ICD-10 Transition : Financial Implications. June 20, 2013 Presented By: Erika Holmes, FSA, MAAA

Transcription

1 ICD-10 Transition : Financial Implications June 20, 2013 Presented By: Erika Holmes, FSA, MAAA

2 Agenda Section 1 General ICD-10 Overview Section 2 Recognize the Risks Section 3 DRG Shift Analysis Section 4 Medicare Risk Adjustment Section 5 Questions & Answers 1 Proprietary and Confidential. Do not distribute. 1

3 General ICD-10 Overview

4 Why Do We Need ICD-10? ICD-9 is over 30 years old ICD-10 has increased granularity of information Diagnosis codes are more important than ever due to current system of procedure based pay is under scrutiny Go Live Date is October 1, 2014! Proprietary and Confidential. Do not distribute. 3 3

5 The Scope of ICD-10 for Payer Organizations Proprietary and Confidential. Do not distribute. 4

6 Recognize the Risk

7 Recognize the Risks Revenue Premium determination Risk-adjusted capitation rates Medicare Stars ratings Costs Medical costs Code-based reimbursement (e.g., DRGs) Health status and clinical decisions Operating costs Claims Processing Provider Inquires Member Services Revenue - Costs Margin Proprietary and Confidential. Do not distribute. 6

8 What Can Go Wrong? Provider behavior Government policies and procedures Payer preparation and management Documentation and coding Clinical decisions Billing functions Risk-adjustment Reimbursement policies Payment integrity activities Incomplete or improper remediation Fraud and abuse Policy changes Improvements in benefit design, medical policy, reimbursement methods Limits on replicating ICD-9 policies with ICD-10 codes Proprietary and Confidential. Do not distribute. 7

9 What Should You Do? Now Before Transition Date During the Transition After the Transition Identify and assess risks Define key performance indicators (KPIs) Establish baseline Create almost real-time monitoring structure Understand opportunities for performance and financial improvement Use monitoring structure to track KPIs Investigate significant deviations from baseline Address reason for significant deviations Continue to track KPIs and respond, as appropriate Implement plans for performance and financial improvement Proprietary and Confidential. Do not distribute. 8

10 Financial Modeling: DRG Shift Analysis

11 DRG Shift Analysis 2013 Diagnosis & Procedure Codes ICD-9 ICD-10 Diagnosis 14,567 69,832 Procedure 3,878 71,920 DRG shift risk driven by Significant number of one to many relationships between code sets ICD-10 options defined across multiple and potentially different DRGs Disappearing concepts in ICD-9 New concepts in ICD-10 Changes or Absence of coding guidelines for ICD-10 Proprietary and Confidential. Do not distribute. 10

12 DRG Shift Analysis Identify Identify historic records for assessment 12 months or more Translate Translate ICD-9 coded records to ICD-10 Apply GEM Group/Price Group ICD-9 and ICD-10 coded records to DRGs Measure Case Mix and/or Pricing Measure DRG changes Financial impact Codes influencing changes Volumes Etc Validate Which shifts are more likely to occur vs. others Proprietary and Confidential. Do not distribute. 11

13 ICD-10 Impact Assessment Methodology Start with ICD 9 Coded Claims Apply ICD 9 Business Logic Translate into ICD 10 Claim Scenarios Apply ICD 10 Business Logic Compare and Quantify Changes Summarize and Report on Risks Claim #1 DRG #1 Claim #1 1 Claim #1 2 Claim #1 n DRG #1 1 DRG #1 2 DRG #1 n Claim #1 Reimbursement Min Max Occurrence Risk Claim #2 DRG #2 Claim #2 1 Claim #2 2 Claim #2 n DRG #2 1 DRG #2 2 DRG #2 n Claim #2 Reimbursement Min Max Occurrence Risk Impact Reports # % $$ Claim #N DRG #3 Claim #N 1 Claim #N 2 Claim #N n DRG #N 1 DRG #N 2 DRG #N n Claim #N Reimbursement Min Max Occurrence Risk Proprietary and Confidential. Do not distribute. 12

14 Potential DRG Changes: MDC 6 S U R G I C A L M E D I C A L Surgical CDRGs CDRG Description CDRG Stomach, esophageal & duodenal proc 326 Total 5, Major small & large bowel procedures 329 Total , Rectal resection 332 Total , Peritoneal adhesiolysis 335 Total , Appendectomy w complicated principal diag 338 Total , Appendectomy w/o complicated principal diag 341 Total , Minor small & large bowel procedures 344 Total , Anal & stomal procedures 347 Total , Inguinal & femoral hernia procedures 350 Total , Hernia procedures except inguinal & femoral 353 Total , Other digestive system O.R. procedures 356 Total ,858 Major esophageal disorders 368 Total Major G.I. disorders & peritoneal infections 371 Total Digestive malignancy 374 Total G.I. hemorrhage 377 Total 12 1, Complicated peptic ulcer 380 Total Uncomplicated peptic ulcer 383 Total Inflammatory bowel disease 385 Total G.I. obstruction 388 Total Esophagitis, gastroent & misc digest disorders 391 Total Other digestive system diagnoses 393 Total Grand Total 5,643 21,339 1,755 5,131 3,651 11,522 1,816 2,623 1,030 4,009 2,070 Proprietary and Confidential. Do not distribute. 13

15 DRG Shift Example Reduced Provider Reimbursement Weight Payment ICD 9 DRG 637 DIABETES W MCC $8,124 ICD 10 DRG 638 DIABETES W CC $4,745 I9 Dx Dx Description dx Diabetes with ketoacidosis, type II or unspecified type, uncontrolled dx Unspecified cerebral artery occlusion with cerebral infarction dx Other persistent mental disorders due to conditions classified elsewhere dx Rhabdomyolysis dx Urinary tract infection, site not specified dx Other nonspecific abnormal serum enzyme levels dx Dysphagia, unspecified I10 Dx dx1 E11.69 Type 2 diabetes mellitus with hyperglycemia E11.65 Type 2 diabetes mellitus with other specified complication dx2 I63.50 Cerebral infarction due to unspecified occlusion or stenosis of unspecified cerebral artery dx3 F06.8 Other specified mental disorders due to known physiological condition dx4 M62.82 Rhabdomyolysis dx5 N39.0 Urinary tract infection, site not specified dx6 R74.8 Abnormal levels of other serum enzymes dx7 R13.10 Dysphagia, unspecified 42% lower reimbursement due to change in coding sequence Proprietary and Confidential. Do not distribute. 14

16 Potential Health Plan Impact by DRG $2,000,000 Top 10 DRGs by Change in Reimbursement $1,500,000 Reimbursement Risk $1,000,000 $500,000 $0 $8,284,057 $6,864,916 $6,864,916 ($500,000) DRG Min. Impact Max Impact Proprietary and Confidential. Do not distribute. 15

17 Potential Provider Impact by DRG $100,000 Top 10 DRGs by Change in Reimbursement $0 Reimbursement Impact ($100,000) ($200,000) ($300,000) ($400,000) ($472,199.43) ($307,364.95) ($294,699.84) ($252,321.32) ($252,321.32) ($500,000) DRG Min. Impact Max Impact Proprietary and Confidential. Do not distribute. 16

18 Benefits of ICD-10 Financial Modeling Assess overall risk to organization Quantify baseline Establish priorities Identify specific services that generate risk Formulate specific contractual requirements Provider out-reach Real-time monitoring and focused reporting Staff training and education Proprietary and Confidential. Do not distribute. 17

19 Financial Modeling: Medicare Risk Adjustment

20 ICD-10 Why it matters? ICD-10 may have a significant impact on HCC risk scores largely due to the vastly greater number of codes in ICD-10 and the potential for new HCC s More than 1,000 ICD-9 codes have more than one ICD-10 option CMS has not yet assigned HCC categories to ICD-10 Changes not likely to be known until 2014 and will impact 2015 and 2016 payment years What can you do now to get your arms around potential areas of impact? Proprietary and Confidential. Do not distribute. 19

21 ICD-10 Impact Assessment Methodology Leverage the General Equivalency Maps to identify relationships between ICD-9 and ICD-10 codes Identify ICD-9 codes that share the same ICD-10 relationship but fall into different HCC categories Identify a minimum and maximum substitution ICD-10 code Run minimum and maximum substitution codes through the HCC model to identify areas of potential impact Proprietary and Confidential. Do not distribute. 20

22 Example Code Assessment ICD-9 ICD-10 forward map ICD-9 backward map Anterior nasal diphtheria A3689 Other diphtheritic complications Anterior nasal diphtheria Other specified diphtheria No CC No CC Diphtheritic peritonitis CC = 31 Minimum Potential Impact Code = (No CC) Maximum Potential Impact Code = (CC 31) Proprietary and Confidential. Do not distribute. 21

23 Case Study Results Case Study Population Analyzed Medicare 5% sample population Minnesota Approximately 20,300 members "Minimum" Impact Scenario Change in % of Study Risk Population Score Risk Score Change 5% -2.1% No Change 95% 0.0% 100% -0.2% [1] "Maximum" Impact Scenario Change in % of Study Risk Population Score Risk Score Change 12% 25.1% No Change 88% 0.0% 100% 4.5% [1] [1] Based upon weighted risk scores and not weighted simply upon members. Proprietary and Confidential. Do not distribute. 22

24 Benefits of ICD-10 Financial Modeling Understand drivers of risk score change Which codes? Which members? Prioritize resources Be prepared for release of ICD10 to HCC mappings Are results as expected or surprises? Impact varies by population Craft educational outreach campaigns (providers and members) Enhance risk score analytics and accuracy: greater portion of revenues will be affected by coding (commercial populations). Inform management of what is known and what is not known Proprietary and Confidential. Do not distribute. 23

25 Erika Holmes, FSA, MAAA Director, Actuarial Consulting (952) Questions & Answers