Despite the continued objections of some healthcare industry groups, all indications are that the Centers for Medicare & Medicaid Services intends to hold steady with its Oct. 1, 2014, ICD-10 implementation date. With less than a year to go, savvy provider organizations are planning and budgeting for every stage of the conversion process in order to diminish the economic impact wherever possible and to prepare for the expenses they will inevitably incur.
Karen Testman, chief financial officer at MemorialCare Health System, a Long Beach, Calif.–based six-hospital institution with fiscal year 2012 revenues of $1.8 billion, says her organization is budgeting for five areas related to ICD-10 implementation: computer-assisted coding, comprehensive clinical documentation improvement, HIM training, the systemwide IT component, and training and education.
“We’ve already had a clinical documentation improvement program in place, but this is really about spending the time and effort and money to build out our Epic electronic medical system and design templates to help physicians document correctly and completely in the system,” she says. “By February, we will be coding everything in ICD-10, and we will be mapping back to ICD-9 to get our bills out.”
All told, Testman says MemorialCare expects to spend $24 million to implement ICD-10 in its hospital business and $8 million on the physician side of the organization. Additionally, the system anticipates that ICD-10 will add $800,000 to $850,000 to its annual budget on an ongoing basis.
“It’s a huge amount of money, and the majority of the cost is operating expenses that can’t be capitalized. You can’t capitalize training,” she says.
Although she believes the system’s early adoption plans will help it mitigate much of the lost staff productivity that many providers are expecting when ICD-10 goes live, she says there will be other staff-related costs.
Preparing for long-term costs
“There will be some long-term costs that will never go away. We’ll be adding four coder FTEs on the hospital side, and that will be a permanent cost,” she says, noting she does not expect to add coders on the physician side.
Testman says there will also be permanent IT costs associated with ICD-10, such as the maintenance of new tables that are being built now and will continually need to be updated.
“We will also be mapping between 9 and 10 indefinitely because not all payers are being forced to move to 10. Workers compensation, for example, will still be billed in 9, so there is the ongoing cost of maintaining that translation system,” she adds.
Even with its extensive planning and training efforts, MemorialCare still expects to take a financial blow when ICD-10 rolls out.
“Our margins will be impacted,” says Testman. “There is no question as we look at our 10-year plan that our margins will go down. Our hope is that over time we might see some improvement in that. As healthcare evolves with population health management, we hope there will be opportunities for growth as we take on more risk. There may be a chance to get some of that margin back.”
Testman believes the greater specificity that will come with ICD-10’s more granular coding protocols will ultimately help the industry improve its ability to care for patients, but she doesn’t expect it to happen quickly.
“Hopefully, down the road, all that additional information becomes useful in managing populations, but I think it will take a while,” she says. “Right now, it just feels like a burden with no benefit.”
Minimizing barriers to implementation
Bruce Ritchie, vice president of finance and CFO at Salisbury, Md.–based Peninsula Regional Medical Center, a 288-licensed-bed institution with fiscal year 2013 gross revenues of $478 million, says his organization has an ICD-10 steering committee that has been meeting for years to prepare for the transition.
“The ICD-10 steering committee is now in its third year of meeting on a monthly basis. Our steering committee includes executive leadership and a strong project management team that is responsible for allocating resources and minimizing barriers to implementation,” he says.
PRMC expects to sustain costs prior to and following the ICD-10 conversion, Ritchie says. Based on an ICD-10 expenditure analysis completed for PRMC by an outside organization, the system expects to spend about $911,000 to $1.05 million on the project.
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