Report: Dreaded ICD-10 Conversion Had Modest Impact

In March of 2014 we were warned that the ballooning of ICD-10 diagnostic codes from 13,000 to 68,000 was going to disrupt the finances and data systems of healthcare providers.

As it turns out – it was manageable.

Premature warnings of disaster?

A new report from public accounting, consulting and technology firm Crowe Horwath reveals four key findings (as originally cited by Becker’s Hospital CFO):

1. On average, there was minimal impact on cash collections, initial denial rates and days in accounts receivable due to the ICD-10 conversion; however, there were delays in inpatient billing and coding, Crowe said. This resulted in a 10.1 percent increase in inpatient discharge and not final billed days from October through December 2015, compared to the same period in 2014.

2. Crowe observed a temporary increase in denial claim adjustment reason code 11, indicating the diagnosis is inconsistent with the procedure, for a small number of hospitals. As a percentage of total gross patient services revenue, this denial reason code spiked from October through December 2015.

3. Crowe specialists observed that most calculated hospital denials realization gaps, which determines overall cash leakage from denials with respect to initial denial rates, range from 3.1 percent to 7.7 percent of gross patient services revenue, including some greater than 11 percent.

4. In most cases, Crowe said, its calculated denials realization gap indicates more cash leakage is occurring than the final denial write-offs indicate. According to the report, this typically occurs due to using contractual and administrative adjustment codes that are used instead of the correct final denial write-off codes in cases where collections departments are unable to successfully resolve denied accounts.

The lesson? Prepare for the worst (as many healthcare providers did), but don’t rule out the possibility of success!

There are conflicting numbers on denials in the industry though. Some claim denial rates are 1%, while we’ve heard hospitals state its as high as 30%!  Moving forward, there is still great interest to use analytics as a means to identify negative trends in denials. This will lead to proactively implementing changes which reduce denials overall. What’s the new target? We’ll see what the industry says in the next six months!