News headlines have focused on the bureaucratic mandates, financial looniness, and unlikely assumptions that seem designed to drive medical providers away from the Affordable Care Act or out of business entirely. But this year, a non-Obamacare bureaucratic car bomb is set to explode in the medical world in the form of ICD-10—a new coding system for patient diagnoses and inpatient procedures. Mandated by the Centers for Medicare & Medicaid Services, the coding system standardizes communications among providers and insurers. Well, it standardizes them more, since ICD-9 has been in place for 30 years. Uncertainty over hitches in replacing the old coding system with a brand new one has industry experts advising practices to keep several months worth of cash on hand to cover lags in reimbursement. Practices lacking that much liquidity under the mattress may be truly screwed.
Theoretically, the new coding system covers inpatient care involving Medicare, Medicaid, and "everyone covered by the Health Insurance Portability Accountability Act." The government says up and down that the new codes aren't really necessary for private practices providing outpatient care. A handy FAQ insists:
Will ICD-10 replace Current Procedural Terminology (CPT) procedure coding?
No. The switch to ICD-10 does not affect CPT coding for outpatient procedures. Like ICD-9 procedure codes, ICD-10-PCS codes are for hospital inpatient procedures only.
But as EHRIntelligence points out, "While it's true that CPT/HCPCS codes will continue to be the gold standard for outpatient procedures, providers will be required to include ICD-10 diagnostic codes with their claims in order to receive reimbursements from payers."
So, if doctors want to be compensated by anybody other than cash-only patients, they need to adopt the new codes, too.
The problem is that glitches are anticipated in switchover to the new coding system, since nobody is allowed to use it before October 1, 2014, and everybody is required to use it after that day. That's right, another government-mandated healthcare industry hard launch, exactly one year after Healthcare.gov debuted.
Actually, ICD-10 and Healthcare.gov were originally scheduled to launch on the same day in 2013. That would have been fun.
The Healthcare Billing & Management Association warns that "it is possible that not all payors will be ready for ICD-10 on October 1, 2014," so "it will be important that you are able to submit in both ICD-9 and ICD-10 formats." The group further recommends that practices "establish a line of credit to tide the office over during the first months following the implementation of ICD-10" to acommodate reimbursement delays.
The CMS itself notes in its Implementation Guide for Small and Medium Practices:
The transition to ICD-10 will result in changes to physician reimbursements. … [C]hallenges with billing productivity combined with potential payer claim processing challenges may result in signicant impact to cash flow. This may require the need for reserve funds or lines of credit to offset cash flow challenges.
According to HealthcareITNews:
Healthcare providers may face disruptions in their payments even if they are on target to operate using ICD-10 codes on Oct. 1, 2014.
Since providers will, and indeed need, to be able to pay rent and staff salaries if the transition does not flow as smoothly as testing has indicated, experts advise having up to several months' cash reserves or access to cash through a loan or line of credit to avoid potential headaches.
"Just figure that with the transition to ICD-10 there will be delays in reimbursement," said April Arzate, vice president of client services at MediGain, a Dallas-based revenue cycle and healthcare analytics company.
Arzate recommends keeping enough cash on hand to cover medical supplies, payroll, rent, and the rest of a medical practice's overhead for three to six months.
A separate document on risk-mitigation strategies for implementing ICD-10, prepared by the Healthcare Information and Management Systems Society, specifies a "minimum of six months of cash reserves to mitigate revenue impacts over the ICD-10 transformation period."
Lines of credit might step in where available cash is short, but banks issue lines of credit to good risks—not medical practices already struggling in an uncertain regulatory environment.
If you're a doctor, now is a good time to look at your cash flow, or your retirement options. If you're a patient, you might just consider buying your favorite doc a good-bye drink.