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Five Financial Implications of the ICD-10 Transition

The looming question is, are payers and providers really ready to tackle the new, greatly expanded code sets? A quick glance at payer readiness lists suggest maybe not. That may explain why the American Medical Association (AMA) and lawmakers are pushing hard for a delay to the October start.

The reason behind the concern is, quite simply, money. Moving from a system of roughly 13,000 codes to 68,000 codes (and the number keeps changing) creates a number of financial implications. In most other countries, the codes are used as diagnostic and health management tools. However, in the United States, providers are reimbursed based on the codes. So, what does that mean for the bottom line of a practice? In a nutshell, potentially higher costs.

Top 5 financial implications are wide-ranging

1. Costly Software Updates

The code set is changing from five characters in ICD-9 to seven in ICD-10. So, at the very least, software vendors will need to re-write their programs to adjust the input fields to accept more characters. Whether it is done through a free or paid upgrade, the cost will most certainly be passed along by some vendors.

2. Increased Training Costs

It goes without saying that staff on both the payer and provider end will need to be trained on the expanded code sets. Not only will provider staff members have to learn the new codes, but they will also need to understand any software changes that go with them.

3. Increased Coding Costs as Trained Coders Command Top Pay

All of the changes are good news for the coders who are able to get up to speed quickly on the new system. The demand for coders skilled in ICD-10 has been compared to the demand for Y2K coders. Because of the demand, top coders command more pay.

4. Dual Processing and Higher Administrative Costs

With payer readiness in question, providers need to be prepared to revert to ICD-9 codes or endure a period of dual processing. In addition, payers who do not have to meet HIPPA may continue to use ICD-9 codes. Thus, provider staff will see a duplication of work that will drive administrative costs upwards.

5. Delayed Reimbursement and Poor Cash Flow

Perhaps the biggest unknown is how payer readiness will effect reimbursement times. Larger players may be able weather a longer wait for payment. However, an interruption in cash flow may cause a significant hardship for smaller practices.

ICD-10 is here

The AMA has been in favor of pushing back the start date and waiting for ICD-11, which will be released by the World Health Organization (WHO) within the next few years. As Dr. Steven Stack, President of the AMA puts it, “ICD-10 is problematic, it requires a level of specificity and precision clinicians say we don’t think we’re going to be able to provide.” Under ICD-9 there are 16 codes to diagnose a broken femur. Under ICD-10, there are 750 ways. “There are many instances we don’t know that level of detail,” he said. Nevertheless, ICD-10 moves forward and the financial impact remains.

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