With the go-live date rapidly approaching, hospitals and health systems need to make ICD-10 a priority if they want to avoid costly surprises and setbacks.
This article appears in the December issue of HealthLeaders magazine.
Despite the continued objections of some healthcare industry groups, all indications are that the Centers for Medicare & Medicaid Services intends to hold steady with its Oct. 1, 2014, ICD-10 implementation date. With less than a year to go, savvy provider organizations are planning and budgeting for every stage of the conversion process in order to diminish the economic impact wherever possible and to prepare for the expenses they will inevitably incur.
Karen Testman, chief financial officer at MemorialCare Health System, a Long Beach, Calif.–based six-hospital institution with fiscal year 2012 revenues of $1.8 billion, says her organization is budgeting for five areas related to ICD-10 implementation: computer-assisted coding, comprehensive clinical documentation improvement, HIM training, the systemwide IT component, and training and education.
"We've already had a clinical documentation improvement program in place, but this is really about spending the time and effort and money to build out our Epic electronic medical system and design templates to help physicians document correctly and completely in the system," she says. "By February, we will be coding everything in ICD-10, and we will be mapping back to ICD-9 to get our bills out."
All told, Testman says MemorialCare expects to spend $24 million to implement ICD-10 in its hospital business and $8 million on the physician side of the organization. Additionally, the system anticipates that ICD-10 will add $800,000 to $850,000 to its annual budget on an ongoing basis.
"It's a huge amount of money, and the majority of the cost is operating expenses that can't be capitalized. You can't capitalize training," she says.
Although she believes the system's early adoption plans will help it mitigate much of the lost staff productivity that many providers are expecting when ICD-10 goes live, she says there will be other staff-related costs.
Preparing for long-term costs
"There will be some long-term costs that will never go away. We'll be adding four coder FTEs on the hospital side, and that will be a permanent cost," she says, noting she does not expect to add coders on the physician side.
Testman says there will also be permanent IT costs associated with ICD-10, such as the maintenance of new tables that are being built now and will continually need to be updated.
"We will also be mapping between 9 and 10 indefinitely because not all payers are being forced to move to 10. Workers compensation, for example, will still be billed in 9, so there is the ongoing cost of maintaining that translation system," she adds.
Even with its extensive planning and training efforts, MemorialCare still expects to take a financial blow when ICD-10 rolls out.
"Our margins will be impacted," says Testman. "There is no question as we look at our 10-year plan that our margins will go down. Our hope is that over time we might see some improvement in that. As healthcare evolves with population health management, we hope there will be opportunities for growth as we take on more risk. There may be a chance to get some of that margin back."
Testman believes the greater specificity that will come with ICD-10's more granular coding protocols will ultimately help the industry improve its ability to care for patients, but she doesn't expect it to happen quickly.
"Hopefully, down the road, all that additional information becomes useful in managing populations, but I think it will take a while," she says. "Right now, it just feels like a burden with no benefit."
Minimizing barriers to implementation
Bruce Ritchie, vice president of finance and CFO at Salisbury, Md.–based Peninsula Regional Medical Center, a 288-licensed-bed institution with fiscal year 2013 gross revenues of $478 million, says his organization has an ICD-10 steering committee that has been meeting for years to prepare for the transition.
"The ICD-10 steering committee is now in its third year of meeting on a monthly basis. Our steering committee includes executive leadership and a strong project management team that is responsible for allocating resources and minimizing barriers to implementation," he says.
PRMC expects to sustain costs prior to and following the ICD-10 conversion, Ritchie says. Based on an ICD-10 expenditure analysis completed for PRMC by an outside organization, the system expects to spend about $911,000 to $1.05 million on the project.
"We expect expenditures related to coder training, additional FTEs, technical enhancements, IT labor for system upgrades and testing, and consulting auditing fees," Ritchie says.
PRMC also anticipates staff productivity will decrease by 30% to 50% as coders and clinicians get up to speed on the new code set, yet Ritchie expects to see a rebound to 90% of current efficiency levels within six to 12 months.
In addition to lost productivity, Richie says the conversion poses other threats to PRMC's profit levels. "The potential revenue risks include denials and payment errors and could potentially result in a revenue impact of $625,000 to $1.4 million according to [our] ICD-10 impact analysis assessment."
Ritchie says PRMC will begin testing in January 2014, and, like most providers, he is concerned about payer readiness.
"PRMC's team will continue to have conversations with our vendors, and this will help refine our transition risks," he says. "Our biggest concern is whether Medicaid and Medicare will be ready."
PRMC will use its established clinical documentation program, internal communications operations, and physician champions to train and engage its medical staff in ICD-10, Ritchie says.
"PRMC continues to strengthen the physician engagement and alignment approaches through peer-to-peer documentation champions, the clinical documentation improvement program's educational strategies, and department-level education," he says. "We have a dynamic physician champion that is on our steering committee and several other physicians on the physician engagement team. We also publish bimonthly articles on ICD-10 in our physician newsletter."
Protecting revenue with skilled coders
Richard Rosenhagen—who is assistant vice president for electronic medical records, health information management, and clinical documentation improvement programs at Oceanside, N.Y.–based South Nassau Communities Hospital, a not-for-profit, 385-staffed-bed teaching hospital with annual revenues of about $425 million—says his organization is putting an emphasis on coder training because of the potential negative effect on reimbursement if bills are not coded correctly.
"If we perform poorly with ICD-10 coding, it results in a lower payment," Rosenhagen says. "If our coders can do a better job with the available documentation to confirm the accuracy of the coding, it could possibly put us on a different level of payment. Without the accurate coding, we could get the lower payment, so there is a potential monetary impact."
South Nassau is taking what Rosenhagen calls an "80/20 approach to training."
"We are focusing on the top 20 or so diseases that account for the top 80% of our cases. We are focusing on the diagnoses and procedures where accurate ICD-10 coding will be impacted."
The organization expects to spend roughly $1 million to implement ICD-10. Of that, it has invested about $40,000 in an online training course for coders and $12,000 to certify six internal ICD-10 trainers to provide classroom education.
The online training includes rigorous anatomy and physiology education because of the increased level of specificity required for correct and complete coding, Rosenhagen says.
"It's a very formal course where they go through body system by body system and have to pass a quiz on each section before they can move onto the next," he says. "Everyone who is going to code for us in 10 is going to have to go through this process to reinforce the foundation they will need. You need a reference set for the medical terminology so you can take the coding to the highest level possible."
"We want to make sure our coding staff is thoroughly trained to do the task because we are so dependent on having well-defined clinical information for our future analytics and reimbursement," he adds.
South Nassau will also begin dual coding in ICD-9 and ICD-10 in January. Despite the long lead time and detailed training, Rosenhagen knows the move to ICD-10 will affect staff efficiency.
"There will be a slowdown in productivity. What we are hoping is, if we do an adequate job of training and have the right computer resources, it will make the slowdown as short as possible," he says, noting that the EMR "has been built with information that coders can use for making coding decisions."
With decreased productivity and the natural attrition that is expected as some ICD-9 coders opt out of learning ICD-10, there will likely be a need to hire new FTEs, Rosenhagen says. To attract enough skilled coders in its competitive marketplace where many health systems are trying to hire from the same limited labor pool, South Nassau is rethinking its human resources strategy and becoming more flexible with regard to employee work sites, viewing remote coding as a viable option.
"Coder resources are going to be limited. We are going to put a program into effect that allows for remote positions where people can work at home at various times of day. ... We think that is going to be effective for us," he says.
Building referrals from independent physicians
South Nassau is also using ICD-10 as an opportunity to gain referrals from independent physicians in its area, Rosenhagen says.
"The physician community associated with South Nassau—especially smaller practices—are not going to be prepared unless they are associated with a larger organization, like ours, that can provide the informational resources to help them understand the demands of ICD-10 on their practice."
By reaching out to its medical staff to offer classes for their office staffs, South Nassau believes it will encourage closer relationships with its community physicians.
"We are in the middle of a very competitive environment, and doctors here share privileges at several hospitals. This will help us make inroads with primary care offices and other specialties," Rosenhagen says. "Our administration is reacting appropriately and reaching out to doctors who need assistance in this area."
Biting the bullet
Although there is still the possibility of a delay, providers say they are proceeding diligently with their plans to make the transition on Oct. 1, 2104, and are not banking on the government giving them more time.
"The sense we have is that it is not going to be delayed, and we are all forces go to prepare," Testman says. "Our understanding is the federal government is ready, which is unusual, so I don't see them delaying. Personally, I don't think they should. Sometimes you just have to get it done and move forward."
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This article appears in the December issue of HealthLeaders magazine.