What keeps healthcare chief financial officers (CFO) up at night? A recent article published by Becker’s Hospital Report covering CFOs’ top 2016 concerns found that many were worried about remaining profitable.
How can this be? According to a variety of recent surveys, more than 80% of hospitals now have CDI programs. However, even with the efforts of their CDI teams, CFOs are concerned about continued losses associated with treating CMS beneficiaries.
It isn’t enough just to have a CDI program. Organizations need a robust CDI program, one that can evolve to navigate the ever-changing reimbursement landscape.
Do organizations have what they need? Well 44.5% of respondents to an American Hospital Association (AHA) survey reported a mature or high-functioning CDI program—yet The Advisory Board Company’s September 2014 report, “What sets the top 10% of documentation programs apart?” found only 10% of CDI programs operating at best practice.
Who is right?
We all know there is variation among CDI departments and their role within their organization, but more often than not, success is measured by CDI’s financial impact. Let’s face it, CDI departments are a supportive business function, and such functions are usually required to demonstrate a return on investment. Yet the question remains: Are we accurately measuring the effect of CDI efforts by using broad measures like casemix index?
Most organizations have harvested the benefits from CDI efforts when it comes to common clinical conditions, considered the “low-hanging fruit,” so continued improvement in a facility’s case-mix index may be more difficult to achieve and sustain. Additionally, the difference between an average CDI program and CDI best practice can result in a $2 million gap, but it’s a gap that drops after one year, according to another 2014 report from the Advisory Board Company, “Get the most bang for your CDI buck.”
As expected, many organizations find it difficult to sustain the financial effects of their CDI efforts.
Does it need to be that difficult?
As financial pressures grow within the healthcare sector, the need for a best-practice CDI department has never been greater. According to the AHA, one-third of hospitals lose money on operations. Beginning in 2012, hospital closures outnumbered openings for the first time in decades, with more closures expected in the years to come, according to the Medicare Payment Advisory Commission (MedPAC). Although payment rates from private payers have grown at an average of 5%–6% in recent years, CMS payments have been unable to keep pace. In fact, current figures place Medicare reimbursement at 88% of cost, leading to an industrywide Medicare margin of -5.4%.
“We really do believe much harder times are coming from a reimbursement standpoint,” said one CFO in the Becker article.
One of the factors contributing to Medicare revenue reductions is the loss of lucrative short-stay admissions. In 2012, MedPAC reported a payment-to-cost ratio for one-day inpatient stays of 1.55, translating into payments that exceeded costs by 55%. No wonder CMS implemented the 2-midnight rule. The shift in patient services to the outpatient setting is also creating demand for out-patient CDI efforts to offset some of the potential losses.
Although many organizations are satisfied when CDI efforts increase the Medicare case-mix index, did you know it has risen 4.7% between 2011 and 2016? Yes, improved documentation contributed to the increasing case-mix index, but there are also several other factors.
In other words, your organization should be experiencing an increasing case-mix index based on national trends, but the degree of that increase will likely vary depending on the sophistication of your CDI efforts.
So what does a rising case-mix index mean?
The fact is, the case-mix index is an arbitrary value. What is a realistic case-mix index goal for your organization? What value is there is comparing your organization’s case-mix index to another’s?
The goal shouldn’t be an increasing case-mix index; rather, it should be to ensure the organization is profitable when treating Medicare patients. Profitability, or the lack thereof, can be quantified. What value is a high case-mix index (i.e., higher reimbursement) if the cost of treating those patients exceeds the payment? This is why it’s so important to understand how CMS is incorporating quality of care into its payments.
What is quality care? What is appropriate care?
It isn’t enough to add profitable diagnoses to a claim; they must also be supported by clinical evidence and appropriate documentation within the health record.
One of the most common reasons for Medicare denials is insufficient documentation. In fact, coded diagnoses without appropriate clinical support have become such an issue that AHIMA joined with ACDIS in 2013 to revise its query practice recommendations (Guidelines for Achieving a Compliant Query Practice) to include clinical validation of documented diagnoses.
In order to be successful, an organization must be able to balance documentation improvement efforts addressing both financial pressures as well as the quality perspective, which often requires different skills.
MedPAC found that hospitals who perform well on both cost and quality metrics have an overall Medicare median margin of 2% compared to the comparison group’s median of -6%. In other words, hospitals that appropriately meet the needs of their patients can be profitable, but achieving this requires a comprehensive understanding of the factors influencing CMS reimbursement.
It is no longer enough to have CDI staff focus on identifying missing diagnoses that are classified by CMS as a CC or MCC. Sometimes, CDI efforts are going to result in lower-paying MS-DRG assignments.
As organizations demand more from their CDI programs, administrators must also provide clear guidance by understanding the interaction of provider documentation, coded data, and profitability. It is time to move beyond equating a rising case-mix index with CDI success.
by Cheryl Ericson, MS, RN, CCDS, CDIP, AHIMA-approved ICD-10-CM/PCS trainer, CDI Education Director at ezDI