3M's Larson Discusses Dealing with P4P Initiatives

Beginning this month, Medicaid providers must submit a "Present on Admission (POA) Indicator" for every diagnosis on inpatient acute care hospital claims. Concurrently, Medicare is replacing the current DRG (Diagnosis Related Groups) payment system with new severity-adjusted DRGs to better categorize hospital patients and more accurately predict resource use.

Clearly, payment system changes and P4P (Payment for Performance) initiatives represent the future, and dealing with them will tax individual physicians and institutions. 3M has been a leader in DRG platforms, and Nancy Larson, president of 3M Health Information Systems, Inc., spoke with Digital HealthCare & Productivity about ways to prepare for payment system changes and P4P initiatives.

DHP: What steps should providers take to prepare for payment reform and P4P initiatives?

Larson: Providers need to understand the impact of appropriate documentation on payment. There's going to be more attention paid to what kind of documentation is available for the people who work in medical records, so that coding and claims are more accurate for the appropriate Medicare reimbursement.

So, although there is an IT component, there is a strong documentation component. It's also helpful for providers to do modeling on the financial impact of Medicare Severity DRGs (MS-DRGs), because depending upon what their current case mix is, there could be changes in their reimbursement as early as this month based on the MS-DRGs.

DHP: What role does IT play in this?

Larson: The HIM (Health Information Management) or medical records department needs to work hand-in-hand with the IT department to make sure systems are accommodating the right reimbursement calculations and passing the information to the appropriate legacy systems and newer systems.

For example, most medical records coding software allows coding of the POA indicator, but that POA indicator may need to be passed on to other systems, such as case or utilization management systems. Other systems that will be impacted later, such as those that report quality metrics, have not had to include it until now. It will be important for IT to understand what data elements have to be brought up to speed and ensure that their vendors are accommodating the new requirements.

DHP: What are some of the challenges around pay-for-performance and pay-for-reporting as far as data collection and data reporting?

Larson: One challenge is that providers need to collect a lot of the information manually. This is a huge issue because providers are being pulled in so many different directions as far as how many different quality indicators must be reported. Payment changes by CMS have been more focused, so it's easier to accommodate what CMS is requiring, such as coding for MS-DRGs and the POA indicator. But other reporting agencies are now asking for a number of quality indicators that later may have payment associated with them. It's very difficult to find a single IT solution that accommodates all of the different reporting requirements. This is still a significant burden on provider organizations.

DHP: Do you see this changing?

Larson: I think over the next five to seven years, indicators will become more consolidated and we will have more understanding in the industry about which indicators really are making a difference and which aren't. If the industry chooses to focus on specific quality indicators, it will be easier to have more streamlined IT systems. Now there are a lot of reporting requirements and it's very difficult to streamline the reporting process.

DHP: Some say the new payment regulations are only a concern for hospital coders and Health Information Management (HIM) departments. Is this a valid viewpoint?

Larson: The financial impact could be significant enough that I think that it is an operational challenge too. So, for example, if you have a hospital whose case mix historically had a higher reimbursement with the previous CMS-DRGs and now that case mix is reimbursed differently under MS-DRGs, I think that there would be some significant operational discussions that would have to happen in the provider organization to ensure that they are operationally doing the correct thing.

What we found over our years of assessing documentation is often times appropriate high-quality care is given, but if the documentation isn't there, then the coders can't code it and it can't be submitted from a billing standpoint. Historically with the CMS-DRG system, that situation may not have had as much a financial impact as it will with MS-DRGs because of the new severity component to reimbursement.

DHP: Can hospitals look to industry vendors for support and solutions?

Larson: Absolutely. I know that all the coding vendors--QuadraMed, Ingenix, 3M, (etc) -- see this right at the core of what's happening in the medical records department, but it also has an impact on the large HIS vendors such as Siemens, Epic, and Cerner. For these vendors, the near-term road map may be to plug in the coding solutions, but the long-term impact is on the billing systems they offer. The quality and decision support systems they offer have to also accommodate data supporting payment changes or P4P initiatives because it will be a very real business reality for their customers.

DHP: How can a hospital determine if its vendors are adequately prepared to respond to payment changes and new reporting requirements?

Larson: The checklist should include: Are their systems accommodating POA indicators? That's an immediate requirement that's not going to go away. And for data collection and reporting, can the vendor system accommodate the appropriate information from a documentation stand point? Vendors offering physician documentation systems or computerized physician order entry systems, for example, should be looking for ways to capture critical information that impacts coding for MS-DRGs. These kinds of things will help providers get a step ahead of what's going to be coming with new payment models and pay for performance initiatives.

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