ICD10 Migration Overview May 4 2012 Agenda ICD10

ICD-10 Migration Overview May 4, 2012

Agenda ICD-10 Overview ─ Business Problem ─ Implications of the Migration ─ Impact to the Healthcare Provider Mc. Kesson’s Role Prep for Success: ICD-10 Transition Planning Questions Confidential; For Internal Mc. Kesson Use Only 2

ICD-10 Overview Connie Phillips Product Marketing, HSES, & Edu/Comms, ICD-10 Program

ICD-10 Transition ICD codes are maintained by the World Health Organization ICD-10 was adopted by WHO in 1990 Most countries already use ICD-10 ─ Canada was the last to make the transition ─ Many more codes resulting in more detailed definitions ─ From 16, 000 ICD-9 codes to 155, 000 ICD 10 codes Improved support for analysis related to: Risk and severity ─ Predictive modeling ─ Quality and cost efficiency analysis ─ Population epidemiologic research ─ V 9107 x. A: Burn due to water -skis on fire

ICD-10 Fast Facts X Compliance date October 1, 2013 => 2014 ─ Rule proposes to change the compliance date for ICD -10 -CM and ICD-10 -PCS from October 1, 2013 to October 1, 2014 ─ Deadline extension would apply to all affected entities – payers, hospitals, physician practices ─ Final ICD-10 rule likely to be published this summer Medicare will not accept claims with ICD-9 codes after compliance date Confidential; For Internal Mc. Kesson Use Only 5

ICD-9 vs. ICD-10 Diagnosis Codes ICD-9 -CM Diagnosis Codes 3 to 5 digits Alpha “E” and “V” on 1 stcharacter No place holder characters ICD-10 -CM Diagnosis Codes 7 digits Alpha or numeric for any character Include place holder characters (‘x’) Terminology Similar Index and Tabular Structure Similar Coding Guidelines Approximately 14, 000 codes Some what similar Approximately 69, 000 codes Severity parameters limited Extensive severity parameters Does not include laterality Common definition of laterality Combination codes limited Combination codes common Health Data Consulting 2010 Confidential; For Internal Mc. Kesson Use Only 6

ICD-9 vs. ICD-10 Diagnosis Codes Clinical Example A provider sees a patient in a [subsequent encounter] for a [non-union] of an [open] [fracture] of the [right] [distal] [radius] with [intra-articularextension] and a [minimal opening] with [minimal tissue damage] ICD-9 Code Description 813. 52 Other Open Fracture of Distal End of Radius (Alone) ICD-10 Code Description S 52571 M Other intra-articular fracture of lower end of right radius, subsequent encounter for open fracture type I or II with nonunion Health Data Consulting 2010 Confidential; For Internal Mc. Kesson Use Only 7

So What? Why Should Customers Care? Top Ten Reasons 1. No code, no pay 2. Increased AR days 3. Increased clinical documentation requirements 4. Increased denial rates 5. Unpredictable DRG Assignment 6. Unpredictable Quality Measures 7. Poor predictability in an ACO environment 8. Unpredictable contract changes 9. Challenges addressing audits 10. Difficulties in redefining case mix I’m kind of a big deal Health Data Consulting 2011 Confidential; For Internal Mc. Kesson Use Only 8

Healthcare Providers Anticipated Impact Areas Source: Accenture

Industry Readiness Workgroup for Electronic Data Interchange Feb. 2012 survey ─ Nearly ½ of providers did not know when they would complete their impact assessment. ─ Over one third of health plans have completed their assessment, but ¼ are less than halfway done. ─ Less than a tenth of vendors indicated they had completed solution development for ICD-10 products and services Source: WEDI letter to CMS, dated March 15, 2012 Confidential; For Internal Mc. Kesson Use Only 10

Transition Costs Industry Studies Hay. Group Implementation Estimate ─ Total cost to healthcare system would be between $3. 2 to $8. 3 billion ─ Medicare program implementation between $200 -$220 million ─ Medicaid state programs implementation $1 to $3 million each Health Data Consulting 2011 Confidential; For Internal Mc. Kesson Use Only 11

Hospital Transition Costs IT Systems & Business Operations IT Systems ─ Architectural updates, Data Conversion, User interface updates, EDI updates, Reporting updates, Coding Tools, Testing Business Operations ─ Training (Clinicians, Analysts, IT Staff, Coders), Contract updates, analytic redesign, Clinical Documentation Improvement, Vendor management, Operational Disruptions Health Data Consulting 2011 Confidential; For Internal Mc. Kesson Use Only 12

Revenue Impact How long do you expect revenue losses based on implementation to last? 35% 30% 25% 20% 31% 15% 23% 10% 5% 0% 23% 10% Less than 6 months More than 6 months 1 - 2 years 6% 7% More than 2 years Permanent Not sure © 2011 Health. Leaders Media, a division of HCPro, Inc. Confidential; For Internal Mc. Kesson Use Only 13

Clinical Impact Documentation – It must be better! DCBA, Inc. analyzed Horizon documentation software: The solution does support the level of specificity needed for ICD-10 Hospitals can start documentation initiatives now to bring clinical documentation where it needs to be for ICD-10 Confidential; For Internal Mc. Kesson Use Only 14

Ambulatory Impact Documentation – It must be better! Workflow change for all the end users ICD-10 will require them to select levels of detail they aren't used to ─ Product changes will support that need ─ Billing – Practices typically do not use coders so correct granular codes must be selected during the patient visit Most physician practices haven’t had bandwidth to focus on this yet because of ARRA and other e-Rx incentive programs Confidential; For Internal Mc. Kesson Use Only 15

Ambulatory Impact ICD-9 to ICD-10 Diagnosis Translation Family Practice Superbill Template ICD-9 – Two Pages 16

Ambulatory Impact ICD-9 to ICD-10 Diagnosis Translation Family Practice Superbill Template ICD-10 – Nine Pages! 17

Mc. Kesson’s Response to ICD-10 Sally Love Connally, VP Program Office, MTS Confidential; For Internal Mc. Kesson Use Only

ICD-10 Transition Major industry impact Impact on Mc. Kesson Significant product updates to Mc. Kesson’s provider and payer solutions Extensive organizational effort to deliver upgrades efficiently for our technology customers: ─ ─ ─ Holistic customer roadmapping Upgrade pricing/contracting across MTS Slotting across MTS BUs Deployment (self-install vs. onsite) Post deployment support Mc. Kesson Response Centralized ICD-10 program office to coordinate product mgmt and customer communications across business units Internal audit to identify areas of risk for ICD-10 readiness Plans set in place to achieve success in all affected product groups

Preparing for ICD-10 – MTS Level Across Organizations and Functions Performance Mgmt Paragon Horizon Clinicals Core HIS • Product Readiness • Communications • Upgrade Capacity • Deployment Managed Services Physician Practice Solutions Relay. Health Enterprise Imaging

HSES ICD-10 Program Centralized HSES Enterprise Upgrade ICD-10 Program Executive Sponsorship Rod O’Reilly Dave Souerwine Teams are organized by function HSES ICD-10 Program HSES team leads with participation from across the organization: § HSES § HSPM § Enterprise Imaging § Paragon § Managed Services § Physician Practice Solutions Program has accountability to Rod O’Reilly and Dave Souerwine Product Management Customer Road Maps Education / Comms Pricing & Contracting Service Delivery & Support Process Improvement

HSES ICD-10 Program A Customer-Centric Approach Mission The mission of the HSES ICD-10 program is to create a comprehensive deployment strategy and approach for our Horizon Clinicals and core Revenue Cycle customers. Guiding Principles Work collaboratively across business units and product groups. Drive consensus across the organization. Use communications to keep our employees and customers up-todate on the industry and our program.

HSES ICD-10 Program Critical Organizational Effort Product Management Education & Comms Customer Road Maps • ICD-10 Release Planning & Management • Cross-BU Product and Services Compatibility and Dependencies • Product Documentation • Integration Documentation • Strategy for Customer and Employee Communications • Knowledge Repository • Knowledge Management – Process & Standards • Education Plan and Process • Customer Product / Release Gap Analysis • Customer ICD-10 Road Maps • Coordinated Scheduling / Slotting for Upgrades • Coordinated Change Management Pricing & Contracting Service Delivery & Support • Standard Contract • Services delivery Templates Models and Standards • Contract Consolidation / • Cross Business Bundling Unit Demand / Capacity • Streamlined Management Processes Across Product Groups • Upgrade Readiness • ICD-10 Services Pricing and Packaging All Product Groups Represented on Each Team

Overall Program Status # ICD 10 Work stream Key Areas of Focus 1 Product Management ► Product Compatibility/Dependency – Enhanced Documentation G 2 Communication & Education ► ICD 10 Knowledge Management G 3 Scheduling and Slotting ► ER 11. 0 and Rev Cycle Road-Mapping and Slotting Y 4 Contracting ► Consolidated Upgrade Contracting G 5 Services Delivery ► Pre-Req Assessment and Upgrades Delivery 6 ICD-10 Value Added Services ► Comprehensive ICD-10 Service Offering Packaging / Positioning 2/25/2021 FOR INTERNAL USE ONLY/PROPRIETARY AND CONFIDENTIAL Status Y=>G G 24

Program Update Key Accomplishments ► ICD-10 Upgrade Universe Defined: ICD-10 Partner Category and Core Revenue Cycle ► Attained Business Unit Alignment to Centralized Scheduling/Slotting Coordination ► Centralized Scheduling Toolset: Working Model In Place ► Centralized ICD-10 Contracting Process Defined: Stand-Alone or Consolidated for All BUs ► Customer Gap Action Plans completed for Wave 1 and Wave 2 customers ► 103 of 135 accounts put into initial target slot assignments for all ICD-10 products in our scope ► Clinical ER 11. 0 HW Sizing Assessments completed for majority of the confirmed Q 1 Slotted customers ► Executive Briefing and EAE Communication Presentation developed outlining HSES ICD-10 Program ► Clinicals ER 11. 0 Contract Ready: Complete SOWs and Option 2 Contract Language ► Internal ICD-10 ITE & QA Planning: Program has been established and is making progress 2/25/2021 FOR INTERNAL USE ONLY/PROPRIETARY AND CONFIDENTIAL 25

HSES ICD-10 Upgrade Universe Partner / Core Revenue Cycle ICD-10 Partner Category ICD-10 Upgrade Unit Universe Partner Class New Business Total Revenue Cycle – Core Parent Organizations 139 4 143 111 Facilities 516 321 837 414 Production Server Instances 217 126 343 173 Upgrade Events 2, 162 241 2, 403 723 Self Installable 1, 244 93 1, 337 521 918 148 1, 066 202 Avg. – Self Installable 9 23 N/A 5 Avg. – Services Required 7 37 N/A 2 Service Required 2/25/2021 FOR INTERNAL USE ONLY/PROPRIETARY AND CONFIDENTIAL New Business Health System Facilities Ascension 85 CHS 126 HMA 58 Tenet 52 26

Preparing for ICD-10 Competing priorities and conflicting timelines CY 2012 CY 2013 OCT APR 5010 Compliance Date (1) Stage 2 Final Rule Anticipated HIPAA IFR for AOD Proposed Rule ICD-10 Adoption Delay 2/25/2021 OCT 5010 Compliance Date (2) Stage 2 Proposed Rule Released APR CY 2015 CY 2014 APR OCT Health Care Reform Value Base Purchasing, Bundled Payments, PCMH 2014 Edition Deployed Payment Adjustments Begin Stage 3 Proposed Rule Stage 3 Final Rule Stage 33 Deployed Proposed ICD-10 Implementation Date Oct. 1 Confidential & Proprietary - For Mc. Kesson Internal Use Only 27

Prep for Success: ICD-10 Transition Strategy Lorna Yates, CPC Sr. Project Manager Confidential; For Internal Mc. Kesson Use Only

ICD-10 Transition Our Comprehensive Approach I. Readiness Assessment Technology/Interface Systems • • • Evaluate status of 4010/5010 Evaluate compliance/readiness of all systems Identify all interfaces affected Ascertain integration points Assess capacity to support parallel processing Documentation/Coding Review & Analysis • Perform claims data analysis • Perform documentation review and analysis II. Roadmap Development Technology/Interface Systems • Roadmap/timeline integrated with enterprise-wide IT strategy including: • Pre-requisites; • Versions; and • Timeline Documentation/Coding Review & Analysis • Provider documentation gaps and training timeline Process and Operations • Define key business initiatives by department/area • Conduct departmental current state workflows • Determine all functions utilizing ICD 9 and understand ICD-10 impact • Assess current staffing levels and capacity to support parallel processing Determine Training Approach • Assess staff training needs and determine types of training required Financial Implications • Assess potential financial implications valuate status of 4010/5010 • Evaluate compliance/readiness of all systems III. Implementation & Business Improvement Technology/Interface Systems • Coordination and alignment of ICD-10 technology systems upgrade and/or implementation with enterprise-wide strategic plan • Implement/configure test environments Documentation/Coding Tools & Optimization • Optimization/acquisition of coding tools • Ongoing claims and documentation review and analysis Process and Operations • Business requirements and timeline • Education/Training roadmap and methodology • Payer contract renegotiations timeline • Workflow/process timeline • Resources requirements Budgetary Considerations & Assumptions • Resource expense (training and staff augmentation) • Revenue and cash flow impact • Technology cost • Productivity impact Process and Operations • Design/implement workflow improvements and adjustments • Execute training and education • Translate existing forms or implement form changes • Execute reimbursement optimization strategy • Employ/educate temporary coders • Perform application testing • Update/renegotiate payer contracts Budget/Revenue • Funding/ Forecasting/Risk Mitigation

ICD-10 Transition: Our Comprehensive Approach Readiness Assessment Roadmap Development Implementation & Risk Mitigation Confidential; For Internal Mc. Kesson Use Only

ICD-10 Transition: 10 Critical Steps to Success 1. Enable Organization-Wide Education and Accountability 2. Ensure Interdisciplinary Steering Committee Presence and Empowerment 3. Develop an Enterprise-wide ICD-10 Strategy and Plan 4. Determine Enterprise Optimization Opportunities and Process Gaps 5. Execute Interdisciplinary Project Management 6. Drive Mc. Kesson and Third-Party Vendor Accountability 7. Document and Communicate Payer Implementation Plan 8. Adequately Assess and Document Detailed Training Plan 9. Manage Change and Provide Ongoing Risk Assessment 10. Successful Implementation Confidential; For Internal Mc. Kesson Use Only 31

Assessment Phase I Enterprise Integration Architect Deliverables Sample Integration Diagram Revenue Cycle Integration HIS Confidential; For Internal Mc. Kesson Use Only 32

Assessment Phase I Enterprise Integration Architect Deliverables Sample Environment Management Plan HIS Scheduler Confidential; For Internal Mc. Kesson Use Only 33

Assessment Phase I ICD-9 vs ICD 10 Comparison of Clinical Documentation Confidential; For Internal Mc. Kesson Use Only 34

Assessment Phase I Clinical Documentation Sample Review Assessment of 50 medical records comparing ICD-9 codes to an ICD-10 translation indicates the following: v 86% of codes have documentation currently to support the specificity needed for ICD-10. Additional documentation may be required to support assignment of the other 14% of codes v Opportunity to improve physician documentation to achieve the highest level of specificity available in ICD-10 Confidential; For Internal Mc. Kesson Use Only 35

Assessment Phase I Workflow – Physician Office Confidential; For Internal Mc. Kesson Use Only 36

Assessment Phase I Medical Policy © 2010 The Advisory Board Company Mckesson Technologies, Inc. Confidential and Proprietary 37

Assessment Phase I Medical Policy Medical Policies - Downstream Impacts ü ü ü ü ü Benefits Design Adjudication Fraud and Abuse Appropriateness measures Authorizations Risk assessment Disease management Case management Analytics Customer / Provider service © 2010 The Advisory Board Company Confidential; For Internal Mc. Kesson Use Only 38

Assessment Phase I Deliverables Summary and Review Executive-level Meeting and Summary Report § Review of: ü Interface and System Analysis ü Claims and Documentation Analysis Summary ü Workflow Process Gap Analysis and Opportunities ü Training and Education Opportunities ü High Level Financial Impact Analysis Confidential; For Internal Mc. Kesson Use Only 39

Roadmap Phase II Considerations Phase II activities establish a transition timeline üValidation of • Departmental Processes/Applications • Payer Contract Findings • Enterprise-wide technology and systems ü Documentation of Changes to Operational Workflow ü Completion of a Cost Prediction Model ü Determination of Training Methodology and Participants ü Creation of an Integrated Testing Approach and Timeline ü Creation of an ICD-10 Transition Project Plan Source: Health Data Consulting © 2010 Mckesson Technologies, Inc. Confidential and Proprietary 40

Roadmap Phase II Considerations Reporting and Analytics ü Data Warehousing ü Support for ICD-10 codes and code types ü Re-definition of data marts ü Support for number of codes per claim ü ICD-9 based grouper and aggregation model updates ü Testing ü Test Databases ü Test Cases Source: Health Data Consulting © 2010 Mckesson Technologies, Inc. Confidential and Proprietary 41

Roadmap Phase II Customer Technology Roadmap Example

Roadmap Phase II Current vs. Future State Metrics Area DNFB Days – Coding Hold Days in A/R Current State Hospital: 1. 07 average days for December 41 thru December 2011 Future State Transition Period Future State Permanent Period 5. 5 – 8 Days 2 – 3 Days 54. 4 during the first year of transition 47. 4 during the second year of transition 41 Clean Claims Rate Daily insurance revenue (to be used in DNFB calculation) # of Certified Coders 82% $1, 274, 370 79% 82% 5 5 Charts Coded Per Hour - IP Charts Coded Per Hour - Surgical 5 17 5– 7 (staff reassignment, if needed) 3. 5 12 4 14. 5 Charts Coded Per Hour - Emergency Dept 28 20 24 2, 031 2, 432 908 645 772 39 overall 49 during the 1 st year of transition 42 during the 2 nd year of transition 39 Chart Coded Per Hour - Specialties (Practices) Charts Coded Per Hour- Internal Medicine (Practices) Days in A/R - Practices: 2, 861

Roadmap Phase II Recommendations Focused Provider Documentation Training Top 10 Attending Physicians (Inpatient and Observation) Physician Name Number of Accts CARTER D. O. , JOHN ROSS M. D. , DOUG GREY M. D. , MEREDITH GREEN M. D. , MARK KOVATCHM. D. , LUCA PRATT M. D. , GREG STEVENS M. D. , ISABELLE MONTGOMERY M. D. , ADDISON YANG M. D. , CHRISTINA BAILEY D. O. , MIRANDA 692 688 562 558 529 522 520 495 416 397 Physician Practice Physician Champion Candidates HORTON M. D. , MARGARET M DEVEROUX M. D. , JENNIFER Primary Care Associates General Neurology Confidential; For Mc. Kesson Use Only 44

Roadmap Phase II Recommendations Focused Clinical Documentation Improvement Overall Top 10 MS-DRGs with 1 -Many Translations affecting the DRG DRG Description Total Claims Affects DRG Percentage of Overall Claims 470 Major joint replacement or reattachment of lower extremity w/o MCC 374 2. 93 871 Septicemia or severe sepsis w/o MV 96+ hours w MCC 423 364 2. 85 292 Heart failure & shock w CC 394 334 2. 61 280 Acute myocardial infarction, discharged alive w MCC 295 2. 31 291 Heart failure & shock w MCC 283 255 1. 99 247 Perc cardiovasc proc w drug-eluting stent w/o MCC 251 1. 96 065 Intracranial hemorrhage or cerebral infarction w CC 239 237 1. 85 287 Circulatory disorders except AMI, w card cath w/o MCC 228 1. 78 190 Chronic obstructive pulmonary disease w MCC 222 182 1. 42 281 Acute myocardial infarction, discharged alive w CC 163 1. 27 Confidential; For Mc. Kesson Use Only 45

Roadmap Phase II Clinical Documentation Improvement (CDI) Services Drive the criticality of this component and the need to: Assess current state of documentation against ICD 10 requirements ─ Categorize the gap ─ Devise plan to address Key Benefits: ─ Provide organization with better information for planning, measuring patient care and physician profiling ─ Improve accuracy of hospital and physician outcomes ─ Improve chances for appropriate reimbursement ─ Confidential; For Internal Mc. Kesson Use Only 46

Roadmap Phase II Budgetary Costs Network Management

Roadmap Phase II Roadmap Deliverables Summary and Review Executive-level Meeting and Summary Report § Review of: ü Roadmap and timing ü Budget Review ü Approved Staffing ü Work-plans and departmental commitment ü Complete Training Schedule for all staff ü Approved Communication Plan ü Regular Governance Meetings and Executive Sponsorship Confidential; For Internal Mc. Kesson Use Only 48

Implementation Phase III Deliverables Standard Statement of Work Collaboration with customer project team, steering committee, and executives § Modify or optimize impacted ü Systems ü Applications ü Business processes and operations ü Training materials and tools § Change management and acceptance § Budget compliance § Key performance indicators Confidential; For Internal Mc. Kesson Use Only 49

Implementation Phase III Deliverables Execute Roadmap and Timeline Powered by Mc. Kesson: Real-world active transition experience § Sharing what we have learned from other customer engagements Medical Records specialists to review § Clinical Documentation opportunities based on inter-departmental workflow between HIM, CDI Specialists, Case Management and Quality Management § Physician templates for specificity required by ICD-10 Clinical Domain Expertise Group Enterprise Scheduling Experts Communication Plan for both staff awareness and payer relationships Dual coding workflow plan Project Management including a detailed project plan Confidential; For Internal Mc. Kesson Use Only 50

Implementation Phase III Deliverables Execution supported by World Class Tools of the Trade üCode Translation Tool for job aids and cheat sheets üDetailed test cases based on your application mix üStaff and Payer communications library for your use üICD-10 Transition Analytics Scorecard powered by HBI üClinical Domain Expertise Group Confidential; For Internal Mc. Kesson Use Only 51

ICD-10 Transition Summary ICD-10 impacts all areas of the healthcare enterprise Mc. Kesson is working across groups to provide a comprehensive offering that includes analytics, physician training & change management, IT outsourcing, and more Your customer might need our help if… ─ Clinical leaders are not engaged with ICD-10 work group ─ Documentation improvement isn’t part of their ICD-10 project plan ─ If they don’t have a clear and detailed plan Confidential; For Internal Mc. Kesson Use Only 52

Questions? ? ? Next Steps: Look for the ICD-10 Overview Self Study Guide on the MPT Product Training Portal! Confidential; For Internal Mc. Kesson Use Only 53