How providers should address post-implementation ICD-10 challenges

A Law Review Q&A

Similar to the uneventful response observed following the arrival of "Y2K", ICD-10 has come and the nation's health care system remains intact. Indeed, on Oct. 29, 2015, the CMS reported that claims were processing "normally." However, questions remain regarding the transition's effect on revenue, as well as the scope of potential government enforcement. The switch to ICD-10 is also the beginning of a new era of complexity and specificity in medical record documentation.

It is clear that the full effects of ICD-10 has yet to be felt. We spoke with George Breen, Bethany Hills, and Jackie Selby of Epstein Becker & Green, P.C. about what providers ought to consider as they address and prepare for post-transition challenges.

DB: What are some potential reimbursement challenges that providers may need to address?

A: Clearly, providers should expect revenue challenges—translated as delays—involving both public and private payors. Existing reimbursement arrangements will be affected and payment delays to providers are inevitable as a result of the transition to ICD-10. While CMS recently announced a 12 month "grace period"—in which neither quality penalties nor contractor claim denials will occur relative to physician or other practitioner claims under Medicare Part B so long as a valid ICD-10 code is used from the right family—this does not apply to, among other things, inpatient hospital services, nor does it automatically translate to managed care. Indeed, at least one major commercial payer has stated that it expects full provider compliance with ICD-10. 

What the new ICD-10 grace period means for you

The need to be ready for challenges in billing for inpatient hospital services is real. Under ICD-10, the number of diagnostic codes available for coding healthcare services has gone from 13,000 to 68,000. For inpatient services, diagnosis and procedure codes are often grouped through software programs into diagnostic-related groups (DRGs). These "groupers" are central to the claims and payment process for inpatient services because claims payment is based on the DRG. As part of ICD-10 implementation, new DRG grouper methodologies will be needed to translate the new codes into DRGs for payment. For inpatient services, reimbursement rates based on a percentage of what Medicare pays likely will be least affected. Reimbursement rates based on negotiated case rates tied to specific DRGs likely will be most affected. As such, case rates will need to be adjusted or reassigned to DRGs within a new grouper methodology. 

Here too, providers must recognize the significance of clinical documentation as it sits at the crux of reimbursement challenges and may create a number of unanticipated outcomes. Value-based payments, regardless of the specific methodology, could be significantly affected by the ICD-10 transition. Thus, the need for accuracy in clinical documentation—to correctly capture the visit and the diagnosis—ultimately affect incentive payments.

DB: Should providers be concerned about the impact of the ICD-10 transition on their managed care contracts?

A: Yes, and providers should proactively review their managed care contracts. Some managed care agreements address ICD-10 conversion by requiring providers and the plan to comply with ICD-10 in claims submission and payment processes as of October 1. Agreements for reimbursement of inpatient services based on case rates tied to specific DRGs require plans to implement new rates in conjunction with ICD-10 implementation. While it's impossible to predict how such rates will need to change, agreements typically have multiyear terms with limited rights to terminate early.

In reality, contracts with managed care entities may not sufficiently address the revenue impact of this change. Many insurers have worked to map ICD-9 to ICD-10, but such changes may, or may not, be effectively "neutralized" by the revenue neutrality provisions in some managed care contracts; indeed, there is unlikely to be a revenue neutral solution. 

ICD-10 from the inside: What November means for a top health system

It may not be easy to determine what "revenue neutral" means when comparing what was paid for a service based on ICD-9 codes and a DRG grouper to the new DRG grouper based on ICD-10 codes. In fact, comparisons are impossible unless medical records are coded for both ICD-9 and ICD-10. Providers can expect to see such issues ultimately going through the dispute resolution process provided for in managed care contracts. 

Because significant payment disputes are possible, providers should proactively address the ICD-10 issues in their current contract negotiations. Provisions addressing grouper changes, specifically addressing ICD-10, those referencing "revenue neutral" requirements and provisions dealing with policy and manual compliance should be carefully evaluated in current contract reviews.

Moreover, providers must be vigilant and review all policy and manual changes released by health plans, as many such changes will be addressing operational issues identified in the ICD-10 transition. 

DB: How will the transition to ICD-10 affect compliance departments?

A: Providers need to recognize that the transition to ICD-10 impacts more than just revenue stream or billing and coding. This transition plainly impacts compliance departments. Consistent with an ever increasing focus on payment for quality and medical necessity, health care providers must ensure that the medical record contains enough specificity for the selection of the ICD-10 code that best reflects that condition. 

If a clinical record does not contain enough information to support the selection of a specific code, the compliance department must understand the impact of this inconsistency on the claim and be able to determine whether there is a reimbursement impact. Indeed, billing, compliance and professional staff should have comparable training and apply consistent standards in creating and evaluating the medical record and identifying the appropriate ICD-10 code. 

As important, the compliance department must determine whether CMS' recently stated flexibility on accepting the correct family of codes for claim submission also permits that same flexibility in an overpayment analysis.

With more specificity, increased enforcement will likely follow. Enforcement efforts can be expected to focus on whether clinical documentation supports the ICD-10 code selected, and when not, the potential for claims of false or fraudulent billing. Health care entities should also anticipate—and be prepared to respond to—aggressive payer audits, both private and public. Providers should take the "grace period" to establish an effective audit protocol which addresses the challenges ICD-10 brings.

Questions for the Author?

Feedback / Comments on the Article?


Next in the Daily Briefing

If defensive medicine 'works,' what does that mean for value-based care?

Read now