Cash on hand: You'll need it for ICD-10

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.

Although there will be a great deal of testing and preparation done by the vendors of practice management and electronic health record (EHR) systems by clearinghouses and payers, "we really won't know the true effect until they turn it on," Arzate added.

Mitigate revenue disruption
The recommendation that Arzate pointed to is to reserve at least enough money to cover medical supplies, payroll, rent, everything required to keep the practice operational for three to six months — just in case any payers experience disruptions in cash flow that delay payments.

That's especially difficult for small practices. "You may not have to have it on hand," Arzate explained, "but you need to have the resources available."
It's better to talk with the bank now before the funds are needed, added Clint Hughes, MediGain vice president of marketing. "The bank will be more open now than if you come to them desperate because you're two months behind," he said.

Arzate suggested that they establish a line of credit, or if they already have one in place, "ask for an increase or different payment terms," she said. "They just need to start that process ahead of time."

Also, check with payers to determine if they have a contingency plan in the event of a disruption and what they intend to do for providers so they're not left with a significant cash flow crisis.

The HIMSS ICD-10 PlayBook, a blueprint for provider and payers ICD-10 implementation, recommends that practices should have a minimum of six months of cash reserves to mitigate revenue impacts during the transformation period.

Paul Weygandt, MD, vice president of physician services at J.A. Thomas & Associates, a Nuance company, said that the amount of cash reserves will vary depending on the healthcare organization. J.A. Thomas, based in Atlanta, offers clinical documentation improvement services.

"The better way to look at this," Weygandt explained, "is that the amount of money that you need to set aside is inversely proportional to the preparation work you do for ICD-10."

Staff retention will be critical
Take, for example, a physician practice that has sent the billers for the necessary education, which will be completed by April of next year, they have also checked all the IT systems in their office, talked with the vendors and know they will be able to code in ICD-10 as early as three to six months before the implementation deadline. The physicians know that they are going to undergo an education program for their specialty so they really understand how to approach ICD-10. And they go through all the workflow issues in the office. Several months before the trigger date, office billers should start dual coding in ICD-9 and ICD-10 for the most common diagnoses handled in the office.

"If you have a pretty good handle on that, let's say two to three months before the implementation date, you know that you are going to do pretty well," Weygandt said, then "you're not going to have to set aside a lot of money."

But most physician practices have a very loyal group of employees who have worked for them for years. "Even if the office is totally prepared, if there is a problem for some of the insurers or others involved in the process, you certainly would want to set aside enough money to cover payroll for office staff for two to three months. It isn't scientific. Those people are so incredibly valuable to the small practice that they can't afford to lose them, and many of them cannot do without a paycheck for a few weeks," Weygandt said.

Retrain and retain your office staff. They're loyal and very valuable. "The transition is difficult," he added. "But we do have quite a bit of advanced warning, enough time for people to take necessary actions."

What to glean from HIPAA 5010
Arzate said the transition from the Medicare claims format HIPAA 4010 to 5010 in January 2012 provides lessons.

"For many carriers the challenges started showing up three or four weeks later with Medicare payment delays. Some of the claims weren't getting formatted even though they were passing through all these edits that had been programmed for the update," she said, adding that with programming there are going to be glitches. 

Unlike HIPAA 5010, however, ICD-10 starts with the clinicians, coders and physicians that actually generate the codes.

"You have all of these coding changes that have to be done on the front-end by the provider and by the staff," Arzate said. "I think the problems we saw with 5010 are going to be magnified when we get ICD-10."