December 19, 2011

Calling All CFOs — ICD-10 is a “Now” Issue

By Ron Jones

I’m lucky to have the opportunity to work closely with CFOs at a number of the nation’s leading hospital and health systems, and I give them a great deal of credit for tackling the challenges in front of them – from securing meaningful use funds to implementing pay-for-performance models to improving billing processes. But during recent conversations I’ve been shocked to hear that ICD-10 is not on every CFO’s short list of issues to address – and in some cases, it’s not even on their radar.

To many CFOs, the introduction of up to 155,000 new ICD-10 reimbursement codes by 2013 is strictly a coding issue that will fall under the domain of IT or information management departments. The deadline of October 2013 also is causing a sense of procrastination, as many CFOs say they’ll wait until January of that year to start exploring solutions. These reactions have led me to believe that most CFOs don’t understand the enormity, complexity and time-sensitivity of the issue, or the financial incentives to get started now. As a result, hospitals and health systems are at great risk of losing significant revenue if CFOs don’t start focusing on ICD-10 today.

Without preparing for ICD-10, hospitals face lost productivity and denied claims, which, coupled with undercoding, could deliver a financial hit of as much as $850,000 for an average 250-bed hospital. This threat comes at a time when operating margins are tight, the complexity of revenue cycle management continues to increase exponentially and self-pay receivables are 30 percent of total hospital receivables.

ICD-10 is a revenue/reimbursement issue, not just an education or coding issue. The CFOs who understand the impact and potential associated revenue loss of ICD-10 recognize that, in order to survive this transition, providers need computer-assisted coding (CAC) technology to increase coder productivity, improve coding accuracy and ensure compliance — and they need to start their CAC evaluation process now. They see that they can’t wait until 2013 to start preparing, because along with coding technology, ICD-10 readiness requires a complete overhaul of reimbursement business processes as well as the technology to crosswalk between ICD-9 and ICD-10 codes using pre- and post-2013 dates as claims flow through the system. They understand that building new workflows, adjusting staffing levels and implementing new documentation procedures will be critical to evaluating how many patients can flow through the system and how to allocate resources to secure a margin from an operational perspective (and absorb an inevitable cost increase 12 to 15 months out).

Unfortunately, fewer than 100 institutions have implemented the CAC solutions and process improvements needed in both inpatient and outpatient environments to ensure that clinicians can capture each episode of care and properly prepare for the dramatic shift in documentation that ICD-10 will bring. Industry analysts project that 2,000 additional facilities will implement CAC during the next three years, but the time to act is now. CFOs should evaluate carefully the looming loss of resources and revenue that ICD-10 will bring and start preparing for it today.

About the Author

Ron Jones, senior vice president of Hospital Solutions, OptumInsight, is a proven executive in healthcare IT who has provided leadership for the company’s hospital solutions group since April 2009. Jones provides leadership in driving growth, generating new revenue streams and overseeing business operations for a comprehensive portfolio of hospital revenue cycle, coding and consulting solutions.

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