ICD-10 could spur takeovers of unprepared medical practices, consultant says

Smaller practices that may not have the capital to invest in systems and staff to manage the coding change may seek out mergers, joint ventures or other partnerships.

As ICD-10 moves closer to its Oct. 1 deadline, at least one consultant says he thinks smaller medical practices that are unprepared for the change will be ripe for takeover.

“It’s more about co-venturing business partnerships, but not outright acquisition. I think it will start,” said Paul Keckley, managing director of Navigant Center for Healthcare Research and Policy Analysis.

“They’re doing that with medical groups. Every major health plan is making acquisitions of medical practices.”

[Also: ICD-10 bill surfaces, calls for delay]

Keckley said he believes the industry may also see an uptick in these mergers by summer’s end.

While Keckley’s theory wasn’t corroborated by other consultants and experts Healthcare Finance reached out to, that doesn’t mean he’s wrong. This year has already seen mergers and joint ventures form between hospitals and physician practices for the goal of streamlining management and compliance tasks.

At the same time, recent studies show just how unprepared many practices feel for the changeover to the new diagnostic coding vocabulary.

In a May 27 survey by NueMD of small and medium-sized medical practices, 30 percent said there should be no transition to ICD-10; 54 percent were highly concerned about the compliance deadline; and 25 percent were not familiar with the ICD-10 coding standards.

[Also: New ICD-10 bill asks for transition period]

Also, 50 percent reported a high concern for the cost of software upgrades and 65 percent were highly concerned about the claims processing.

Health systems must have the ability to run duplicate systems for six to nine months to handle pre- and post-Oct. 1 claims, according to Keckley.

But that costs money.

“You’re doing everything you can, the deadline is real. Expect one out of four providers is not going to make the cut on Oct. 1 because they don’t have capital,” Keckley said. “This is going to be the August story.”

Mark Williams, a principal in the PwC Health Industries Advisory Practice who focuses on ICD-10, said smaller players are already challenged by the administrative side of healthcare.

“ICD-10 is one of those things,” he said.

Yet whether ICD-10 is the trigger to a sell-off is hard to say, he said. It’s all part of a bigger picture of regulations, CMS compliance and cyber security breaches, all which drive merger or joint venture decisions.

“Take those all into one picture, that’s what starts to create a bigger likelihood to run out of resources,” he said.

Charlie Saponaro, CEO and president of Medical Record Associates, a health information services company, works with healthcare providers on the transition.

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The number of providers he sees who aren’t prepared is down to 15 to 20 percent, he said.

“It certainly will be a financial struggle for them, dropping bills and denials, if they’re not that prepared,” Saponaro said. “If they’re really in that position, they’re borderline distressed. The problem is the acquirer is going to have the same problems, unless they have the capacity to absorb (the problems). I don’t think any of the hospitals I know have that access capacity.”

While a longshot bill to delay the rollout have surfaced, Keckley said it is more likely that the Centers for Medicare and Medicaid services would roll out some contingency plan to help practices avoid costly losses from coding errors holding up reimbursements.

“They’ve been rumoring about that for months,” he said. “I think they’ll extend it 90 to 180 days.”

Twitter: @SusanMorseHFN