Healthcare Revenue Cycle Management, ICD-10, Claims Reimbursement, Medicare, Medicaid

Policy & Regulation News

Will ICD-10 Recovery Bring Artificial Medical Cost Inflation?

By Jacqueline DiChiara

- As the healthcare industry enters the second half of the year with the rise and fall of the summer solstice this week, 100 days remain until the onset of ICD-10 implementation. Priorities for healthcare providers are changing as time ticks onwards. The simple concept of monitoring expected input versus expected output is becoming a complicated financial concern as October 1 looms nearer.

ICD-10 deadline

A hearty plethora of ICD-10 questions indeed lingers. Is “moderate” ICD-10 implementation still a success? Will there be claim rejections from day 1? Is now the right time to move forward with ICD-10? What does enhanced granularity really mean? Do diagnostic codes imply reimbursement?

What may the months following October 1 bring as the winter solstice, perhaps hard to consider as we now welcome the first days of summer, approaches? Cecil Bohannan, Jr, Delivery Manager, Advisory Services, CTG Health Solutions, chatted with about the greater financial implications of ICD-10, the greatest misconceptions swirling around the industry, and why inflated confidence in data may lead to false financial hopes as ICD-10's aftermath unfolds at the tail end of the year. What payment changes can healthcare providers anticipate come October?

CB: Most people don't expect any changes to payments for professional providers. On the other hand, there's a slightly larger degree of variance that people are expecting for institutional providers, not because of the direct payments related to ICD-10, but indirectly because of what most people in the industry are calling Diagnosis-Related Group (DRG) drift. Since the inputs are changing into the grouper systems, the outputs could also change.  

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The real financial implication is the timing of October 1 and how long it's going to take for all of the variation to shake out. It'll be bad from the provider perspective if people aren't ready because you are going to get some very hardline responses from some health plans, as required by the federal regulation. How do you anticipate the billing process being impacted come October?

CB: October going into November is probably going to see a lot of Incurred But Not Reported (IBNR) increase. So there'll be a lot of people still getting services, but maybe some providers not able to bill. It will artificially look like the costs to provide healthcare coverage to members are going down when, in fact, the real issue is you just don't know what the cost is because the providers haven't been able to send you a claim.  

You'll have a recovery period, as well. It could be that in the fourth quarter of 2015 it is going to look like your medical costs are down, but in the first quarter of 2015, once everyone figures out how to get their claims paid, suddenly medical costs could look artificially like they’re going up because you've got all those old claims being paid a quarter late. What are some misconceptions about ICD-10 that require clarification?

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CB: There is a misconception in the industry that payers are looking at ICD-10 as an opportunity to decrease their medical costs, to increase the amount of claims that they can deny, and otherwise not pay people. The people in health plans that I’ve worked with are talking about how they want to pay appropriately for the services that are rendered; they don't want to pay inappropriately for the services that are rendered.  

Another misconception is people are going to be able to use the data immediately to make new sorts of medical and financial decisions. Most people who've thought this through think that that early October, November, and December data that we get will probably be pretty decent from the large hospital HIM departments, but otherwise, there's probably going to be some spotty quality to those codes generated on those claims.  

People are saying we can't trust the first-quarter's data because we just don't know what it is. Most payers that I've worked with, many providers, and even CMS said they’ll collect data for a year before they make any kind of financial or medical decision based on the data. Yes, we're going to be getting all this great data early, but there will not be a lot of decision making based on the data in the first year.

There's some misconception that every provider is against the implementation of ICD-10. I haven't seen that to be the case. There is a vociferous group that is against the implementation of ICD-10, and they're against it for a good reason. The provider bears the cost of generating ICD-10 data, but other entities receive the benefit of improved data. How will the healthcare industry collectively benefit from ICD-10 implementation?

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CB: The data that ends up going to the health plans, the population analytics groups, or the medical management teams are where the advantages are going to be, where people get better data and can make better decisions.  

The benefit is not uniform across the industry. A lot of providers recognize that we're 20 years behind the rest of the world from a data perspective because we just haven’t had the gumption to go ahead and bite the bullet and eat the cost for doing this work.  

Every time we wait to implement ICD-10, it costs money, in two ways. One, you've lost your option to do other work that you could have been doing that might have been of higher priority. And, two, you've got to keep some people with the knowledge of what was going on and what will need to be restarted out of other efforts. You've got the build-up time that happens whenever you restart your ICD efforts.


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