Wednesday, October 19, 2011

Au Contraire, ICD-10 is NOT like the Mortgage Crisis of the Great Recession

This article recently published on www.govhealthit.com has a catchy title and garnered a lot of exposure and RT’s on Twitter. After I read it a couple times, I became convinced the ICD-10 mandate will not create a financial upheaval similar to the mortgage crisis of the Great Recession.  To the contrary, I came away with just the opposite opinion: that opinion being, unlike the mortgage crisis that cost a lot of money, decimated the worth of many homeowners and shows no signs of improvement, I believe ICD-10 will have a net positive impact on the healthcare in the United States; albeit with some bumps at the start and hiccups along the way.

I’ll get into why I think ICD-10 is unlike the recent and on-going mortgage crisis a bit deeper down in this post but first I’d like to identify a few key points made in the article that spurred my doubt and/or which I was unable to reconcile to the claim that implementing ICD-10 will cause a financial crisis similar to the current mortgage crisis of the Great Recession. I want to make these points so as to provide some background about why I disagree and also to provide others an opportunity to clarify, educate and/or rebut my position.  Indeed there are important points made and ideas presented with which I wholeheartedly agree.

Observations & Questions I Have

1.   What actually defines the mortgage crisis? And how large is it?

Freddie Mac and Fannie Mae controlled approximately 50% of the mortgage market in 2008.  Many believe it was actually the private sector that triggered the mortgage crisis. So, even if all of the other factors and assumptions used in the math are correct, the ICD-10 crisis would be only half what is stated; admittedly still a huge amount of money.

2.   What caused the mortgage crisis?

Is there a correlation between what caused the mortgage crisis and the ICD-10 mandate? I agree the mortgage crisis was about ethical failures in leadership, transparency, and poorly documented quality that led to higher than expected risk.

I also believe it was caused by individual/homeowner greed, mortgagor ignorance as to how certain mortgage products operate, and a government where one political party was demanding equal home ownership opportunities for all while the other party was not implementing enough control over sophisticated financial products, namely collateralized mortgage obligations. I’m just not able to match abstracts of those particular causes to parallels in ICD-10.

3.   Recent decision by HHS to rescind the part of healthcare reform known as "Community Living Assistance Services and Supports” (CLASS) program stating that it was actuarially unsound.

Is this comment intended to imply ICD-10 will create unsound, non-neutral funding and finances? 

 
Items of Agreement and How ICD-10 Might Cause Some Heartburn

The author states the following items are (1) partial causes for pending ICD-10 financial doom (2) items that may in fact ameliorate some of the pain; or even create value. 

1.   5010 issues will create delay and must be resolved to enable ICD-10

For a while now, I’ve been saying there will be 5010 issues – yet I think they’ll be resolved in Q1-Q2 of 2012 and not cause major disruption and/or the ICD-10 compliance date to be delayed.

2.   Radical shifts in healthcare IT software and solutions companies

We’re already seeing this and I think it’s a good thing and won’t exacerbate healthcare financial stability.

3.   Code Shifting Issues (DRG, HCC, Case Rate and Otherwise)

This topic appears to be the crux of the argument that ICD-10 may create financial loss similar to the mortgage crisis.  It really deserves a more detailed response on its own - and I intend to address modeling one day - but for now I'll say this:

Not all of the multi-trillion dollar healthcare economy will have to shift its reimbursement paradigm due to ICD-10 because not all providers are reimbursed based on ICD codes or related derivatives like DRG’s, Case Rates, and HCC’s, etc. So while a majority of institutional/facility and Medicare premium payments to payers are based on ICD’s and their derivatives, there are many that aren’t so ICD-10’s impact to these providers – typically “non-institutional” - shouldn’t directly impact their reimbursement; but admittedly cursory reporting requirements for ICD-10 codes may add some administrative overhead that will translate to some financial cost.  Moreover, the trend toward performing procedures outside of hospital inpatient institutional settings may further diminish the institutional providers most impacted by ICD-10.

I can appreciate the example about the cost shift of the DRG groupings but it was just that, one example and there may be others that counter or negate this example.  I will not argue there won’t be some potentially risky shifts and until a comprehensive modeling of the entire set of ICD-10 based DRG’s – which are not even out yet – is performed, we just don’t know enough to state either way.

4.   Introduction of Opportunities & Risks

No doubt that ICD-10 will introduce opportunities and risks!  And doesn’t all change introduce opportunity and risk? Yet merely pointing out risks without balancing them against opportunities makes for a lop-sided argument that ICD-10 will create a mortgage-like crisis.

Why I Think ICD-10 is unlike the Mortgage Crisis

1.   ICD-10 specificity will enable more realistically defined benefit plans for members, more accurate reimbursement to providers and more equitable cost-sharing among all healthcare constituents: payers, providers, and sponsors/employer groups. 

In my opinion and experience, some providers are underpaid for services and others are overpaid – due seemingly minor clinical, procedure and/or administrative variations.  The increased specificity of ICD-10 will address these inequities.

2.   “ICD-10 is an Innovation & Quality Improvement Program as Well as a Regulatory Compliance Effort”

To me, this statement validates the likely potential that ICD-10 will not create financial havoc. Besides the above referenced increased accuracy of for benefit plan and provider reimbursement, ICD-10 will enable additional, innovative care programs and opportunities. I mentioned some of these in a recent blog post.

3.   A few other insightful considerations listed in the article seem to argue against the premise that ICD-10 will cause a mortgage crisis:

a.     Firms are upgrading aging and brittle transaction systems – often not maintainable – to new systems; often COTS products with superior functionality and TCO measures.

b.     In many cases, business process are being improved and streamlined as part of the remediation process.
  
c.     Redundant or contradictory business functions and data systems are being eliminated or consolidated.

d.     All of the above should bode well for cost savings, improved care management processes and and overall improvement to our healthcare system. Surely there will be cost and pain associated with developing, implementing and smoothing out the ruffles associated with these improvements.  But, unlike, the mortgage crisis, those costs should be considered investments; not money spent just to get back to where we once stood with our homes.

So I do agree with a lot of what was stated in the article; just not wholeheartedly with idea that ICD-10 will have a huge financial impact similar to the mortgage crisis of the Great Recession. It’s been several years now since the mortgage crisis started and there have been many failed government “mortgage assistance” programs. From what I read and have personally experienced, things are not looking better and I’m not aware of any in-process or proposed plans to make the mortgage crisis better. But I’ve witnessed and participated in making positive steps toward compliance with the ICD-10 mandate that will pay dividends when delivered and into the future.

Note: The above comments, thoughts and ideas are mine only and do not represent those of any of my employers or clients – past, present or future!  :’)

  


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