Could ICD-10 have as big a financial impact as the mortgage crisis? Yes. Here's why.

By Michael F. Arrigo
10:38 AM

ICD-10 may create a massive redistribution of healthcare wealth; cause hospital and health plan bankruptcies, mergers, consolidation, and precipitate radical shifts in healthcare IT software and solutions companies. Most investors, health care IT firms, hospitals, and insurance companies are unprepared for this new paradigm. Investors are just awakening to the business opportunities for IT, consulting, software, analytic, and other companies who are positioning themselves for strategic advantage around this shift. Like a good business plan, investors make their decision based on leadership and solid management teams. Investing in leadership and best practices should be a component of the ROI for your ICD-10 business case. Proper ICD-10 impact assessment and implementation planning can help health care make the best transition possible.

Education can help socialize the right values and ethics so that organizations do the right thing. Some executives assume that ICD-10 is an IT only problem instead of a clinical and business problem as well. Understanding how ICD-10 changes medical concepts can help hospitals and other health care providers plan for shifts in reimbursement. For hospitals, ICD-10 clinical documentation improvement, coder quality, and other aspects can be addressed via a methodology and reference implementation model. For health plans and large self-insured employers, planning will be critical in redesigning medical policy, benefit plans and remediating systems in time. Vendor assessments for enrollment portals, electronic medical record (EMR) systems, revenue cycle, analytics, actuary, claims, case management and utilization management systems will be important. Awareness training for management and coder re-training will also be key. Following the assessment, establish a clear business road map for ICD-10. This must include an "as-is" and "to-be" process evaluation and redesign, application remediation, possibly even modification of enterprise architecture. Greater cooperation among hospital staff as well as between providers, health plans, and large self-insured employers can also help.

Real world examples bring ICD-10 business cases into focus. Large companies have bigger reimbursement risks, are subject to headline risk in the press, and are seen as ‘deep pocket’ litigation targets. Recently, a large employer was reviewing HIPAA compliance. The company is self-insured and manages a health plan that pays $ billions in benefits each year. At first, the company took comfort knowing that its outsourced claims partner was primarily responsible for ICD-10 compliance. When presented with the reimbursement risk ICD-10 may introduce, senior management pointed at the presentation and said, “Now that worries me.” The employer realizes that it can use ICD-10 to its strategic advantage by planning now for reimbursement shifts, and potentially avoid headline risk, labor relations problems, and hits to its stock price.

Those companies that don’t make these important leadership decisions might experience financial impact that carries a wallop like the mortgage crisis.

 

1. Source: “National Health Expenditures…,” CMS https://www.cms.gov/NationalHealthExpendData/downloads/proj2010.pdf

2. ICD-10 (World Health Organization International Classification of Diseases; US Version ICD-10 CM for diagnosis and ICD-10 PCS for procedure codes). The compliance date for ICD-10 is October 1, 2013.

3. Source for amount of mortgage losses by Freddie Mac and Fannie Mae: Los Angeles Times http://articles.latimes.com/2010/sep/16/business/la-fi-fannie-freddie-20100916 Total mortgage losses are estimated to be over $500 billion.  ICD-10 loss estimate based on a hypothetical 4.6 % shift in reimbursements during 2014, the first full calendar year of ICD-10. Risk factor decreases from 4.6% to 4.4% via coding accuracy and clinical documentation improvements between 2014 and 2016.

4.IT Companies Stand To Gain From Health Care’s ‘Y2K’ Problem: The Wall Street Journal http://on.wsj.com/fJOnqG

5. Y2K planning and remediation estimates exceed $300 billion. http://en.wikipedia.org/wiki/Y2K 

6. Percutaneous Transluminal Coronary Angioplasty - MS-DRG 251 “Percutaneous cardiovascular procedure without coronary artery stent without MCC”

7. Coronary bypass -- MS-DRG 230 "Other cardiothoracic procedures without CC/MCC"

8. Source: CMS https://www.cms.gov/acuteinpatientpps/downloads/CMS-1533-FC.pdf - Vascular Repair - MS-LTC-DR 254 “Other vascular procedures without CC/MCC”

9. Source: California Medical http://files.medi-cal.ca.gov/pubsdoco/newsroom/newsroom_20048.asp

10. Administration Pulls Plug on Health Reform Measure http://www.foxbusiness.com/markets/2011/10/14/told-government-pulls-plug-on-health-reform-measure/

 

 

Michael F Arrigo is Managing Partner of the Healthcare Practice at No World Borders a HIPAA and Health Care Reform Management and IT consulting firm that helps hospitals, health plans, and self-insured employers improve their planning and outcomes for ICD-10 and other initiatives.
 

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