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As CMS and commercial payers shift risk to providers in the form of bundled and value-based contracts, the importance of reporting diagnostic data has become paramount.

AAOS Now

Published 9/1/2018
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Margaret Maley, BSN, MS

Reasons Why Diagnostic Coding Matters in Value-based Care

Payers are great at collecting data. They use the information to develop payment policies, determine reimbursement rates, and, increasingly, to negotiate value-based contracts. Payers profit because they know how much it costs to take care of patients with certain illnesses and comorbidities. Payers know how to harness the power of data.

Orthopaedic surgeons—not so much.

Most orthopaedists fail to document and assign even the most basic data, such as comorbid conditions, that would support a higher cost of care in terms of time, visits, and complications. If you treat a highly complex patient base and aren’t diligently documenting such data, you will not fare well in a value-based payment world. As the Centers for Medicare & Medicaid Services (CMS) and commercial payers shift risk to providers in the form of bundled and value-based contracts, the importance of reporting diagnostic data has become paramount. The following are seven reasons why.


Courtesy of choja

Reason 1: Diagnostic coding is the language of risk adjustment

Payer systems read and analyze International Classification of Diseases, 10th Edition Clinical Modifications (ICD-10) code data; they don’t read the narrative in your charts or operative notes unless they are trying to deny payment for medical necessity. If you want to communicate the complicated nature of your patients, you must learn to speak ICD-10 so you can describe patient conditions and treatment plans in a language that payer systems can understand.

In the first generation of Medicare Advantage plans, CMS paid the plan administering the contract the same amount, adjusting only for age and gender, and based payment rates on traditional Medicare fee-for-service, with a built-in savings to Medicare. Patient complexity (including age and health status) and comorbidities were not considered. Plans lost money or “cherry-picked” patients, leaving some populations underserved. Now, Medicare Advantage
reimbursement includes risk-adjustment factors that consider the real cost of complications from comorbidities such as diabetes, rheumatoid arthritis, and morbid obesity. If you don’t accurately document and code the comorbidities of your sicker, older, and more complex patients, their length of stay, complication rate, and outcomes may look drastically different compared to an orthopaedic surgeon who treats a healthier population without the “explanation” that your patients are more complicated.

Reason 2: Chronic conditions drive costs and outcomes; chronic conditions documented correctly equal diagnostic codes

Orthopaedists don’t treat patients’ comorbid conditions, such as diabetes or morbid obesity. But comorbidities do impact surgical decision-making, outcomes, and overall costs in an episode of care. Although most surgeons don’t document diagnoses of chronic conditions in medical records, it is a requirement in value-based care.

This doesn’t mean that you need to assign a diagnostic code to every condition that appears on a patient’s problem list. But you should explain to the patient the impact of the comorbidities on your decision-making and potentially his or her outcome. Document that in the record and code it. Doing so explains “the rest of the story” when a morbidly obese patient with a hip fracture who smokes requires an additional day in the hospital or suffers a complication like a nonunion or blood clot.

Reason 3: Diagnostic coding builds a statistical case for why some patients consume more resources than others

When you document and code the complete picture of each patient’s condition, over time you develop a rich data set on your patient base. An analysis of such information can indicate the reasons why a patient has consumed more resources. But a statistical case can be made for such risk factors only if you explain the comorbidities using ICD-10 terms.

Reason 4: Diagnostic coding can protect your provider profile

Some accountable care organizations, health systems, and payers evaluate data on hospital length of stay and complications. Documenting and coding any medical conditions that impact patients’ immunologic status, such as steroid use or rheumatoid arthritis, can explain why some surgeons’ patients have longer hospital stays or higher complication rates than patients of other providers. Maintaining a favorable profile is advantageous for surgeons who seek value-based contracts or inclusion in clinically integrated networks.

Reason 5: You are a better business partner for the hospital

The Comprehensive Care for Joint Replacement (CJR) Model payment is based on diagnosis-related groups 469 (major joint replacement or reattachment of lower extremity, with major comorbidities or complications) and 470 (major joint replacement or reattachment of lower extremity, without major comorbidities or complications). Documenting and coding comorbidities more accurately reflect the higher inpatient and postoperative costs of caring for a patient who has comorbidities.

This information, for example, can be very helpful when a patient with Parkinson’s disease dislocates after a hip replacement or a type 1 diabetic has a postoperative wound problem.

Reason 6: Diagnostic coding can keep you from losing money

Once payment is bundled, additional payment is not made if the patient returns to the operating room. If you can make the case with data that your patients are sicker and consume more resources than the average patient, you may be able to negotiate higher payments on the bundle for the procedures performed. Like Medicare Advantage plans, we need to recognize that sicker patients consume more resources and, thus, should result in higher reimbursement for hospitals and providers.

Reason 7: Your future income depends on it

Many proactive surgeons and health systems are already succeeding with bundled payment opportunities for spine, shoulder, and joint replacement surgery—outside of the CJR and Bundled Payment for Care Improvement models. For example, Lowe’s Home Improvement and Walmart offer zero out-of-pocket costs to employees willing to travel to a designated center for total hip and total knee replacements. They also cover the costs of travel and still save money. Surgeons must build care bundles using sound cost data in order to negotiate sustainable contracts.

Regardless of your personal thoughts on value-based care, CMS and commercial payers are moving a significant portion of their reimbursement to risk-based contracts to encourage delivery of evidence-based, cost-effective care. Learn the language of ICD-10, document and code comorbidities, and start taking a serious look at your risk-adjusted data. As your diagnostic coding becomes more complete and accurate, your data density will become more favorable.

Margaret Maley, BSN, MS, is a senior consultant with KarenZupko & Associates, Inc. She has been developing and delivering AAOS coding and documentation workshops for more than 20 years.