Healthcare Reforms: Today and Tomorrow- Part 2

This article is a continuation of the earlier article (Healthcare Reforms: Today and Tomorrow- Part 1, http://healthcarereformmagazine.com/article/healthcare-reforms-today-and-tomorrow-part-1.html). The earlier article focused on the setup stage (until year 2013). This article will discuss the next two stages – the launch stage and the after-effects stage:

2014 – 2015: The Launch

The phase starting with 2014 will be the most crucial phase for determining the future of the US healthcare for decades to come. ICD10 transformation would be in its first year of all around implementation, the Health Benefit Exchanges (HBE)would be coming into play in real earnest, the final stage of Meaningful Use (MU) incentive phase would be around the corner and the Meaningful Use penalty phase (potentially much more impactful than the incentive phase) will not be a far off event.

During this phase, ICD10 transformation will still be in its infancy and if empirical evidence from other countries is anything to go by it is not going to be an easy adoption. 

Some of the potential issues might include-

• The loss of productivity due to increased complexity of the coding structure and the lack of trained coders could be to the magnitude of 2-4 times at least for first 6-12 months. This will put significant burden on the providers not only from staffing perspective but also from longer AR perspective.
• Contract renegotiations will be a long and drawn-out process due to lack of evidentiary data based on ICD10 codes.  The process will be further complicated because as of now CMS’ ICD10 DRGs lump together all the ICD10 codes belonging to a particular ICD9. This would be fine for financial neutrality of the claims, but will have an unwarranted side-effect of lack of enthusiasm for adoption on provider side. If the provider community does not see any benefit or detrimental impact of choosing any of the mapped ICD10 code, their focus on picking up the absolutely correct code might waver.
• Clinical decision support systems and disease management systems, two very crucial tools to encourage preventative healthcare  rather than curative, will have to be retuned and it will take time to build historical data to do so. During the interim, clinical quality might actually dip rather than improve.

In parallel, the MU stage 1 and 2 would have been adopted widely by this phase and work would be at peak towards stage-3 compliance. One potential outcome of this phase could be tight integration between MU and ICD10. Health and Human Services (HHS) could potentially make ICD10 compliance  a mandatory requirement for stage-3 certification. This is the logical next stage of evolution for EMR/EHR systems and many in the industry are currently petitioning the HHS to go ahead this amendment for MU stage-3 requirements.

By 2014, the impact on financial and clinical outcomes due to stage-1 and possibly stage-2 measures would become clearer. If all expectations are met, a slight dip initially will give way to much improved quality of care, though the reduction in cost of care may not be that explicit by 2014. It is also the expectation of many in the industry, especially the analytics community that the success of MU measures will lead to wide adoption of consolidated measures rather than isolated attribute measurements. This focus on composite analysis is making the Comparative Effectiveness Research (CER) as the next big buzz word in the healthcare community currently. We strongly believe that CER would be in early stages of adoption by early 2014 at least among commercial payer community.

By 2014, assuming the political climate does not change drastically, the HBEs would be adopted by almost all states in some shape or form. We believe there could be two distinct forms of HBEs that states could adopt: 1) a set of open competitive exchanges closely monitored by the state or 2) a single monolithic state-operated exchange. Whichever route is adopted by the state, the initial exchanges are not expected to be the complete one-stop shop as some in the industry are envisioning. The initial exchanges (generation 1 exchanges) will provide basic functionalities such as information about the plans available in member’s area, eligibility information, subsidy calculators etc. The next level of functionality such as real-time enrollment into desired plan and comparative clinical and financial analytics will start to take shape but should be adopted in the main stream only during the third phase of the healthcare reforms post 2016.

Some of the biggest challenges which we expect the industry to face with respect to HBEs are:

• The issue of adverse selection – expected to be resolved through better informational support to prospective enrollee as well as some kind of review mechanism
• The governance structure – Whether to go with a single exchange or with an open competitive environment
• Work distribution – between real-time self-service option and broker controlled call center option

2016 onwards: The after-effects

Whichever way one looks at it, the US healthcare industry is not going to look anything like what it looks like today.

The Meaningful Use program will reach the penalty phase.

It is widely accepted that withholding of payments is going to carry a much more significant impact on the provider community than the initial incentives that are being offered for the adoption of certified EMRs and other standards.

The early adopters of MU measures should be sitting quite comfortably at this point and should have started realizing the significant benefits of the EMRs and EHRs. On the other hand, the severity of the penalties would force the non-adopters to scramble for adoption. This will lead to a fresh wave of revenues for the vendors and system integrator community. We expect a 2-3 year period beyond 2016, before EMRs are almost universally adopted.

Once universally adopted, EMRs and EHRs will move towards the next generation of evolution. i.e., public CDRs (Clinical Data Repositories such as HealthVault and GoogleHealth) and focus on PHRs (Personal Health Records). The shifting nature of the insurance products from group/employer based insurance to individual market (further enhanced by adoption of HBEs) will further speed up the adoption of public CDRs and PHRs. We expect that by the end of the decade, a significant percentage of country’s population will have a self-controlled longitudinal health record in one or the other public CDR.

ICD10 will be well-entrenched by 2016, at least for transactional systems.

The payer community, which is all set for almost universal adoption of ICD10 by October 2013, would have gone through a long and painful consolidation process through 2014 and 2015. But by 2016 they should be ready for realizing the true potential of ICD10 adoption. By early 2016, the grouper software would go through the typical fine tuning and ICD10 based DRGs (where not all ICD10 codes for a specific ICD9 code be clubbed together) would have hit the market. This is the time when fine tuning of payout models should start to show more precise contracts and better and accurate payout rates.

By 2016, the progressive payers would have also optimized their application portfolios and would have consolidated their adjudication engines and other applications rather than bring all of them over to ICD10. In addition, the ROI of higher granularity of the codes would have started manifesting in more streamlined and automated medical management functionality. The Disease Management and Case Management (DM/CM) aspects of the payer operations would also be getting streamlined at this point with appropriate care options associated with the incrementally granular IC10 codes.

The providers, on the other hand, are a different ball game. Quite a significant number of providers (the estimates vary from 30 to 60 percent) would not have adopted IC10 or their internal operations by October 2010. The non-adopters are expected to either leverage their clearing houses for the conversion to ICD10 or just adjust their Revenue Cycle Management (RCM) systems with a simplistic map to ICD10. This would mean that by the early 2016, when payers (who would have done significant modeling in terms of payouts against ICD10 codes) get ready to renegotiate the contracts, the providers would not have much of clue in terms of ICD10 based reimbursement. This could lead to significant delays in contracting and readjustments in the networks.

In addition, the non-adopting providers will also find themselves at a competitive disadvantage with respect to adopting providers when it comes to better quality of care and membership to community initiatives (EHRs) that would have switched to ICD10 by 2016. Another significant impact on the non-adopting providers could occur in case HHS and CMS decide to merge ICD10 adoption and MU stage-3 measures. If that happens, all the non-adopting providers could find their EMRs as non-compliant.

So in a nutshell, by 2016, the payer community, in general, is expected to be on its way to reap the rewards of ICD10 transition investments whereas non-adopting provider community could struggle from reimbursement as well as competitive advantage perspective leading to a potential rush towards adoption.

Jury will still be out on the HBEs, though most all expect them to survive and flourish.

Health Benefit Exchanges, that would have starting sprouting up in 2013, would have reached full strength by early 2014 and by 2016 would have passed through the initial test of successful implementations. But the real test of adoption would still be ahead. Adoption is the key to survival of HBEs, preferably electronic adoption.

The adoption of HBEs could be driven by factors such as:

• The target population – The electronic savvy, web access, population age and literacy would define percentage adoption, e.g., we expect the state of California exchange to be much more widely adopted than some exchanges in the Midwest.
• The state strategy for exchange structure – It is believed that a state with multiple exchanges competing for enrollment will have a higher chance of adoption than a state with a single monolithic tightly controlled exchange.
• The integration of exchange with clinical aspect and it’s ability to provide services beyond simple information, such as ability to enroll real-time, ability to avoid adverse selection through a clinically integrated plan-recommendation engine, ability to provide an integrated clinical and financial dashboard to the registered members etc.

Though the fate of HBEs is highly dependent upon the political climate, adoption rate and other parameters, they still seem to be a highly viable option, as growing focus on individual market rather than the current group markets will render the need for a real-time, web-based competitive market place, controlled by an individual almost inevitably.

In closing, we would like to reiterate that the US Healthcare industry is about to get a long overdue face-lift and the next decade will be nothing if not a tumultuous upheaval. The end result could be significant reduction in ever-increasing cost of care and significant increase in ever-diminishing quality of care, provided the industry, irrespective of payer, provider or regulatory, adopts a common strategy and works towards mutually beneficial goals. The healthcare reform bill provides a decent framework to do so but like any other bill its fate is in the quality of execution. We will wait and see.

About The Author

Rajiv Sabharwal

AVP, Chief Solutions Architect, HCLS

Infosys Technologies Ltd

Rajiv Sabharwal is Chief Solutions Architect for Healthcare and Life Sciences at Infosys Tech., a leading global IT services and products organization with annual revenue of approximately $5 billion in 2008. Since 2006, Mr. Sabharwal has been responsible for ideation, development, and delivery of all healthcare and life sciences related products and solutions for the organization. Some of the solutions include iTransform (product suite for managing 5010 and ICD10 transition), Interoperability platform (a middleware suite of components tailored for seamless interoperability) etc.

Rajiv is recognized as an expert in 5010 and ICD-10 and has conducted multiple workshops, webinars, podcasts, speaking sessions in large event gatherings etc. Rajiv also has a weekly blog column “Healthcare for One and All” running in Health Data Management (http://www.healthdatamanagement.com/blog/).Mr. Sabharwal has also been on user group/advisory boards for IFPUG, HL7, and ourMedicina.

Prior to joining Infosys, Mr. Sabharwal was the technical program director for LS vertical at HCL Technologies. Mr. Sabharwal is a graduate of Delhi College of Engineering in computer sciences and holds an MBA degree in finance.