By Dr. Suman De

Even before the industry could solve the puzzle of ICD-10 mapping, “Revenue Neutrality” has become a new food for thought. It’s obvious that ICD-10 will alter health plan’s existing coverage determination, clinical policies, and adjudication logics at a much finer level, which can complicate their reimbursement decisions for every single service claimed by the providers. If this occurs, then guaranteeing that provider payouts remain at the same level in ICD-10 as they currently are in ICD-9 will become somewhat of a myth.

But “every cloud has got a silver lining.” In order to strategize for this colossal financial challenge that can well distort the bottom lines of the payers and the providers, the first thing to do will be to agree on an accepted definition for the so-called term “Revenue Neutrality.” In my opinion, the concept can be defined as a “goal to ensure that claims payments of health plans based on ICD-10 are within an understandable and acceptable variance from what is paid today based on ICD-9 such that, either the payer or its members/provider partners experience zero or minimal negative financial impact.” But, the definition is just building the block. The real challenge is more about implementing and testing the same in ICD-10 as in ICD-9.

With a fair maturity over the GEM and insight to the newly released MS DRG for ICD-10, the industry has well understood that there is no way to completely and accurately map from ICD-9 to ICD-10 (except for 5% of the 1:1 exact cases). This makes it difficult to satisfy all the ICD-9 DRGs to the same ICD-10 DRGs especially for the ones which belong to the high cost, high volume MDCs (Newborn, Transplant, Circulatory System, Injury etc.). Moreover, it is nearly certain that CMS will carefully study the clinical resources consumed for each new ICD-10 diagnosis and procedure codes within the next couple of years. This study may alter the ICD-10 codes grouping from their currently assigned MS-DRGs or even produce some different or additional MS-DRGs with MCC/CC lists. Isn’t this really bothering? Also, think there are many more beyond MS DRG. The payers and providers that negotiate on APR/APS DRG still have miles to go as vendors have not even released the ICD-10 test version for those which are expected sometime in 2012. Too close to the deadline right? And won’t that be risky too if the approach to handle those are left undecided?

So I think, financial neutrality assessment is a priority exercise for all payers and providers in the list of their ICD-10 action items. For payers who deal on long-term contracts, it will be a diagnostic to discover the revenue vulnerable areas and ideate on actionizing the corrective measures before the go-live. But, the payers and providers that dwell in short-term contracting (e.g. 1-2 years) and who are expected to get into a new one by 2012 or early 2013 need to be proactive enough to immediately have the defensive plans in place so that they do not lose out much in the financials.

To handle such critical situation, what any payer and provider will need is a canned modeling and simulation technique. To me, organization’s ICD-10 mapping decision is crucial and evaluation of the same with respect to different business functions (e.g. Contracting, Pricing, Benefit Design, Risk adjustment, Pre-Cert & Adjudication guidelines) that drives claims payouts is a right first step. After that, one need to conduct a volumetric analysis of retrospective claims and compare results for equivalency between the original ICD-9-only set of claims with the crosswalk based ICD-10-only set of claims with respect to DRG and payout derived at each stage. Such evaluation is advisable to carry on multiple scenarios both at an enterprise level and at all impacted functional areas. Based on the crosswalk, data analysis and variance observed, organizations need to further identify control measures and trigger defensive actions to offset the potential identified financial impacts and continue monitoring the outcomes.

But even with defensive levers and cautiously established “reimbursement neutral” map in place, payers still might face some challenges. Because, there is hardly any payer control over provider ICD-10 coding patterns which grossly differ from provider to provider. Providers operating on the customary reimbursement, per diem and fee schedules along with the risk-based payment mechanisms will largely bank on their coders’ way of natively defining ICD-10 which will require them to look at some simulations in individual cases, and use the updated plan policies and payment algorithms to make some predictions. So, it becomes evident now that neutrality assessment is not a one-sided activity but it will require both payers and provider partners to work closely and estimate the payment impacts and mitigate any major changes.

Honestly, after writing so long, I don’t feel that I have written enough to make the reader complacent with this neutrality challenge. But, I wish to keep the forum open for new ideas and thoughts around the topic which can complement or contradict mine and help to make the discussion rich. One last thing before I end for the day, the industry realizes the problem that’s pretty apparent, but let’s be proactive enough to resolve it before it turns into a serious issue.

About Dr. Suman De
Dr. Suman De is Senior Associate consultant for the healthcare domain at Infosys Technologies, a leading global IT services and products organization with annual revenue of approximately $5.38 billion in 2010.

Dr. Suman has over 5 years of experience in healthcare domain and specializes in the development and implementation of IT-enabled business solutions for Health Insurance and Managed Care organizations. Dr. Suman’s core area of expertise is in-depth understanding of the impact of the HIPAA 5010 and ICD-10 implementation over the critical payer business areas such as member services, benefit design, claims processing, contract management and medical management.

Dr. Suman is an active participant in numerous industry initiatives, and organizations- AHIMA, WEDI SWG for ICD-10 etc. Dr. Suman has been a speaker at 4th WEDI 5010, ICD-10 Implementation Forum at ST.Petersberg, FL. Currently engaged with a large National Payer as a ICD-10 consultant in its Financial Neutrality Assessment & Financial Neutrality Testing Strategy project.

Dr. Suman is a registered clinician with a degree in medicine and holds a MBA degree in Healthcare from TISS, Mumbai.