ICD-10 Conversion and Quality

1. ICD-10 Conversion and Quality Presented November 10, 2010 Quality Leaders Forum Presented by: Seraphin Nicholson, MSE, MHSA

2. ICD Overview • ICD-9 codes will be replaced • Current codes are 30 years old • Diagnosis coding systems and data structure will change • Federally mandated, conversion must occur by October 2013 • ICD-9 is obsolete • Current codes do not reflect current medical knowledge or advances in technology • Is running out of structural capacity • Inhibits the transition to interoperable health data exchange • U.S. is the only industrialized country not using ICD-10 codes • Scope of impact • All healthcare settings and providers • All health plans and payors • All IT solutions using or storing diagnosis and procedure coding

3. Code Changes • The ICD-10 code set is a full replacement of the ICD-9 code set. This new structure provides additional granularity for diagnosis and inpatient procedure codes and has a different structure:

4. Code Changes, cont. • This new granularity offers greater specificity for diagnoses and procedures. • For example, under ICD-9, 250.61 is a diabetes mellitus patient, not states as controlled, with Type I neurological complications. • Under ICD-10, this could be coded as: • E10.40 Type I diabetes mellitus with diabetic neuropathy, unspecified • E10.41 Type I diabetes mellitus with diabetic mononeuropathy • E10.44 Type I diabetes mellitus with diabetic amyotrophy • E10.49 Type I diabetes mellitus with other diabetic neurologic complications

5. Financial Impacts of Code Changes • Hospital revenue may significantly be impacted by code changes • For example: • ICD-9 code 31.99 “Other operations on trachea” currently groups to DRG 168 “Other respiratory systems O.R. procedures w/o cc/mcc” with CMS weight 1.3026 and pays $6,513 • ICD-10 0B717DZ “Dilation of trachea with intraluminal device via natural or artificial opening” will group to MS-DRG v26.0 “Major Chest Procedures w/o cc/mcc” with CMS weight 1.7662 and pays $8,831

6. Provider & Staff Impact • Provider impact • New framework of thinking about disease states • More details need to be documented in chart • Massive expansion of categories to be familiar with • Hospital-based support personnel • Coders: new scheme, increased information needed to code validly • Finance & billing office: new scheme, payor conversion problems and disparities, overlap during aging of old scheme, new fee schedules and financial models • Health IT: support of new data formats, handling of old data and reports, legacy systems that will not convert

7. Consequences • Some consequences of ICD-10 conversion include: • Decreased coding productivity • Increased provider queries • Increased delays in reimbursement • Discontinuity in data structures will impact related analytics, trending and associated decision-making • Revenue cycle performance will likely: • Increase in unbilled receivables • Increase in accounts receivables • Slowed and/or reduced cash flows

8. Long Term Value & Benefit • Public Health • Better disease epidemiology information including signs and symptoms, risk factors and co-morbidities • Research • Better data for mining and improving predictive accuracy • Health Reform • Supports pay for performance • Supports determination of episodes of care and high risk pool patients • Reimbursement • Reimbursement based upon complexity and outcome

9. ICD-10 & Quality • Improved Quality Measurement • Data availability for quality metrics, patient safety and compliance • Clinically robust pathways can be based upon detailed codes • ICD codes used for measuring quality • HealthGrades, AHRQ, NCQA are just a few of the many organizations that use ICD codes • Increased granularity in ICD-10 codes will help payors and providers more easily identify patients in need of disease management and more effectively tailor disease management programs

10. ICD-10 & Quality, cont. • Organizational Monitoring and Performance • ICD-10 offers providers and payors better data in support of their efforts to improve performance, create efficiencies and contain costs • RAND believes the coding error rates will be less than what is currently experienced under ICD-9-CM codes because of the improved logic and standardized definitions of ICD-10-PCS and the more accurate clinical terms in ICD-10-CM1 • Increased code specificity will: • Make it easier to compare reported codes with clinical documentation • Check for consistency between diagnosis and procedure codes • Check for illogical combinations of diagnoses 1RAND Corporation. “The Costs and Benefits of Moving to the ICD-10 Code Sets.”

11. ICD-10 & Quality, cont. • Replacing ICD-9-CM with ICD-10-CM and ICD-10-PCS will provide higher-quality information for measuring healthcare service quality, safety, and efficacy. This will in turn provide better data for: • Quality measurement and medical error reduction (patient safety) • Outcomes measurement • Clinical research • Clinical, financial, and administrative performance measurement • Health policy planning • Operational and strategic planning and healthcare delivery systems design • Payment systems design and claims processing • Reporting on use and effects of new medical technology • Provider profiling • Refinements to current reimbursement systems, such as severity-adjusted DRG systems • Pay-for-performance programs • Public health and bioterrorism monitoring • Managing care and disease processes • Educating consumers on costs and outcomes of treatment options

12. ICD-10 & Quality, cont. • Moving to the new code sets will also permit improved efficiencies and lower administrative costs due to replacement of a dysfunctional classification system. This in turn allows: • Increased use of automated tools to facilitate the coding process • Decreased claims submission or claims adjudication costs • Fewer rejected and improper reimbursement claims • Greater interoperability • Decreased need for manual review of health records to meet the information needs of payers, researchers, and other data mining purposes • Decreased need for large research organizations to maintain dual classification systems (one for reimbursement and one for research) • Reduced coding errors • Reduced labor costs and increased productivity • Increased ability to prevent and detect healthcare fraud and abuse

13. ICD-10 & Quality, cont. • In a 2004 cost/benefit analysis for the Department of Health and Human Services, the RAND Corporation quantified some of the benefits of improved data derived from ICD-10-CM and ICD-10-PCS. RAND concluded that the benefits far outweigh the costs of implementation, estimating the dollar value of the benefits in the following categories: • More accurate payment for new procedures • Fewer rejected claims • Fewer fraudulent claims • Better understanding of new procedures • Improved disease management2 2RAND Corporation. “The Costs and Benefits of Moving to the ICD-10 Code Sets.” March 2004. Available online atwww.rand.org/pubs/technical_reports/2004/RAND_TR132.pdf

14. Compliance • HIPAA 5010 Transaction Sets • Required to enable transition to ICD-10 • Effective date 1/1/2012 • Based on transaction date, not date of service • ICD-10 • Effective date 10/13/2012 • Based on date of service (all OP settings) and discharge date (all IP settings)

15. Meaningful Use & ICD-10 Relationship • Must pursue HIPAA 5010/ICD-10 at the same time as EMR adoption to receive meaningful use incentive payments • Meaningful Use Stage 1 Criteria: • Maintain an up-to-date problem list of current and active diagnoses based on ICD-9-CM or SNOMED CT • The Office of the National Coordinator (ONC) under HHS has stated that later criteria will require utilizing ICD-10 or SNOMED CT for problem list documentation.

16. Bottomline • The rule is final and HHS does not intend to delay the compliance date • Health Reform and ARRA-HITECH legislation both strengthen the need for ICD-10 • Meaningful use criteria • Administrative simplification provision in health reform • Noncompliance will jeopardize reimbursements and critical business and clinical operations

17. Questions? Seraphin Nicholson snicholson@caph.org 510-874-7221