ICD-10 aftershocks: 4 challenges every CFO can expect in the wake of go-live

If any individual in the C-suite will feel the effects of ICD-10 most prominently, it will be the hospital CFO.

As the organization's financial manager, the CFO possesses an incredible amount of responsibility to maintain cash flow and revenue — both of which will be put to the test post-ICD-10 go-live.

CFOs may find themselves caught in the middle of growing denial rates while also trying to employ additional coders, CDI specialists, denial managers and others. It's a precarious place to be, and CFOs must start planning now to address these challenges.

 This article provides four ICD-10 aftershocks for which CFOs must be prepared.

1. Significant productivity loss throughout the revenue cycle

It's not a matter of whether productivity aftershocks will occur in ICD-10 — it's a matter of where and for how long. Our recent analysis suggests even the most prepared hospitals will experience an initial decrease in productivity across several roles in the revenue cycle, including coders, billers and claims management. This decrease could be as much as 35 percent for coding and last through January 2016. Coder productivity should increase steadily in 2016 and level off around 25 percent, but may never truly regain ICD-9 efficiencies.

Billers and claims management roles are also likely to experience performance deficits. Clinical documentation specialists will be tasked with clarifying and improving physician documentation to address ICD-10 specificity needs. According to Mark Hepler, corporate vice president and hief CFO of Munson Healthcare in Traverse City, Mich., "ICD-10 elevates the visibility of clinical documentation quality and its importance to the financial health of an organization." Finally, as providers, clearinghouses and payers navigate the new waters of ICD-10, an early spike in claims denials may also occur.  

By June 2016 — when we predict organizations will be hit hardest — some will experience an increase in A/R by five days or more. How might this translate to days in A/R and other operational indicators? For an average healthcare system, this equates to millions and millions of dollars in reduced cash flow. Note that these numbers have been calculated based on hospitals already dual-coding and practicing in ICD-10. Hospitals that have not yet dual-coded may take far longer to recover.

How to prepare: Devote extra time and resources to any coding backlogs now. You'll want to clear up these bottlenecks before new ones emerge post ICD-10 go-live. Secure funding for additional staff members through June 2016 and perhaps even beyond. Model the impact to A/R in order to have enough cash on hand or to develop other contingency plans. CFOs must be able to calculate these numbers quickly and regularly.

2. Short-term denial increases expected

If CMS predictions hold true, short-term spikes in denial rates of 100 to 200 percent are entirely plausible. Complicating matters will be additional denials from commercial insurers. These rates will be unlike anything the industry has ever seen before, and they could send denial management teams into a state of overload. Revenue cycle success during the first months of ICD-10 will be determined by how quickly organizations can respond to and manage claims denials.

How to prepare: Mitigate denials now. Start with your most common denials in ICD-9, as these will likely be your top denials in ICD-10. Complete a root-cause analysis to determine where to focus. Are these denials due to coding errors, insufficient documentation, or both? If documentation is insufficient or typically delayed, is it because of several physicians or only one? Also look at high-dollar, high-volume service lines, as these could have the biggest impact on the organization's bottom line.

3. Cash flow and revenue hits

Denials and delayed payments will directly affect revenue and cash liquidity, both of which are necessary for business growth and expansion of service lines. Without this liquidity, hospitals could face mergers, staff cuts and more. Despite testing and preparations, it's entirely reasonable to think some payers won't be ready to accept ICD-10-coded claims.

How to prepare: Set aside cash or pursue lines of credit now. Continue end-to-end testing strategies to mitigate technology-related problems and ensure timely claims submission and processing. Also devise a strategy for how you'll submit both ICD-9- and ICD-10-coded claims if payers either aren't ready or experience technical difficulties.

4. Denial management hiring challenges

As denials increase, it will be difficult to find qualified denial management experts who are well-versed in the specificity of ICD-10. Denial management is not something that can be taught in a classroom — rather, it's often learned by on-the-job experience. Those who can efficiently and effectively manage ICD-10 denials will be in high demand following go-live.

How to prepare: Start beefing up staff performance now. This may include partnering with a vendor or even looking into more robust denial management software. Organizations will need the ability to quickly identify trends and patterns in denials and take steps to rectify those denials immediately.

Looking ahead

ICD-10 has a direct effect on revenue, which is why CFOs may feel the most intense implementation aftershocks. An organization's revenue is what keeps its doors open and business operations flowing smoothly. CFOs need to know how productivity may decrease and how this, in turn, will affect operations. The ICD-10 transition also "strengthens the connection between clinicians and finance; leading to improved processes and efficiency," according to Mr. Hepler with Munson Healthcare. Advanced preparation is the best way to work through the transition.

 

About the Author
Kelly provides strategic and global program management, healthcare product development, and competitive intelligence at Whittle Advisors. Prior to Whittle Advisors, she worked at Trinity Health, leading the ICD-10 physician network program. Prior to joining Trinity Health, she transitioned Thomson Reuters' hospital product portfolio to ICD-10-CM/PCS compliance.

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