The Effect of ICD-10 on Your Medical Practice Budget

You've probably been warned to expect a mess when ICD-10 goes live this October. Whether or not such claims are exaggerated, you can take steps to make sure the effects on your bottom line are minimal.

The most obvious costs associated with implementing the new ICD-10 coding system are for training, software upgrades, and, in some cases, the purchase of new hardware. There are other, less tangible costs, and those are the ones that inspire fear, because it is hard to know exactly what to expect and how much to budget for.

"The two biggest intangible costs will come [after implementation] from lost productivity and denied or delayed claims due to coding mistakes," said Fletcher Lance, vice president and national healthcare leader at consulting firm North Highland.

There could be glitches on the payers' end as well. "Some experts have warned providers to expect anywhere from a 50-percent to 200-percent increase in queries and denials from payers during the first few months of ICD-10," said Ken Bradley vice president of strategic planning and regulatory compliance at Navicure, a medical claims clearinghouse. This could be disastrous for small practices or for those operating a very tight margin.

Everyone knows their practice needs to put some money aside to cover extra expenses and shortfalls in payments. But how much to budget is a trickier question. Training and IT purchases are expenses you already know about. What practices really need to know is how much cash to have at the ready during the first few months after implementing the ICD-10 coding system. Perhaps the best strategy is to have three months to six months of operating cash set aside, or available in the form of a line of credit, said Bradley. Even that is a big range.

You can get a clearer idea of how much you will need by making an honest evaluation of your preparation for conversion to ICD-10. The more prepared you are for the new system, the less money you are likely to need. Faster, more accurate coding will reduce the number of rejected claims and productivity losses that will be a big part of practice expenses, after the Oct. 1, go-live date.

Many practices have arranged for a line of credit to see them through, but there are other ways to prepare for a potential revenue shortfall. Bradley suggested building up cash reserves by paying for large purchases on payment plans and delaying new purchases when possible.

This is also an excellent time, he said, to manage your accounts receivables as aggressively as possible. Whatever you do, you need to start now.

"Practices that are well-prepared will be in better shape come October," said Lance, "but it is going to be hard to address this if you start in September."