Could ICD-10 have as big a financial impact as the mortgage crisis? Yes. Here's why.

By Michael F. Arrigo
10:38 AM
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U.S. National Healthcare Expenditures (NHE) are $2.7 trillion in 20111 and are forecasted to grow 34% in five years. This multi-trillion dollar economy will shift its reimbursement paradigm to ICD-102 in under 24 months. ICD-10 will introduce opportunities and risks to hospitals and health plans that may be equivalent to the $148.2 billion to $500 billion in losses3 to the U.S. economy in the mortgage crisis. This is because ICD-10 introduces favorable and unfavorable reimbursement results.

Yet, ICD-10 was obscure outside the health care industry until just months ago. Only recently did mainstream business media start covering ICD-104, described by The Wall Street Journal as health care’s ‘Y2K5 problem’. It is ironic that Y2K, the mortgage crisis, and ICD-10 have similarities. Cynics criticized Y2K as an expensive non-event. As I’ll point out later, even if this were true, Y2K produced other important benefits. The mortgage crisis was about ethical failures in leadership, transparency, and poorly documented quality that led to higher than expected risk.

[Cover story: ICD-10's ten-year reign of fear.]

One of the most important risk mitigation strategies for ICD-10 will be choosing and empowering leaders. We need to help leaders make the business case for dealing with ICD-10 as an innovation and quality improvement program as well as a regulatory compliance effort. Compliance will enable one to complete a checklist by a deadline to avoid penalties. Quality and innovation will mitigate reimbursement variation and provide health care organizations with strategic advantage. ICD-10 and HIPAA 5010 are just the beginning of a five-year perfect storm of mandates. Start now to build a foundation that will enable agility to respond to these and future changes. Make a decision now about leadership.

Here is one business case for ICD-10. First, reimbursement risk affects all parties in the healthcare service supply chain. For example, an 82-year old female patient with a cardiovascular condition could have a procedure under ICD-9 CM with a correlating Diagnosis Related Grouping (DRG) of 251 equaling a reimbursement to the provider of $9,622.80. Under ICD-10 this same procedure might be documented and coded similarly and correlate to the same DRG of 2516. In this case the reimbursement would be “neutral” under ICD-10. If the same procedure is documented and coded differently, this procedure could result in a DRG 2307 . The reimbursement might shift to $24,343. This reimbursement risk is $14,721 or 153% of the original reimbursement. However, CMS suggests cross-walking this procedure to another DRG 2548, which could result in a third reimbursement outcome. A macroeconomic view in this spreadsheet shows the impacts, using CMS projections.