The ICD-10 transition: Avoiding revenue disruptions

Scheduled to be fully implemented on October 1, 2015, ICD-10 includes about 80,000 diagnostic codes, compared with the 14,000 in ICD-9, which has been in widespread use since the 1970s. The new system requires much more specificity while documenting patient visits for both public and commercial third-party payers to consider claims and to deny or revise payments.

In early March, the American Medical Association (AMA) and 99 state and specialty societies voiced concerns regarding ICD-10 to the Centers for Medicare and Medicaid Services (CMS). The groups fear that inadequate contingency measures for the ICD-10 transition could lead to a multi-billion dollar disruption for physicians while posing serious access to care issues for Medicare patients.

End-to-end testing revealed that the claims acceptance rate would have declined from 97% to 81% if ICD-10 had been implemented then. A decrease of that magnitude could result in an alarming backlog of unpaid Medicare claims.

Related:ICD-10 documentation: The key to getting paid

“Robust contingency plans must be ready on day one of the ICD-10 switchover to save precious healthcare dollars and reduce unnecessary administrative tasks that take valuable time and resources away from patient care,” AMA President Robert M. Wah said in a written statement.

Although CMS offers general equivalent mapping code translation to convert from ICD-9 to ICD-10 (or vice versa,) the system is often cumbersome to interpret. In some cases, the conversion results in convoluted and inconsistent mappings, says Andrew Boyd, MD, assistant professor of biomedical and health information science at the University of Illinois at Chicago.

“The first step in preparing for ICD-10 is to learn the new ICD-10 codes that will directly apply to physician practices,” says Boyd, whose team of researchers developed a website that guides healthcare providers through the transition. “What are the rules around the new codes?” For example, under the new system physicians will have to specify whether an ear infection is present in the right or left ear or both ears. 

NEXT: Preparing your practice

Preparing your practice

To ensure a smooth transition, it’s advisable to run trend reports and review your practice’s key metrics-those activities that have the greatest impact on revenue-for example, the status of pending claims and the pattern for rejected claims. If the pattern in ICD-10 mirrors your practice’s experience in ICD-9, that’s a good sign.

But if there are spikes in reimbursement problems, it’s necessary to make changes before October, says Pam Jodock, senior director of health business solutions in the North American division of the Healthcare Information and Management Systems Society (HIMSS) in Chicago.

Awareness of that history for ICD-9 within your organization helps streamline a process for tracking the same activity under ICD-10, before complications pose a financial threat. “If you see abnormalities in your reports after October 1, work with the appropriate parties to get those issues resolved quickly,” she suggests. Contacting a few insurers responsible for the bulk of your revenue would be a wise course of action.

Related:9 strategies to prepare your practice to ICD-10

A payer may be inclined to create a mitigation plan for your practice’s financial stability if it experiences a dramatic increase in pending or denied claims. Some insurers will extend advance payments to physicians and perform reconciliations later. They would rely on their payment history for that physician in allocating reimbursement.

After the kinks in ICD-10 are ironed out, the payer would determine if reimbursement was correct, insufficient or excessive. If there was underpayment, it would be corrected. However, if a provider was overpaid, the insurer is due a refund, Jodock says.

“We are urging all of our members to prepare for operationalizing. October 1 is not the end, it’s the beginning of using the new coding system,” she adds.

NEXT: Financial considerations

Financial considerations

Other recommendations for managing the ICD-10 transition include keeping a watchful eye on your practice’s spending and maintaining four to six months of cash flow in reserve. For some practices, that much of a cushion isn’t feasible. In those situations, a temporary loan may help a practice stay afloat.

“It’s not uncommon,” Jodock says. “Almost all small businesses have a line of credit.” This allows a business to continue meeting financial obligations when accounts receivable don’t keep pace with accounts payable, and without applying for new credit every time a shortage occurs. A practice can access its line of credit on an as-needed basis and pay off the balance when it’s able to do so.

Advance planning proved helpful for Beyer Medical Group in Fredericktown, Missouri. The rural practice has used ICD-10 codes since October 2013. Its internal software program has been converting the new codes back to comparable ones in ICD-9 before the practice submits claims to payers, says Deborah McEuen, CMM, HITCM-PP, administrator of the practice, which consists of two physicians-one in family practice and one in internal medicine-as well as three nurse practitioners.

Related:ICD-10 in 2015: What physicians need to know about testing, costs, and preparedness

“We did it in preparation for one of the early deadlines,” McEuen says, in an attempt to establish a comfort level with the new system before it goes into effect. “We didn’t want to be making mistakes when the dollars counted.”

Five years ago, “we were just afraid as everybody else,” she recalls, noting that the healthcare industry was predicting that such a conversion would be very costly and require the expertise of consultants to retrain everyone from physicians to coders and billers.

Additional learning resources have become available since then-at minimal or no expense. “We didn’t spend a penny doing this, and it didn’t cost us a penny whenever we implemented it,” McEuen says.

What helped her group succeed was that “we believed it was a better system to begin with,” acknowledging that ICD-9 codes weren’t aligned with the evolving realm of healthcare.

“As your instruments get better, your treatments get better, and your medications get better, your coding has to get better, too. It has to keep up,” she says. “Why are people so down about this? This is fabulous news. We embraced it.”

The practice is an active member of the Coalition for ICD-10, which testified to the healthcare industry’s readiness at a congressional hearing before the U.S. House of Representatives Energy and Commerce Committee.

NEXT: How much does conversion cost?

How much does conversion cost?

Due to speculation over conversion expenses for small physician practices, the Professional Association of Health Care Office Management (PAHCOM)-also a member of the Coalition for ICD-10-undertook a membership survey to measure actual costs. The survey, conducted from mid-December 2014 to mid-January 2015, yielded 276 responses from practices with six or fewer direct care providers.

As anticipated, expenditures rose with practice size, but they decreased per provider. The averages ranged from $4,372 for a solo practitioner to $1,838 per practitioner for a six-provider practice. The overall average expenditures were $8,167 per practice and $3,430 per provider, according to the survey published online February 10 in The Journal of the American Health Information Management Association.

“Based on this survey and the two other recent studies, the financial barriers to ICD-10 are significantly less than originally projected,” the authors wrote.

Documentation: more important than the codes

While an earlier study commissioned by the American Medical Association reported higher costs, the difference may be partly due to vendor response. Educational materials are now readily available for a nominal cost, and specialty-specific superbills can be downloaded from the Internet at no charge.

In addition, many vendors offer free ICD-10 system updates, and physicians’ adoption of electronic health records has helped to ease the transition.

Related:Coding association predicts a smooth transition to ICD-10

“When you have the documentation for what really happened in the visit, then it’s easy to code in ICD-10. Coding in ICD-10 isn’t more difficult,” notes Karen Blanchette, MBA, association director of PAHCOM. “Some people say, ‘Oh, but there are so many codes.’ Well, there are so many words in the dictionary, but we’re still able to speak and use the ones that we choose to use for the points that we’re trying to make.” A practice only needs to become familiar with a certain code set that it uses repeatedly, not the entire ICD-10 library, she says.

“Very often, when a doc says ICD-10 is a problem and tells me all the reasons why it won’t work, I ask to see their ICD-10 coding book and they don’t have it,” says Dennis Mihale, MD, MBA, chief medical officer of Caresync, a Tampa-based healthcare technology and services firm that helps patients adhere to treatment plans developed by their physicians.

Practitioners who have used ICD-10, however, point out that it “is much more logical from a physician standpoint than ICD-9. It’s organized and structured the way a physician thinks,” he says. For example, the new system requires more specificity pertaining to a fracture’s location, such as the forearm.

“Most physicians only code 25 to 50 diagnoses,” Mihale says. “The physician doesn’t really have to know how to code in ICD-10, but he or she has to know how to document properly. With the specificity and detail necessary, the coder can code in ICD-10. Look at the book, so you can see the kind of specificity that your coder needs.”

NEXT: Securing a line of credit

Securing a line of credit

Some experts recommend that practices secure a line of credit ahead of the ICD-10 transition that they can draw on if a problem with the  transition halts their cash flow temporarily. “It would be prudent to take out a credit line equal to about 5% of the total reimbursement for the year for the practice,” says Michael F. Arrigo, CPHIT, CPEMR managing partner of No World Borders, a healthcare management and information technology consulting firm.

If applying for a credit line, Marc Lion CPA, CFP, founding member of Lion and Co. CPAs LLP in Syosset, New York, recommends bringing these items with you:

• 2 years of personal tax returns;

• 2 years of business tax returns;

• financial statements for the current year;

• 3 months of current personal and business bank statements;

• 3 months of current brokerage statements (regular and retirement), if applicable;

• copies of 2 years of any K-1s that may appearing on the return on schedule E;

• regarding number 6, if any of the K-1s are related to businesses that a significant ownership position may exist, be prepared to provide 2 years of copies of those tax returns as well; and

• if a business owner, a letter from your certified public accountant

• indicating that if any funds from the business are to be used toward the purchase or the refinancing, it will not hurt business operations.

Prepare now for ICD-10

Take a financial snapshot

Begin analyzing the financial health of your practice. Evaluate your payer mix, determine your typical accounts receivable cycle and examine denied claims, both for coding and documentation reasons. Determine what you will need to do to survive financially if you encounter a major problem with reimbursements after October 2015.

Gather coding data and identify diagnostic patterns

Analyze your practice’s coding patterns to determine which codes you use most frequently, which ones make up the largest portion of your revenue, and which ones are denied most frequently, and for what reasons. This should be done for each payer you work

Improve your documentation

Providers should begin documenting patient encounters as if ICD-10 is already in place. The goal is to be ready, from a documentation standpoint, for testing and going live with ICD-10.

Contact vendors and health plans

Ask your payers and vendors-electronic health records, billing services, clearinghouses-about their ICD-10 readiness. Monitor the preparedness of your vendors and payers and work with them to identify and address gaps.

Begin testing

Testing ICD-10 claims to ensure that your coding and documentation are working properly is vital, and should begin as soon as possible. The Centers for Medicare and Medicaid Services is holding testing weeks prior to the transition, but waiting for those events is not necessary. Testing is important both within your practice and with the clearinghouses and payers you work with. Make sure you test using records that reflect patient encounters you commonly deal with.