ICD-10 revenue neutrality: 9 ways to protect your cash flow

By Beth Mahan
09:48 AM

Though a year of change, it is inarguably a year of opportunity that will markedly improve the classification of morbidity data, indexing of patient records, patient care review, basic health statistics and research. The transition from ICD-9 to ICD-10 offers enormous opportunities for improving documentation processes for health records — especially the EHR.

ICD-10 provides refinement to financial/reimbursement models; it will improve clinical specificity results in improvements to patient safety functions; and it will improve understanding of disease and costs and allows providers and others to improve on their delivery. The ICD-10 code sets are not a simple update of ICD-9. The ICD-10 code sets have fundamental changes in structure and concepts that make them very different from ICD-9, and payments based on ICD-10 must be within an understandable and acceptable variance for both payers and their trading partners.

[Q&A: HIPAA 5010 and ICD-10 from a software vendor's perspective.]

Providers are typically challenged to do more with less — working to maximize cash flow opportunities during normal operating cycles, let alone in one leading up to a transition of this magnitude. Wave one of the ICD-10 implementation is around the corner with 5010 compliance required in January 2012, when all HIPAA covered entities will be required to submit any electronic transaction, (including claims, eligibility and referral authorizations), from its current Version 4010/4010A standard to Version 5010.

As with any major system conversion, at risk is disruption to cash flow, resulting in an impact to the bottom line. The October 1, 2013, deadline for ICD-10 compliance looms ahead; careful planning to include a thorough review of these risks is imperative. As part of a holistic risk mitigation strategy, providers must understand and be able to forecast possible changes to cash flow and engage in advanced planning to protect revenue losses before, during, and post ICD-10 conversion. Organizations who adopt this proactive approach will have a unique opportunity to improve their core business operations, create value, enhance their revenue stream, and optimize costs across the organization. It is predicted that while reimbursements will initially decline with ICD-10 conversion, this opportunity will ultimately better position hospitals in accurately reflecting actual conditions and treatment so that appropriate reimbursement is retained as well as enhancing accuracy of data through the management of a provider’s coding, billing, receivables, as well as payer and external contractor agreements.

Given the material change from ICD-9 to ICD-10, providers will want to ensure that any change to codes, payment structure or methodology is implemented on a revenue-neutral basis. 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 and a reimbursement for the procedure of $9,622.80. Under ICD-10, this same procedure, if documented and coded one way, would lead to the same DRG of 251 and therefore would be “revenue neutral” under ICD-10. If the outcome is not coded correctly, however, this procedure could result in a DRG 230 where the reimbursement would shift to $24,343. Understanding the impact in your provider community is paramount during this transition.

[Related: A look inside two health org's actually making ICD-10 progress.]

Healthcare providers must aggressively take advantage of the time remaining to diagnose and put in place a risk mitigation plan that will address any fluctuations from moving to ICD-10. As providers make this transition, they must consider several points in any review:

1. Discuss budgeting avenues for additional cash reserves if material delays in payment occur
2. Conduct financial modeling to understand financial implications moving from ICD-9 to ICD-10 and determining the revenue impact by provider or system facility, service line and geography
3. Review managed care contracts to negotiate protective language relevant to reimbursement in the event payment shifts occur that could have a negative impact on your bottom line
4. Engage with your high-volume payers to assess their readiness state to process your claims coded in ICD-10
5. Conduct clinical documentation improvement reviews using ICD-10 code set
6. Develop a strategy for coding, billing and claim backlogs to improve cash flow
7. Determine strategy for denials management pre- and post-ICD-10 conversion
8. Assess readiness state of external vendors who support coding, billing, follow up and denials
9. Review audits occurring that may be impacted by compliant use of ICD-10 over time

As we head towards the deadline for this important classification conversion, an area of primary focus for both payers and providers will require retooling of IT systems, significant workflow reengineering, awareness, training and significant infrastructure investment.

Related HIPAA 5010 and ICD-10 articles:

Commentary: Could ICD-10 be the next mortgage crisis? Yes, and here's why

Q&A: How meaningful use is clashing with ICD-10

From the print issue: ICD-10's day of reckoning, the HIPAA 5010 compliance deadline

Guest post: I'm 5010 compliant, but where are my checks?!

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