1. HEALTH AUTHORITY – ABU DHABI
Simplifying Pricing
HEALTH AUTHORITY – ABU DHABI
Health Systems Finance
May, 2007

2. 1 2 AGENDA Outpatient Claims (Capitation Payments)
Inpatient Claims (DRG Payments)
© Health Authority – Abu Dhabi

3. HOW TO TREAT OUTPATIENT CLAIMS
Description of Outpatient Claims
Large volume of claims
Small size of average claim
Sizable part of overall value
Current Reimbursement System
Need to refer to CPT codes (large number) for mostly routine procedures
Most bills in the end still of similar value (little spread)
Real value (time of the doctor spent with the patient) not reflected
Solution
Move to a capitation-based model (i.e. pay per person seen) because
it will greatly simplify and thereby encourage billing to increase revenues
it is in-line with resource consumption (doctor’s time)
no clinical data will be lost (provided that an ICD 9 diagnosis is furnished with the claim)
© Health Authority – Abu Dhabi

4. STAGES FOR INTRODUCTION OF CAPITATION PAYMENTS
Phase III: Move to quality
Phase II: Refine it
Phase I: Make it work
Get public hospitals to submit at all (even if without perfect information, no ICD-9, shortcuts to ICD-9 etc.) to offload back-log
Get private providers to join to have uniform system
Get rough cut on prices even in the absence of activity based costing
Reward providers for quality of information provided (higher capitation payment if full ICD-9 diagnosis and procedures)
Refine prices once better costing information from hospitals becomes available
Do not accept claims without quality information
Start rewarding providers for quality of outcome
© Health Authority – Abu Dhabi

5. WHAT’S IN A CAPITATION PAYMENT+ -
All-in
Easiest to bill
Counteracting cap on drugs
Ex drugs
Still easy to bill
In-line with cap on drugs
Additional relevant clinical information for insurer
Ex drugs, lab and x-ray
Less risk for hospital
Wrong incentives: will definitely lead to upgrading (no visit without lab and x-ray)
© Health Authority – Abu Dhabi

6. HOW MANY CAPITATION PRICES+ -
Explanation
One only
One payment per visit independent of doctor or type of visit
Easiest
Disregards increasing complexity, probability of procedures and costs of doctor’s time with specialization
per speciality group
One payment per visit depending on speciality group
Still easy if limited number of groups (e.g., 3)
Can use existing groups (GP, specialist, consultant)
Better reflects degree of specialisation
Disregards first vs. follow up topic (present for all specialities)
No disincentive to grow visits
per type of visit
One payment per first visit
Different type for all follow-up visits in a defined time period
Disincentive to growing visit frequency
Accurately reflects different resource consumption on first vs. follow-up visit
Does not reflect speciality-driven differentiation
© Health Authority – Abu Dhabi

7. HOW TO COUNTERACT WRONG INCENTIVES
Counter measures
Increase number of visits
scheduling
short term drugs only
referrals
Proper definition of incident/claim
Monitoring of visit information by insurer
Reduce/withhold expensive medical treatment
cheap/no drugs
no/little procedures
Monitoring of procedure information – especially for profit-oriented/private providers – by insurer (less of a problem for public hospitals)
Later move to quality/outcome-based payment components
© Health Authority – Abu Dhabi

8. HOW TO PUT IT ALL TOGETHER
Each claim tied together by a single diagnosis (prerequisite for payment of any claim)
Each claim can contain multiple visits under the same diagnosis
first visit within a month with full rate (first visit)
all subsequent referrals on same day as well as all visits with the same diagnosis within the same month at discounted rate (follow-up visit)
Example:
Price in AED GP
Specialist
Consultant
First visit
100
150
200
Follow-up visit 50 75
© Health Authority – Abu Dhabi

9. HOW TO HELP CODE AN OUTPATIENT CLAIM
Problem Statement
There are large volumes for outpatient claims
For an outpatient claim to be paid an ICD 9 diagnosis needs to be furnished
Medical coding skills within a hospital are a scarce resource and proper coding would overwhelm medical records departments
Proposed Solution
Coding done by doctors themselves with “cheat sheets/superbills”
check box of 10 most common diagnoses on prepared forms by speciality
others either added by medical records department or aggregated under other
© Health Authority – Abu Dhabi

10. TO DO’s
Coding
Supply cheat sheets with most common diagnoses by speciality for outpatient settings
Grouping
Group specialities into three buckets
Prices
Provide average outpatient costs for exemplary hospitals to set price level
Check price level against current average outpatient claim by DAMAN
Decide on price differentiation by
speciality
first vs. follow-up visit
© Health Authority – Abu Dhabi

11. 1 2 AGENDA Outpatient Claims (Capitation Payments)
Inpatient Claims (DRG Payments)
© Health Authority – Abu Dhabi

12. HOW TO IMPLEMENT UNIFORM CODING FOR INPATIENT SERVICES
Why do we need uniform coding (e.g., ICD-9 diagnosis and procedure) on every claim?
prerequisite for efficient handling of claims on both sides (provider and insurer) in current system
prerequisite for further automation (electronic data exchange)
prerequisite for introduction of DRGs
prerequisite for all meaningful statistical analysis by HAAD, payors and providers
How will we go about implementing uniform coding on every claim (“Educate then legislate”)
Educate
Convince insurers to agree on uniform claims format amongst themselves
Focus on top public hospitals (80% market share) to explain need for uniform coding in claims and help redesign processes to make it happen
Legislate
Power to make claims and reporting forms in uniform coding format mandatory
Power to introduce new price lists based on uniform codes
Power to move to DRG based reimbursement system (which needs uniform code)
© Health Authority – Abu Dhabi

13. MAKING UNIFORM CLAIMS CODING HAPPEN IN TOP PUBLIC HOSPITALS
Doctor
Billing
Medical
Records
Current Situation
Doctor files patient record in paper form
Oftentimes missing or incomplete documentation
Medical Coding Department uses paper records from doctors and codes ICD-9 for both diagnosis as well as procedures
Finishes within weeks after discharge
Billing Department needs immediate solution upon patient discharge (co-payment problem)
Billing does not refer to codes from medical records but manually assembles bill
Short Term Goals
Careful attention to detail (plus incentives)
Matches codes with prices
Finishes within days after discharge
All bills submitted with ICD-9 diagnosis and procedure code
All bills submitted electronically
All bills submitted two weeks after discharge
Issues to be resolved
Timing (e.g., for co-payment)
Communication
Staffing & training
© Health Authority – Abu Dhabi

14. WHY IS IT A WORTHWHILE PURSUIT
All data present, we just need to start using it!
If we start using it, we can
get a complete patient record to greatly improve the quality of care and provide full feedback to providers
start reimbursing hospitals with a DRG based pricing method to greatly simplify the claims filing procedure for hospitals
move to an electronic filing system for claims to greatly improve the efficiency and lower the cost of claims filing for hospitals and insurers
absorb the intended insurance of nationals into the system by closing the claims gap to avoid additional financial strain on the system
© Health Authority – Abu Dhabi

15. WHAT’S BROKEN WITH THE CURRENT PRICING SYSTEM
Incomplete
Complex list with over 1500 individual procedures for a fee-for-service type reimbursement
Still frequently missing items leading to multiple calls into HAAD
Inconsistent
No uniform reference to one set of standard codes (CPT or ICD-9)
Pricing too high for individual items, too low for others
Descriptions of procedures are not unique identifiers (leading to various amounts being billed for the same procedure)
Resulting problems
Hospitals do not understand pricing system and therefore do not (fully) use it to bill
There is no (IT) system to help them use existing price list
Even if there were, it is too complicated and neither transparent nor clinical in focus
© Health Authority – Abu Dhabi

16. WHY WE NEED A DRG-BASED SYSTEM FOR INPATIENTS
What are DRGs
DRG = diagnosis-related group
System to classify hospital cases into ca. 500 groups referred to as DRGs (example: normal newborn, vaginal delivery; heart failure; pneumonia)
DRGs assigned by a grouper program based on standard diagnoses, procedures and other factors (age, sex, co-morbidities)
Patients within a DRG a expected to use similar hospital resources therefore used as a basis for payment to hospitals
ICD- 9
Standard Procedure Coding
DRGs
Grouper
Why do we need them?
Complete (and simple): only 500 items needed instead of over 1500 on the current price list (which is still incomplete)
Consistent: rational basis for determining prices (equal use of resources), relative weights known, only multipliers needed
All the source data in place (ICD-9 diagnoses and procedures) for grouping by provider, payor or HAAD
Proper incentive for hospitals for efficient use of resources (manage length of stay, compete for more patients)
It is easy for HAAD to come up with DRG list based on Saudi data from Daman
© Health Authority – Abu Dhabi