In Part I of this article, what we might refer to as the "Bad News, Worse News" section, we drew a weather map of the perfect storm of revenue threats that healthcare providers are facing, even as the rest of the economy tanks under tremendous (and one hopes temporary) dysfunctions in the financial sector.  Providers are chasing hundreds of patients for revenues that used to come from a single payer; they're being subjected to (whether they are aware of it or not) increasingly sophisticated tools that discount and deny claims, and they're having prior years' settled claims scrutinized for re-adjudication by government and private payers alike. Meanwhile, payers and employers are toying with new quality-based reimbursement models that threaten to move the battle onto a new, unfamiliar landscape, with rules of engagement that have yet to be written.

These trends, I suggest, are not temporary, and their impact is accelerating, not levelling out or diminishing.

Part II is where I tell you what to do about it, or at least where to look at answers. But why in the world would an HIT guy like me tell you to go to a bank?

I remember back in aught-two, I was working for a big hospital on their HIPAA transaction implementation project when I got called into an unusual meeting:  Some corporate veeps from a big commercial bank up in Chicago had flown into town and asked for a pow-wow. They were too smart to say they were going to Solve All Our Problems, but they wanted us to know they were Going Into Medical Banking in a Big Way, and wanted to partner with some Forward-Thinking Hospitals.

We Don't Need No Steenking Batches
We were way ahead of the game. We'd been transmitting electronic claims directly to our Blue plan, which was also our Medicare FI, for years. That plan also offered a clearinghouse service, which we employed to reach the state Medicaid and most of the other payers in our mix.  We had even pioneered the use of the 835 transaction, so we were posting a lot of remittances and tallying the cost savings of streamlined administration. We used a local bank for lockbox services, thank you very much, and we had purchased an EDI translator, which would allow us to weather the upcoming transition even more smoothly.

The watchword of the day was "disintermediation" and, with the standardized format of the new, interoperable world of HIPAA, we were going to move more and more payers from the click-fee based clearinghouse to direct connections. We weren't looking for partners. We were looking for freedom.

Yield No Quarter
Management and technical consensus was that the bank wanted to offer us an immature version of the expertise we already had, and would be nickel-and-diming us for services we could more easily do ourselves.

We thus closed the book on Medical Banking, even as that term was just beginning to enter the industry vernacular.

The Future is Gnaw
Fast-forward a half-dozen years, and, as a free-range analyst, working for clients of all sizes, shapes and stripes (including software vendors and -gasp!- health plans), it's been hard for me to ignore the fact that Medical Banking managed to survive my disintermediation analysis. Indeed, it seems to be gaining traction. What gives?

It's tempting to simply update my previous dismissive analysis: The HIT-savvy providers like the one where I used to work developed their own solutions, then the HIT vendors and clearinghouses got the ones that needed some extra help, and now the banks are coming in with extra hand-holding for the small and particularly timid remaining few.

Such an explanation has the distinct advantage of supporting my prior conclusion and allowing me to maintain an attitude of haughty superiority. It has the unfortunate disadvantage of being completely wrong, or at least wrong in several important ways that could do a great disservice to my provider consituency.

Let's Not Focus on the Past
Rather than dwell on the many ways I was wrong, however, I think it would be helpful to turn our attention toward a way that I was right -- even though the connection didn't occur to me until the potential value of the Medical Banking approach began to sink into my consciousness.

The clue came a couple weeks ago, when my glance fell on a slide I had just delivered as part of my presentation to the AICPA Healthcare conference in San Diego. The table illustrates what I refer to as the "Diverse and Dispersed" principle, which explains why providers are underrepresented in the standards development process at the national level, and why they tend to implement far less sophisticated HIT than their payer counterparts:

The point I was making with the slide is that providers are at a natural disadvantage in the HIT arms race, and need to make an effort to correct this natural and understandable deficiency.  Providers are hands-on service-oriented and community-based, with diverse operational structures that are only peripherally information-based (outside of specific clinical solutions). Payers are information-process oriented, with administrative economies of scale that let them grow without geographical expansion (i.e. a fully-staffed office in every community).

National Pried
Providers, I said, need to redouble their efforts and behave like national organizations -- seeking collaborative interchange solutions, forming technological policy alliances, directing their advocates toward the HIT space. When it comes to HIT, they need to behave more like national information-oriented businesses and less like community-based, service-oriented businesses.

Yeah, right.

Real-Time with Bill, Marred
The other presentation I was giving at AICPA was about Real-Time Adjudication, and why I felt the economics of HDHP would drive the implementation of checkout-counter claims settlement faster than any regulatory mandate could ever hope to do. One of the attendees that was most interested in that material was, you guessed it, a corporate veep from a big commercial bank.

We had long conversations about how banks who understood healthcare and integrated the administrative side with the financial side could offer a 360-degree view of the entire history of the transaction: claim and remittance advice history, for instance, with the check or EFT from the payer (if any) and the check(s) or bank card transaction(s) from the patient.

If they could get payers to support a common RTA functionality, banks could help integrate it at the office level with full support. Further, they could offer the now-100%-responsible patient with financial assistance setting up an HSA account or even a medical credit card, and/or process the card transaction or set up monthly payments while they were at the provider's office. (That was back when banks used to lend money -- September 18, to be exact.)

Banks were in a perfect position to help providers collect the money they are losing, at an increasing rate, right now.

Maybe There is Principle Involved, After All
When I glanced at the slide on the printout though, I had an aha moment that went beyond the specific can-do's of the banking model. My eyes fairly zig-zagged across the table I had developed to describe providers and payers:

Operational Consistency + Geographically Dispersed + Information-Centered + Compliance Driven = BANK

Banks are, in essense, scalable, information-oriented, hands-on service organizations with the same geographic footprint as the providers they serve -- or could serve, with the proper mindset and approach.  Provider-oriented banking could level the playing field, bringing scalable technologies to the local and regional provider community, aggregating technology, expertise and the data itself (a necessary element for the analytics to counter the Denial Engine phenomenon).

Unlike the clearinghouses that often (but not always) serve two masters, the provider-based bank would be beholden to the doctor, clinic or hospital for their revenue stream, and would be subject to regulatory and contractual obligations to serve their interest. (It would be an unfair generalization or even a gross overstatement to say that a clearinghouse has no such obligation or commitment, but providers should ask the important question: If I'm not paying the clearinghouse for the services they provide me, then who, exactly, do they work for?)

The nickels, dimes and quarters banks might charge pale in comparison to the piles and piles of dollars providers are losing every day thanks to the collective disadvantages they suffer in an increasingly belligerent HIT arms race. But banks, like providers, need to learn fast, change fast and partner fast (and yes, those partners must include clearinghouses and software vendors). Are they smart enough to do it?

Maybe the ones that are left will be.

Once-reliable revenue streams are drying up. Money you thought you'd socked safely away evaporates overnight.  Your staff starts devoting more and more time to collections, leaving less and less time for day-to-day operations. The things you used to do to pay the bills aren't working anymore, and indications are that you will have to change your business model or go bankrupt.

Is this a crisis or a catastrophe? Will it be a temporary crunch or a drawn-out recession? Is the source of the problem the stock market, the credit market or unqualified borrowers?

If you're a healthcare provider, the answer to all of these questions is "none of the above,"  because the symptoms I'm describing have nothing to do with the financial crisis everyone else is talking about -- they're a result of permanent changes to healthcare reimbursement, and the longer you wait to do anything about them, the fewer resources you will have to adapt to the new paradigm.

And in the "odd bedfellows" department, the best friend you may have in dealing with this fearful new world might just be your local banker. Not the countless bankers that wrote thousands of bad mortgages, hid the risk in dodgy securities, and tied a bow around the toxic result and delivered it to the taxpayer for settlment -- but the mere handful of bankers who are actually performing services for healthcare that deliver value well beyond any fees or charges they might ask you to pay.

The Old Bad News
Healthcare used to be known as "recession-proof" -- no matter what else happens, people will keep getting sick and when they do, they will need care. Right? That formula has worked for decades, propped up by byzantine reimbursement rules and third-party cost-shifting schemes. At least, that is, until 2006, when healthcare hit 16% of US GDP.  That number may turn out, like $4/gallon gasoline, to be the intolerable price point, at which everything you used to know becomes, suddenly, wrong.

The threats to providers' revenue streams are not new, but they are varied and their collective impact is only now being felt across the board.  Some of these will be familiar to frequent readers:

• The impact of High Deductible Health Plans moving significant portions of revenue from the payer bucket to hundreds of individual (and notoriously difficult to collect) patient buckets.
• The cream-skimming effect of sophisticated Denial Engines, which deduct 1-4% or more from payer remittances, above and beyond traditional editing schemes.
• Post-hoc recoveries, such as the nationwide roll-out of Medicare's Recovery Audit Contractor system, which re-adjudicates settled claims and deducts "found money" from current remittances. (Guess what? RAC is not the only -- or even the biggest -- of these programs.)
• Moving risk (and concomittant cost) from payer to provider, perhaps in justifiable ways, through denying coverage for "never events," such as hospital-acquired infections.  (It should be noted that, even hospitals which would never have billed for them in the first place must now carry the burden of reporting via the new "Present On Admission" indicator in the 837 claim transaction.)

And now a further shift is underway: A transition of reimbursement from traditional service-based reporting to new experiments in quality-based schemes, such as PQRI, Medical Home and a panoply of public and private P4P approaches. A lack of consistency in the reporting requirements and the notorious absence of significant payback for such reporting does not alter the fact that employers and payers are shifting the emphasis away from conventional claim/encounter/procedure-based payment modalities.  Providers who snooze will lose. (The lack of funding may actually be a good thing, if providers wake the hell up and demand the purveyors get together and line up their own ducks, standardizing and simplifying the reporting requirements before putting any more provider revenue at risk.)

Other Than That, Mrs. Lincoln, How Did You Like the Play?
Oh, and there seems to be something going on down on Wall Street which probably merits some attention.

The important thing for doctors, hospitals, clinics and ancillary facilities to understand is that the reasons their revenues are down is not entirely the fault of the nationwide economic crunch or the price of gas and that, even after those crises have subsided, the impact of these "permanent" pressures will not only persist, but increase.  More patients are moving to HDHPs every year. Denial Engines, once the province of large payers with sophisticated technological infrastructures are being deployed at the clearinghouse level, where they can be turned on with the figurative flip of a switch.  Recovery auditing is now a growth industry, selling its government-honed expertise on the open market. "Quality" and its sister term, "transparency" are increasingly seen by the provider community as synonyms for "underpayment."

What's a provider to do?  I'd recommend a three step program: Learn Fast, Change Fast and Partner.

And why does a provider-side HIT guy like me think a bank might be the right place to look for a partner?

That's another story.... Or at least, Part II of this story.  Take a deep breath. Help is on the way.

Back in December 07, I warned about the delayed impact that January's shift of High Deductible Health Plan enrollment would have on provider revenues. Moving significant percentages of revenue from the difficult-but-predictable insurance plan bucket to the thousand-points-of-non-collection patient-self-pay bucket would take some time to sink in.  In fact, I said it might take until July before providers realized they weren't going to get paid for January's care.

Hopless Optimism
Today, a friend and loyal reader passed along a NYT editorial by Barbara Ehrenreich that suggests the current financial crisis is due in large part to positive thinking, as characterized by the popular film, "The Secret." The financiers simply believed too much in the upside, but that is a matter of course, given the nature of our 21st Century business mindset: "Everyone knows that you won’t get a job paying more than $15 an hour unless you’re a 'positive person,' and no one becomes a chief executive by issuing warnings of possible disaster."

As Ehrenreich might expect, such a dire prediction has not made me rich, and its coming true does not make me happy. But there it is: Fierce Healthcare's headline today suggests a string of hospital bankruptcies is underway. And I know of others.

How Do I Stiff Thee? Let Me Count the Ways....
And it's not just HDHPs, or the falling economy, or rising gas prices that are squeezing provider revenue streams. There's the expansion of the denial engine phenomenon, which gives payers new and more creative ways to reduce payments, plus those ever-popular "fraud and abuse" audits that turn last year's revenues into this year's red ink.  (Or the previous year's, or the previous year's.) Oh, and even I did not predict that Medicare's opaque but obstinate NPI "remediation" strategy would drive individual providers out of business, or that  congress's impeccable sense of timing would simultaneously throw fee schedules out the window during the heat of summer.

Waste Is Just Recycling Waiting to Happen!
The good news? 25 to 30% of the money spent on healthcare is wasted on administrative costs. (I think those numbers may be low, in fact, given the secondary impact that much of that work is done to address the increasing risks of nonpayment, which then creates secondary cost burdens of charity care and litigation.)

Okay, why is that good news?

Because it means we can squeeze more healthcare out of the same dollars. This can be done, to a meaningful degree, at the organizational level: You implement processes and technologies to capture more dollars and waste fewer dollars. You get rid of unprofitable payer contracts. You automate things that can be automated and turn your billers into revenue recovery analysts.

Is There a Web Filter to Protect Against Perverse Incentives?
But the grander scheme would be to eliminate the systemic causes of such outrageous operational costs: Payers need to voluntarily eliminate the nonsensical variety of flaming hoops that providers must leap to get paid, or they will be forced to do so by an increasingly informed community of patients, employers and legislators. Cost-shifting should be penalized, not rewarded.

Why do I believe this will happen? Because it's becoming increasingly clear that it must happen. We simply can't afford to pay so much money for so little healthcare any more.

For a little light weekend reading, you might want to check out the new regulations CMS has posted in a Notice of Proposed Rulemaking (NPRM).  One proposed to adopt the 5010 version of the ASC X12 electronic claims and other administrative transactions, along with the D.0 NCPDP pharmacy claim. In a separate item, there is a proposal to adopt the long-awaited ICD-10 code set, to replace the overburdened ICD-9.  Just a few hundred typewritten pages for now, but they should replace it with the tidy three-column PDF excerpt from the Federal Register sometime next week.

Earlier, I published the notice from Medicare's COBC contractor suggesting that CMS had drastically redefined the NPI Final Rule for Medicare's own purposes. Among other things, the email said that Medicare would be sending SSN, EIN, State License Number and Location Number, along with NPI, in 837 "crossover claims" to its secondary payers.  These are among the same identifiers that Medicare expressly forbid its providers from submitting on their own 837s as of May 23, 2008.

The email stated that: "Such values...do not represent 'legacy provider numbers,'" And implied that it had the blessing of CMS regulators, saying "this solution has been pronounced 'HIPAA compliant' by CMS’s internal HIPAA compliance determination staff—the same folks who are called upon to provide rulings involving issues of compliance interpretation within the current HIPAA 4010-A1 Implementation Guides."

Today, I found some very explicit references, still out on CMS's website, that explain quite clearly just how contrary that interpretation is to previous policy interpretations, published, we must assume, by Those Same Folks.

Let's see. Where should we start. How about this one?

What is the purpose of the National Provider Identifier (NPI)? Who must use it, and when?

...As of the compliance dates, the NPI is the only health care provider identifier that can be used for identification purposes in standard transactions by covered entities. CMS FAQ 2623

Maybe that's not quite clear. There could be exceptions.

Will a health care provider continue to use other numbers besides the NPI to identify itself in standard transactions after the compliance date?

Upon the compliance dates, only the National Provider Identifier (NPI) may be used for identification purposes for a covered health care provider in standard transactions. Legacy identifiers (such as the Unique Physician Identification Number (UPIN), Medicaid Provider Number, Medicare Provider Number, and others) may not be used after the final compliance date of May 23, 2008. Where a covered health care provider must be identified in standard transactions for tax purposes, it would use its Taxpayer Identifying Number as required by the implementation specifications. Health care provider identification numbers other than the NPI may continue to be used in the internal processes and files of health plans or health care clearinghouses if they wish to continue to use those identification numbers in those internal processes and files. CMS FAQ 2632

That's still a lot of words. Do you have anything clearer?

Do I need a National Provider Identifier (NPI)?

All health care providers who are covered entities under the Health Insurance Portability and Accountability Act of 1996 (HIPAA) are required to obtain and use an NPI as of May 23, 2007. The NPI replaces all existing provider identifiers used today to identify health care providers as health care providers in HIPAA standard transactions.  CMS FAQ  8198

Okay, well, maybe the payer-to-payer COB claim isn't a standard transaction!

Let's look that up in the Code of Federal Regulations, shall we? Let's flip open our handy 45 CFR Parts 160 and 162, also known as the HIPAA Transactions and Code Sets Final Rule.

First, how do we know that when a health plan like Medicare sends a coordination of benefits transaction to another health plan, that it has to use a standard transaction?

If a health plan electronically conducts COB with another health plan it must do so using the standard transaction. [p. 50336]

But do the HIPAA standards really require that?

The HIPAA standards do require health plans to use the standard COB transaction for exchanging COB with other health plans. [p. 50348]

Yeah, but the TCS Final Rule came out a long time before NPI. Won't it cost a lot of money for the plans to give up their old way of sending all those different numbers?

When the NPI is implemented, there will be a one time cost to entities to align their proprietary health care provider files to NPS data and add the NPI to their files. Once the NPI has been added, though, we would expect ongoing costs for several functions (COB, health care provider monitoring, communications with health care providers, etc.) to be reduced because of the uniform numbering system and the elimination of health care provider enumeration activities by individual health plans. [p. 50349]

Okay, but all that English stuff is from the preamble. Where does it say so in the regulation?

§ 162.1802 Standards for coordination of benefits.

The Secretary adopts the following standards for the coordination of benefits information transaction: (b) Dental claims. The ASC X12N 837—Health Care Claim: Dental, Version 4010, May 2000, Washington Publishing Company, 004010X097. The implementation specification is available at the addresses specified in § 162.920(a)(1).

(c) Professional health care claims. The ASC X12N 837—Health Care Claim: Professional, Volumes 1 and 2, Version 4010, May 2000, Washington Publishing Company, 004010X098. The implementation specification is available at the addresses specified in § 162.920(a)(1).

(d) Institutional health care claims. The ASC X12N 837—Health Care Claim: Institutional, Volumes 1 and 2, Version 4010, May 2000, Washington Publishing Company, 004010X096. The implementation specification is available at the addresses specified in § 162.920(a)(1).  [p. 50372]

Okay! Okay! We can go back to English!

So, I pasted this all together pretty quickly on a Friday afternoon. And I am, after all, just an unpaid volunteer. So maybe things that seem pretty plain on their face get a lot more complicated if you have lots of time and plenty of paid staff to come up with answers that work a little better for the things you want to happen.

How long do you suppose CMS has been working on this one?

Updates Concerning Major Initiatives
NPI Issue---
CMS decision concerning allowance of legacy identifiers on 837 COB & NCPDP COB claims removed from the payment floor on/after May 23, 2008.

That's from a slide show given by CMS's COBA Government Task Leader at the NPAG Conference on September 25, 2007.  Do you suppose when he covered that bullet point he said, "We're just going to violate the NPI rule," or did it take them ten more months to come up with that solution?

And if they knew in advance they were going to redefine the regulation and the standards to allow social security numbers, EINs, and all those other IDs, why did they bounce all those provider claims on May 23?

And why are they still bouncing them?

It's enough to make you wonder if the government thinks it doesn't need to play by its own rules. 

Nah. That could never happen in the greatest democracy in the world!

When somebody forwarded me a link to the SEEDIE site a few weeks back, it wasn't just to tell me about it. It was to ask whether we had done it.

SEEDIE is the mythical Society for Exorbitantly Expensive and Difficult to Implement EHR’s. According to the website, "While the other groups argue endlessly about which standards are most appropriate in pursuit of 'plug and play' solutions, SEEDIE recognizes that data exchange should only occur after a lengthy and expensive custom integration process. Further, that integration should require ongoing technical support from multiple vendors."

I loved it. But I decided I simply couldn't blog about it. The criticisms they implicitly levied against the HIT industry in general and the HIT collaborative community in particular were just a little too close to some things I have said in the past.

Add to that our own penchant for satirical cartoons and videos, and I simply didn't think I could come up with a denial that would sound plausible.

But now SEEDIE (and its pre-eminent vendor string-puller, Extormity) have come out of the closet in a big way (if still dressed up in anonymity) with an interview in iHealthBeat. Other than their penchant for single malt scotch, I can't see any resemblance to yours truly or my partner in crime, Michael Christopher.

Check it out.