At the Margins

Our latest insight into health care margin improvement efforts

What your peers are planning for October 1—and beyond

Ed Hock August 4, 2015

October 1 is just the beginning.

When hospitals and health systems nationwide officially switch to ICD-10 on that date, it can be tempting to think you’ve crossed the finish line. However, when I’m speaking with hospital executives, I stress that they still face three main challenges to succeed in October and beyond.

First, many organizations lack visibility into their mid-revenue cycle performance metrics and rely on rough estimates for critical success. If this sounds familiar, it’s time to find an analytics tool that will drill down into issues impacting mid-revenue cycle performance.

Second, it’s critical to fight physician fatigue around documentation improvement initiatives. On top of the general lack of engagement from physicians in this topic, medical leadership will now have to re-energize providers who have been through countless ICD-10 prep sessions.

Lastly, most hospitals and health systems will lack access to benchmarking key success metrics for a full year after October 1. With MEDPAR benchmarks under the new code set not available for a full year, organizations run the risk of flying blind with the no way to compare performance.

The Advisory Board recommends the following strategies to ensure success under the new code set.

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Adjustments ahead: Your value-based purchasing forecast

Eric Fontana July 27, 2015

“What’s the biggest thing I can do to improve my hospital’s value-based purchasing (VBP) score?”

It’s a common question this time of year, as hospitals scramble to understand Medicare’s latest proposals for distributing VBP funds.

A few years ago, I could have given you an easy answer: “Improve your process of care.” Back in 2013, the first year of VBP’s existence, process-of-care measures made up 70% of a hospital’s total performance score—so improvements on those measures paid off big. But the times have changed.

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Why CFOs should rethink their cost accounting model

John Johnston , Julie Cummings July 23, 2015

It was no surprise to us that in a recent Advisory Board survey of finance executives, nine out of 10 respondents didn’t have faith in the accuracy or usefulness of their own cost accounting data.

As operations and finance consultants, we go into health systems all the time to help them improve their margins, and often we find that our clients have been flying blind. Most of them are still using the ratio of costs to charges (RCC) to estimate costs—which only provides managers with very approximate information on the costs of specific resources or services.

The risk of cutting the wrong costs, or relying on bad data to pursue strategies, should be too high to tolerate. Then why don’t most systems seek out better options?

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Catch up on the hip and knee bundled payment news

by Natalie McGarry July 21, 2015

On July 9, CMS proposed a mandatory bundled payment program for hip and knee replacements, the Comprehensive Care for Joint Replacement (CCJR) Model. We now enter a 60-day comment period, where the public can submit feedback on the proposal through September 8, 2015, before the five-year program kicks off on January 1, 2016.

Here's the CCJR model at a glance.

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A deep dive on the diagnosis codes that will impact ICD-10 payment

by Natalie McGarry and Eric Fontana July 16, 2015

This is part two of a blog post series analyzing a large, proprietary dual-coded claims dataset for potential changes in reimbursement under ICD-10. Our previous post focused on severity tier (or CC/MCC) shifts. This post will provide more specific details about those diagnosis codes associated with payment reductions when dual-coded under ICD-10.

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How to win the upper hand in your next contract negotiation

Braden Decker July 13, 2015

Rapidly changing reimbursement terms make it extremely difficult to know whether a new—or proposed—payer contract is good, bad, or ugly. Hospital executives often tell us they worry managed care teams don’t have easy access to the right data to negotiate on equal footing with payers.

Even with the right data, evaluating the financial impact of new contracts is a complex exercise given the multiple variables that may come into play: changing from "percent of charge" to "fee schedule," incorporating a complex (and often proprietary) grouper, or accounting for shifting patient populations and chargemaster changes.

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What the new ICD-10 grace period means for you

Ed Hock July 9, 2015

Physician practices nationwide just breathed a collective sigh of relief.

On Monday, the Centers for Medicare and Medicaid Services (CMS) announced a set of measures to ease the transition to ICD-10 later this year—including issuing payments for incorrect codes on professional claims in some circumstances.

What does this mean for you and your organization? Let’s dig into the details.

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HOPPS proposal: What's next for the two-midnight rule?

Eric Fontana July 6, 2015

Late Wednesday, CMS released the Hospital Outpatient Prospective Payment System (HOPPS) Proposed Rule for CY 2016. While the rule proposes a -0.2% reduction for hospital outpatient payments, the two-midnight rule is grabbing all the early headlines.

We're providing a complete breakdown of the HOPPS proposal during our annual webconference on August 11. In the meantime, here's our first take on the two-midnight-related proposals.

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