managed care contracting under icd-10 rob borchert, mba, crce-i – best practice associates lorrie...

Managed Care Contracting Under ICD-10

Rob Borchert, MBA, CRCE-I – Best Practice AssociatesLorrie Borchert, CPC, CRCE-I – Best Practice Training Institute

Maryland AAHAM Education ConferenceJanuary 17, 2014Linthicum, MD

@Best Practice Associates 2

Learning Objectives

• Review of ICD-10 Impacts! • Review of ACA components! (2014 and beyond)• Discussion of various Contract Types!• Discussion of new Exchange Contracts!• How to perform various analyses!• What will payors do?• What should YOU do?


ICD Code DifferenceCM - Clinical Modification

1 2

Series1 13000 68000

5000

15000

25000

35000

45000

55000

65000

75000

ICD 9 ICD 10

PCS- Procedure Coding System

1 2

Series1 11000 87000

5000

15000

25000

35000

45000

55000

65000

75000

85000

95000

ICD-9 ICD 10


Mapping Between Old And New Systems

• General equivalence maps (GEMs) between ICD-9-CM and ICD-10-CM/PCS have been developed

• GEMs do NOT equal crosswalks

• Reimbursement map added to CMS web site in 2009– Intended for use by payors – Temporary mechanism – Allows claims processing by legacy systems– Allows for data collection for reimbursement changes

• Maps should NOT be used for coding medical records


Mappings


GEMs Mapping


CMS GEMS vs. CMS Reimbursement Mappings

Source: Deloitte Consulting presentation “Do Not Underestimate ICD-10’s Impact on Population Health Management” at the Forum 10 in Washington, DC 10/15/10


When should GEMS be used?

• To convert databases such as:– Payment systems– Payment and coverage edits and policies– Risk adjustment logic– Quality measures– Disease management programs– Utilization/case management systems– Financial modeling– Variety of research applications involving trend data

• To translate coded data for comparing data across transition period

9

When should GEMs NOT be used?

• When you have access to the medical record?• When you have access to text descriptions or

clinical terms describing diagnosis or procedure• When a small number of codes are being

converted• GEMs should NOT be used for coding medical

records!!!!

@Best Practice Associates


Sports MedicineHit by a ball - ICD-9-CM code: E917.0

ICD-10-CM possible code• W21.00 – Struck by hit or thrown ball, unspecified type• W21.01 – Struck by football• W21.02 – Struck by soccer ball• W21.03 – Struck by baseball• W21.04 – Struck by golf ball• W21.05 – Struck by basketball• W21.06 – Struck by volleyball• W21.07 – Struck by softball• W21.09 – Struck by other hit or thrown ball


ICD-10-PCS Code Structure

ICD-10 PCS Code Structure:

1 2 3 4 5 6 7

Section

BodySystem

RootOperation

Body Part

Approach

Device

Qualifier


ICD-10-PCS Example

Interphalangeal fusion of right great toe, percutaneous pin fixation

OSGP34ZSection Med/Surgical 0

Body System Lower Joints S

Root Operation Fusion G

Body part Toe Phalangeal Joint - Right

P

Approach Percutaneous 3

Device Internal Fixation Device

4

Qualifier None Z


ICD-10 Impacts


Impacts to People

Source: AAPC website


Impacts to Process

• Documentation practices• Productivity and efficiency practices• Contracts and business processes• HIM practices• Practice management processes• Budget• Payment conversions• System logic and edits• Claims edits• Disease & Utilization management


Impacts to Process


Impacts to Technology

• IT system changes• Upgrade software• Modified field lengths• Modified system logic• Update superbills/encounter forms and databases• Data reporting elements• Submitting ICD-9 and ICD-10 codes• Retain access to historical coded data in ICD-9 format


Revenue Cycle Impacts

Medium Impact to process and training Large impact to process and training

IT A

pplic

ati

ons

Clin

ical

Busi

ness

Pro

cess

/Pa

tient

Acc

ess

Payment Posting

Scheduling

Patient Access Services Charge/Coding Integrity Patient Financial Services

Pre-Registration

Financial Counseling

Charge Capture

Entry

Coding Assignment

Account Resolution

Claims Processing

Test Order“Optional

”Clinical

Doc.

Clinical Interventio

n

Scheduling

PatientAccounting

Registration

Performance Measurement

Pricing

HIS (including

CPOE) HIMClaims

Clearinghouse

Patient Accounting

Case Management

Utilization Management


Contract Management and Insurance Verification

• Building coverage patterns from TPP contracts• Specific specialty definitions of both CPT and

diagnosis (Case Rates)• HIPAA Transaction sets• Educating and Training staff for optimum

coverage in identifying both POA and principal reason for admission (medical necessity)

• TPP systems monitoring


ICD-10 Effect on Payor Reimbursements

• Independent analysis of some of the most common reimbursement arrangements identified conversion challenges that may modify some payor and provider reimbursement arrangements, while for others the effect will be minimal.

• Solutions to these situations need to be tailored to your specific environment; however, you will want to review the possibilities identified in the analysis outlined in the table below.

• In cases such as diagnosis-related group carve outs where codes have a relatively small impact on reimbursement formulas, most payors will likely experience few conversion problems.


ICD-10 Impact on Payor Reimbursements

Common Reimbursement Arrangements

Potential ICD-10 Impact Identified by Independent Analysis

DRGs and other case rates

Hospitals, government, and commercial payors Code focus: ICD-9 and procedure codes 1. ICD-9 diagnosis and procedure codes are the basis for diagnosis-related groups (DRG) classifications.

2. Using General Equivalence Mappings (GEMs), a number of ICD-10 codes did not map easily to the MS-DRGs (inpatient reimbursement); the clinical review process was required to complete the conversion process. GEMs are a tool to help find matches between ICD-9 and ICD-10 codes.

3. The ICD-10 MS-DRGs will likely produce some different reimbursement results compared to ICD-9-based MS-DRGs, for example: a. Clean mapping problems b. Service frequency, billed code volume, impact on dollars c. Clarity of ICD-10 code may produce a different code assignment based on the original ICD-9 code d. Dollar and volume magnitude related to the changes to Complications Comorbidities (CC)/ Major Complications Comorbidities (MCC) lists are unknown

4. The Inpatient Psychiatric Facility Prospective Payment System for psychiatric facilities and Medicare Severity Long-term Care DRG for long-term hospitals both use the same MS-Grouper and will be similarly affected.

5. When applying CMS-designed ICD-10 MS-DRGs to a commercial population, the case mix may vary more than the Medicare population does.





Risk-adjusted Reimbursement

Medicare/Medicaid programs Code focus: Hierarchical Condition Categories (HCCs) and Rx-HCCs 1. Although more than 5,500 ICD-9 diagnosis codes on the HCC and Rx-HCC models have no ICD-10 map, HCC developers will be able to include the conditions in the ICD-10 HCC without altering the intent. The largest potential impact is that more than 1,000 HCC ICD-9 codes have more than one ICD-10 option. 2. The ICD-10 transition impact will be quite evident in situations where one ICD-10 code maps to more than one ICD-9 code and either the ICD-9 codes do not map at all to a HCC, or to the same HCC.

DRGs/inpatient care rate carve-out, pass-through or add-on technology procedure or diagnosis

Commercial insurers Code focus: DRG inpatient payment carve-outs where payment is negotiated 1. Diagnoses carve-outs are typically paid by broad category with little reliance on coding specifics to differentiate payment levels. 2. Expect minimal impact on procedural coding because inpatient patient carve-out procedures and technology are often reimbursed as a percentage of charges. Outpatient procedures are reimbursed based on Current Procedural Terminology (CPT) codes where additional information is not needed to pay a claim.

Episode-based Reimbursement

Demonstrations (ACE – Acute Care Episode) and other pilots While there have not been many systems reimbursing on episodes of care based on ICD-9 codes, the advent of ICD-10-specific codes will likely accelerate the development of these payment types.





Performance-based Reimbursement

Health plans, Medicare Pay for Performance (P4P) Code focus: Healthcare Effectiveness Data and Information Set (HEDIS) and similar performance measures 1. The most common structures are based on either reaching specified performance level or degree of improvement. The transition to ICD-10 may affect HEDIS-based outcomes as HEDIS uses ICD-9 diagnosis and procedure codes along with other codes such as CPT and revenue codes. In the case of immunization codes, ICD-9 codes are more specific than the ICD-10 mapping (five ICD-9 codes would now map to two ICD-10 procedure codes). Because these ICD-10 codes are less specific, the small portion of immunizations occurring in an inpatient setting will be unidentifiable under ICD-10, and this may affect performance measurement.

Hospital Billed Charges Hospitals Code focus: billed charges, CPT/HCPCS 1. The conversion to ICD-10 should have minimal impact on billed charges because predecessor ICD-9 codes were not used to create the charges.

Usual and Customary Reimbursement (UCR)

Payors, hospitals, and providers Code focus: diagnosis codes 1. Diagnosis codes are used to help determine the payment rate and facilities’ qualification as inpatient rehabilitation facilities (IRFs). Therefore, the initial conversion to ICD-10 will have some impact on reimbursement based on IRF-Prospective Payment System (PPS). The challenge will be in determining which ICD-10 codes are the qualifying codes that should be included in the IRF logic. 2. The increased specificity of ICD-10 codes will influence the IRF-PPS model in the future.





Other Reimbursement Arrangements

Brief summary Resource Utilization Groups (RUGs): Minimal if any impact on skilled nursing facilities and RUGs.

Home Health Resource Groups (HHRGs): Although many of the HHRG diagnostic categories are broad, there will be some instances where HHRG assignment for the same condition may vary under ICD-10 compared to ICD-9 diagnosis codes.

Possible future conversion of the CPT/HCPCS codes to ICD-10 PCS parallel with the CPT/ HCPCS codes.

Source: Zenner, Patricia. ICD-10 Impact on Provider Reimbursement. Milliman, 2010. Retrieved from http://publications.milliman.com/publications/health-published/pdfs/icd-10-impact-provider.pdf.


Examples of I-9 to I-10 ConversionsCrohn’s Disease ICD – 9 (4) ICD – 10 (28)

Regional enteritis of small intestine

555.0 K50.00

Regional enteritis of large intestine

555.1 PLUS an

Regional enteritis of small intestine w/ large intestine

555.2 ADDITIONAL

Regional enteritis of unspecified site

555.9 27 CODES

ICD – 9 92.27 ICD-10 PCS

Implementation or insertion of radioactive elements

261 PCS codes for Anatomical sites specified21 distinct Approaches


MCC/CC Category ConversionConversion Summary MCC CC Total

ICD-9-CM Codes on List 1,592 3,427 5,019

ICD-10 CM codes Auto-translated 3,152 13,594 16,845

DRG Description # ICD-9 codes # ICD-10 codes

291-293 Heart Failure & Shock 27 20

231-236 Coronary Bypass 9 232

250-251 Percutaneous Cardiovascular Procedure without Stent

8 136

258-259 Cardiac Pacemaker Device Replacement

6 14

533-534 Fracture of Femur 14 273


Managed Care Today

• Fully examine the rates you have today!!!!!– MSDRG rates– Case Rates for inpatient– APC/APG Rates for outpatient surgery and

ancillary support services– Per diem rates for various services– Percent of charge rates for various services– Discount off Medicare rates


Managed Care Tomorrow

• Insurance Products under ACA:– No ability to deny or limit coverage for pre-existing

conditions– No lifetime limits on benefits– No ability to cancel coverage without proof of

fraud– Ability of patients to demand reconsideration of

health plan decision to deny payment for test or treatment – includes an external appeal process



• Insurance Products under ACA:– Cost-free preventive services – access to

screenings/vaccinations & counseling without deductible or co-insurance

– Kids on parent’s plan until reach age of 26– Must be able to choose your primary care

physician – no need for referral to OB/GYN– Use nearest ED without penalty or no requirement

to get prior approval and no higher deductible or co-insurance for out-of-network ED visits


In God, We Trust, All Others Bring Good Data!



• What payers will seek from providers under BOTH Affordable Care Act (ACA) and ICD-10:

• medical decision making models• capitation models• quality measures and payments• bundling payment• patient-centered medical homes

• As a provider, can YOU bring your Quality and Cost factors to the table FIRST?


10 Considerations for Building a Pricing Strategy

Make margin decisions NOW

Gather competitive pricing from all sources

Use market research to understand trade-offs consumers are willing to make between price versus serviceAssess the value to you of a loss leader

Calculate customer value profile to include transaction and downstream

Scrutinize cost reports for accuracy

Inventory your “soft selection” factors

“Sell” the organization’s pricing strategies to physicians and staff

Identify and follow enterprise metrics

Set your market position


Medical Decision Making Models

• Not all services are created equal• We do too many unnecessary things and don’t do

enough of the good stuff• If something costs more, you are less likely to buy• If something costs less, you are more likely to buy• If you have already paid, you feel entitled to it• Patients are interested in what happens to them• The best treatment for a given individual may

depend on their own goals and values


Value-Based Benefit DesignLow Cost – High Value

• Identify high value services that are underused– Screening– Prevention– Evidence based chronic

disease management– Prenatal care

• Reduce or eliminate cost to access

• Offer to payor for increased market share

Costs more – Learn more• Identify preference sensitive

and supply sensitive services for which evidence suggests– Coronary revascularization– Back surgeries– Cross sectional imaging– Large joint replacements

• Center of Clinical Excellence• Patient Preference = High Value• Should Cost More


Value-Based Benefit DesignNo Co-Pay – High Value

• Immunizations• Pregnancy• Hypertension• Asthma• Diabetes• Coronary Heart Disease• Congestive Heart Failure• Depression

Center of Clinical Excellence = High Value

• Surgery for BPH• Arthroscopy for OA at knee• Knee and hip replacement

surgery• Hysterectomy for DUB,

fibroids• Some CT, MRI and PET scans• Invasive treatments for

angina• Endoscopy for GERD


Capitation

Utilization• Visits/PMPM• Days/1000• OP Procedures/1000• Referrals/1000• Lab/VISIT

Unit Cost• Cost per IP Day

– Medical– Surgical– ICU; Intensive Care

• Cost per Consultant• Cost per IP service

Capitation = Fixed Payment per Member per Month (PMPM) for Block of Covered Services


Shared Decision Making• Provides an incentive to patients to use patient decision aids that intersect with affected areas• Make entire library of patient decision aids available to patients and providers

Is This Covered?


Product Pricing on the Health Benefit Exchange

• New population – individual and small group plans• Little to no experience regarding the populations• Some states will have only 1 plan on the exchange, others, like Colorado, may have as many as 800 plans with 17 carriers participating• Some plans may be trying to acquire market share by offering very low cost plans (less than $200/month for basic benefits)• May be some new entrants into the health insurance market in your state


Key Aspects of Quality Measures and Payments

• Share patient information across the continuum of care and across the network of providers – while maintaining confidentiality;

• Capture and compute accurate costs of care;• Track clinical outcome data in relationship to

services provided;• Assure longitudinal collection and storage of patient

information;• Support the use of clinical protocols and guidelines

to improve quality and contain costs.


Bundled Payment Models

• Model One: Retrospective Acute Care Hospital Stay ONLY

• Model Two: Retrospective Acute Care Hospital Stay PLUS Post-Acute Care (end either 30, 60, or 90 days post; can select up to 48 clinical condition episodes)



• Model Three: Retrospective Post-Acute Care Only (end either 30, 60, or 90 days post; can select up to 48 clinical condition episodes)

• Model Four: Acute Care Hospital Stay Only (hospital, physicians, and others)



Flexibility• Under models where there are choices of

episodes of care to be bundled, organizations can choose which episodes they wish to bundle

• Will take data, time, and benefit to get providers to sign up for Models 2 to 4

• Some health plans are bundling now – such as vaginal deliveries


Typical Errors in Contract Modeling

• Overall systems integration – lack of consolidated database to share payor information experiences for such as “case rates”, etc.

• Chargemaster increases – tracking and tying into contract renewals due to independent Managed Care system and/or lack of communication between Finance and Managed Care/PFS

• Costs of managed care portfolio – Service Line, Product Mix, etc.– Inpatient versus outpatient services– Resource utilization within Service Line– Resource utilization within Case Rate



• Changes in payor administrative policies or procedures – Coding policy changed that may vary by payor– Bundling of CPT codes– Claim edit programs– Changes in claim payment time frames– Changes in precertification policies– Typically vary by payor

• Legislative changes impacting product mix – shifting of traditional government programs into managed care models



• Unresolved payor denials– Timeliness of receiving denials– Time and cost to review and challenge by type– Denial percentage factors into ongoing negotiations

• Payor operational inefficiencies– Inability to credential/load and update physician info– Auditing process; internal and external– Underpayments, refunds and offsets

• Shift in payor mix cannibalization – new payors entering market due to ACA Exchanges


Patient-centered Medical Homes“A model of primary care that is patient-centered,

comprehensive, team-based, coordinated, accessible, and focused on quality and safety”

According to the American College of Physicians, “the most effective way to realign payment incentives to support the PCMH model involves incorporating three different components: 1. a “bundled” monthly care coordination payment for medical

professional work occurring outside of face-to-face patient visits;

2. a visit-based fee-for-service component; and3. a performance-based component to reward the provision of

efficient, high-quality services”


Managed Care Contracts

• “Evergreens”: review cancellation/termination language and consider ending by September 30, 2014 for NEW contract under ICD-10

• Beware of amendments: payors will ‘slip’ in amendments regarding the “implementation of ICD-10” without full details of their readiness and/or changes in their systems, edits, medical necessity changes, payment protocols


Language to Question!• “in preparation for the implementation of ICD-10,

we will process claims as usual and accept the submitted codes. The reimbursement for the year 2014 -2015 will be budget neutral, reflecting no impact on XXXXX hospital”

• Similar language but with a twist – “…although our processing protocols may have changed due to ICD-10, reimbursement will be budget neutral for 2014 – 2015”

• YOUR ANALYSIS MAY SHOW DIFFERENT REIMBURSEMENT BENEFITS!


Language to Add to a Contract• With the discontinuation of ICD- 9 as of

September 30, 2014, the auditing of historical claims will not involve any claims with initial DOS over three (3) years old from review request date

• As of October 1, 2017, no claims with ICD-9 codes will be available for audit. Any open claims with ICD-9 codes must be resolved by January 1, 2018.


Language to Consider!

• All new and/or modified system processing changes to the payor system must be shown to the hospital/practice and explained by the payor. This includes crosswalks, medical necessity edits, claim processing edits, etc.

• As of October 1, all claims will be processed using ICD-10 codes and no crosswalks to ICD-9 will occur.


HIPAAA Non-Covered Entities

ICD-10 Myths and Facts

“Because ICD-9-CM will no longer be maintained after ICD-10-CM/PCS is implemented, it is in non-covered entities’ best interest to use the new coding system. The increased detail in ICD-10-CM/PCS is of significant value to non-covered entities. CMS will work with non-covered entities to encourage their use of ICD-10-CM/PCS”


HIPAAA Non-Covered EntitiesThe ICD-10 Transition: Focus on Non-Covered Entities

Definition of “best interest” • ICD-10-CM codes will provide expanded detail in injury codes,

which will help automobile insurance and workers’ compensation program coordinate payment

• ICD-9-CM codes will no longer be maintained once ICD-10 has been implemented. The ICD-9-CM code set will become less useful and resources will be continually harder to obtain after three years

• Not adopting to ICD-10 coding could lead to undue hardship for non-covered entities’ provider. They will have to translate from ICD-10 manually


Medicaid ExpansionArizona Kentucky New Mexico

Arkansas Maryland New York

California Massachusetts North Dakota

Colorado Michigan Ohio

Connecticut Minnesota Oregon

Delaware Missouri Rhode Island

District of Columbia Montana Vermont

Florida Nevada Washington

Hawaii New Hampshire West Virginia

Illinois New Jersey

Kansas and South Dakota – undecided as of May 2013


Declared State-Based Exchange (16 States + D.C.)Planning for Partnership Exchange (7 States)Defaulted to Federal Exchange (27 States

Health Exchange BackgroundState Decisions for Creating Health Exchanges

Source: http://kff.org/health-reform/state-indicator/health-insurance- exchanges/#map. Dated May 28, 2013.

http://kff.org/health-reform/state-indicator/health-insurance-


Health Exchange BackgroundCoverage Requirements and Tiers

An exchange must offer a plan choice in each of the five categories, which are based on the actuarial value of the plan.The actuarial value is based on the average cost share of covered health expenses reimbursed by the plan for the typical population.In a given state, a participating payor must offer at least one Platinum or Gold plan.The ACA also states that the federal government will select at least two multistate carriers available in every state and every exchange.The plans must provide the 10 essential health benefit (EHB) categories in total, as defined by CMS. However, states can require a higher level of benefits.

The federal subsidy is indexed on the value of the Silver tier.

Gold (80%)

Catastrophic (Under 30 or Qualify for Exemption) [No Subsidy Provided]

For example, a Gold plan would cover the equivalent of $2,000 for an average patient’s$2,500 in annual medical expenses. Higher coverage requires higher premiums.


Description 100% 133% 150% 200% 250% 300% 400%

Individual1 $11,490 $15,282 $17,235 $22,980 $28,725 $34,470 $45,960

Family of Four1 $23,550 $31,322 $35,325 $47,100 $58,875 $70,650 $94,200

Insurance Premium Cost Target Percentage of Income2

2.0% 2.0% 4.0% 6.3% 8.1% 9.5% 9.5%

Health Exchange Background

0% to 133% of FPLEligible for Medicaid[If State Expands Program] DSH may also be effected

100% to 250% of FPLEligible for Cost-Sharing Support.Basic Health Plan (133% to 200%)

133% to 400% of FPLEligible for Health Exchange Subsidy[Sliding Scale Subsidy as Tax Credit]


IV. Exchange Plan Premiums State Differences

Description

California Covered California

Vermont Vermont Health Connect

Maryland Maryland Health Connection

Regions • 19 regions, largely along county lines.

• Rural counties were grouped together.

The whole state is a single region.

• The whole state is a single region.

• There will be six navigator regions.

Health Plans • 13 plans participating.

• Anthem Blue Cross and Blue Shield of California plans are offered in all 19 regions.

• Kaiser is offered in 18 of 19 regions.

• Two health plans will be offered.

• Blue Cross Blue Shield of Vermont and MVP Healthcare.

• Each plan will offer two Bronze, two Silver, one Gold, and one Platinum.

13 health plans will be offered.

Coverage • Between three and six plans are offered in all 19 regions.

• There is an average of 4.5 plans offered in any given region.

• Average of 12 hospitals and 2,000 physicians per region.

Vermont is building to a statewide universal health insurance coverage model.

• All plans will be offered throughout the state.

• Provider networks will vary by health plan.


Provider Exchange Financial Impact

• Develop a current status view – revenue and profitability by payor

• Project anticipated payor mix changes– How much volume will shift to the exchanges?– How much additional Medicaid?

• Project anticipated reimbursement– Sensitivity analysis on the range of reimbursement possibilities– Percentage of current Medicare or commercial rates

• Determine potential impact on profitability• Negotiate rates for exchange products based upon how

much margin reduction can be tolerated

Analyzing the impact of payor mix changes will depend on several key assumptions


Contract Questions

• What types of contracts will your organization be offered from the payors?

• What type of analysis are the payors doing regarding your clinical experience?

• Do you want contracts based on their data or YOURS?

• Will other contract types be offered? Next!!!

•Outpatient•Physicians

FFS

•MSDRGs•Am Surg

Case Rate

s

•Inpatient•Distinct Services

Per Diem


Preferred Contract Approach

• A new contract allows for the greatest flexibility to– Define clinical protocols– Negotiate rates– Limit terms (audits, take-backs, length,

etc.)

• Does not interfere with current contracts

• Establishes strength based on payor history and the challenge to change

• Your data shows profitability under new approaches!

Value based

Contract

ICD-10 Case Rates

Bundled Services

Risk/Cost based

Contract


Summary of Next Steps!• Perform Profitability Analysis by Payor!• Identify “Evergreens” with lowest profit and determine

termination requirements!• Perform an ICD-10 Financial Analysis for both inpatient and

outpatient!• Review current Contract language for revision!• Openly discuss New Contract options!

– Value-based Purchasing– Bundling with Physicians or without Physicians– Risk/Cost based Contracts– Other Considerations

• Draft a “data-supported” White Paper!• Conduct a meeting with Finance and Managed Care!• MOVE FORWARD!!!!


???QUESTIONS???


Lorrie Borchert – [email protected]

(540) 226 - 2034

CONTACT INFORMATION

Rob Borchert – [email protected]

(315) 345 - 5208

mailto:[email protected]

mailto:[email protected]

managed care contracting under icd-10 rob borchert, mba, crce-i – best practice associates lorrie...

Documents

md slide

ball icd

icd code difference

pcs code structure icd

cms gems

possible code w21

volleyball w21

football w21