Healthcare Town Hall

Even with the direction of reform now in question, change continues throughout healthcare. One evolution that should be well underway is the mandated, industry-wide conversion to ICD-10. Here is a summary from GovTech:

They say it’s a bigger deal than the Y2K bug.

Not so much in terms of mass hysteria, but in scope: In 2013, the U.S. will upgrade to the latest version of the International Classification of Diseases (ICD) system — the standard diagnostic taxonomy by the World Health Organization — a move which represents “the largest health-care systems modernization effort in history,” said Bartlett Cleland, senior director of policy at TechAmerica, a technology industry association.

As hospitals switch to the latest disease diagnosis and procedure codes, industry observers say, the technical and economic impact to the U.S. government and health-care community could eclipse the much-hyped system upgrades at the turn of the century.

“It’s going to affect anybody who touches the health-care system,” Cleland said. “If not done correctly, this change has the potential to be even more painful than anything in the health-care debate that’s going on.”

ICD-10 is starting to get more press and attract a greater sense of urgency. This blog article has appeared several places. Why the increased attention? First, because 2013 no longer seems so far away; and second, because many in healthcare are not yet prepared for the conversion. The industry’s preparation was recently highlighted in this survey.

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Electronic Health Records Andrew Naugle, ICD-10, Pat Zenner

A new study looks at how health organizations are responding to the ICD-10 deadline of Oct. 1, 2013. In many cases, they don’t seem to be responding at all—70% indicated their organization has done  “little or nothing” to implement the new standard.

You can read the study here.

Electronic Health Records, Quality of Care Andrew Naugle, ICD-10, John Kasey, Patricia Zenner

Administrative costs are often mentioned as a source of waste in healthcare financing.

We asked Andrew Naugle to tell us what is driving spending and where savings may be found.

Q: How much do health plans spend on administration and can they reduce that cost?

Andrew Naugle: If a health plan gets a dollar in the door, it spends about 85 cents of it on benefits, about 12 cents on administration, and it gets to keep about 3 cents as profit or surplus. Those numbers come from a study I did looking at the annual statements of about 900 health plans. Of course there is some variability, but the numbers hold pretty true.

Health plans spend a lot of their time and attention trying to manage benefit costs. That’s not an unreasonable area to focus on if 85% of the premium dollar goes to pay for benefits. However, reducing benefit costs can be a real challenge, as it requires changing member and provider behavior—a tall order.

On the other hand, while administrative expense represents a much smaller piece of the premium pie, health plans tend to be in control of their own administrative spending. Managing administrative cost, therefore, ought to be easier, as plans need only change their own behaviors rather than the behavior of third parties that don’t appreciate being told what to do.

Too bad it’s not that simple, because managing administrative expense can be very painful for organizations for a whole host of reasons. Ultimately, I have seen clients achieve significant improvement in their administrative expense positions. However, real bottom-line impact requires a comprehensive strategy, management buy-in and commitment, and major investments of time and energy.

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Administration, Efficiency admin, Andrew Naugle