September 24, 2013

ICD-10: Not One-and-Done

By Fletcher Lance

The transition to ICD-10 is a significant endeavor requiring a tremendous investment of financial capital and human resources. Unfortunately, many providers are approaching the conversion as a “one-and-done” event.

While this approach might work in the short term, it will not reap long-term or sustainable value relative to an investment. Now’s the time to take a step back and look at the whole picture, to uncover other areas of impact, and to discover new opportunities to help restructure the revenue cycle and begin a path to financial clarity, certainty and consistency –especially given that provider revenue will continue to be under more and more pressure. The opportunity is to streamline operations by focusing on key codes, service lines and physicians, resulting in lower cost, higher quality and operational excellence.

The Opportunity

A key first step is to take the experiences and learning from the conversion process and implement a new lower-cost, higher-value operational model. How does this work? We know that a small number of ICD-10 codes drive a large percentage of any hospital’s revenue – approximately 5 percent of codes often equal about 80 percent of a hospital’s revenue. These codes generally are clustered in the orthopedic, cardiac, neurological and women’s health service lines. We also know that certain physicians deliver the majority of the procedures in these service lines. This is important because it provides opportunities to optimize coding and revenue cycle processes by aligning our limited resources with the most impactful processes. By focusing our efforts, we can become proactive and predictive regarding future reimbursement and reimbursement risks.

There are many examples of providers making significant progress in coding, training and operational improvement areas as part of their preparations for ICD-10. Many organizations are working diligently on improving clinical documentation and establishing long-term improvement programs. Others are working to help train coders and physicians not only on the increased importance of documentation specificity, but how the enhanced capture of patient complexity will improve care and reimbursement. Many organizations also are diving deep into the revenue cycle, evaluating the potential impact of DRG shifts and increasing denial backlogs. While all of these are worthwhile endeavors, many are performed in silos, potentially leading to unsustainable results.

A Sustainable Program

There is a way to link all of these improvement activities to a sustainable, ongoing program. By focusing the most critical resources on the most valuable activities, any organization can streamline billing and coding processes for the procedures that move the needle. Current revenue cycle and coding groups should be reorganized to center on the activities that really matter to the organization, delivering billing and coding excellence associated with the high-value/volume procedures.

As teams become focused on key activities, operations become more efficient, creating improved quality and lower cost. As part of this effort, improved data integrity enables enhanced monitoring of operations and critical resources. The data can be used to predict a variety of things: denial rates, payment rates, projected procedure volume, and payer responsiveness. Enhanced data and streamlined processes allow providers to lower their fixed costs while moving operations from reactive to proactive.

The Future Vision

The ideal vision would be that, through intense focus on the procedures that matter, coupled with a dedicated team, any organization could achieve a frictionless revenue cycle (i.e. one that does not require a lot of human intervention or cost because the provider has worked hard to eliminate errors in the coding and billing steps while gaining an understanding of payor rules and processes).  The result is a process with very low administrative overhead and very high value, because both the provider and payor are focused on what really matters.

Part of this vision also involves looking to the front of the ship, not the back. In the past, we have used retrospective data to make key decisions. In the future, we will leverage enhanced analytics to understand DRG shifts, prioritize allocation of finite resources, and target our training efforts for building a better overall healthcare system. The data contained in these analyses can provide insights into the acuity of patients, detailed revenue implications, and easy evaluation of service lines’ quality and financial performance.

When clinical, coding and revenue cycle team members maintain a laser focus on the procedures and service lines that truly make an impact, organizations will see sustainable productivity and efficiency improvement.

This approach, informed with real-time and predictive data analytics, creates a unique opportunity: the ability to capitalize on significant investment in ICD-10 while simultaneously building a sustainable, lower-cost, higher-quality coding and revenue cycle operation.

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.

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