D'Arcy Gue

Danger: ICD-10 Revenue Cycle Risks

July 11, 2013

ICD-10 3 Minute Read

When ICD-10 geeks start talking, the term “revenue neutrality” gets bounced around a lot.

Payers say they want to maintain “reimbursement neutrality,” and not deny more claims or reduce reimbursements as a result of the transition from ICD-9. On the other hand, they want to avoid overpayments, incorrect payments, and duplicate payments (both in ICD-9 and in ICD-10) — all of which are likely to increase. In the long term, ICD-10 is intended to have a revenue-neutral impact. In the short term, especially in the months surrounding the ICD-10 go-live, revenue neutrality will be difficult for many hospitals.

We’ve all seen the numbers, but a brief repeat of CMS’ dire predictions (supported by many industry leaders) is probably in order:

  • Centers of Medicare & Medicaid Services (CMS) estimate ICD-10 will initially result in a decrease in cash flow and loss of revenue.
  • Denial rates are expected to increase by 100% – 200% post-implementation, with an increase in A/R days by 20% – 40%.
  • Healthcare organizations may endure declining payments for up to two years after the October 1, 2014 implementation date

Both CMS and some payers expect that there will be delayed payments during and after the ICD-10 transition, due to problems like insufficient documentation, coding errors, increased payer scrutiny of potential double billings, and more. An increase in aged accounts and receivables is bound to affect cash management, productivity and staffing.

ICD-10 REv Cycle

Every provider should be prepared for these issues. And they can be.

1. To help avoid revenue hits, conduct a comprehensive financial impact analysis, including a process map that models the transition from ICD-9 to ICD-10. The map should reflect how all processes flow and connect to each other pre- and post- ICD-10. Done properly, the map will show how, where and when the transition could affect the revenue cycle, and tell you where special attention will be needed.

2. Set up a solid financial plan upfront, budgeting for potential cash flow impacts and preparing for delayed claims adjudication and payments. Plan to adjust accounts receivable cash reserves. Perhaps, talk to your bank about a temporary increase in lines of credit. Don’t neglect to factor in the cost of your ICD-10 implementation itself; this project will be a lengthy initiative with extra staffing, training, systems and, perhaps, external support expenses.

3. Educate and communicate. First, make sure your staff clearly understands the relationships between ICD-9, ICD-10, coding errors / slowdowns, inadequate documentation and revenue. Establish good lines of communication with your payers to reduce wasted time and confusion.

4. Right-size your staffing in critical areas such as coding, patient access and patient accounting to handle increased work volume.

5. Run both ICD-9 and ICD-10 in tandem, post-implementation to help reduce slowdowns in payments.

6. Make sure you, your payers and your vendors are collaborating within the same timeline, so that you can test, and retest, in advance of the deadline.

7. Most important, the revenue cycle impact of ICD-10 in your organization will be proportional to how well your overall implementation project is planned and executed.  You will need strong program management and project leadership, a committed and supportive senior management team, buy-in from medical staff, and an educated workforce to achieve a well-integrated in-time implementation across your enterprise.

Keep in mind that ICD-10 will not only bring us up to date with the rest of the world, but it will eventually bring your organization, staff and community many significant net gains.

Download our ICD-10 Benefits Report to fully understand the advantages to ICD-10 and how it will improve healthcare.

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