HIMSS: Hospitals will have to shell out millions for ICD conversion

While organizations are planning for the mandatory transition to the ICD-10 code set, many have wondered what the financial implications will be. Now, they may be wishing that they were still wondering about financial implications after the Centers for Medicare & Medicaid Services (CMS) estimated that the total costs associated with the ICD-10 conversion may reach $640 million in 2013 alone. These estimates were presented during a HIMSS Virtual Briefing Oct. 12.

During the presentation, Denise O. Hall, RN, BSN, a shareholder at Pershing Yoakley & Associates, said that American Society of Clinical Oncology data showed that organizations of 400 beds or more can expect to drop $1.5 million-$5 million on the ICD-10 conversion. Meanwhile, 100- to 400-bed hospitals and those with less than 100 beds can expect to fork over $500,000 to $1.5 million and $100,000 to $250,000, respectively.

Additionally, improper and returned claims are estimated to account for $329 million in productivity losses in 2015 alone, while system changes for providers are estimated to be nearly $75 million.

“Documentation will be vital in this process,” Hall noted. While she said that most commercial payors will be ready and prepared for the transition, there are concerns that Medicaid programs will not be ready, particularly because they are still using archaic code sets even prior to ICD-9.

Gearing up for the ICD-10 conversion, education and training will be imperative. “Now, anatomy and physiology becomes extremely important,” Hall added.

With ICD-10, CMS and the American Health Information Management Association (AHIMA) estimated that claim denial rates will skyrocket 100 to 200 percent and that organizations will be hindered by payment declines for nearly two years after the conversion.

Hall outlined the following strategies to help mitigate risk during the ICD-10 conversion:

• Determine organization structure and departmental responsibilities and readiness for the impending transition to ICD-10;
• Create ICD-10 impact awareness throughout the organization;
• Develop projections of operational needs, including staffing and internal education training. Hall estimated the work required and time frame needed to be trained in ICD-10 will double;
• Identify specific documentation gaps to determine focused educational needs; and
• Calculate the potential impact on financial results.

What can organizations do now? “Plan,” said June St. John, CTP, senior vice president, healthcare product manager at Wells Fargo Wholesale Banking. “See if you can renegotiate terms with major suppliers to create a more balanced payment schedule,” St. John offered.

Additionally, she noted that providers should identify and implement cost-saving measures prior to Oct. 1, 2013. She said that organizations should be aggressively managing inventory levels to avoid overstock and reduce overhead where possible.

St. John said that hospital administrators should also focus on:

• Receivables: Manage your account receivables aggressively;
• Establishing a dialogue with primary relationship bankers or financial institutions now;
• Request a working capital model/forecast: These can provide advice on other services that exist in the market;
• Establish dialogue with primary third party payors: Learn how each plans to prepare for ICD-10 changes and ask if they are implementing new rules for claims submission and re-submission.

What question should hospitals be asking financial providers?

• Can you help me forecast my working capital?
• What steps can I take now to manage some of this myself?
• What additional products and services can the bank offer to accelerate days in accounts receivable and extend suppliers' term and days in accounts payable?
• What credit products can help with unexpected negative impacts to working capital during the initial period of transition to ICD-10 codes in late 2013 and early 2014?
• What other strategies should we implement to prepare for the financial risks?

St. John said that organizations must ensure that they have identified changes that will be required for current hardware and software systems to gear up for ICD-10.

“Many payors and providers are approaching this as merely a code or system change,” St. John offered. However, the process will be much more than that. Hospital administrators must ask how the hospital will be impacted by coding errors. Additionally, hospitals will need to engage in active discussions with third party payors and conduct account payables and receivables audits and then consult a trusted financial advisor.

Most of all, however, hospitals must be prepared.