Updated on: January 30, 2014

ICD-10: Beyond Financial Neutrality

By Fletcher Lance
Original story posted on: December 1, 2013

Nobody enters a race to finish second, and no team fields just their defense. During recent months there has been a clear business rationale for focusing on essentially defensive strategies for wrapping the ICD-10 transition in revenue neutrality.

But as planning for 2014 falls into place, an argument has been made for moving beyond that adaptation phase by harnessing the improved management of new, more detailed data streams to generate increased opportunity. A potential way forward is by a sustained, analytical approach that embeds the ICD-10 transition steps in an ongoing performance-improvement process focused on the subset of codes that drive the lion’s share of reimbursement for most providers.

This approach starts with drilling down through the new expanse of 155,000 codes to find the ones that actually move the needle – codes that may only number 3,000 to 4,000. Put another way, approximately 5 percent of codes often equal about 80 percent of a hospital’s revenue. A big part of financial neutrality is all about focusing on the codes that matter, which allows you to work down analytically through the service lines that make a difference, the physicians who drive quality, and the coders who excel. This method for the ICD-10 transition involves identifying these revenue drivers and exploring their translation into the new coding world to identify unexpected pitfalls.

For example, hip replacement is a common procedure that can be extrapolated across many providers with orthopedic service lines. Under ICD-9, the diagnosis and procedure codes for a patient with a complication of hypertension yield a specific DRG and Medicare weight. But under the increased specificity of ICD-10, that same combination of diagnosis and procedure can generate a different DRG and Medicare weight that would reduce reimbursement by 18 percent.

As discussed before, how to cope with this DRG shift is by identifying the key codes for any enterprise, then examining the service lines behind them and implementing mitigation measures, including a clinical documentation improvement program. This approach addresses the concept of revenue neutrality. But a significant investment in both financial and human capital is a key component in implementing strategies like dual coding, targeted training, and supporting technology. Leveraging those strategies to develop additional returns, above and beyond protecting revenue, would provide a stronger investment case.

A key suggestion now is to look at that initial transition work and say “let’s dig a little deeper” to find new opportunities. Aside from negative DRG changes like those outlined for a hip replacement scenario, where are the positive shifts, and how can you accentuate the positives? How can you look at service lines to make better decisions regarding what’s more profitable in order to clearly distinguish between offerings you should increase and the ones you should reduce? If you offer all the orthopedics services and all of them are revenue losers, you might need to look at making service line decisions at a system or facility level, rather than just addressing individual diagnoses or procedures. You can use the ICD-10 transition for more than a snapshot view and position it instead as a toolkit for delivering and monitoring strategic decisions.

That toolkit can include targeted reporting on outputs defined by multiple variables to provide executive leadership with a concise overview that proves dynamic over time. Drilling down through the key revenue codes can produce reporting that provides a system-level view of ICD-10 impacts across facilities and markets. It can also look at impacts by service lines or by payor and identify top DRGs by payments. Reporting can generate detailed forecasts and track performance to identify potential gaps for specific redress.

The higher-resolution data from ICD-10 also allows for enhanced analytics that give decision-makers more than just retrospective data. The benefit of real-time monitoring can enhance strategic planning for new opportunities and offer increased insight into issues such as payment rates, denial rates, and procedure volume. This is an additional layer of investment return on top of the increased organizational efficiency from streamlining the revenue cycle by focusing on codes that matter.

Approaching the ICD-10 transition as a “one-and-done” endeavor would overlook the potential for sustained improvement that will come from harnessing the deeper detail on revenue-driving codes. Once an enterprise has this clearer view of the food chain, it can track the new data aggressively. By applying discipline and rigor, the transition from ICD-9 to ICD-10 can become more than just a point in time and instead a tool that can yield new revenue and continuous process improvement.

About the Author

Fletcher Lance serves as vice president and healthcare lead for North Highland, possessing more than 18 years of experience in healthcare management and information technology consulting. He specializes in IT implementations, process improvement, clinical management, patient management, and IT evaluation and selection.

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Disclaimer: Every reasonable effort was made to ensure the accuracy of this information at the time it was published. However, due to the nature of industry changes over time we cannot guarantee its validity after the year it was published.