How to know if you’re ready for ICD-10

The move from the current ICD-9-CM diagnosis code platform to the ICD-10-CM platform will happen on October 1, 2015 – whether your organization is ready or not.

Organizations that have followed the Medicare five-step plan should be in the final, testing phases. Regardless of how close your organization is in preparing for ICD-10, it’s helpful to understand the goals for the new set of diagnostic codes, as well as Medicare’s guidance for implementing them.

Controlling costs, safety and outcomes

ICD-10, the tenth revision of the World Health Organization’s International Statistical Classification of Diseases and Related Health Problems (ICD), was designed to replace ICD-9 for a simple reason: ICD-9 could no longer keep up with the advances in medicine. The antiquated codes did not reflect current technology and medical techniques, and they lacked the specificity to support the level of analysis required by Centers for Medicare & Medicaid Services (CMS).

The specificity of ICD-10 will allow greater granularity in reporting quality, safety, and efficiency measures. This enhanced reporting capability should make it easier to analyze data accurately and to compare costs and outcomes of different procedures and treatments.

The resulting analysis will help healthcare providers and payers better allocate medical and financial resources, with the ultimate goal of maximizing outcomes and becoming more cost-efficient.

Medicare implementation process

Although it isn’t mandatory, following Medicare’s five-step process for implementing ICD-10 is an excellent preparation strategy. Those steps are as follows:

  • Make a plan with step-by-step target dates.
  • Train staff on ICD-10 fundamentals and codes.
  • Update in-house processes and document new procedures.
  • Communicate with vendors and health plans to confirm readiness and to set up testing opportunities.
  • Test systems and processes with vendors, clearinghouses, billing services, and health plans.

With the impending October 1 deadline, organizations should be well into the testing phase. Providers should have already submitted claims to Medicare for end-to-end testing. Medicare will continue to test submitted claims until September 30.

The financial impact of not having a system that accurately processes claims with ICD-10 codes can be significant. According to Medicare, a valid ICD-10 code must be used on all claims as of October 1, 2015, or a provider will not be paid for that service.

However, physicians will not be subjected to Physician Quality Reporting System (PQRS), Value-based Modifier (VBM), or Meaningful Use (MU) penalties related to the specificity of the diagnosis code, and Medicare says that claims won’t be denied for Part B services for one year, as long as the main family code is correct. This one-year delay for physicians may cause a false sense of security for Part A hospital providers, who do not have the one-year grace period. Without the denial waiver, Part A providers could see an increase in accounts receivable, an increase in denials, or payment fluctuations due to Diagnostic-Related Group (DRG) changes for claims with the wrong diagnosis codes.  Finally, systems that aren’t fully tested and ready for ICD-10 will make it difficult for organizations to accurately assess the impact on DRGs.

How to test for ICD-10 readiness

A thorough end-to-end test can uncover coding issues and pinpoint areas that need improvement now, while there’s time to correct them.

We recently helped a major healthcare provider assess the potential financial impact of moving from the current ICD-9-CM diagnosis code platform to the ICD-10-CM platform. First, we identified the provider’s top 10 DRGs (by volume) for 2014. The claim set included several major national and regional payers. Then, we analyzed almost 3,700 inpatient claims, reviewing the primary ICD-9 diagnosis and procedure codes and mapping them to ICD-10 codes. We then determined whether the case would potentially map to a different DRG code.

The results showed the importance of testing and training. More than 1,000 of the analyzed cases, representing 32 percent in expected revenue, were at risk for DRG reassignment. For this organization, that percentage represented approximately $6 million. More than 60 percent of the cases fell within three of the ten DRGs reviewed, identifying the specific areas that needed organizational attention.

We then re-mapped each of the cases in the highest volume DRG at risk for re-assignment and determined that 36% of the cases would map to a new DRG under ICD-10.  In this case, the majority of the cases actually mapped to DRGs with higher weights which we calculated would result in an additional $400k in revenue to the provider.

During our review, we also discovered ICD-9 coding errors that we brought to the client’s attention.  These errors could have impacted ICD-10 reimbursement amounts on these cases and we recommended additional training be provided to the staff prior to October 1. 

By performing this  review in advance, the provider can better anticipate the impact of the new coding requirements in advance of the actual transition. 

Medicare is ready for ICD-10. Are you?

Medicare recently completed its last round of end-to-end testing, and claims were 90-95 percent clean. By October 1, the agency will be ready.

With the implementation deadline looming, healthcare providers and payers should be in the final phases of testing and training. Providers, in particular, need to test their systems to ensure that they can:

  • Generate a claim
  • Perform eligibility and benefits verification
  • Schedule an office visit
  • Schedule an outpatient procedure
  • Prepare to submit quality data
  • Update a patient's history and problems
  • Code a patient encounter

We also recommend testing to confirm your organization can process the claim correctly and that the payer can do the same. Does the payer have a back-up plan if the electronic claim cannot be processed? Does your organization have a communications plan with payers to address the inevitable issues? Your contract with a payer may stipulate that the payer shares responsibility for financial issues as a result of the upgrade to ICD-10, but a better strategy is testing and preparation to avoid issues in the first place.

What to expect on October 1

From a revenue standpoint, chances are that training, programming, coding, and processing costs will increase, and in the short term, some revenue is likely to be delayed.

An outside advisor, such as Baker Tilly, can analyze your claims and provide reports to:

  • Forecast the impact of ICD-10 on accounts receivables and revenue
  • Analyze post-implementation reimbursement impact, code shifts, and denials
  • Identify needed edits in the ICD-9 to ICD-10 conversion process
  • Assist in uncovering fraud, abuse, and potential audit issues

An outside advisor can also act as a liaison between healthcare providers and payers, and provide solutions to ease the burden of ICD-10 on both parties.

The conversion from ICD-9 to ICD-10 can be disruptive to your organization. The time to proactively test, train, and mitigate potential issues is now.

For more information on this topic, or to learn how Baker Tilly healthcare specialists can help, contact our team.