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Mitigating Health Reform Risk through Innovative Denials Management Suzanne Lestina, FHFMA, CPC VP, Revenue Cycle Innovation Avadyne Health Revenue Cycle.

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Presentation on theme: "Mitigating Health Reform Risk through Innovative Denials Management Suzanne Lestina, FHFMA, CPC VP, Revenue Cycle Innovation Avadyne Health Revenue Cycle."— Presentation transcript:

1 Mitigating Health Reform Risk through Innovative Denials Management Suzanne Lestina, FHFMA, CPC VP, Revenue Cycle Innovation Avadyne Health Revenue Cycle co-op A Chapter of AAHAM Spring Conference May 8th, 2014

2 2 OVERVIEW Industry Challenges Understanding ICD-10 Risk Impact of ICD-10 on Revenue cycle Reimbursement Denials Provider Call to Action

3 3 Before We Start deos/cbbn22/third-world- health-care---knoxville-- tennessee-edition

4 4 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

5 5 Reform and the Revenue Cycle Four Different “Buckets” of Reforms Will Impact Hospitals and Their Revenue Cycles Payment Cuts New Requirements Coverage Expansion New Economic Incentives Revenue Cycle Imperatives Improve Performance and Efficiency Denials Prevention Charity Care Policies & Process Rational Pricing Eligibility Processes ICD-10 Bundled Payments Documentation and Coding Physician Integration Self-Pay Collections

6 6 ICD-10 Enables Reform… …But Comes with Significant Work Reform Enabler 1.Improved data for re- engineering care delivery Allows for refined evidenced base protocols 2.Provides detailed data to segment patient population and manage chronic conditions 3.Supports value-based reimbursement methodologies 4.Provide stability and predictability in administrative processes ICD-10 Implementation

7 7 Delay – Advantage or Disadvantage?

8 8 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 ) was enacted, which said that the Secretary may not adopt ICD-10 prior to October 1, 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, The rule will also require HIPAA covered entities to continue to use ICD-9-CM through September 30,

9 9 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.

10 10 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

11 11 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.

12 12 Industry Implementation Status WEDI ICD 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, 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 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

13 13 Where are Providers Today? Friday, March 14 th, 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”

14 14 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 ICD- 10 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

15 15 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

16 16 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.

17 17 ICD-10 Imperatives

18 18 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

19 19 Reality of Change  Payer Readiness Variability  Necessary Payer Conservatism  Inevitable Lender Uncertainty  Reimbursement Restructuring  Will delay provide opportunity to make transition smoother?

20 20 This Isn’t Payer Versus Provider  ICD-10 challenges both payers and providers  There is 2 years of uncertainty after implementation for everyone

21 21 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

22 22 Payer Readiness  Payers have to do extensive modeling themselves  Which will continue after first roll-out  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  Cash-flow delay, higher administrative costs, etc.  Will delay provide additional opportunity to test configuration issues?

23 23 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

24 24 Configuration Risks ICD-9 to ICD-10 mapping inconsistencies Example: Hypertension ICD-9-CM:  Essential hypertension, malignant –  Unspecified essential hypertension –  Essential hypertension, benign – 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

25 25

26 26 Payer Conservatism  Increased denial rate –  Payers will be more ready to assume miscoding  Cash flow delays –  Payers will be more diligent in validating appeals  Tougher preauthorization's –  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

27 27 Cash Flow Impact  Slow down in cash flow –  Increased pressure on cash-on-hand  Slip in net revenue –  Increased scrutiny of operating margin  Ratings to be more conservative –  Historical trends won’t necessarily apply going forward

28 28 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

29 29 ICD-10 and the Revenue Cycle

30 30 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%

31 31 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

32 32 Understand Your Current Performance Jan 13 Feb 13 Mar 13 Apr 13 May 13 Jun 13 July 13 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul

33 33 Know Your Denial Trends

34 34 Sample Denial Analysis MetricResultTargetComments Bill Age 91+ Days41.16%< 23% Median Based on 2013 MAP High Performance Data Bill Age 301+ Days15.42%< 3%Deeper analysis of aging % Accounts Resolve Without Touch49.39%> 70% Pre-Service & Bill Edit Improvements can help this. Non essential work activity19.04%< 2% Indicates training or workflow inefficiencies Avg Touches To Resolve - Non-Denied1.90< 2 Avg Touches To Resolve - Denied (Depends on Clinical/Technical mix) First Pass Denial Rate45.97%< 10% In depth denial analysis

35 35 Percent A/R over 90 Days Aging Categories# AcctsAcct BalBal % Col ,453$8,023, % ,541$6,213, % ,675$5,114, % ,935$8,993, % $2,227, % ,948$17,908, % Grand Total26,286$48,479, %

36 36 Claims Activity Analysis Work Activity# Activities% of Activities Tickle Re-Bill Submitted Account Has Paid Allowance Claim In Process Secondary Bill Submitted No Action Required Changed Financial Class Balance Moved to Self-Pay Refer to Case Management Submitted Appeal for UR only Refer to UR Review

37 37 Average Touch to Close Claims Status# Accts# TouchesAvg Tch To Close Denied5,01614, Not Denied5,1239, Grand Total10,13923,

38 38 First Pass Denial Rate Claim Status# Accts# Accts %Tot Chgs Denied7, %$332,399,963 Not Denied8, %$392,813,167 Grand Total15, %$725,213,130

39 39 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.

40 40 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

41 41 Types of Denials – Volume

42 42 Types of Denials – Dollars

43 43 Source of Denials by Worker Area

44 44 High Impact Denials

45 45 Revenue Risk Management

46 46 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?

47 47 Track Denials by Payer Identify high volume payers Volume of claims per payer  Number of claims  Dollar of claims Reimbursement averages Type of Denials

48 48 Analysis by Financial Class Primary F/C# AcctsAcct BalBal % Col Commercial23,581$58,930, % Medicaid8,770$15,258, % Medicare5,228$22,451, % Self Pay36,918$25,315, % Workers Comp1,061$868, % Managed Care99$1,136, % Grand Total75,657$123,961, %

49 49 Denial Activity by Payer

50 50 Denied Accounts by Payer

51 51 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

52 52 Next Steps

53 53 Revenue Cycle Feedback Loop Denials management  Start thinking of everything as a denial  Culture of back-to-front revenue cycle feedback  Get ready to use staffing to accelerate cash and pursue denials  Cross-Train! Get denial specialists and analysts together with managers of each revenue cycle area at least monthly  Talk specifically about revenue levels  Talk specifically about documentation issues  Talk specifically about denial outcomes per area

54 54 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)

55 55 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

56 56 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

57 57

58 58 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 1 st Illinois Chapter of HFMA and speaks frequently to HFMA chapters, healthcare providers, state hospital associations, and other professional organizations. Suzanne K. Lestina, FHFMA, CPC, Vice President, Revenue Cycle Innovation, AvadyneHealth Contact Information Ms. Lestina can be reached by telephone at (708) and/or by at

59 59 Resources 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: 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)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, :01 am ETJoseph Conn https://www.wedi.org/news/press-releases/2013/12/17 (icd-10-survey-results-summary)https://www.wedi.org/news/press-releases/2013/12/17 Bruised by ICD-10 delay, healthcare execs huddle over what to do next; By Joe Carlson, Joseph Conn and Andis Robeznieks – Posted: April 5, :01 am ET CMS MLN Matters number: SE1409 Effective Date 10/1/2014


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