Written by Gregory M. Adams, FHFMA

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According to the group Catalyst for Payment Reform, of the value-based payment models in action, 53 percent of commercial payer VBPs put providers at some financial riskif they fail to contain costs or improve care.

However, on the flip side, many value-based payments still fall into the category of pay-for-performance, which offers providers only potential financial rewards and no risk. I believe that the progression of VBPs will move quickly away from this model into models that will penalize providers for poor quality.

This is already being done by the Medicare program, which is seeing to it that hospitals are slapped with big penalties that experts say are only increasing. A recent study from CipherHealth shows a mounting $1.6 billion in Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) and readmission penalties facing hospitals today. That’s $1.6 billion! The survey calculated that at more than 500 hospitals nationwide, the three-year at-risk amounts were $3,500 per inpatient bed.

Based on a study by the PWC Health Research Institute, the financial impact of these value-based reforms is expected to have a significant impact on low-performing hospitals. For example, a 300-bed hospital with poor quality metrics would be penalized approximately $1.3 million a year, beginning in 2015, under Centers for Medicare & Medicaid Services (CMS) value-based reforms. And this doesn’t consider the impact of reduced payments from commercial payers. In this example, if we assume that another 30 percent of the hospital’s revenue is commercial, using the same penalty relationship, the hospital would lose over $2 million a year.

Now, let’s put that number into perspective – while profitability for hospitals increased overall in 2012, there was a wide disparity in hospital performance, with over 30 percent of hospitals running at a loss. For those hospitals, even a small decrease in payments will strain resources. So, how does a hospital fix any quality issues through changes in operational practices, which will cost money, while receiving less in payments? It will not be easy, and keep in mind that any quality comparisons, at least at the federal level, are a moving target. Under the current CMS formula, not only do providers need to improve their scores, they need to improve at a faster rate than other hospitals nationally to benefit.

Now how does VBP relate to ICD-10? Well, the accuracy and completeness of coding drives many of the quality and severity-of-illness indicators that in turn determine value-based payments or penalties. And with the increased complexity of coding under ICD-10, the potential for inaccurate coding increases exponentially. On top of that is the uncertainty of how both CMS and commercial payers will change their measurement criteria for quality and value with the increased specificity of the ICD-10 codes. With all of these unknowns, one thing is clear – clinical documentation is, or should be, a top priority for every provider. The accuracy and preciseness of the coding of a patient’s record ultimately will affect VBP payments and whether reimbursement decreases, increases, or stays the same during the ICD-10 transition. Millions of dollars are hinging on your clinicians and coders, so here are two tactics to help you tackle these transitions.

The Workgroup for Electronic Data Interchange (WEDI), the nation’s leading nonprofit authority on the use of health IT to create efficiencies in healthcare information exchange, announced the release of its findings from its August 2014 ICD-10 Industry Readiness Survey. The latest survey results are based on responses from 514 respondents, consisting of 324 providers, 87 vendors and 103 health plans.

Since 2009, WEDI has conducted nine ICD-10 readiness surveys in an effort to gain a broad perspective on the readiness status for different sections of the industry, and to gauge how quickly they are progressing towards the Oct. 1, 2015 implementation deadline. The full survey results are contained in WEDI’s September 19 letter to the Department of Health and Human Services (HHS) which can be viewed online via the WEDI website. Highlights from the latest survey findings include:

• Vendor product development: About 40 percent of vendors indicated they are complete with product development. This is an improvement over the October 2013 survey.
• Vendor product availability: More than 25 percent of vendors responded that their products would not be ready until 2015 or responded ‘unknown.’
• Health plan impact assessments: Nearly 75 percent of health plans had completed their impact assessment.
• Health plan testing: More than 50 percent of health plans have already begun external testing compared to less than 25 percent in the prior survey.
• Provider impact assessments: About 50 percent of the providers indicated they have completed their impact assessment—essentially the same number as in the October 2013 survey.
• Provider testing: About 35 percent of providers have begun external testing, while in the October 2013 survey about 60 percent had expected to begin by the middle of 2014.
• External testing approach: About 60 percent of health plans expect to test with a sample of providers, while about 20 percent indicated they will test with a majority of providers.

“Based on the survey results, all industry segments appear to have made some progress since October 2013, but the lack of progress by providers, in particular smaller ones, remains a cause for concern as we move toward the compliance deadline,” said Jim Daley, WEDI chairman and ICD-10 Workgroup co-chair. “Delaying compliance efforts reduces the time available for adequate testing, increasing the chances of unanticipated impacts to production. We urge the industry to accelerate implementation efforts in order to avoid disruption on Oct. 1, 2015.”

WEDI will continue its efforts to move the industry forward and plans to continue its surveys to gauge industry readiness. WEDI has conducted several ICD-10 forums—the most recent of which was in July 2014—and plans to hold additional events in 2015, as well as continue to provide educational opportunities and produce work products to assist the industry in preparing for ICD-10 implementation. More information on WEDI events and ICD-10 work products are available on the WEDI website.

- See more at: http://www.wedi.org/news/press-releases/2014/09/25/Results-from-WEDI-ICD-10-Industry-Readiness-Survey-Released#sthash.y5QeiaRr.IPe8lLJa.dpuf

On Thursday, July 31, 2014, the Department of Health & Human Services (HHS) finalized the rule that establishes October 1, 2015 as the new implementation date for the healthcare industry’s transition to the ICD-10 diagnosis and procedure coding system.  Citing the potential costs along with other factors, the agency determined and ultimately decided that a one year delay was the most reasonable for all stakeholders affected.  Click here to read the Centers for Medicare & Medicaid Services (CMS) news release and here to view the actual rule as published in the Federal Register.

On Friday, June 13 (coincidence, omen, or both), the Office of Management & Budget (OMB) received the interim rule to implement the ICD-10 diagnosis and procedure code set by October 1, 2015.  Interim rules typically have a public comment and review period of 90 days, at which time, the OMB may publsh as originally drafted or modify based on those public comments.  Following that time line, it is possible that a final rule for ICD-10 implementation may be published in the Federal Register around the end of September.  Assuming the date does not change, that would give NYP and the rest of the healthcare industry one more year to ready itself for the new code set.

As we know, and have experienced, such rules are not written in stone and can be overturned by congressional actions similar to the fourth (yes… fourth) and most recent delay handed down in April of this year through its inclusion in the Protecting Access to Medicare Act of 2014.  In the interim, the industry, most notably the Workgroup for Electronic Data Interchange (WEDI) continues to pressure the Centers for Medicare & Medicaid Services (CMS) and the Department of Health & Human Services for more information, more education, and a stronger, more concrete testing and readiness plan to get the larger industry to embrace the transition.

In a letter to the Secretary of the Department of Health & Human Services (HHS), the Workgroup for Electronic Data Interchange (WEDI) requested improved management of the healthcare industry’s tranbsition to the ICD-10 coding system.  Among its 13 points of action, WEDI cited establishing credibility, more transparent communication of its own agencies readiness activities, a well defined testing process with published results, defined and tracked milestones, and generally more positive communication of the benefits ICD-10 will have on the delivery of healthcare.  The full letter to the secretary can be viewed by clicking here.