HEALTH AUTHORITY – ABU DHABI Simplifying Pricing HEALTH AUTHORITY – ABU DHABI Health Systems Finance May, 2007

1 2 AGENDA Outpatient Claims (Capitation Payments) Inpatient Claims (DRG Payments) © Health Authority – Abu Dhabi

HOW TO TREAT OUTPATIENT CLAIMS Description of Outpatient Claims Large volume of claims Small size of average claim Sizable part of overall value Current Reimbursement System Need to refer to CPT codes (large number) for mostly routine procedures Most bills in the end still of similar value (little spread) Real value (time of the doctor spent with the patient) not reflected Solution Move to a capitation-based model (i.e. pay per person seen) because it will greatly simplify and thereby encourage billing to increase revenues it is in-line with resource consumption (doctor’s time) no clinical data will be lost (provided that an ICD 9 diagnosis is furnished with the claim) © Health Authority – Abu Dhabi

STAGES FOR INTRODUCTION OF CAPITATION PAYMENTS Phase III: Move to quality Phase II: Refine it Phase I: Make it work Get public hospitals to submit at all (even if without perfect information, no ICD-9, shortcuts to ICD-9 etc.) to offload back-log Get private providers to join to have uniform system Get rough cut on prices even in the absence of activity based costing Reward providers for quality of information provided (higher capitation payment if full ICD-9 diagnosis and procedures) Refine prices once better costing information from hospitals becomes available Do not accept claims without quality information Start rewarding providers for quality of outcome © Health Authority – Abu Dhabi

WHAT’S IN A CAPITATION PAYMENT + - All-in Easiest to bill Counteracting cap on drugs Ex drugs Still easy to bill In-line with cap on drugs Additional relevant clinical information for insurer Ex drugs, lab and x-ray Less risk for hospital Wrong incentives: will definitely lead to upgrading (no visit without lab and x-ray) © Health Authority – Abu Dhabi

HOW MANY CAPITATION PRICES + - Explanation One only One payment per visit independent of doctor or type of visit Easiest Disregards increasing complexity, probability of procedures and costs of doctor’s time with specialization per speciality group One payment per visit depending on speciality group Still easy if limited number of groups (e.g., 3) Can use existing groups (GP, specialist, consultant) Better reflects degree of specialisation Disregards first vs. follow up topic (present for all specialities) No disincentive to grow visits per type of visit One payment per first visit Different type for all follow-up visits in a defined time period Disincentive to growing visit frequency Accurately reflects different resource consumption on first vs. follow-up visit Does not reflect speciality-driven differentiation © Health Authority – Abu Dhabi

HOW TO COUNTERACT WRONG INCENTIVES Counter measures Increase number of visits scheduling short term drugs only referrals Proper definition of incident/claim Monitoring of visit information by insurer Reduce/withhold expensive medical treatment cheap/no drugs no/little procedures Monitoring of procedure information – especially for profit-oriented/private providers – by insurer (less of a problem for public hospitals) Later move to quality/outcome-based payment components © Health Authority – Abu Dhabi

HOW TO PUT IT ALL TOGETHER Each claim tied together by a single diagnosis (prerequisite for payment of any claim) Each claim can contain multiple visits under the same diagnosis first visit within a month with full rate (first visit) all subsequent referrals on same day as well as all visits with the same diagnosis within the same month at discounted rate (follow-up visit) Example: Price in AED GP Specialist Consultant First visit 100 150 200 Follow-up visit 50 75 © Health Authority – Abu Dhabi

HOW TO HELP CODE AN OUTPATIENT CLAIM Problem Statement There are large volumes for outpatient claims For an outpatient claim to be paid an ICD 9 diagnosis needs to be furnished Medical coding skills within a hospital are a scarce resource and proper coding would overwhelm medical records departments Proposed Solution Coding done by doctors themselves with “cheat sheets/superbills” check box of 10 most common diagnoses on prepared forms by speciality others either added by medical records department or aggregated under other © Health Authority – Abu Dhabi

TO DO’s Coding Supply cheat sheets with most common diagnoses by speciality for outpatient settings Grouping Group specialities into three buckets Prices Provide average outpatient costs for exemplary hospitals to set price level Check price level against current average outpatient claim by DAMAN Decide on price differentiation by speciality first vs. follow-up visit © Health Authority – Abu Dhabi

1 2 AGENDA Outpatient Claims (Capitation Payments) Inpatient Claims (DRG Payments) © Health Authority – Abu Dhabi

HOW TO IMPLEMENT UNIFORM CODING FOR INPATIENT SERVICES Why do we need uniform coding (e.g., ICD-9 diagnosis and procedure) on every claim? prerequisite for efficient handling of claims on both sides (provider and insurer) in current system prerequisite for further automation (electronic data exchange) prerequisite for introduction of DRGs prerequisite for all meaningful statistical analysis by HAAD, payors and providers How will we go about implementing uniform coding on every claim (“Educate then legislate”) Educate Convince insurers to agree on uniform claims format amongst themselves Focus on top public hospitals (80% market share) to explain need for uniform coding in claims and help redesign processes to make it happen Legislate Power to make claims and reporting forms in uniform coding format mandatory Power to introduce new price lists based on uniform codes Power to move to DRG based reimbursement system (which needs uniform code) © Health Authority – Abu Dhabi

MAKING UNIFORM CLAIMS CODING HAPPEN IN TOP PUBLIC HOSPITALS Doctor Billing Medical Records Current Situation Doctor files patient record in paper form Oftentimes missing or incomplete documentation Medical Coding Department uses paper records from doctors and codes ICD-9 for both diagnosis as well as procedures Finishes within weeks after discharge Billing Department needs immediate solution upon patient discharge (co-payment problem) Billing does not refer to codes from medical records but manually assembles bill Short Term Goals Careful attention to detail (plus incentives) Matches codes with prices Finishes within days after discharge All bills submitted with ICD-9 diagnosis and procedure code All bills submitted electronically All bills submitted two weeks after discharge Issues to be resolved Timing (e.g., for co-payment) Communication Staffing & training © Health Authority – Abu Dhabi

WHY IS IT A WORTHWHILE PURSUIT All data present, we just need to start using it! If we start using it, we can get a complete patient record to greatly improve the quality of care and provide full feedback to providers start reimbursing hospitals with a DRG based pricing method to greatly simplify the claims filing procedure for hospitals move to an electronic filing system for claims to greatly improve the efficiency and lower the cost of claims filing for hospitals and insurers absorb the intended insurance of nationals into the system by closing the claims gap to avoid additional financial strain on the system © Health Authority – Abu Dhabi

WHAT’S BROKEN WITH THE CURRENT PRICING SYSTEM Incomplete Complex list with over 1500 individual procedures for a fee-for-service type reimbursement Still frequently missing items leading to multiple calls into HAAD Inconsistent No uniform reference to one set of standard codes (CPT or ICD-9) Pricing too high for individual items, too low for others Descriptions of procedures are not unique identifiers (leading to various amounts being billed for the same procedure) Resulting problems Hospitals do not understand pricing system and therefore do not (fully) use it to bill There is no (IT) system to help them use existing price list Even if there were, it is too complicated and neither transparent nor clinical in focus © Health Authority – Abu Dhabi

WHY WE NEED A DRG-BASED SYSTEM FOR INPATIENTS What are DRGs DRG = diagnosis-related group System to classify hospital cases into ca. 500 groups referred to as DRGs (example: normal newborn, vaginal delivery; heart failure; pneumonia) DRGs assigned by a grouper program based on standard diagnoses, procedures and other factors (age, sex, co-morbidities) Patients within a DRG a expected to use similar hospital resources therefore used as a basis for payment to hospitals ICD- 9 Standard Procedure Coding DRGs Grouper Why do we need them? Complete (and simple): only 500 items needed instead of over 1500 on the current price list (which is still incomplete) Consistent: rational basis for determining prices (equal use of resources), relative weights known, only multipliers needed All the source data in place (ICD-9 diagnoses and procedures) for grouping by provider, payor or HAAD Proper incentive for hospitals for efficient use of resources (manage length of stay, compete for more patients) It is easy for HAAD to come up with DRG list based on Saudi data from Daman © Health Authority – Abu Dhabi