February 5, 2013

ICD-10 Implementation: Not all Codes are Created Equal

By Fletcher Lance

At first glance, the transition to ICD-10 seems like a daunting task. The code set used throughout the U.S. is set to expand from 18,000 to 155,000 codes, after all. Those codes also will transition from being just three to four numbers to seven alphanumeric characters. As a result, both the number of codes and complexity are increasing. Additionally, ICD-10 is significantly more specific than ICD-9. Indeed, some ICD-9 codes have as many as 200 possible equivalents in ICD-10, so identifying the correct code will become even more challenging.

But there is hope: Know that not all codes are created equal. For example, code W5621XS (Bitten by an orca) and Y92250 (Injury at art museum) likely will not have a significant impact on a hospital’s or a physician office’s processes or revenue. The problem is that many providers and payers are treating all codes the same, making conversion seem like an insurmountable hill to climb.

Lessons from Webster’s

Webster’s Third New International Dictionary contains more than 470,000 entries, yet most college graduates’ vocabularies encompass only 12 to 25 percent of that figure. The fact is, most of us require a relatively small number of words on a day-to-day basis; however, we know that when we need something more, we can find it in the dictionary. ICD-10 is similar. In a typical hospital, approximately 5 percent of ICD-9 codes drive 80 percent of the revenue, and our experience is that between 900 and 1,200 codes drive that revenue. Knowing that such a small number of codes correlates with such a big share of revenue can offer a new perspective as it pertains to a provider’s approach to ICD-10.

To leverage that perspective, any hospital can identify the higher-impact codes that affect service lines, physicians, tools and key processes and systems. Just use the complete ICD-10 listing – the code dictionary, if you will – as a reference to continually build and augment your base of institutional knowledge.

Complexity Priority

As with a Russian nesting doll, there is complexity and value priority within the ICD-10 model. There are procedures that have high rates of complexity in terms of conversion, high-volume occurrence and high dollar value. These codes are the ones that need to be prioritized.

By identifying and focusing on such codes, organizations have a real chance to achieve effective and efficient ICD-10 implementation. This approach resonates with staff and team members, and it provides hope that a successful game plan is being mapped out.

The Impact

With this kind of plan in place, hospitals also can reduce their risk significantly. Hospitals must maintain revenue neutrality, and the approach outlined above provides protection from denied claims, claim overpayments, faltering coder productivity and biller productivity impact (and other financial consequences of higher complexity and change).

By establishing a framework that identifies these codes, hospitals can focus financial and human resources on key processes, training, dual-coding and general best practices to ensure the integrity of their revenue cycles.

Seeing the Future

In addition to creating a systematic approach for identifying key codes, physicians, coders, service lines and processes, this method enables hospitals to predict future revenues. By narrowing down lists of key codes sorted by complexity and volume, hospitals can take a hard look at revenue impact and diagnosis-related group (DRG) shifts that will emerge as a result of ICD-10 implementation.

At the simplest levels, the specificity of ICD-10 will allow procedures to be categorized more accurately. As a result, procedures connected to some codes will be reimbursed at higher levels, and some will be reimbursed at lower levels. Hospitals must know these impacts in advance. Using the necessary codes and the correct DRGs, hospitals can “look into the future” and predict DRG shifts before they happen, avoiding impact to revenue.

Successful Implementation of ICD-10

Today, hospitals are under more pressure than ever, with big changes on the horizon – including meeting meaningful use, implementing ICD-10 and dealing with the proposed cuts to Medicare payments. The only way for hospitals to implement ICD-10 successfully is to prioritize the codes that drive revenue, using a systematic approach to evaluating, testing and finalizing plans. The hospitals that delay and take the all-codes-are-created-equal path will be subject to significant financial risk, threatening their very survival.

About Fletcher Lance

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.

Fletcher was instrumental in developing Codes That Matter℠, North Highland’s proprietary method of prioritizing ICD-10 implementation.

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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.