December 15, 2014

ICD-10: Let’s Focus on the Money

By D’Arcy Gue and Thomas Grove

ICD-10 is supposed to be about better disease management and more accurate medical diagnoses and treatment reports. But for many in the healthcare world, ICD-10 is all about money.

The federal government wants ICD-10 in order to help our healthcare system save money. ICD-10’s promises of more precise and complete data for research, fraud and abuse investigations, and payment determinations is expected to cut costs significantly. For providers, it’s a lot simpler. Many smaller providers don’t want ICD-10 at all, because converting from the antiquated ICD-9 coding system costs money, which they’ve been reluctant to spend. Many larger healthcare organizations are all for ICD-10; most have already spent a bundle on implementation and related projects such as sophisticated (and already money-saving) documentation improvement programs. These organizations definitely don’t want their money wasted.

The bottom line is that converting to ICD-10 by Oct. 1, 2015 is the law. Regardless of preferences, providers have to comply, or they simply won’t get paid on or after that date. Out of business, end of story.

Unfortunately, the converse of this statement isn’t true. ICD-10 readiness of providers, coders, and systems will not necessarily mean smooth payments and financial bliss. By its very complex nature, ICD-10 is one of the greatest healthcare industry changes since Medicare, and it will likely have some degree of negative cash impact on even the most prepared health systems. The new code system requires major changes in documenting diagnoses and procedures, coding them, and billing – all of which is expected to negatively impact most provider organizations’ revenue cycles in the short term. Payors also will face issues, and the net effect will be a significant slowing of cash flow.

How major will these negative effects be?

  • According to the Centers for Medicare & Medicaid Services (CMS), total long-term increases in A/R days could be as high as 20 percent; while short-term increases (defined as between six months and two years) could be between 20 and 40 percent.
  • UnitedHealth Group has estimated that payers will take seven days longer to adjudicate claims.
  • The Canadian ICD-10 implementation experience, along with a pair of U.S. studies, have told us to expect that coding productivity will drop by 50 percent immediately following the transition to ICD-10. Productivity will remain at that level for at least 90 days before things begin to improve.

What Should You Do?

Developing cash retention strategies is one option. Holding on to six months’ worth of cash would probably solve most providers’ cash flow irregularity problems. Unfortunately, access to that much cash isn’t common, which makes the next step – inventory management – all the more critical.

ICD-10 Chart Inventory Management 

The most important thing you can do in advance of ICD-10 is to get a solid handle on inventory management within your revenue cycle by preventing chart pileups created by unfamiliarity with ICD-10 documentation, coding, and billing requirements.

Before Billing

Unless you have managed to double your coding capacity through some combination of hiring, computer-assisted coding, and contract coding services, you will develop a backlog of uncoded charts.

Following the transition, some portion of charts submitted for coding will not have been documented adequately to enable correct translation into ICD-10 codes. These charts will have to be returned to the physicians for clarification, adding time to the billing process and slowing down coders, who will have to reorient themselves to the charts in order to complete them.

Most facilities, prior to final billing, have claims that fail in the billing process due to combinations of codes that are not consistent with good billing practices. Some are obvious – not billing for prostate surgery on a female patient, for example. However, many others are less obvious, and some won’t be familiar to the coding staff in their ICD-10 forms. They will require extra time. Best practices suggest that staff should work these edited claims daily, but it is easy to envision a backlog developing as your coding and billing teams reorient themselves to the new ICD-10 codes. 

Claims Submitted to the Payer

As a provider, you may have no control over a payer’s inventory of your claims, but it will be essential to keep track of it. Your organization will likely have more dollars tied up in your payers’ inventories than ever before.

You should not assume that successful testing will prevent this from occurring. When claims submissions converted from HIPAA 4010 to 5010 several years ago, many providers and payers experienced serious issues. One large, multi-state physician group that worked directly with approximately 50 payers (and hundreds of others through a clearinghouse) reported that, despite 100 percent successful testing with their payers, file and claim rejections (and in several cases, no responses at all) resulted in a 33-percent decrease in cash flow, which took approximately 90 days to resolve. You need to be on top of any delays in reimbursement from the payers and ready to discuss resolutions such as advance payments with them.

Even if payers configure their systems properly, there are volume impacts to consider. Payers rely on their systems to adjudicate approximately 90 percent of claims (both positively and negatively) with no human intervention. If inconsistencies cause more claims to fall into the category of requiring manual review, unprocessed claims will start clogging up the payer-to-provider pipeline. 

Claims Returned After Adjudication

The above scenarios focus more on revenue delays, but a permanent revenue loss is also a significant risk for providers, and this may result from unworked denials by payers. Most payers provide only a 30-to-60-day appeal period after processing a claim. A growing inventory of denials may slow down the appeals process so much that deadlines will be missed and revenue lost. Factors to prepare for in this worst-case scenario include:

  • Lost knowledge. In our work with healthcare providers, we’ve seen that their insurance follow-up procedures are organized according to each payer. For example, one business office representative may process only Medicare patient claims; another will only deal with Blue Cross patients. Why? Providers’ processes, not illogically, revolve around “specialty” knowledge. By focusing on one payer, each representative develops a deep understanding of the payer’s processes and retains unique information about specific denials. Unfortunately, this knowledge is usually unrecorded and essentially comes from individual experience. Representatives develop time-saving shortcuts for recognizing and addressing particular denials (for example, “I know that when Blue Cross sends this denial on that diagnosis/procedure combination, I just need to send a copy of X paperwork, and the bill will be paid.”)

    In the ICD-10 world to come, knowledge gathered and used via these informal, content-based rules will not exist, at least for some time – until representatives gradually learn more about the new processing environment. In the meantime, they will face extra work making phone calls to payers to identify issues and/or to prepare larger appeal packets. Out of necessity, they will spend more time and work less productively in gathering information to resolve claims.

  • Mistakes. There can be no doubt – the new, more complex ICD-10 coding system will cause an increase in coder mistakes. These will equate to more payer denials and more referrals back to coders for examination and reprocessing. In an environment in which coders will already be facing backlogs of new claims, this inevitable re-working of old claims will add to potential inventory logjams.

  • Payer responsiveness. More volume and lost knowledge doesn’t only affect the provider. More denied claims will increase the appeals payers will have to process. In addition, the absence of experience-based knowledge among coders, described earlier, will ensure more phone calls into payers’ call centers. This development will not be a minor annoyance; during the aforementioned conversion to HIPAA 5010, some payers’ phone queues had two-to-three-hour waits. Calculate a few such interludes into a representative’s day and his or her productivity will plummet.

Put This On Your Revenue Cycle To-Do List:

Well before the ICD-10 implementation deadline, your ICD-10 revenue cycle team should build a solid claims inventory report card. It should include detailed backup reporting. Many facilities already have some form of this, plus related information in other locations. However, pulling this data into a single report card will be of great value in managing your financial risks. Do not wait until your billing inventory starts to grow to start building reports (both total inventory and payer-specific reports) in order to investigate climbing A/R. There will be more than enough other challenging ICD-10-related tasks after the transition! 

About the Authors

As a co-founder of Phoenix Health Systems, D’Arcy Gue has had leadership roles in the growth of the company. Currently, she leads overall corporate administration, marketing and industry relations, services development, human resources, and knowledge management. She has led various strategic initiatives, including the development of ICD-10 services, HIPAA-based security and privacy compliance tools, and online education programs.

Thomas Grove has more than 16 years of experience in healthcare IT. As a principal at Phoenix Health Systems, he provides IT project leadership and consulting services with a focus on ICD-10, meaningful use, and privacy and security. 

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