June 5, 2012

Three Financial Myths of ICD-10

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When any type of change is introduced, there are some half-truths or misconceptions that often surface. For example, when it comes to long- and short-term implications, there are some financial myths surrounding the new ICD-10 compliance requirement.

While some perceive ICD-10 as an expensive, administrative-intensive initiative, organizations can leverage the requirement to their financial benefit  by processing more transactions electronically, minimizing risk through better documentation, or gaining access to more accurate data, thus providing insight for better patient outcomes.

While CMS has said that it does not intend ICD-10 to impact revenue, there may be some adverse revenue impacts in the long term. Rather than taking a reactionary approach to ICD-10, however, looking at it opportunistically can result in process improvements, improved clinical care and financial benefit. Let’s look at some of the financial myths surrounding ICD-10:

Myth No. 1: ICD-10 is a costly, revenue-neutral initiative

The concept of revenue neutrality is important, and while CMS has said it does not intend for ICD-10 to impact revenue in the short term, once it has trend data, it likely will make adjustments to DRG weights and codes in order to reimburse appropriately for resources needed to provide patient care. The intent of the expanded code set is to deliver value, so it’s only reasonable to expect that longer-term revenue and reimbursement will be adjusted for those patient encounters and episodes of care that are more resource-intensive.

If your hospital does not have a clinical documentation improvement (CDI) program as part of its ICD-10 plan, this may be what you have been looking for to get started. The result just might be better documentation and better reimbursement, accomplished through capturing details that substantiate patients’ acuity, severity of illness and care risk. Accuracy in coding at every point and seizing the opportunity for documentation improvement, where possible, can lead to financial rewards when it comes to treating sicker patients.

Because ICD-10 impacts systems and processes, it is more than just a coding initiative. Rather than viewing it purely as a regulatory requirement or compliance cost, organizations can interpret it as an opportunity to be seized.

For example, by making sure appropriate testing is performed prior to implementation, organizations can ensure that there is no delay in processing and maintain the same or better standards of service and operational performance post-implementation. Organizations should make an investment in evaluating their operations, implementing improved data analytics and more efficient processing with 5010 transactions whenever possible, or seek to automate certain operations. Such actions can contribute to the financial health of your organization.

Bottom line: Approaching ICD-10 by looking for every strategic advantage – whether improved electronic processing with 5010 transactions, improved documentation, better data analytics or potentially better coding accuracy – the expectation is that paying attention to these details can result in enhanced reimbursement, more efficient processes, improved disease management, better outcomes for patients, and ultimately, a financially healthier  healthcare system.

Myth No. 2: ICD-10 will necessitate an increase in the cost of coding, especially considering coding productivity impacts expected upon implementation

Coder wages have risen during the years, and ICD-10 adoption is putting more pressure on providers seeking to finance the cost of employing quality coders. Add to wages  the hidden costs associated with ICD-10, such as staff training, employee benefits and downtime while training and practice is taking place, and it’s clear to see why the cost of coding with ICD-10 is expected to increase – this is also why more organizations are considering outsourcing these services. Outsourcing enables organizations to shift the responsibility for training and transition to an experienced partner.

Keeping coding in-house requires a significant investment of time and resources with no guarantee of on-time delivery or success. Recruiting, hiring, managing, training and retaining coders during a period of change are all elements that factor into financial implications.

With the compliance deadline extended, however, offering more time to prepare coders, organizations can get ahead of the curve and thwart a greater productivity decline upon activation.

Computer-assisted coding can help minimize declines in productivity by using structured language in the medical record to provide preliminary coding results. With computer-assisted coding, the responsibilities of coders will shift more toward auditing, validating and adding to codes selected by the coding application. The end result is a decrease in time spent going through records, thus limiting productivity impact. However, such an application may require more highly skilled coders, presenting another reason to consider outsourcing.


As with any new skill or process, there’s a natural evolution from novice to expert. Coding in ICD-10 requires practice to gain and maintain efficiencies and proficiency. Training is important, but training without ample practice makes it difficult to achieve progress in terms of productivity – and that’s yet another reason to consider letting the ICD-10 coding transition become someone else’s problem.

Bottom line: Even with the proposed one-year delay, organizations should take this time to stay the course and maintain education investment, preaching practice and perfection. Organizations concerned about the productivity impact of a coder shortage can consider technology, outsourcing or using offshore resources to maintain momentum and reduce any increase in the overall costs of coding.

Myth No. 3: ICD-10 is a payer vs. provider project

As mentioned earlier, there is the perception out there that ICD-10 is a costly, revenue-neutral initiative. Providers and payers need to work together – rather than in opposition – in order to understand how cost and reimbursement may change with the adoption of ICD-10. Payers have testing and payment risks, and they will need to get their protocols tested and their adjudication systems validated with real test cases. Because many providers will be focusing on clinical documentation improvement during this period of transition, there’s a chance that there will be unexpected negative consequences for payers as documentation improves.

With changes in the electronic environment, providers will need to test their systems. Providers also will have access to more information, which will help them better identify complications and complexities of care. For example, with HIE, providers can gain access to historic episodes of care from another hospital, or to a prescription system that shows patient medications and potential negative interactions. These changes, combined with the implementation of  clinical documentation improvement programs, may result in a case mix shift for providers.

From a provider perspective, they also need to understand any changes in contract terms. Providers can capitalize by focusing on documentation improvement, but only fully valid services and accurate coding will prevent takebacks by the payer auditing cycle. From the payer side, they can try to capitalize by adjusting rates in their favor, but until both sides understand how documentation and coding is changing and how reimbursement is being impacted based on specific contract terms, they cannot clearly identify opportunities or needed adjustments.

There are resources, organizational tools and revenue integrity systems that can help close this necessary monitoring gap between providers and payers. Such tools easily can be implemented to ensure that reimbursement is monitored appropriately and that any shifts in patient severity are identified clearly.

Bottom line: Achieving success does not have to be adversarial. An understanding of who will “win” with ICD-10 requires a concerted effort between payers and providers to ensure that focus remains on accurate and timely processes for delivering high-quality patient care without unnecessarily increasing costs. Providers and payers both can benefit and avoid costly implementation issues if they work together.

Benefitting from the Essence of Change

Organizations should treat ICD-10 as an opportunity rather than a compliance requirement and turn it to their benefit financially either by minimizing risk, maximizing opportunity, or both. The code set is going to change, so organizations may as well have the change work to their advantage and prepare for success upon ICD-10 activation. Ignoring these three myths of the financial impact of ICD-10 adoption may lead to greater overall costs.

About the Author

Veronica Hoy, MBA, is vice president of SOURCECORP HealthSERVE Consulting, Inc. Veronica has been an operating executive for 10 years, focusing on providing strategic leadership and direction to healthcare professionals and organizations. She has more than 20 years of healthcare experience in business process outsourcing, accounts receivable management, coding, billing, release of information, consulting and systems implementation.

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Disclaimer: Every reasonable effort was made to ensure the accuracy of this information at the time it was published. However, due to the nature of industry changes over time we cannot guarantee its validity after the year it was published.