Published November 4, 2015

Turning Lemons into Lemonade: Squeezing the Value-Based Reimbursement Benefits Out of ICD-10

To say that the ICD-10 transition has been challenging is an understatement. Now that we have taken the plunge, it is time to extract the benefits of accurate ICD-10 code selection to position your organization for success under new value-based reimbursement models.

Shift in Payment Models

For decades, providers have been paid for services on a fee-for-service basis. Experts agree that volume-based reimbursement is one of the underlying causes of skyrocketing healthcare costs, as it incentivizes quantity over quality.

The transition from volume-based to value-based reimbursement now is moving rapidly. On January 26, 2015, the Department of Health & Human Services (HHS) released an aggressive timeline to shift away from fee-for-service payments, with the goal of having 90% of Medicare payments based on value by 2018.

Commercial payers are following suit, as illustrated by the following statement from a recent American Healthcare Insurance Plans Coverage Blog:

Health plans are playing an important role in lowering health care costs. Health plans are partnering with providers to create innovative, high-value payment systems to reward value and quality over volume. 

ICD-10 will play a critical role in the volume-to-value transition, as it is the primary vehicle for measuring the severity of a patient’s medical condition and outcomes of care. Both are key factors in determining the level of reimbursement a provider will receive under emerging alternative payment models.

Hierarchical Condition Coding

Today, the Centers for Medicare & Medicaid Services (CMS) uses Hierarchical Condition Codes (HCCs) to adjust capitation payments to Medicare Advantage plans based on the health expenditure risk of their enrollees. A plan with enrollees who have high HCCs will receive higher payments than a plan with enrollees who have low HCCs, because it is expected the former will require more intensive medical treatment.

A patient is assigned an HCC by measuring certain reported factors that are likely to determine the future healthcare needs of that individual. Those factors are defined by the diagnosis codes reported by providers in submitting claims for payment.

If a provider assigns a less-specific diagnosis code for an individual, and thus a lower HCC is assigned to that patient, this creates the risk that the capitated payment will not be sufficient to cover the cost of providing care for that individual.

For example, the HCC assigned to a patient with diabetes or hypertension will vary significantly, depending on whether the provider assigns a general or more specific ICD-10 code:

HCCs and Value-Based Reimbursement

Like capitated payments made to Medicare Advantage plans, new value-based reimbursement models vary provider payments based on the level of disease within the population served. CMS adjusts the total cost of care benchmarks for the Medicare Shared Savings Program (MSSP), the Bundled Payment for Care Improvement Initiative (BPCI), and related programs based on the assigned HCCs for the population to be served. For example, an accountable care organization (ACO) participating in the MSSP whose attributed beneficiaries have low HCCs will be assigned a lower benchmark, making it more difficult for the ACO to realize shared savings.

As payers move to models involving greater provider risk, such as global budgets, accuracy in assignment of ICD-10 codes becomes even more critical, as the HCCs assigned based on these codes will directly determine providers’ payments.

Coding and Clinical Documentation Improvement

Given that non-specific codes can dramatically (and negatively) impact reimbursement under new payment models, it is critical that documentation and diagnosis coding accurately reflect the acuity of the patient’s condition known and present at the time of the encounter.

Certainly, the use of an unspecified code is appropriate in some cases, and should be assigned when the documentation does not reflect a higher level of specificity. However, healthcare providers should be educated to identify scenarios where specificity appears to be under-documented or miscoded. Clinical documentation improvement and coding proficiency go hand-in-hand in supporting this critical initiative.

Tips and Tricks to Improve the Use of ICD-10 Codes:

  • Learn current ICD-10 coding guidelines and conventions to ensure that the correct codes are being applied. For example, many chronic conditions with complications have a combination code available, which should be used instead of listing the individual conditions (e.g. hypertension with chronic kidney disease).
  • Code from the medical record documentation. Do not rely on General Equivalency Mapping (GEMs) or other crosswalk tools to assign ICD-10 codes. Although these tools can be helpful resources, they often lead to an unspecified code versus the specific codes available for selection.
  • Perform documentation reviews to validate that the correct ICD-10 code is being assigned, and engage in provider documentation training on code selection.
  • Monitor coder productivity and quality.

Historically, fee-for-service reimbursement has placed emphasis on the CPT (Current Procedural Terminology) and HCPCS (Healthcare Common Procedure Coding System) procedural service codes for professional claims instead of ICD-9 diagnosis codes. However, with the rise of value-based reimbursement models and the focus on risk and outcomes, now is the time to focus on accurate ICD-10 diagnosis coding and documentation. Doing so will allow providers to accurately reflect how their patients are categorized by payers and how their future reimbursements are determined.

PYA is ready to assist you in evaluating the accuracy of your providers’ coding and documentation to ensure appropriate payment under fee-for-service and HCC and other risk-adjusted models. If you would like to discuss how we can customize a review in line with your payer mix, or you have other questions related to the ICD-10 transition, contact one of the experts listed below at PYA at (888) 420-9876.

 

[1] Hierarchical Condition Coding Risk Adjustment Factor is the relative value of the condition used as a part of the calculation to predict the payer’s liability expenditure and the provider’s reimbursement. Values represent FY2016 Categories and examples of Adjustment Factors.

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