Leveraging Healthcare Coding Supplier Relationships

Challenge: Medical Center’s Coding Suppliers

A large academic medical center in the Midwest utilizes 4 different outsourced coding suppliers across the health system that did not have co-terminus contract renewal dates. Fees also differ across these suppliers for the same services at the same hospital locations. Though select suppliers proactively decreased rates upon contract renewal, rates still did not reflect the market. It is understandable that rates increase when a new International Classification of Diseases (ICD) is released given the learning curve and increased complexity, but it is expected that rates decrease over the years as coders learn and become more acquainted to the new ICD version.

Approach: Negotiations with Coding Service Suppliers

Upon partnering with our healthcare technology consultants, the health system’s goals included improving standardization of current services, lowering the cost of coding services across the full system, and improving quality of service. Incumbent negotiations were conducted with all 4 suppliers to allow them to address the system’s goals. All suppliers recognized that there were other discussions being held with incumbents, so if they did not address the hospital’s goals, there was potential to lose the partnership. Multiple rounds of negotiations were conducted prior to selecting finalist(s) for the health system.

Impact: Coders Reduced Service Rates

Conducting incumbent negotiations allowed for the health system to continue leveraging their historical relationship with each supplier. There are instances where coders have been with the health system for multiple years and developed a relationship with the providers.

All suppliers reduced their rates for all service lines of coding that more closely aligned with expectations, especially given that ICD-10 had been implemented for multiple years.

During COVID-19, there has been an extraordinary labor shortage for qualified coders. However, there was also less inpatient and outpatient volumes given the decreased non-necessary visits. Hospitals did see steady emergency department patient volumes, as many OP and IP coders shifted to ED coding.

Select suppliers also implemented tiered structures based on actual volumes. The higher the volume in the month reviewed, the lower the rate for services.

Key Takeaways

Off-Shore Coding. International coders typically come at a significantly lower rate than on-shore (United States) coders. Areas to evaluate include: quality, English proficiency, and turn around time. Hospitals should consider utilizing off-shore coding for outpatient services rather than inpatient services, as outpatient coding is usually less complex and detailed than inpatient coding.

Future ICD Implementation. The International Classification of Diseases is developed and annually updated by the World Health Organization. The development of ICD-11 started in 2007 and spanned a decade of work. Though ICD-11 officially came into effect on January 1st, 2022, it will likely take years to become implemented in the United States. When the official implantation of ICD-11 takes place, it is expected that coding rates increase, but monitor renewal agreements to ensure rates decrease again.