ICD-10 delay positive for not-for-profit hospitals says finance firm

New York-based credit ratings and research firm Fitch Ratings has analyzed the one-year delay on International Classification of Diseases (ICD-10) implementation and come to the conclusion that it will help more than hurt the finances of not-for-profit hospitals.

The delay in implementation carries some costs for health care providers that had staffed up and implemented training programs in anticipation of the switch to the new coding system. Now that the switch is no longer taking place on October 1 of this year, some of those training and staffing investments will be wasted. The American Health Information Management Association (AHIMA) estimates that nationwide this will increase direct implementation costs by an amount somewhere between $1 billion to $6.6 billion.

However, the delay also buys more time to test the system with payors and put aside money in a contingency fund in case the switch creates reimbursement delays — a step even the Centers for Medicare and Medicaid Services (CMS) recommends.

Fitch Ratings noted that the majority of the not-for-profit hospitals it rates would have been prepared for an October 1, 2014, implementation date. However, now that President Obama has signed the sustainable growth rate (SGR) formula fix into law that also delays ICD-10 implementation, these hospitals do not have to worry about a potential disruption in their revenue cycles this fall and a resulting negative credit impact on the sector.

The delay most directly benefits not-for-profit hospitals with lower credit ratings. “In our view, lower rated credits would be more susceptible to this risk as have less financial resources to absorb a potential delay in reimbursement,” the Fitch Reports article said.

At the individual physician practice level, the delay may be even more important. The American Medical Association hailed the move as much needed because many of its members had yet to begin preparing for the switch. “Prior to passage of the new law, physicians only had six months to get ready for the implementation deadline, and those who had not begun preparing their practices would likely face considerable cash-flow problems and other serious administrative issues,” the association noted in a post in the AMA Wire.