At the Margins

The good and bad news with severity tier (CC/MCC) changes in ICD-10

by Natalie McGarry and Eric Fontana

This is part one of a blog post series analyzing a large, proprietary dual-coded claims dataset for potential changes in reimbursement under ICD-10. Make sure you're subscribed to our blog to get the next post where we examine which secondary diagnosis codes are most commonly associated with reduced payments.

For the past year, providers and industry experts have been closely watching Congress for signs that the ICD-10 transition will be delayed. But with no congressional action, and not one, but two successful end-to-end ICD-10 tests, it appears that the October 1 conversion will hold.

Early perspectives on the impact of the ICD-10 shift have been mixed. CMS studies in 2011 and 2013 have reported both a potential slight uptick (0.05%) in total payments, and a smaller loss (0.004%) when later repeated. Our own analysis reveals that up to 5% of revenue may be subject to change under the incoming coding system.

To prepare for the transition, many providers have been dual coding in ICD-9 and ICD-10 to compare MS-DRG assignment, and estimate reimbursement changes. We've aggregated data from 24 ICD-10 Compass member institutions to analyze a unique dataset comprised of over 100,000 dual-coded claims.

Reimbursement shifts may be categorized into three major groups: changes in severity tier, changes in MS-DRG groups, and switches between medical and surgical MS-DRGs. This analysis will focus on the first and most prominent category—changes in severity tier ("CC/MCC").

Reimbursement Shifts

Severity tiers are designed to categorize patients on the basis of their complexity and cost of care with more complex patients failing into a higher paying tier within a base MS-DRG. We've identified numerous instances where coding a claim in ICD-10 results in a severity tier shift with potentially significant impacts to anticipated reimbursement.

Example: Significant payment disparity exists within heart failure base triplet

Heart failure and shock

Most severity tier changes see reduced payments

While only a small number of claims we examined experience a change in severity tier, those that did will largely see a reduction in payment.

Our data set revealed that 1.4% of dual-coded claims resulted in a change in severity tier, of those claims, 62% exhibited a negative reimbursement impact.

CC/MCC Change Volumes Distribution

Sizable risk of net revenue losses from severity tier shifts

Within this dataset, claims exhibiting severity tier shifts represent roughly 1.6% of total expected payments. When we focus on those claims that would have experienced a change in payment to CC/MCC changes, we'd see a net impact of approximately -0.14%. This represents the combination of a 0.42% reduction in payments due to downgrades in severity tier, offset moderately by a 0.28% increase in reimbursement where cases receive an upgrade.

Reimbursement impacts due to CC/MCC changes

Focus documentation efforts on three key service lines

The dual-coded sample reveals that cases within the general surgery, general medicine and cardiac services lines are most susceptible to revenue declines due to unfavorable shifts in CC/MCC. Perhaps not surprisingly, general medicine has the highest number of cases switching tiers, yet the per-case value of general surgery elevates its importance as a focal point for documentation and coding efforts due to the potential for higher per-case reimbursement reductions.

CC/MCC changes with negative reimbursement impact graph

It will be crucial that organizations not only focus on highly reimbursed procedural cases where severity tier shifts dramatically reduce the per-case payment, but also high volume services with less generous reimbursement. Understanding your organization's historical mix of cases is critical to investigating your downside risk.

DRG 'factories' beware: Procedural payment downgrades could inflict losses

While many facilities see a lower proportion of surgical cases relative to medical, severity tier shifts in higher paying surgical cases carry a disproportionate potential for revenue losses on a per-case basis. To illustrate the disparity in per case reimbursement reductions, the table below highlights the average reduction per-case due to severity tier downgrades in our dual-coding sample by service line. Not surprisingly, the top three service lines represented are heavily procedural in nature and again represent front line opportunities for documenting and coding improvement.

Per Case Payment Reductions by Service Line

Top 10 severity tier shifts split between medical and surgical MS-DRGs

Below we've displayed the MS-DRGs exhibiting the largest volume of negatively impacted payments in our sample due to CC/MCC shifts. It is important to note that the MS-DRGs with the highest absolute volumes of severity tier shifts may not change tiers all that often.

For example, MS-DRG 765, cesarean section with CC/MCC, has the highest absolute volume of negative severity tier shifts in the data, but the observed shifts only represent a fraction of the total cases (3%) for that MS-DRG. In contrast, MS-DRG 669 has a lower absolute number of shifts than 765, but switches tiers 18% of the time.

Top 10 MS-DRGs with Negative CC/MCC Shifts

It's not all bad news: Dual-coded data shows upside is available

Fortunately, it's not all bad news: our dual-coded sample indicates that the shift to ICD-10 is likely to result in some positive payment changes due to cases moving into higher severity tiers, providing an opportunity to counterbalance losses attributable to the negative impacts detailed above. Perhaps not coincidentally, the top four services with upside mirror those with the potential for payment reductions detailed previously.

CC/MCC changes with positive reimbursement impact

Procedural-heavy service lines have highest gains, but assess your own case mix

While it's true that a majority of claims in our dataset (62%) saw lower reimbursement due to severity tier downshifts when coded in ICD-10, individual cases with large per-case upside may help to bridge the gap.

Below we list service lines with the highest average gain per case, prime targets to ensure documentation and coding is optimized. As we saw earlier in the negative change analysis, general surgery clearly exhibits the highest upshift in revenue per case, however individual facilities should consider their own mix of cases to assess where documentation and coding improvement efforts can help optimize payments across the board. The impact of an upgrade to a "CC" or "MCC" for a substantial number of general medicine cases is not to be underestimated.

Per Case Payment Gains by Service Line

Top five MS-DRGs for increasing revenue

Below we profile the top five MS-DRGs in our dataset associated with a positive upgrade in payment. Data has been displayed in order of volume. It is important to recognize that while some MS-DRGs shift a low proportion of cases, such as with cesarean sections, due to the high volume of that MS-DRG it may represent an outsized opportunity for revenue gains.

 Top 5 MS-DRGs with Positive CC/MCC Shifts

Ready to revolutionize your mid cycle?

There are two key things will define success in an ICD-10 world. First, it's critical to have an analytics tool that gives you clear visibility into your performance and allows you to benchmark against your peers. Most importantly, you need a tool that provides ICD-10 benchmarks sooner than those from Centers for Medicare and Medicaid Services.

Second, you'll need to engage and train physicians in documentation improvement through the transition and beyond. That's why the Advisory Board offers support at all stages of the education process, from planning to implementation.

To learn more about how the Advisory Board sets you up for success under ICD-10, contact