perfect storm

Healthcare Reform

Healthcare’s Perfect Storm

, , , , , , , , , , , ,

perfect storm

This article originally appeared in the Summer 2013 issue of the Xerox HealthFocus magazine.

Three climate-altering changes in healthcare will be implemented in the next few years:

1. The ACA’s redefinition and potential expansion of means-tested Medicaid populations.

2. The transition from ICD-9 to ICD-10.

3. The transformation from volume to value in pricing and program management.

These have the potential to disrupt business and reporting – and states must prepare to weather the storm.

ACA Redefines Medicaid Populations

All financial means-tested Medicaid, CHIP and tax credit-supported applicants to a Health Insurance Marketplace must use the Modified Adjusted Gross Income (MAGI) methodology to determine income and family size. This requires all states to perform a MAGI equivalence transition of their population whether they expand their Medicaid programs or not. Subsequently, states must replace the current set of 14 mandatory and optional affected Medicaid population groups with three new groups.

Programs that do expand must also define policy and coverage for the newly eligible group, including a benchmarked set of 10 Essential Health Benefits. State-specific legislative complexities will further affect population and benefit determination. Many states expanding their programs have decided to use set fee per patient Managed Care Organizations  for the newly eligible to reduce program change. Based on new ACA guidance, some states also intend to expand Managed Care to include dual eligibility to control costs and improve their care.

ICD-10 Transition

The nomenclature of ICD permeates the business of healthcare – and the transition from ICD-9 to ICD-10 is the functional equivalent of changing its language from English to Greek. The same thing can be said in both languages, but not with the same words.

ICD defines criteria ranging from eligibility determination, to disease management, to service authorization criteria, to federal reporting. But the change is largely a business transition, not a technological one. There is not a one-to-one conversion between codes, so different healthcare organizations will use different code cross-references to retain policy or budget neutrality.

Increasing the turbulence is the fact that not all payers or providers will be ready by the October 1, 2014 deadline and will employ different mitigation strategies. The most common will be processing both codesets on the same dates of service for a period of time, making data analysis and utilization reviews somewhat complex. Another likely option is an automated step-up/step-down ICD-9-to-ICD-10 translation based on predefined cross- reference maps. This could happen at the provider, clearinghouse or payer level, but has risks based on the one-to-many and many-to-many relationships between the codesets.

Moving from Volume to Value

Growing incentives for health outcomes are shifting policy focus from using claim volume to evidence-based performance measures. This involves gathering member claims from several providers, consolidating a complete healthcare experience, and then reimbursing providers based on their performance. The goal is to encourage efficient, effective care.

Key Effects

Each initiative represents a significant transformation in healthcare policy, processing, rules and reporting. But their overlapping timelines and convergent impact on resources, system modernization, testing and project management is exponentially more challenging. Each factor would be difficult to assess individually; collectively, it will be nearly impossible to understand the root cause of utilization or expenditure changes. For example, would an increase in more complex services be due to pent-up demand from newly eligible members or ICD-10 coding changes?

The managed care per member per month fixed payment caps will mask utilization changes, but future rate-setting will be based on the actual risk-based experience of the Managed Care Organizations. Additionally, coordinating the federal and state payment and services of the dual eligibilities through Managed Care introduces a previously unexplored merger of Medicare and Medicaid policy and funding.

Combined delivery from Accountable Care Organizations and Medical Homes requires a known baseline of historical data to set initial performance and quality standards, but ICD changes will make measuring performance against those baselines difficult.

While these three gale forces will significantly affect the healthcare landscape, they are by no means the only winds of change. Smaller tempests, from continuing HIPAA Operating Rule expansion to the implementation of the Transformed Medicaid Information Management System (T-MSIS) to Meaningful Use phase II incentives will require attention and resources.


Everyone will probe and analyze the new data to determine if the ACA’s effect on healthcare delivery costs and outcomes meets expectations. The numerous cross-currents of major healthcare reform initiatives will make concise interpretation of the results very difficult.

States will need detailed project plans, impact analysis, system remediation, testing and communication plans to successfully navigate these currents; success depends on identifying cross- project interdependencies and timelines.

Juggling Medicaid expansion, ICD-10 and price restructuring will be a challenge, but the sooner we a determined outlook and knowledgeable partners can help every provider weather the storm.