ICD-10 Delay – How Disruptive Regulations and Risk Can Provide Immediate Financial Benefit

by Michael Arrigo

ICD-10 is delayed.  Long live the delay?

Unfortunately, healthcare providers used the April 9, 2012 CMS announcement of a delay in ICD-10 (World Health Organization International Classification of Diseases, version 10) to justify delaying spending on ICD-10 Assessment, ICD-10 remediation, ICD-10 testing and ICD-10 training.  This is despite copious information from well-respected sources such as the WEDI NCHICA timeline saying from surveys that the industry is not ready and that providers in particular need to get going on ICD-10.

CMS conceded that the cost of an ICD-10 delay to the healthcare industry is significant, given that providers already on track for compliance may spend as much as $6.6 billion for extra personnel and IT vendor expenses. CMS also believes that the cost of adhering to the October 2013 date as planned would be even higher—given cash flow disruptions as well as the need to process claims manually—and maintains that a one-year delay will result in net savings relative to other options.

Misinformation About ICD-10

Poorly informed politicians and even physicians have wasted valuable time writing, editing and publishing nonsensical articles stating that ICD-10 isn’t fit for the U.S. healthcare business because it contains diagnosis codes about parrots and water skis.  Never mind that every leading economy in the world is using ICD-10 except the U.S. (see Why did the AMA vote to delay ICD-10).  Part of the issue is that the AMA controls CPT codes which are only used in ambulatory billing.  It does not control ICD-10.  We still often hear that those who work in or serve ambulatory – only settings don’t believe that ICD-10 will impact them.

Note that ICD-10 does impact both ambulatory and inpatient reimbursement.  That is because ICD-10 CM must be used for diagnosis coding for ambulatory and well as inpatient billing.  Claims billed for ambulatory procedures using CPT may not get paid or may be subject to RAC Audits if the proper ICD-10 CM code isn’t used.

Historically, Healthcare IT Solutions have been Hard to Use, Hard to Interoperate

Those physicians and politicians who write anti-ICD-10 articles are probably using a Treo or Blackberry instead of an iPhone.  And, they probably distrust ICD-10 as yet another IT initiative that will cost them money and provide questionable benefits.  They are probably also using hard to adopt systems like Epic.  (see  the Forbes article about Epic and related comments below).

“I hear it’s just as bad getting data from one Epic system to another. E.g., in Portland, Oregon they are all on Epic and none can talk with each other as they are all so customized (a strength and weakness).”

“Meaningful Use should be driven by meaningful tools. While Epic and others operate in a silo fashion, the patient still receives a sub-par experience. The EHR wave is in full motion and it’s clear that it’s all about market share and reacting later to whatever policy pushers ink out. In the interim, not-so-meaningful tools”

Physicians who do not want to move to ICD-10, may be driven by fear of change, and avoiding pain.  Many love practicing medicine but don’t love dealing with changing IT.  This resistance is based on experience.   A recent Healthcare IT news survey noted that physicians were complaining about learning new CPOE and ePrescribing tools.  But nearly all of them had the Angry Birds app on their iPhone.   To be fair, to these physicians who are resistant to change, it isn’t that they don’t want to change, it is that poorly designed, hard to use healthcare IT systems are being forced upon them that make the change more difficult than it has to be.   Other software companies outside the healthcare market, and leading software as a service companies spend $millions on usability design. In healthcare it appears that the software engineers and IT people don’t talk to the clinicians until the software is deployed.  If we can make healthcare IT more usable and friendly like an iPhone app, there will be less resistance to adopt it.

Changing the National Dialogue about ICD-10 to Improving Cash Flow and Reducing Risk

Why don’t we shift the national dialogue about ICD-10 to a positive one that is about more money and pain avoidance?  After all, aren’t those the only things that really drive changes in business and most physician behavior?  Yes, we admire physicians who care about the patient and deliver high quality care.  Yes, we are population health management advocates, but we are also realists. We understand that the Chief Financial Officers (CFOs) who control spending on these initiatives have to keep their jobs, and they do that by managing monthly and quarterly profit and loss statements.  Anything that gets in the way of that, including long-term (and in their minds poorly defined) mandates such as ICD-10 become back burner initiatives.

Short-Term Fiscal Issues for CFOs Trump Strategic Initiatives and Regulatory Compliance

We understand why many may be making the ill-informed decision to delay adopting ICD-10.  If hospital CFOs don’t see immediate financial benefit or an issue that involves pain avoidance or other risk avoidance of an immediate legal issue, they’ll delay.  The reason is they have shorter term fiscal issues to deal with on a monthly and quarterly basis.   Some CFOs as well as coders and physicians are probably praying that they can retire before ICD-10 arrives.  Some may have good reason.  Unfortunately, too many vendors are using scare tactics about ICD-10 in the hope that they will cause prospects to take action.  Too many health IT vendors are also afraid because they don’t understand it, and their tone is too defensive.

ICD-10 creates risk.  Risk creates opportunity.

It is common knowledge that ICD-10 (and HIPAA 5010) are having the effect of slowing reimbursements.  Slower liquidity in the health care economy is not a good thing.  If you can address this pain point, you can have a more constructive dialogue with the C-level executives about new strategic initiatives and compliance with ICD-10.  You can change the conversation from one about “survival” and ICD-10 to one about thriving and gaining strategic advantage with ICD-10.  (see ICD-10: Let’s get on with it).

Therefore, we have changed our approach in how we message to hospital and insurance (health plan) CFOs.  We believe that focusing on a solution that enables reduction in the cost of claims for payors and self-insured employers, and accelerates claims remittance to providers is something a CFO likes and wants to hear about.   As a byproduct of that initiative you can free up funds for the investment  to comply with ICD-10, address Medical Loss Ratio (MLR) for health plans, and improve hospital and physician group revenue cycle and cash flows.  If you can improve cash flows and make them predictable,  you can measure and include risk based pricing on those cash flows.

Making The Benefits Tangible

We believe we can save health plans and self-funded employers 15% or more, and accelerate claims payments to providers from 90 days to 7 days.  If you can do that, you can get the CFO of the healthcare organization to consider investing in the future, which includes all of the regulatory compliance work for ICD-10 and related initiatives.

Too Many Healthcare IT Companies are Selling Magic

Second, we believe that even some of the most highly priced public companies in healthcare IT are behaving defensively about ICD-10.  They say “…look at all of the programs we have in place…”  Unfortunately, activity is no substitute for a strategy.   There are just too many healthcare IT companies trying to sell “magic” for ICD-10.  The “magic” is designed by IT people.  IT people generally don’t understand the way clinical staff, coders, etc will interact with the solution as they transition from ICD-9 to ICD-10.  Many vendors of digital encoders, computer assisted coding (CAC), natural language processing (NLP) and EMR systems, and so-called “terminology services” have or will miss the fundamentals here in my opinion.

ICD-10 Impacts Pharmaceutical and Medical Device Companies as well as Hospitals and Health Plans

Third, we believe that pharmaceutical and medical device companies – even some of the largest publicly traded firms – do not understand yet that this change will impact them and potentially, their stock price.  Most stock analysts understand medical device and pharmaceutical companies because they sell products protected by long-running patents that create higher profit margins and barriers to entry.  People like stocks of a company with a wonder drug like  Lipitor – until the patent runs out.   In contrast, health plans and hospitals sell services regulated by highly complex and much harder to understand regulations, and inter-complexities between the payor and provider.

Pharma and med device companies are perceived (as of the date of this blog) to be the safe money in healthcare.  But are they?

ICD-10 Disruption will Create Innovation and Opportunity

For some, until they hit hard times because of a flawed or non-existent ICD-10 strategy, they wont’ realize their perceptions were wrong.  Our data comes from reputable sources in the payor / provider community and from some of the largest public companies in healthcare. While we cannot share the confidential nature of some of those conversations, we can share that there is still a huge opportunity for people and innovative companies who can bring thought leadership to this area because it is such a disruptive new paradigm.

Michael F. Arrigo

Michael is Managing Partner & CEO of No World Borders, a leading healthcare management and IT consulting firm. He serves as an expert witness in Federal and State Court and was recently ruled as an expert by a 9th Circuit Federal Judge. He serves as a patent expert witness on intellectual property disputes, both as a Technical Expert and a Damages expert. His vision for the firm is to continue acquisition of skills and technology that support the intersection of clinical data and administrative health data where the eligibility for medically necessary care is determined. He leads a team that provides litigation consulting as well as advisory regarding medical coding, medical billing, medical bill review and HIPAA Privacy and Security best practices for healthcare clients, Meaningful Use of Electronic Health Records. He advises legal teams as an expert witness in HIPAA Privacy and Security, medical coding and billing and usual and customary cost of care, the Affordable Care Act and benefits enrollment, white collar crime, False Claims Act, Anti-Kickback, Stark Law, physician compensation, Insurance bad faith, payor-provider disputes, ERISA plan-third-party administrator disputes, third-party liability, and the Medicare Secondary Payer Act (MSPA) MMSEA Section 111 reporting. He uses these skills in disputes regarding the valuation of pharmaceuticals and drug costs and in the review and audit of pain management and opioid prescribers under state Standards and the Controlled Substances Act. He consults to venture capital and private equity firms on mHealth, Cloud Computing in Healthcare, and Software as a Service. He advises ERISA self-insured employers on cost of care and regulations. Arrigo was recently retained by the U.S. Department of Justice (DOJ) regarding a significant false claims act investigation. He has provided opinions on over $1 billion in health care claims and due diligence on over $8 billion in healthcare mergers and acquisitions. Education: UC Irvine - Economics and Computer Science, University of Southern California - Business, studies at Stanford Medical School - Biomedical Informatics, studies at Harvard Medical School - Bioethics. Trained in over 10 medical specialties in medical billing and coding. Trained by U.S. Patent and Trademark Office (USPTO) and PTAB Judges on patent statutes, rules and case law (as a non-attorney to better advise clients on Technical and Damages aspects of patent construction and claims). Mr. Arrigo has been interviewed quoted in the Wall Street Journal, New York Times, and National Public Radio, Fortune, KNX 1070 Radio, Kaiser Health News, NBC Television News, The Capitol Forum and other media outlets. See https://www.noworldborders.com/news/ and https://www.noworldborders.com/clients/ for more about the company.

Leave a Reply