Expanding role of RCM, ICD-10, MDx

Aug. 1, 2011

Laboratory stakeholders are in the midst of a perfect storm of healthcare legislation, technology innovation, and government regulation, ranging from the ICD-10 transition to comparative effectiveness research (CER) to exciting advancements in molecular diagnostic testing.

While lab testing represents only 2% of total healthcare costs, test results influence nearly 70% of all healthcare decisions. As such, the value of lab data toward understanding diagnostic treatment, patient outcomes, and value-based pricing will be critical to healthcare reform initiatives. Labs will play an increasingly important role in collecting and reporting relevant data to help reduce costs, determine effectiveness of care, and better inform decisions for physicians, patients, and payors. Take a look at how revenue cycle management (RCM) systems will be pivotal to the emerging regulatory landscape now and in the years ahead as legislation unfolds.

The Patient Protection and Affordable Care Act of 2010 was a major step in healthcare legislation. The 10 titles of the Act, slated for provisional enactment through 2018, begins with the federal government’s new priority on CER.

The objective of CER is to evaluate which healthcare treatments and interventions are most effective. CER also encourages the development and use of clinical data networks and other forms of electronic health data to generate or obtain outcomes data. The ultimate goal of CER is to steer innovation towards value by giving patients and physicians the ability to select the most appropriate diagnostic therapy for the best outcome.

Laboratory testing data has many important roles in CER, including the assessment of patient baseline characteristics, effectiveness of alternative treatment interventions, and treatment impact on patient outcomes. A study done by McKinsey & Co. for the Personalized Medicine Coalition revealed that of $292 billion spent on medications in 2008, approximately $145 billion went to drugs that were ineffective for the patients that took them. Further findings estimate the cost of adverse drug events to range between $45 billion to $135 billion per year. At least 25% of these costs could be averted through the use of diagnostic tests for the appropriate biomarkers.

RCM systems with robust data mining and reporting capabilities, and the ability to evaluate lab data relevant to test utilization, ordering patterns, diagnosis, treatment, cost, and outcomes will be a critical analytical tool to define the comparative effectiveness of lab testing. This type of analysis will also assist in the development of physician decision-support tools that can be delivered by the RCM system directly into the physician’s hands via desktop or mobile device.

The lab will play a key role not only in gathering and providing relevant data on comparative effectiveness, but also in using it to help develop value-based pricing based on cost and outcomes. Labs able to demonstrate better or comparable effectiveness at a lower cost will gain a competitive advantage.

The current procedural terminology (CPT), ICD-9, and upcoming ICD-10 codes contained in RCM systems, which represent tests ordered and their corresponding prices, are valuable sources of data for the government and payors. The greater specificity in aggregate data derived from implementation of ICD-10 will benefit healthcare and lab data analysis significantly.

Provider benefits of ICD-10 include improved outcomes measurement, clinical and financial performance, health policy planning, claims processing, provider profiling, pay for performance (P4P) programs, and consumer education of treatment options. ICD-10 expanded code sets will facilitate the review of treatment management and respective patient outcomes, while enhancing the meaningful use of data multifold. Patient-centric RCM systems that analyze historical data will drive optimization and efficiency in diagnostic orders.

Through use of ICD-10, labs will have an improved ability to conduct quality review and claims analysis to promote efficiencies, contain costs, and measure performance. ICD-10 will provide an increased ability to detect and monitor fraud and to implement more sophisticated claims editing procedures that help assess efficacy of treatment, and to better understand medical complications.

The molecular diagnostics (MDx) market is growing at a rate of 20% per year, and is already changing diagnostic specificity in important ways. Currently, one third of MDx healthcare spending is represented by 15% of genetic testing labs with proprietary assays.

Moving forward, greater attention will be focused on the evidence requirements for gene-based laboratory tests that demonstrate analytic validity, clinical validity and clinical utility. In developing and validating new tests, MDx companies must demonstrate the impact of the test to the therapy decision, including its comparative effectiveness on patient outcomes, where appropriate.

The expense of molecular diagnostics tests, which can reach reimbursement levels of $3,000 or more, demonstrates the importance of working with payors in advance to determine coverage criteria and set reimbursement rates to guarantee reimbursement. Data in the RCM system, such as test ordering patterns, can aid significantly in developing criteria related to clinical utility, and defining the circumstances for when the test will be covered.

Lâle White is CEO of XIFIN. She is a nationally recognized expert in the field of medical financial management and regulatory compliance, and has worked with HCFA and the US OIG to develop the first OIG Model Compliance Program.
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