Competitive Advantage

Considering the cost and difficulty of achieving compliance, payers will be forced to determine if they will minimally comply in order to remain viable or if they will leverage compliance as an opportunity to streamline operations and processes, which could result in:

Reducing the Total Cost of Ownership (TCO) for Information Systems

ICD-10 presents a strategic opportunity to review current technology and make system changes that will lower costs, reduce risk, and improve operational efficiencies. Real life case studies provide an illustration of major decisions payers have made to achieve lower TCO:

Reducing the Cost of Claims Adjudication and Reimbursement

Depending upon the source of information, the estimated cost of billing and collecting ranges from 25 to 40 cents of each healthcare dollar. The original intent of the HIPAA administrative simplification legislation was to force a significant reduction in these processing costs. 5010 electronic transactions and ICD-10 code sets will play a significant role in achieving these cost savings. One estimate shows savings to the Medicare program from 5010 and ICD-10 alone will be $30 billion over 10 years.

Because of the level of detail encoded within ICD-10, payers will be able to auto-adjudicate more claims by not having to request and refer to medical records that would otherwise be required to support a claim. Payers will significantly reduce human intervention and time delays required in obtaining additional/missing information. Those payers achieving compliance will have a lower cost structure and a competitive advantage in premium setting and partnering with other payers who do not.

Improving Provider Network Satisfaction and Loyalty

Payers who proactively work with providers in planning for and implementing ICD-10 and minimizing cash flow disruption will be at a competitive advantage over other payers. Some payers are providing or subsidizing EMRs for providers, recognizing that it will be difficult for providers to maximize efficiencies and economies of scale without EMRs. When providers submit claims electronically, auto-adjudication rates rise, and payers spend less to process claims.

Improving Medical Management

More precise clinical documentation of members with chronic diseases will enhance the medical management capabilities of payers. Estimated to include 25 to 40 percent of members, chronic care has been the fastest growing segment in terms of member numbers and costs. This segment includes children and young adults, a group that has traditionally accounted for most payer profits, as they have required the lowest levels of care.

By analyzing member data using the enhanced specificity provided by ICD-10, chronic disease stages may be precisely identified, patients will be accurately monitored, and the appropriate care will be delivered. Payers that properly leverage ICD-10 will gain competitive advantage by reducing medical loss ratios through keeping chronic diseases from progressing to emergent status and providing treatment at the lowest cost setting.

Developing Expertise in Outcomes and Pay-for-Performance

The increased specificity of ICD-10 will enable payers to develop expertise in outcome reporting, analysis, and pay-for-performance. The treatment detail encoded in ICD-10 will enable payers to compare costs and results for treating specific illnesses using different modalities of care and to work with providers to improve outcomes. ICD-10 will make data easier to aggregate and push out to members, empowering them to make smarter healthcare choices. With the increase in self-directed care, consumerism offers the opportunity for reducing costs for payers and members.

Gaining Membership

The number of payers in the US has been decreasing, in part because of the Federal government's desire to reduce costs by having fewer, more efficient payers. The cost and difficulty of ICD-10 compliance for some payers will force further consolidations. Those payers seeking competitive advantage will have the opportunity to acquire membership from those payers who fail to act quick enough or will be able to offer third-party administrative services to those payers. Consolidation among payers will enable payers to enhance their provider networks, gain greater contract positioning, and improve marketing efforts.