ICD-10: Building a Financial Reserve for Your Medical Practice

January 3, 2014

No matter the roadblocks your practice will face this year, especially the ICD-10 transition, a robust financial reserve at year's end will help.

In early 2012, many providers in private practice experienced a large dip in revenue for several weeks. Why? In anticipation of ICD-10, the 5010 electronic submission format was implemented early. Unfortunately, submission clearinghouses were not prepared for technical glitches and new requirements from third-party payers, and group and individual NPIs were often not linked with their corresponding tax IDs and social security numbers. The typical private practice did not discover these problems until three weeks or four weeks after a claim was billed, and they had to correct and identify the problems through a long process of trial and error. As a result, payment was delayed and providers counting on a minimum amount of cash flow to meet overhead costs fell short during the first quarter of 2012.

The implementation of ICD-10 this October, which will expand the current 13,000 ICD-9 diagnosis codes to 68,000, will bring similar problems. We are already seeing warnings. In December 2013 the New York Times published the article, "Roughed Up by an Orca? There’s a Code, For That," which discussed the potential issues that the ICD-10 rollout may bring, and the American Medical Association placed ICD-10 on its list of the top five issues plaguing physicians in 2014.

There are a number of issues you should look out for, ranging from systemic changes to computer glitches. The expansion of diagnosis codes will be an obvious problem. Individual procedure codes are already payable with a limited number of specific ICD-9 diagnosis codes. This will be compounded when a single ICD-9 code translates to a full page of ICD-10 codes. If it isn’t difficult enough to navigate these changes on their own, details will be even more difficult to identify and correct in the context of each third-party payer’s guidelines for ICD-10. Computer glitches will be a problem, and the likelihood of submission delays and rejections is high. After all, hundreds of billing systems, electronic clearinghouses, and commercial and government computer systems must be updated to be cross compatible overnight.

With so many potential problems, you need to be proactive to avoid as much upset as possible.

First, and most importantly, you should have a financial reserve to cover overhead costs in the fourth quarter of 2014. Second, you should contact your practice management, billing, and EHR providers to confirm that they are prepared to be ICD-10 compliant by Oct. 1. And third, you should ask about the new coding policies that commercial carriers plan to adopt for your most commonly used codes, and familiarize yourself with the new codes you will be using. Make a list or cheat sheet of the commercial carriers’ new policies for your office to reference when coding, and create flow sheets that expand your most commonly used ICD-9 codes to their ICD-10 counterparts to help with the transition. You may also want to send out small samplings of claims instead of full batches to test for errors or rejections. This will save money on resubmission costs.

Whatever roadblock you may encounter, a robust financial reserve will ensure the survival of your private practice, especially right before the next holiday season.