A new law that unexpectedly delayed implementation of the ICD-10 codes to at least October 2015 could cariy new costs for some hospitals and health systems, but also could save them money by allowing for better preparation.
The one-year delay in the requirement that HIPAA-covered providers and insurers begin using ICD-10 code sets was tucked in a bill primarily aimed at delaying for a year deep cuts in Medicare physician payments that were about to begin. The Protecting Access to Medicare Act of 2014 cleared CongressMarch 3i and froze Medicare physician pay rates at their current levels until April 2015-narrowly avoiding a 24 percent cut that was supposed to begin April 1.
The law also delayed the switch from ICD-9 to ICD-10 codes until at leastOctober 2015 and barred full enforcement of the controversial two-midnight hospital admissions rule until April 2015.
The Obama administration had administratively delayed the switchover once before, but officials had repeatedly insisted in recent months that they would allow no more time. For instance, Marilyn Tavenner, administrator of theCenters for Medicare & Medicaid Services (CMS), told attendees of a February healthcare conference that the administration would grant no more delays.
The delay could benefit tardy healthcare providers but cost providers that have advanced far along in their ICD-10 preparations, according to an HFMA health policy expert.
“The big push and pull is between large organizations that have prepared for ICD-10 conversion and smaller ones-particularly specialty physician groups-that don’t have the dollars to focus exclusively on this ICD-10 conversion,” says Richard L. Gundling, vice president, healthcare financial practices for HFMA. “Many organizations have spent considerable amounts of resources, including investments in training staff and upgrading IT systems, to prepare for the conversion to ICD-10. Although a delay does allow additional time for transition, it does result in a loss of momentum and will require additional costs to prepare for the conversion again one year later.”
Delay Upside
The positive aspects of a delay for hospitals were underscored in an April analysis by Fitch Ratings, which concluded that it was a positive credit development for not-for-profit hospitals.
The Fitch report said the majority of hospitals the agency rates were expected to finish preparations for the switch to new codes by the previous Oct. 1transition deadline. However, the potential disruption to the revenue cycle could have had a negative credit impact on the hospital sector, especially on lower-rated providers.
In the short term, the transition to ICD-10 will pose a challenge for many providers because ICD-10 is much more complex than ICD-9, featuring eight times the number of codes currently used for diagnosis, according to Fitch. Nonetheless, the credit rating agency also notes that most providers were prepared after “substantial investment in technology and personnel.”
Continuing questions surround the readiness of both governmental and commercial insurers to adequately process claims and payments in a timely manner, according to Fitch.
“In our view, lower-rated credits would be more susceptible to this risk, as they have less financial resources to absorb a potential delay in reimbursement,” the rating agency says.
Some hospitals have participated in beta testing with payers, which entailed sending payers ICDio-coded sets and receiving estimated payment amounts. CMS also recently announced plans to conduct end-to-end testing with a small sample group of providers in late July.
Regarding the delay, Fitch notes that it “views this dual-coding testing positively and believes it will give these hospitals a distinct advantage in identifying weak points and correcting them.”
Among the factors fueling Fitch’s concerns with the move to ICD-io-the first coding-set conversion hospitals will have to implement using an electronic platform-are difficulties hospitals have had with recent IT upgrades. The report cites recent hospital replacements and upgrades in their patient billing technology systems, which resulted in “many” dropped bills and other issues that took months to correct. Those problems put “some pressure” on hospitals’ financial performance, and Fitch expects similar IT issues with the ICD-io conversion.
Now is a “challenging time” for the hospital sector, the credit rating agency stated. Fitch issued a negative 2014 outlook for U.S. not-forprofit hospitals and health care in December 20i3 due to pressure on patient volume, continued uncertainty related to healthcare reform, and payment challenges.
CMS Response Awaited
Hospital and health IT officials have pushed CMS to clarify how it will respond to the required delay in the switchover, about which the law provided little detail. Among the details sought by providers are whether Oct. 1, 2015, is the new deadline to switch over to ICD-10, whether CMS will allow providers to switch to ICD -10 before the deadline, and whether CMS might now skip ICD-10 implementation for ICD-11, which is slated for release in 2017.
In response to requests for implementation details from hfm, a CMS spokesperson said on April 10 only that the agency is “examining the legislation and will provide guidance to providers and other stakeholders soon.”
CMS has estimated the likely cost to the industry of the one-year delay of ICD-10 at $1 billion to $6.6 billion in addition to the costs incurred from the previous one-year delay (Dimick, C., “Senate Passes ICD-io Delay Bill,” Journal of AHIMA, March 3i, 2014).
The Workgroup for Electronic Data Interchange (WEDI), a group of government officials and healthcare industiy and consumer advocates that advise the secretary of the U.S. Department of Health and Human Services, supports the delay. In a written statement, Devin Jopp, president and CEO of WEDI, voiced this support, noting that the delay will allow providers “to complete the necessary work and conduct extensive testing.”
The group’s October 20i3 industry readiness survey found many organizations had fallen behind in their implementation progress.
Jim Lazarus, managing director, strategy and innovation for revenue cycle solution, for The Advisoiy Board Company, says hospital CFO clients initially responded to the delay by planning to derive savings from a pause in their organizations’ implementation efforts. Some pause in broad testing and education efforts has given way to a focus on dual coding implementation with an emphasis on clinicians and cases that drive large shares of payments and are particularly vulnerable to payment delays during the diagnostic code shift.
“When CFOs recognize the financial opportunities to minimize the risk and drive returns between now and October 2015, they are all strongly validating the need to continue with ICD -10 efforts and finding the extension of resources and investment organizationally well worth it,” Lazarus says.
Date: May 29, 2014