How ICD-10 impacts revenue cycle management

July 2, 2012
Converting to the new code set will touch virtually every aspect of a provider’s operations.

The transition to ICD-10 offers a pathway to profound performance improvement. However, migration to ICD-10 involves much more than just converting codes, expanding data fields or even installing brand-new ICD-10-compliant systems. At its most basic level, migration to ICD-10 is about exchanging one diagnostic and procedure clinical terminology for a richer and greatly expanded set. However, this drastically oversimplifies the scope of people, processes and information technology that will be significantly impacted by the use of this new terminology.

Converting to the new code set will touch virtually every aspect of a provider’s operations, including patient services, care delivery, revenue cycle management, data analysis and reporting, as well as a number of information-technology systems that use diagnostic and procedural information.

Key areas of impact
One critical operation that needs attention is revenue cycle management, which includes medical coding, contract management, billing and reimbursement. Health systems must determine whether existing code sets accurately represent the business policies of the organization, and if there is an opportunity to leverage the more granular capabilities of ICD-10 to achieve process optimization and reflect the services provided accurately.

Eligibility and utilization management: Eligibility terms will need to be configured, while medical necessity, policy checks and associated protocols will have to be updated to utilize ICD-10 codes.

Clinical documentation: To ensure appropriate clinical documentation is in place, it is critical to conduct a thorough assessment of clinical documentation processes to identify situations in which additional data is needed to assign the appropriate ICD-10 code. Results of the assessment can be used to target clinical documentation improvement initiatives. This includes not only training physicians and other caregivers in documentation techniques, but also evaluating and enhancing any documentation templates in electronic medical records systems. Capturing clinical documentation, including all relevant diagnostic data within the treatment record, improves the quality of care, enables improved billing and cash flow, and improves clinical and financial audit results.  

Contract management, billing and reimbursement: Migration to ICD-10 will require providers to describe patient conditions in a new way, refer to new coding guidelines and adhere to new documentation guidelines for the purpose of reimbursements. In many cases, ICD-10 classifies clinical conditions and procedures differently than ICD-9-CM does. As a result, the conversion of complex payment methodologies from ICD-9-CM to ICD-10 could have an unintended impact on aggregate payments to providers or the distribution of payments across providers.

Understanding how new ICD-10 codes align with existing ICD-9 contracts and reimbursements data will be critical to billing and coordination of benefits. The industry is bracing for an increased number of denials due to incongruities between the two coding systems. Denials may have several causes, such as improper eligibility checks or insufficient documentation for processing a claim. In order to manage against a spike in denials, providers will need to start analyzing the root cause of current denials and address process gaps.  

How to prepare for the transition?
Training: Training is of the utmost importance. Medical coders will require the highest level of training, as they will be responsible for coding the medical records. Some staff may just require training on diagnostic coding, while other staff will require training on diagnostic and procedure coding as well as anatomy and physiology. Proficiency in computer-assisted coding will increasingly need to become mainstream. Physicians will need to be trained on ICD-10 and its clinical concepts as it pertains to their specialties, but will also need focused training on clinical documentation to ensure that a sufficient explanation of patient condition and services is available for the coder to be able to assign the appropriate ICD-10 code. Training on advanced clinical documentation technologies, such as speech recognition and natural language processing, will also be important. Staff members that do not have a high level of interaction with ICD codes today would require a basic level of understanding so that they are aware of the changes that are being implemented and how they will impact the organization.  

Financial impact analysis: A majority of hospital inpatient reimbursement is based on ICD-9 codes and on patient classification systems. There are two factors that may have an unintended impact on reimbursement because of ICD-10 migration: 1) the grouper logic is changed because ICD-10 classifies clinical conditions and procedures differently from ICD-9, and 2) payers may be mapping the ICD-10 codes received from a claim to ICD-9 so that they can use their existing ICD-9-based systems without any modifications. Early indications are that there will be shifts in diagnosis-related group codes (DRGs). Analyzing the financial impact due to the shift from ICD-9 to ICD-10 will play a critical role in effectively maintaining revenue integrity.

Testing: Testing plays an especially important role in ICD-10 remediation because of the breadth and depth of how the codes are used in both clinical and business processes, as well as the need to ensure the transition does not harm clinical decisions, financial or operational processes. Because ICD-10 codes are not an exact one-to-one match with ICD-9, approximations and mismatches will affect reimbursement. Organizations must plan for end-to-end testing. It will be critical to get on the testing schedule for vendors and clearinghouses in order to test the compliance of each product and transaction, and avoid downstream or upstream impact on business processes.

Begin with the end in mind
The transition to ICD-10 offers the opportunity to improve clinical documentation, revenue cycle performance and analytic capabilities for business intelligence, and create the flexibility to respond to the industry’s continuing evolution. Making the transition will require adequate time for assessing impacts to clinical documentation, business processes, patient satisfaction, IT and training. To meet the challenges and ensure timely compliance, health systems need to view ICD-10 as a strategic initiative for the organization, establish a proper project governance structure and secure support from executives and physicians.

About the author
Sashi Padarthy is director of Cognizant Business Consulting’s healthcare division. For more on Cognizant Business Consulting, click here.

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