Transcript FHT 2005 - AAHAM WI

Revenue Cycle co-op
A Chapter of AAHAM
Spring Conference
May 8th, 2014
Mitigating Health Reform Risk through
Innovative Denials Management
Suzanne Lestina, FHFMA, CPC
VP, Revenue Cycle Innovation
Avadyne Health
OVERVIEW
 Industry Challenges
 Understanding ICD-10 Risk
 Impact of ICD-10 on Revenue cycle
 Reimbursement
 Denials
 Provider Call to Action
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Before We Start
http://thedailyshow.cc.com/vi
deos/cbbn22/third-worldhealth-care---knoxville-tennessee-edition
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Industry Challenges
Shifting Reimbursement Methodologies
 Reimbursement reductions
 Continued Sequestration and Medicare Disproportionate Share reductions
 Managing multiple schemes for payment
 Lower rate increases from commercial payers
Margin Pressures
 Declining revenues
 Physician-owned practice losses
 Budget challenges
 Need to react swiftly to changes in revenue growth
Workforce Reductions
 Healthcare leads other industries in reductions
 59% increase in staff reduction from 2012
Health Reform
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Reform and the Revenue Cycle
Four Different “Buckets” of Reforms Will Impact Hospitals and Their Revenue Cycles
Revenue Cycle Imperatives
Payment Cuts
Coverage
Expansion
New
Requirements
New Economic
Incentives
Improve Performance and Efficiency
Denials
Prevention
Eligibility
Processes
Charity Care Policies
& Process
ICD-10
Self-Pay
Collections
Rational Pricing
Documentation
and Coding
Physician
Integration
Bundled
Payments
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ICD-10 Implementation
ICD-10 Enables Reform…
Reform Enabler
1. Improved data for reengineering care delivery
• Allows for refined evidenced
base protocols
2. Provides detailed data to
segment patient population and
manage chronic conditions
…But Comes with Significant
Work
3. Supports value-based
reimbursement methodologies
4. Provide stability and
predictability in administrative
processes
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Delay – Advantage or Disadvantage?
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ICD-10 New Implementation Date
ICD-10 Compliance Date
On April 1, 2014, the Protecting Access to Medicare Act of 2014
(PAMA) (Pub. L. No. 113-93) was enacted, which said that the
Secretary may not adopt ICD-10 prior to October 1, 2015. Accordingly,
the U.S. Department of Health and Human Services expects to
release an interim final rule in the near future that will include a new
compliance date that would require the use of ICD-10 beginning
October 1, 2015.
The rule will also require HIPAA covered entities to continue to use
ICD-9-CM through September 30, 2015.
.
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Impact of Delay
 Catholic Health Initiatives (CHI) had two big health information technology tasks that
couldn't both be done in the time available;


new electronic health-record systems across 89 hospitals nationwide and
meeting the Oct. 1 federal deadline for implementing ICD-10.
 Action: Spent millions of dollars remediating outdated “legacy” software programs in
some hospitals so that ICD-10 coding could be done as they installed new EHRs.


decisions made 18 months or two years ago to do certain things and postpone certain
things based on the implement ICD-10
remediation money may be wasted based on delay of ICD-10 to at least until Oct. 1,
2015, (and maybe longer).
 Hill Physicians Medical Group, (an independent physician association with 3,800
doctors), had invested $2.1 million in ICD-10 preparations

delay will increase costs by at least 8% to 10%.
 Hardeman County Memorial Hospital-Quanah (Texas), an18-bed critical-access filed
for bankruptcy last May,


the ICD-10 conversion would have disrupted the hospital's reimbursements to the point
of forcing closure.
the delay will give it time to build up a reserve.
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Risks Everyone Talks About
ICD-10 transition is expected to cost $1.64 billion over
15 years


43% of that is cost of upgrading IT systems
Cost is spread across multiple participants—
government ($315 million), payers ($164 million),
providers ($137 million) and software developers
($96 million)
Remaining 57% of costs will mostly impact providers


356 million – training (lots and lots of training)
$571 million – expected productivity losses
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Break Even Point
Over the same 15 year period, the government
estimates nearly $4 billion in benefits from ICD-10
implementation:
 Accurate payments for new procedures
 Reduced claim rejections
 Improved disease management
 Improved understanding of health conditions and
outcomes.
Providers won’t see a break-even point for five years.
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Industry Implementation Status
WEDI ICD-10 2013 Survey Results
(353 respondents; 196 providers, 98 health plans and 59 vendors.)
Providers:
 8 out of 10 providers—Do not have all ICD-10-related business changes
made and cannot begin testing before Jan. 1, 2014.
Vendors:
 More than 20% of vendors indicated they were either less than or only
halfway finished with their ICD-10–related product enhancement and won't
be ready until 2014.
Health Plans:
 One in four health plans surveyed had not completed their ICD-10 impact
assessments
 Only about a third of the plans expected to begin or had already begun
external testing with other data exchange partners by the end of 2013
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Where are Providers Today?
Friday, March 14th, 2014
HFMA’s Forums Listserve
“Has anyone in the forum tried to estimate the financial
impact of moving to ICD 10 for their organization. If so,
do you know of a model or tool to use? Thanks”
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ICD-10 Testing
One of the CMS' Medicare administrative contractors, National Government
Services, recommended in June that the CMS perform external, “end-to-end”
ICD-10 testing of all participants in the healthcare claim stream—providers,
claims clearinghouses and payers.
Cathy Carter, director of the business applications management group in the
CMS' office of information services, said the MACs will perform rigorous
internal testing of their systems before Oct. 1, 2014, but not external testing.
She said there was “no money or process or time” to do external end-to-end
testing.
With time running short, health insurers are picking and choosing who they will
test with. “There may be plenty of providers who won't get to test with any
plan,” said Stanley Nachimson, a Baltimore-area health IT consultant and ICD10 specialist. “If you're not one of the big guys, you may have to get your
information from others.”
*See resource page for resource of this quote
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CMS ICD-10 Preparedness and Testing
CMS’s four-pronged approach to ICD-10 preparedness
and testing
• Internal testing of its claims processing system
• Alpha testing, beta testing and acceptance testing
• Provider-initiated Beta testing tools
• NCD’s, MS DRG’s & GEMS, IOCE
• Acknowledgement testing – Offered to providers the
week of March 3-7, 2014
• Confirm that CMS is able to accept claims into their
system and send back an acknowledgement
• End to end testing
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End to End Testing
July ICD-10 End-to-End Testing Canceled: Additional
Testing Planned for 2015
CMS planned to conduct ICD-10 testing during the week of July 21
through 25, 2014, to give a sample group of providers the opportunity
to participate in end-to-end testing with Medicare Administrative
Contractors (MACs) and the Common Electronic Data Interchange
(CEDI) contractor. The July testing has been canceled due to the ICD-10
implementation delay. Additional opportunities for end-to-end testing
will be available in 2015.
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ICD-10 Imperatives
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ICD-10 Impacts
Productivity loss – Resource Requirements
•
•
estimated 10-50% loss in productivity
Short-term productivity loss will be higher
System deficiencies/lack of readiness
•
ICD-10 IT Architectural Readiness
ICD-9 and ICD-10 business process gaps
Documentation deficiencies – CDI
Payment Policy Changes
Payer System Alteration
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Reality of Change




Payer Readiness Variability
Necessary Payer Conservatism
Inevitable Lender Uncertainty
Reimbursement Restructuring

Will delay provide opportunity to make transition
smoother?
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This Isn’t Payer Versus Provider


ICD-10 challenges both payers and providers
There is 2 years of uncertainty after implementation
for everyone
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Payer’s Perspective




ICD-9 to ICD-10 is not apples-to-apples
Case-mix analysis will include assumptions, adding
uncertainty to risk exposure
Uncertainty in risk exposure means necessary
conservatism to projecting risk
This translates to:



Massive IT systems rework
More complex authorizations and adjudication rules
Focus on re-casting contracts and subscriber mix
based on new ICD10-based utilization data
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Payer Readiness

Payers have to do extensive modeling themselves


They may be technically compliant


But will adjust rules regularly as they learn,
“changing the game” on the provider
Configuration mistakes can lead to many re-bills


Which will continue after first roll-out
Cash-flow delay, higher administrative costs, etc.
Will delay provide additional opportunity to test
configuration issues?
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ICD-10 Words of Wisdom
•
•
•
•
•
•
Just because it has a code, that doesn’t mean it’s covered
Just because it’s covered, that doesn’t mean you can bill for
it
Just because you can bill for it, that doesn’t mean you’ll get
paid for it
Just because you’ve been paid for it, that doesn’t mean you
can keep the money
Just because you’ve been paid once, that doesn’t mean
you’ll get paid again
Just because you got paid in one state doesn’t mean you’ll
get paid in another state
• You’ll never know all the rules
Author, Oday
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Configuration Risks
ICD-9 to ICD-10 mapping inconsistencies
Example: Hypertension
ICD-9-CM:
 Essential hypertension, malignant –
 Unspecified essential hypertension –
 Essential hypertension, benign –
401.0
401.9
401.1
ICD-10-CM:
 Essential (primary) hypertension (includes malignant and benign) –
I-10
Issues:
 Since I-10 does not have a code for ‘malignant’ hypertension, and that
diagnosis may be medically compliant, how will payers adjudicate
claims with this diagnosis?
 If a payer crosswalks I-10 back to I-9 what I-9 code with they choose?
 Will it result in payment or denial
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Payer Conservatism

Increased denial rate –


Cash flow delays –


Payers will be more diligent in validating appeals
Tougher preauthorization's –


Payers will be more ready to assume miscoding
Payers will be more diligent and require more
information
Contracts negotiated to payer favor –

Payers will assume worst-case scenario to avoid
overpayments or paying on denials
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Cash Flow Impact

Slow down in cash flow –


Slip in net revenue –


Increased pressure on cash-on-hand
Increased scrutiny of operating margin
Ratings to be more conservative –

Historical trends won’t necessarily apply going forward
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Preparation Distraction
Preparation for implementation

Much of the focus is on coding preparation and
training
More Global issues to focus on include:




Specialize in denial management while creating a
culture of denial avoidance
Talk with your banks
Talk with your payers
Put your vendors’ feet to the fire
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ICD-10 and the Revenue Cycle
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ICD-10 Risk to Revenue Cycle
DNFB increases
• Estimated to be between 20-50%
Increased denial rates:
• Denials are expected to increase by 25% - 35%
Increased Accounts Receivable (A/R)
• Decreased and/or Delayed Collections
• Days are expected to expand 20-40%
Claim error rate increases
• Expected to increase from 6-10%
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Using Data to Manage Risk
Quantifying performance improvement across key
areas of your revenue cycle will position you to
effectively:
 Forecast performance
 Set goals and objectives
 Create ownership of processes
 Create efficiencies and improve work flow processes
 Trigger corrective action
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Understand Your Current Performance
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul
12 12
12 12 12
12 13 13 13 13 13 13 13
Jan 13
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Feb 13
Mar 13
Apr 13
May 13 Jun 13 July
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Know Your Denial Trends
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Sample Denial Analysis
Metric
Result
Target
Bill Age 91+ Days
41.16%
Bill Age 301+ Days
15.42%
% Accounts Resolve
Without Touch
Non essential work
activity
Avg Touches To Resolve
- Non-Denied
Avg Touches To Resolve
- Denied
First Pass Denial Rate
49.39%
19.04%
1.90
2.80
45.97%
Comments
Median Based on 2013
MAP High Performance
< 23% Data
< 3%Deeper analysis of aging
Pre-Service & Bill Edit
Improvements can help
> 70% this.
Indicates training or
< 2% workflow inefficiencies
<2
2.5-4
(Depends on
Clinical/Technical mix)
In depth denial
< 10% analysis
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Percent A/R over 90 Days
Aging Categories
# Accts
Acct Bal
Bal % Col
91-120
1,453
$8,023,007
6.81%
121-150
1,541
$6,213,019
5.27%
151-180
1,675
$5,114,261
4.34%
181-270
2,935
$8,993,122
7.63%
271-300
734
$2,227,970
1.89%
301+
17,948
$17,908,185
15.20%
Grand Total
26,286
$48,479,563
41.16%
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Claims Activity Analysis
Work Activity
Tickle
# Activities
% of Activities
1150
12.40
Re-Bill Submitted
796
8.58
Account Has Paid
721
7.77
Allowance
675
7.28
Claim In Process
541
5.83
Secondary Bill Submitted
524
5.65
No Action Required
505
5.44
Changed Financial Class
410
4.42
Balance Moved to Self-Pay
298
3.21
Refer to Case Management
297
3.20
Submitted Appeal for UR only
226
2.44
Refer to UR Review
204
2.20
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Average Touch to Close
Claims Status
Denied
Not Denied
Grand Total
# Accts
5,016
5,123
10,139
# Touches
Avg Tch To Close
14,064
2.80
9,715
1.90
23,779
2.35
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First Pass Denial Rate
Claim Status
# Accts
# Accts %
Tot Chgs
Denied
7,003
45.97%
$332,399,963
Not Denied
8,231
54.03%
$392,813,167
Grand Total
15,234
100.00%
$725,213,130
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Denials Management
Effective strategies address two approaches to denials
management
• Denial Avoidance
• Accountability process to prevent up-stream denials
and improve cash flow.
• Denial management
• Gaining stakeholder buy-in for point of service denial
prevention.
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Denial Action Steps
Analyze denial activity by payer
Compare denials to recoveries
Review type of service volumes
• Inpatient
• Outpatient (ER, SDS, OBV, Diagnostic, etc.)
Analyze root cause of denials
• Identify the type and source of denials
• Categorize process issues
•
•
Internal
External
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Types of Denials – Volume
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Types of Denials – Dollars
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Source of Denials by Worker Area
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High Impact Denials
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Revenue Risk Management
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Contracting – Payer Relations
 Payer relations is the alpha and the omega point of the revenue
cycle
 Payer relations is charged with:
Strategic development of payer relationships – How will ICD-10 fit into
this?
• Negotiation of payer contracts – How will ICD-10 fit into this?
• Communication across the enterprise regarding contracts and issues –
How will ICD-10 fit into this?
•
 Payer policies permeate the outpatient and professional code
realms
•
Hundreds of payers – thousands of policies – where to begin?
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Track Denials by Payer
Identify high volume payers
Volume of claims per payer
 Number of claims
 Dollar of claims
Reimbursement averages
Type of Denials
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Analysis by Financial Class
Primary F/C
Commercial
# Accts
Acct Bal
Bal % Col
23,581
$58,930,345
47.54%
Medicaid
8,770
$15,258,689
12.31%
Medicare
5,228
$22,451,623
18.11%
36,918
$25,315,133
20.42%
Workers Comp
1,061
$868,934
0.70%
Managed Care
99
$1,136,648
0.92%
75,657
$123,961,372
100.00%
Self Pay
Grand Total
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Denial Activity by Payer
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Denied Accounts by Payer
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Payer Relations and Revenue Cycle
Contracting and denials management work
together to identify:
 Expected versus actual payment amounts
 Appeals timeliness, prioritization, and effectiveness
 Net denials rates by reasons, amounts, and payers
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Next Steps
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Managing Financial Risk
Use metrics to understand current reimbursement
performance and to identify possible risk with ICD-10.
Possible metrics that should be managed:
•
•
•
•
•
•
•
•
•
Coding Productivity
Coding Days
DNFB
FBNS
Days in A/R
Aging A/R
Denials
Case Mix Index
DRGs (from ICD-9 to ICD-10)
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Additional Metrics to Consider
Other metrics that should be included in preparing for
and managing ICD-10 implementation include:
• Quality Metrics – patient access processes, etc.
• Compliance Metrics – RAC, MIC, etc.
• Productivity Metrics – revenue cycle, etc.
• Clinical Documentation Deficiencies
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Provider Call to Action
 Collaborate with payers and key vendors
 Establish a framework with key performance indicators to manage financial
risk mitigation activities,

i.e. decreased coder productivity and increased payer edits may result in
significant claims submission declines
 Take a holistic approach to revenue cycle remediation

(e.g. patient access, medical necessity, patient financial services, denials)
 Leverage comprehensive claims data analysis to support dual coding and
testing

Run simulation claims in both ICD-9 and ICD-10, one to give coders practice
and gauge coder productivity and two; Identify advance warning of revenue
leakage.
 Understand the likely changes in payment policies, DRG groupings and new
clinical documentation requirements
 Develop a backup plan to mitigate a temporary cash slow down due to
delayed or denied payments
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Suzanne K. Lestina, FHFMA, CPC,
Vice President, Revenue Cycle Innovation,
AvadyneHealth
In this role, Suzanne works on executing strategies that
will lead the industry in next-generation revenue cycle
concepts. In addition, leveraging innovative tools and
technology Suzanne will help customers implement
change that will transform their revenue cycles and help
them achieve positive outcomes.
Prior to joining AvadyneHealth, Suzanne was HFMA’s
director of revenue cycle MAP where she served as the
technical expert and consultant for HFMA’s MAP product
line(s) and served in an advisory capacity regarding the
technical aspects of revenue cycle performance
improvement. Suzanne has extensive revenue cycle
experience, including revenue cycle consulting and
hospital revenue cycle leadership roles in the Chicago
area.
Background and Affiliations
Suzanne holds a bachelor’s degree in organizational
management from Concordia College. She is a past
president of the 1st Illinois Chapter of HFMA and speaks
frequently to HFMA chapters, healthcare providers, state
hospital associations, and other professional
organizations.
Contact Information
Ms. Lestina can be reached by
telephone at (708) 710-3859 and/or
by e-mail at
[email protected]
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Resources
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Insuring the future: Current Trends in Health Coverage and the Effects of Implementing the ACA,
The Commonwealth Fund, April 2013
Moody's’ Investors Service – Median Report August 22, 2013
February 2005 Patient Friendly Billing Report – (report is available at hfma.org/initiatives/PFB.)
TransUnion Healthcare Survey 2010 HFMA ANI
For a sample Charity care policy, follow the link below:
http://www.hfma.org/Content.aspx?id=1082
ICD-10: The Road to Strategic Success; Caroline Piselli, RN, MBA, FACHE; 3M Health
Information Systems; HFMA 2010 ANI, Las Vegas, NV
Source: HIMSS
(http://www.himss.org/content/files/icd10/G7AdvisoryReport_ICD10%20Version12.pdf)
Expensive. Confusing. Time consuming. Looming shift to more complex ICD-10 coding system
has hospitals and physicians scrambling By Joseph Conn Posted: October 26, 2013 - 12:01 am
ET
https://www.wedi.org/news/press-releases/2013/12/17 (icd-10-survey-results-summary)
Bruised by ICD-10 delay, healthcare execs huddle over what to do next; By Joe Carlson, Joseph
Conn and Andis Robeznieks – Posted: April 5, 2014 - 12:01 am ET
CMS MLN Matters number: SE1409 Effective Date 10/1/2014
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