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The healthcare billing environment in the US is a disaster. It creates huge waste in care and cost. As presented at the Cayman Islands International Healthcare Conference in October 2010, this slide deck suggests what the billing system might look like, if we could start over.
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Healthcare Billing & Reimbursement—Starting From Scratch
Moving From The Economics of Revenue to the Economics of Health
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Introduction
Dale Sanders
Twitter: drsanders
Text: 1-345-925-8329
Email: [email protected]
LinkedIn: http://www.linkedin.com/in/dalersanders
Blogs http://callitanything.blogspot.com/ http://healthsystemcio.com/tag/dale-sanders/
Text, email, or tweet your questions during the presentation
Acknowledgements
For direct and indirect benefit of their knowledge in this presentation
David Burton, MD; Healthcare Quality Catalyst
John C. Goodman, PhD; National Center for Policy Analysis
Paul Keckley, PhD; Deloitte
Blackford Middleton, MD; Harvard Medical School
John T. Preskitt, MD; Baylor University
3
Key Messages
The US health insurance and claims processing environment is the single greatest flaw in the US healthcare model
We are significantly influenced in the Cayman Islands by the US insurance model Third party administrators are US-centric Information systems are US-centric
We can further reduce the influence and become a role model for the United States Our Health Services Authority/CINICO partnership on the
CarePay project is a MAJOR step in the right direction
The Bermuda Health System offers valuable lessons
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Overview
Flaws in the US Reimbursement and Billing Model The Effect On The Cayman Islands Recommendations for Change
Evidence of the US Model’s Flaws
The Cayman Islands’ Government Role in Change
Seth Avery Case Study: Bermuda Transition to Something Better Opportunities and Suggestions for the Cayman Islands
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Healthcare Billing at a Restaurant You wait 45 minutes for a table, even though you had a reservation.
You tell the waiter that you’re hungry– but there’s no menu.
The waiter returns with a meal that he thinks is appropriate for you…but he doesn’t know how much it costs.
You have no idea what the food is or what it costs, but you agree to eat it.
You leave without knowing your bill.
The restaurant sends the bill to your bank, not you.
Your bank tells the restaurant, “Your waiter ordered the wrong thing for you. We’re not paying for it.”
90 days later, the restaurant calls to tell your account is being
turned over to collections. 7
Unnecessarily Complex…
Major Flaws in the US Model
We can eliminate these from our Cayman Islands claims processing environment
1. E&M level of service coding
2. Revenue Codes
3. The necessity of Medical Records Coders in the billing process and diagnosis coding
An expensive by-product of the flaws and complexity
4. Procedure-based billing Instead of diagnosis-based billing
5. Transaction-level adjudication Instead of contract performance levels
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HSA Billing & Reimbursement Environment
~$85M in operating revenue A/R days: 70
Income mix Self Pay: 8% Commercial Insurance: 24% CINICO/Government: 68%
About 350,000 patient financial encounters per year ~200,000 pharmacy encounters and claims ~150,000 traditional clinical encounters and claims
About 20% (70,000) of these claims are denied & resubmitted because of errors and disputes Rework labor can range from 5 minutes to 5 days per claim
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Factoids
HSA 103 FTEs (Full Time Equivalent) employees at HSA
are involved in billing and reimbursement
US 31% of healthcare costs are in administrative
overhead associated with billing and claims processing
That’s about $50,000,000 per year in Cayman
Reduce that overhead and return it to physician and staff salaries, equipment and facilities improvements, etc.
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Healthcare Is Not That Unique
Healthcare is a “Services Industry” “…activities where people offer their knowledge and time
to improve productivity, performance, potential, and sustainability. ”
The Tertiary Economic Sector Primary Sector: Farming, mining, fishing Secondary Sector: Manufacturing
We should borrow ideas and concepts for billing and reimbursement from the Services Sector that balances quality, cost, economic efficiency, and risk for all parties
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Common Sense Contracting
Time and Materials (T&M) Encounter-based, CPT procedure-based billing
Firm Fixed Price (FFP) Bundled payments, DRG and ICD diagnosis-based billing Episodic treatment of chronic disease
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We need less of this…
And we need more of this…
+
Evidence of the US Mess
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Administrative Hassles Related to Medical Bills and Insurance Are Serious Problems for More Than 25% of US Adults
Source: Commonwealth Fund Survey of Public Views of the U.S. Health Care System, 2011.
7 106
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24
17
0
25
50
Total Fair/Poor health Excellent/Very good/Goodhealth
Serious problem
Very serious problem
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34
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Percent reporting serious problems spending time on paperwork or disputes related to medical bills and health insurance in past two years
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Spending on Health Insurance Administration per Capita, 2007
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$76$86
$140$191$198
$220$247
$516
$0
$100
$200
$300
$400
$500
$600
US FR SWIZ NETH GER CAN AUS* OECDMedian
* McKinsey Global Institute, Accounting for the Costs of U.S. Health Care: A New Look at Why Americans Spend More (New York: McKinsey, Nov. 2008).
Factoids
A 18 minute office visit takes 52 minutes of patient time and involves 8 people
During a 4 day stay in the hospital, patients will interact with hospital staff 160 times
At least 25% of the overhead is billing and insurance related
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Archives of Internal Medicine, July 2008
What’s Happening in the US Model…? Besides CEO’s of private insurance companies
making $24M per year :-/
Healthcare insurance is now operating pro emptore – as the buyer
Life insurance doesn’t work that way… auto insurance doesn’t work that way… You spend the insurance money as you see fit… for the
best quality-cost tradeoff
Healthcare insurance is buying for you… A major flaw in the model that must change
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Disintermediation of Insurance?
“…some of the most striking examples of efficient care are emerging in those parts of the market where third-party payment is either nonexistent or of marginal importance.” John C. Goodman, PhD; National Center for Policy Analysis
Buyers of Care vs. Insurers of Care The physician is forced to be an agent of the insurance
company-- shaping the practice of the physician--instead of the physician acting as agent of the patient
Cerner Corp is a role model for the elimination of third party insurance for its employees’ healthcare services A model which could be adopted by HSA…or all government?
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Leading Indicator: Growth in Self-Pay Clinics
E&M (Evaluation & Management) Codes
Clinical Procedure (CPT) codes which describe five levels of complexity for physician-patient encounters Originated in the 1990s as a means to cut back on billing fraud The guidelines document from CMS is 48 pages long…!
E&M coding encourages procedures not cognitive diagnosis
Several independent government commissions and the New England Journal of Medicine have repeatedly recommended their elimination
Costs the US healthcare system $150B per year to administer NEJM, May 2011
For podiatrists, there are individual CPT codes for nail debridement of 1 to 5 toes and a separate one for 6 or more toes (?!)
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Coding Environment Leads To Higher Specialty Fees & Growing Compensation Gap
$161,816$133,329
$297,000
$215,978
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
1995 2000 2004
All Primary Care All Specialists
Source: T. Bodenheimer, R. A. Berenson and P. Rudolf, “The Primary Care–Specialty Income Gap: Why It Matters,”Annals of Internal Medicine, Feb. 2007 146(4):301–06.
Median pretax compensation of US physicians, 1995–2004
37.5% increase
21.4% increase
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Revenue Codes
Origins: AMA & AHA wanted to be paid more for the same clinical procedure, depending on where it was performed
CPT 12001 for a simple laceration Can be treated in multiple places… Operating Theater: Code 360 A&E: Code 450 Clinic: Code 510
The price and adjudication should be the same, regardless of location
+
The Government’s Role
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The Power of Western Democracies
They can balance the efficiency of free-market capitalism with the humanity of socialism
The US system is decaying under the greed of a free-market free-for-all
Purely Socialist systems are decaying under the inefficiencies of “no consumer choice”
Good legislation can find a balance between the two… and Cayman is on that path
What else could we do to progress?
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Legislative Themes
1. Reduce Costs and Increase Affordability
2. Increase Access
3. Improve Quality of Care
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Caveat
If anyone should read the following slides out of context, they are only “Sanders’ Dreams and Thoughts” for the Minister, Board, and Senior Management Team
They are not actual Legislative Acts
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Cayman’s CarePay Project
Partnership between HSA and CINICO Critical Vendor Partners: AIS, Cerner, IMO
Real time, point of care eligibility verification and claim adjudication
The patient will know their coverage and out-of-pocket expenses at the point of care
No “Mystery Billing”, 30-90 days later
Claims denials reduced or eliminated completely
Should be in full operation by February/March
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“The Healthcare Financial Efficiency Act” - 2012
Mandate point-of-care adjudication and electronic transactions for eligibility, claims and reimbursement CarePay for all covered lives, not just CINICO
Regulate standard fees (as is currently) and commit firmly to annual updates
Move from CPT-based billing to ICD and DRG-based billing Bundled and Episodic reimbursement rates
Eliminate E&M and Revenue Codes from claims adjudication
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8981 80
65 6258
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0
25
50
75
100
UK NETH NZ AUS CAN GER US
Percent of physicians reporting any financial incentive for targeted care or meeting goals*
* Can receive financial incentives for any of six: high patient satisfaction ratings, achieve clinical care targets, managing patients with chronic disease/complex needs, enhanced preventive care (includes counseling or group visits), adding non-physician clinicians to practice and non-face-to-face interactions with patients. Source: C. Schoen, R. Osborn, M. M. Doty, D. Squires, J. Peugh, and S. Applebaum, “A Survey of Primary Care Physicians in 11 Countries, 2009: Perspectives on Care, Costs, and Experiences,” Health Affairs Web Exclusive, Nov. 5, 2009, w1171–w1183.
Physicians Incentives for Quality, Patient Satisfaction, or Other Goals
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Factoids
More than 50% of all medicines are prescribed, dispensed or sold inappropriately
More than 50% of all countries do not implement basic policies to promote rational use of medicines
Less than 40% of patients in the public sector and 30% in the private sector are treated according to clinical guidelines
World Health Organization, May 2010
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“Healthcare Quality & Safety Act” - 2013
Healthcare transparency…achieve “proportionate balance of knowledge”
Mandatory, public reporting requirements for all providers Patient Satisfaction Quality of Care Access to Care Medical Errors Pricing Prior to Treatment
What the Cayman Islands accomplished in financial reporting transparency, can be accomplished in healthcare
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Contributions to Premature Death
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Behavioral Details
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Steven A. Schroeder, M.D.N Engl J Med 2007; 357:1221-1228September 20, 2007
“Patient Care Insurance Act” - 2014
Mandate insurance coverage for preventive care, health maintenance, and pre-existing conditions Only 4% of healthcare is spent on prevention and public health
(Schroeder, NEJM, 2007)
Mandate insurance payment incentives to care providers for Access, Quality, and Safety
Mandate employers pay a “Health Savings” bonus to employees who meet healthy lifestyle goals
Guarantee portability of insurance plans The patient owns the plan, not the employer
Allow CINICO patients’ broader choice…
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Summary
The Cayman Islands can distance itself from the negative influence of the US healthcare system
Eliminate Revenue Codes and E&M codes from the claims adjudication process
Eliminate Medical Record Coders with physician-based diagnosis coding The coders have invaluable skills that can be used better
elsewhere!
Apply “fixed fee” diagnosis and outcomes-based contracting to healthcare
Adopt a balanced legislative agenda to make it happen
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+Lesson Learned From Bermuda
Seth Avery
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+Case Study: Bermuda
Wealthy, educated population
Territory of the UK
Multi-payer model
Quasi-government hospitals: Bermuda Hospitals Board
Mostly private physicians
Government payer for aged, and children
Healthcare in Bermuda
Hospital inpatient payments based on per diem
Little incentive for hospital to reduce cost through length of stay
Patients became more profitable the longer the stay
Need for new facility became tipping point for examination of model
Little quality data at provider level
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Bermuda: Aging Hospital
King Edward Memorial Hospital ( KEMH)
Almost 60 years old and damaged in Hurricane in 2003
Technology decisions were pressing
Data and revenue stream were questionable
Bermuda: NewHospital
How many beds, type, services?
What data would you rely upon
What levels of care in the new hospital?
Length of stay? Medicine or Surgery?
Bermuda Change Mandate
Produce a viable financial model for the maintenance of the hospital “Reasonable” Non disruptive Bring cost and price closer Do it now
Bermuda Change Plan
Outpatient First
Current Model Fee Schedule of 800 prices Limited specificity
One code for chest x-ray Surgery code limited
Pricing Historical New Model
4,000 new codes New service priced on benchmarks (including cost)
Bermuda Change Plan
Inpatient Next
Current system Per diem no cost containment incentives
DRG system Case rate system ICD-9 Non severity based (v 24) Risk shift to hospital
Bermuda Change Impact
Outpatient billing became more complex
Specific procedures were now billed
Inpatient change required accurate diagnosis and procedure coding
Shift in inpatient payments from long stays ( low DRG payment relative to number days) to shorter (higher DRG values)
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Bermuda Change Impact
Outpatient billing became more complex
Specific procedures were now billed
Inpatient change required accurate diagnosis and procedure coding
Shift in inpatient payments from long stays ( low DRG payment relative to number days) to shorter (higher DRG values)
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+Bermuda Change Impact
Simple pneumonia
ALOS 6 days X $1,098 = $6,588
APPENDECTOMY W/O COMPLICATED PRINCIPAL DIAG W/O CC
ALOS 4 days X $1,098 = $4,392
Simple pneumonia
DRG 90 $4,182
APPENDECTOMY W/O COMPLICATED PRINCIPAL DIAG W/O CC
DRG 167 $6,122
Per diem Case Rate
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Bermuda Change Impact
Physician documentation standards were developed
Documentation standards improved, H & P compliance improved greatly
Data became reliable for quality improvement programs
Incentives for care improvement and cost reductions were aligned
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Questions, thoughts, or advice?
