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Fixing Healthcare, Part Two

My very own ideas for fixing healthcare that could provide industry efficiencies.

EDITOR’S NOTE: Rose Dunn concludes her exclusive two-part series with this final installment on how to fix healthcare.

In my prior article, I shared commentary about some of the inefficient and redundant activities that exist in healthcare. I also said these prevent us from expending the appropriate resources on our primary responsibility – delivering quality care to our patients. So in this article, I’m offering some of my own recommendations to help streamline healthcare and eliminate unnecessary activities and their related costs:

  • Eliminate accreditations. Our taxes already pay for the state to review and validate that healthcare organizations meet the Medicare Conditions of Participation and state Medicaid and licensure requirements. And even if a healthcare organization wishes to post its accreditation approval on the lobby wall, it does not relieve the hospital of Centers for Medicare & Medicaid Services (CMS) oversight, which is conducted by states. Why should we spend healthcare dollars to engage yet another expert to review what the state can do as effectively, and provide us with a report that includes citations for our process improvement? Finally, to make this change, payors must be mandated to accept state reviews and not require yet another third party to accredit the healthcare organization.
    • Savings: Significant ($10,000-$45,000 and annual fees during the triennial period). The cost for HFAP services averages $25,000 for three years. Individual facility costs vary by size and complexity.
    • Labor impact: also, significant
    • Superfluous policies and procedures: Where will the dust settle?
    • Wall space: one less poster to hang
    • Confirmation: even the Advisory Board reports that external accreditation is no better than state agency inspection and did not yield any enhanced patient outcomes as a result of using an external accreditation agency.
  • Convert to one procedural coding classification. Why do we need two procedural coding systems (i.e., AMA’s Current Procedural Terminology/CPT® and ICD-10 PCS)? I realize that each has its pros and cons. However, the restricted ability to compare data across patient statuses and between entities within an integrated delivery network creates a barrier to effectively and strategically plan and manage care across the healthcare spectrum. I know that PCS can describe everything that’s in CPT (and to the same or greater detail than CPT). That doesn’t mean I am advocating for PCS. It’s not as easy to learn as CPT. However, I see a real opportunity here for physicians to get out of the coding business and get into the documentation specificity business by handing off the heavy lifting of coding in PCS to certified coders.
  • Standardize LCDs. Local Coverage Determinations (LCDs) are decisions made by a Medicare Administrative Contractor (MAC) on whether to cover a particular item or service in a MAC’s jurisdiction (region) in accordance with section 1862(a)(1)(A) of the Social Security Act. MACs are Medicare contractors that develop LCDs and process Medicare claims. The MAC’s decision is based on whether the service or item is considered reasonable and necessary. If every MAC is required to abide by section 1862(a)(1)(A) of the Social Security Act, why do some LCDs differ from region to region? The Social Security Act doesn’t differ from region to region.

Even the U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) weighed in on this issue in 2014 with its report, “Local Coverage Determinations Create Inconsistency in Medicare Coverage.” Here’s what the OIG found: “in October 2011, over half of Part B procedure codes were subject to an LCD in one or more states. The presence of these LCDs was unrelated to the cost and utilization of items and services. Furthermore, LCDs limit coverage for these items and services differently across states. LCDs also defined similar clinical topics inconsistently…finally, we recommend that CMS consider requiring MACs to jointly develop a single set of coverage policies. CMS concurred with all of our recommendations.” Has there been any improvement?

The LCDs should be national. If section 1862 is being interpreted in different ways by different MACs, then CMS needs to clean it up. We wonder why healthcare is so expensive – just consider those organizations that cross MAC territories, and have to try to build their billing systems around convolutions from two or more different MACs. 

I pity the registration staff in southeast Missouri that needs to manage the Advance Beneficiary Notices (ABNs) for tests and other services that may differ if the patient is from Missouri, Illinois, Tennessee, Kentucky or Arkansas – governed by five different MACs. And then consider the patient that has a service covered when they are at home in Tennessee, but when they vacation in Missouri, it’s not. Let’s push those in charge to clean up this travesty.

  • It’s time to do away with cost reports. I realize that the ICD-10monitor audience doesn’t often dabble much in the cost report arena, so let me dissect this one. CMS states that “Medicare-certified institutional providers are required to submit an annual cost report to a Medicare Administrative Contractor (MAC). The cost report contains provider information such as facility characteristics, utilization data, cost and charges by cost center (in total and for Medicare), Medicare settlement data, and financial statement data. CMS maintains the cost report data in the Healthcare Provider Cost Reporting Information System (HCRIS).”

ResDAC describes the cost report as a series of forms that collect descriptive, financial, and statistical data to:

  • Determine if Medicare over- or underpaid the provider; and
  • Collect information for use in setting prospective payment rates for:
    • Wage index;
    • DSH adjustment;
    • IME/GME; and
    • Outliers.  

Obviously, this means that healthcare facilities must provide:

  • Facility characteristics (ownership status, type of facility);
  • Statistical information;
  • Financial information;
  • Cost information;
  • Charge information; and
  • Wage information.

Essentially, the report takes the costs of all the non-revenue generating departments and disburses those costs to the revenue-generating departments through a prescribed method that allows the total cost of services to be compared to the total charges.  

Although it is one way for the federal government to collect information across the spectrum of healthcare facilities (for-profit, not-for profit, large and small), the effort involved to compile the cost report can be significant for all organizations. One organization shared that “the Centers for Medicare and Medicaid Services (CMS) estimates an average of over 200 hours of exploration and compilation effort required to answer each Medicare cost report question.” Outsourcing the preparation adds additional expenses to each organization, ranging from $2,000 to $7,000, depending on type of facility, according to one site I found.  

However, the annual Medicare cost report is a critical document only for cost-based reimbursed providers, such as critical access hospitals (CAHs), whose payments are based on this report.

Can’t the federal government glean cost information from the healthcare organization’s tax returns, charge information from the claims, and wage information from payroll reports? If the level of detail for wage indices is not in the payroll reports, then just ask for this information from all the non-cost reimbursed providers. While the hospitals may have the depth of manpower to complete these detailed reports, other providers – such as Skilled Nursing Facilities (SNFs), home healthcare agencies, hospices, Independent Rural Health Clinics (IRHCs), and freestanding Federally Qualified Health Centers (FQHCs) – may not. It’s time for Medicare to take the steps necessary to dig into its big data pockets and create the information they need for their purposes (or for research). One sidebar: federal hospitals are not required to submit a cost report. Go figure!

  • Standardize what’s covered – and what’s not. It’s time for the National Association of Insurance Commissioners (NAIC), state Departments of Insurance (DOI), and/or the feds to intervene and encourage a standard for coverage by all payors across the United States. Our patchwork of coverage and the corresponding prior authorization requirements are horrendous for both providers and enrollees. Medicare Advantage and Patient Protection and Affordable Care Act plans have a core set of services that are offered, so why not all the other commercial plans? Now, before you think I’m advocating for a single-payor program or a national health plan…I am not. I’m just trying to make sense of the hoops that every revenue cycle manager jumps through on a daily basis to get a clean claim out the door.


In my opinion, there are several benefits derived from a core set of covered services that do not require pre/prior authorization. Specifically, it:

    1. Reduces the administration costs for both the payor and the provider;
    2. Simplifies the system configuration for both the payor and the provider;
    3. Facilitates understanding and comparability of the plan benefits for enrollees; and
    4. Encourages competition between payors to provide additional services (icing on the core benefits cake).

Do we think this is likely to happen? We need provider associations to unify, recommend a core set of coverages, and lobby NAIC, your state DOIs, and congressional representatives to push this forward.

I continue to think there are numerous other examples of superfluous expenditures of time and resources that we can eliminate and allow healthcare providers expend resources on what counts most: outcomes, quality, and customer service. 

Programming Note: Listen to Rose Dunn report this story live today during Talk Ten Tuesdays, 10 Eastern.

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Rose T. Dunn, MBA, RHIA, CPA, FACHE, FHFMA, CHPS, AHIMA-approved ICD-10-CM/PCS Trainer

Rose T. Dunn, MBA, RHIA, CPA, FACHE, FHFMA, CHPS, is a past president of the American Health Information Management Association (AHIMA) and recipient of AHIMA’s distinguished member and legacy awards. She is chief operating officer of First Class Solutions, Inc., a healthcare consulting firm based in St. Louis, Mo. First Class Solutions, Inc. assists healthcare organizations with operational challenges in HIM, physician office documentation and coding, and other revenue cycle functions.

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