/icd- 10ImplementationTimelines.html CA ICD-10 Collaborative http://www.caicd-10.org/ 53 Thank you Catherine Mesnik (949) 381-4494 Catherine.Mesnik@stjoe.org 27

Questions Online questions: Type your question in the Chat Box, hit enter Phone questions: To ask a question hit *1 To remove a question hit *2 Upcoming Programs Post-Acute Care Conference January 30 31, Huntington Beach Hospital Compliance Seminar February 13, Sacramento, February 19, Long Beach Rural Health Care Symposium February 26 28, San Diego California Congressional Action Program May 4 7, Washington, D.C Hospital Finance & Reimbursement Seminars June, three programs 56 28

Thank You and Evaluation Thank you for participating in today s program. An online evaluation will be sent to you shortly. Reminder: evaluation completion is required to receive continuing education credits. For education questions, contact Liz Mekjavich at (916) 552-7500 or lmekjavich@calhospital.org. 57 29