Value-Based Payments Can and Will Break Traditional Patient Accounting Systems

The Affordable Care Act includes many healthcare regulations unrelated to the distribution of insurance and expanding Medicaid. One important part of this legislation allows the federal government to explore new payment methodologies that they believe more accurately compensate providers for their services.  For acute care facilities, the term used for these new payment models is “Value-Based” payments where data previously considered to be unrelated to the billed services is used to determine the compensation for providers.

For hospitals providing services covered by this model, post discharge data is used to determine the outcome of the service.  This outcome will then have an impact on payments for these services.  In this new model, discharging a patient is no longer the “end point” of a billed service.  The service is expanded to include post discharge services and results.  This is a revolutionary concept and as it applied to other services, it will have major impact on the hospital industry in many ways that are both intended and unintended by this model.  Regardless of your point of view regarding the fairness of this payment model for this service and others like it, there will be problems with existing patient accounting systems in dealing with this new reimbursement model.

value based payments blog

Many existing healthcare financial processes assume that discharge is the final step in collecting data for billing.  It triggers many other processes such as finalizing a diagnosis, collecting transaction data, organization of the medical record, transmitting claims to insurance and even the aging and classification of revenue.  How well will these systems work when the traditional model of billing no longer is traceable to a conventional beginning (admission date) and end (discharge date)?

In many hospital patient accounting systems, creation of the insurance claim is an automated process that occurs X days after discharge when the facility is comfortable that all the departmental data necessary for the claim is available and reviewed. Somehow, these systems have to treat value-based claims differently or create new ways to link previously separate claims.  For now, the scope is limited to a small number of specific services.  These claims can be identified and separated from the current process, and processed manually as needed by combining and editing claim data.

This leaves us with several questions including:

  • What happens when this model spreads to other services?
  • How will these systems handle the mix of value-based and traditionally billed services?
  • How will they handle the fact that different health plans will use different payment models for the same services?
  • What is the new definition of the “bill date”?
  • How will days in receivables be measured?
  • Will documentation of these claims and their criteria be standardized in the industry?
  • How will payments and adjustments be applied to claims?

For many facilities, these problems seem to be in the distant future, but these payments begin 4/1/16 for DRG 469 and 470 in 67 selected metropolitan areas.  As Medicare perfects the process for reimbursement and data collection, this model will undoubtedly be expanded to include more facilities and then more services.  For facilities specializing in these types of services, the impact will be immediate and severe.  How responsive will software vendors be to making major changes in these processes when this model is limited in scope?

This is not like ICD10 where every insurance claim for every healthcare provider is affected for everyone at the same time.  This transition will be slow and undergo several revisions as it is perfected.  This means that as a healthcare provider with a hospital patient accounting system developed for conventional claims processing, you can expect issues with the accommodation of this payment model.  Just like ICD10, if you depend on these services for a significant part of your revenue, take steps to make sure that your vendor is planning to incorporate the unique data collection and measurement procedures that will be associated with these changes.

Also like ICD10, don’t just assume that this is happening.  Meet with your vendor now and get a handle on their perspective of how these changes will affect their systems and how they intend to deal with it.  Ask for a model or presentation of how these claims will be documented and billed through their application and how the payments and adjustments will be applied.  Even if this is not actual software ready for deployment, they should already be thinking about how they will adapt their systems to accommodate this process and should be able to provide documentation of their strategy.  If they have not made it to the planning stages by this point, there is cause for concern.

By Kalon Mitchell, President MEDTranDirect