Healthcare Reforms: Today and Tomorrow – Part 1
For the last 2-3 years, the whole country has been in the grips of the healthcare reform changes. When one looks around, the only topics that one seems to hear about are meaningful usage, health benefit exchanges, HIPAA 5010/ICD10 etc. Some progressive leaders have started talking about the post-reform world, but the primary underlying theme still revolves around ‘How do we do this all?’
So, are we ready to visualize the post-reform world? As of now even to talk about what all needs to happen is a big mystery, let alone how it will all manifest. But if one reads between the lines and extrapolates based on a reasonable line of thought, few things become clear. For example, we can all pretty much accept the fact that the healthcare insurance, which has primarily been driven by large employer groups and Medicare/Medicaid, is not going to remain that way. The focus on individual market is here to stay.
This essay will try to visualize the shape of the healthcare industry over the next few years. The essay will be discussed in two parts. The first article will discuss the setup stage (from now to year 2013). The subsequent article will discuss the next two stages of the reform, i.e the launch stage (Year 2014-2015) and the after-effects stage (Year 2016 onwards).
Now to 2013: The Setup
The Setup period will primarily be defined by transitioning of the coding standards from ICD9 to ICD10 and secondarily by the advent of the first two stages of meaningful usage (MU). The reason we believe that ICD10 transition will take precedence over MU is because the real impact of MU will come in being only with stage 3 (and possibly a year after that) in 2015, whereas the financial and clinical implications of ICD10 transitions are going to be deep and wide-spread, beginning October 2013.
For the last year and half to two years, the single biggest issue facing the healthcare payer industry has been to figure out how to assess the impact of ICD10 (as well as the associated 5010) on their technical systems, processes, payouts, benefit designs, and on their staff. Though the provider industry has been lagging a bit in this assessment or even to fathom the significance of the transition on their operations, lately they seem to be getting ready for it in real earnest too.
The implications of transition to ICD10 are wide and deep-reaching. They are not restricted only to the revenue cycle but touch functionality areas as diverse as benefit design, network contract renegotiations, disease management, clinical decision support, and possibly the financial viability and solvency of a payer or a provider organization. It is also becoming abundantly clear that there is hardly any possibility of the mandate date being extended. In-fact if anything, it is more likely that the two parallel and large initiatives, i.e., ICD10 and Meaningful Use, will merge either by design (HHS seems to think that stage 3 measures should include ICD10 compliance) or by necessity (Why waste money on two separate exercises despite their obvious overlap, when at a small incremental cost, one can achieve both). At the same time, it is also becoming clearer that stakeholders (especially the providers) have to discard their hitherto held belief that their application vendors will simply take care of the issue. They are starting to realize that this is not simply a technical transition. If anything, the technology remediation aspect of the transition is no more than 25% of the overall effort and cost. Given these two facts,-no slippage of mandate date and large effort associated with the transition, we believe that the ICD10 transition will be the all-consuming focus area for HC industry over the next 2-3 years.
As far as MU is concerned, quite a lot is being talked about it and a decent amount of work is also being done, especially in the provider sector.However, the effort pales in comparison with the effort being spent on IC10 transition, at least at the payer organizations (who control the biggest purse strings in any case). The reasons could be multiple: lack of clarity on the MU metrics (only lately have the measures and their definitions have been finalized), lack of perceived incentives (the penalties come into effect only in 2016), limited resources on part of the providers to invest into MU related initiatives, and the proverbial dependence upon software vendors. We believe that MU will start gathering real momentum in terms of implementation, only towards the end of the period for each of its stages as described above and that makes us put it as secondary focus area for this phase of reforms.
A third focus area seems to be emerging at a somewhat rapid pace which is the concept of Health Benefit Exchanges (HBEs), not to be confused with Health Information Exchanges (HIEs). The concept includes the provision of a state-wide market place for uninsured, underinsured, and small employers, for them to do comparison-shopping of the best available plans for their individual needs. A National Minimum Benefit (NMB) set of facilities are required to be maintained and the premiums are to be co-shared between the member, the employer and the government. Though the concept is in its infancy yet, some of the progressive states have already gone ahead with some statute or the other to support this exercise, states of California and Massachusetts being prime examples. Few other states have also started discussions on shape, features and governance of the exchanges. We believe that due to the mandate date of 2014, the HBE implementations will be in full swing by the end of this phase of reforms.
In summary, following could be the focus areas and significant events of the ‘now to end 2013’ phase of the reforms
- Continual focus on ICD10 transition, reaching a crescendo by end of the phase.
- Payer community being more inclusive (99%+ compliance) compared to provider community (around 60% compliance expected).
- Significant adoption issues post October 2010, in terms of training and productivity, contract negotiation and reconciliation, correct coding and claim rejections. We expect this to take at least another year post 2013 for things to settle down.
- Very quick impact on improvement in quality of care post adoption, but the impact on reduction in cost of care would take significant time post adoption, due to factors such as pace of adoption of ICD10 based DRGs, existing long term contracts, complexity of coding guidelines leading to confusion in coding procedures etc.
- MU getting incremental traction but still being secondary to other pressing initiatives, due to distant penalty phase
- Large IDNs and hospital chains will adopt MU much more readily than small providers (if not a part of large provider groups) as the larger the organization, more diverse the service offering, the higher the incentive and hence better the ROI model. Small providers are still struggling with the fact if it is worth all the associated pains with an EMR in order to get the small 44k incentive.
- The impending penalties in 2016 are not playing that much on provider’s mind as the phase is quite distant and quite a few of them are not sure about the political climate and political will which will prevail at that time.
- Payers are looking at selectively extending some of the MU criterion to either improve their Medical Liability ratios (MLR) or force more of a preventive rather than curative environment for their member populations, though the focus is secondary to other direct-impact initiatives such as ICD10 transition.
- HBEs will either become the biggest focus area or will completely wither away depending upon the political climate.
- There are still quite a few states that intend to repel the reform bill but at the same time 48 out of 50 states accepted the federal grant to strategize the formation of HBEs. The jury is still out on the fate of the exchanges.
- Irrespective of the political maneuverings, we strongly believe that individual market places are the wave of the future and whether it happens under the governmental auspices or not, the healthcare industry is irreversibly driven towards it. Though the lack of political will could push the timeline to latter parts of the decade.
- The beginning of the Accountable care Organizations:In crafting the Affordable Care Act, Congress assigned an important role to ACOs in helping physicians, hospitals and other providers work together more effectively to improve quality of care and slow health spending growth. The integral part of implementing ACOs, will be measuring processes and outcomes across the care continuum to support improvement and accountability and reduce the administrative burden associated with performance measurement. This will be a significant move towards achieving the total health continuum.
We will discuss the ‘Launch’ and the ‘After-effects’ states in the next part, to be published next month.
About The Author
Chief Solutions Architect, HCLS
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.