With ICD-10 implementation less than 10 months away, health plans and providers haven’t fully determined how the new coding standards will affect their businesses, according to a recent poll conducted by KPMG LLP, the U.S. audit, tax and advisory firm.
The KPMG poll, conducted from October to December of 2013, found that while the majority of payer and provider respondents acknowledged that they had completed an ICD-10 impact assessment (76 percent) and had allocated budget toward readiness efforts (72 percent), they were significantly deficient in preparing for key aspects of implementation. Comprehensive system testing, determination of impact on cash flow and revenue cycles were where the majority of respondents revealed that their respective organizations had not properly addressed the impact of ICD-10 implementation.
“As October 1st inches closer, healthcare organizations have their work cut out to properly absorb the impact that the new coding will have on their businesses,” said Wayne Cafran, an advisory principal in KPMG’s Healthcare & Life Sciences practice. “A full 50 percent stated that they had yet to estimate the new coding systems impact on their cash flow. With estimates by those who did measure the impact tallying anywhere from $1M to more than $15M, healthcare organizations are in for a rude awakening when they finally realize what the new standards will have on their bottom lines.”
Significant revenue cycle implications
The transition onto the new coding system will have a significant impact on revenue cycles, according to respondents. Seventy-three percent of those surveyed surmised that the transition to ICD-10 coding would have moderate to severe impact on an organization’s bottom line.
“In terms of specific processes, nearly half of those surveyed (45 percent) believed that denial/variance management would be most affected in the transition outside of coding and documentation,” added Randy Notes, a principal in KPMG’s Healthcare & Life Sciences practice who specializes in revenue cycle operations and improvement. “Successfully managing denials and variance entails a thorough analysis of not just the new codes, but reviewing trends of the previous ICD-9 codes and mapping high volume medical necessity. Organizations also must familiarize themselves with claims rejections and denial representatives under the new process and designing a brand new billing process. It is easy to see why this was a leading pain point among our field.”
Providers and health plans will focus on testing in 2014
Healthcare providers and health plans will spend the early part of 2014 ensuring that their coding systems are properly functioning by October 1st. Forty-two percent of respondents indicated that they have recently undergone system testing, which, according to the Centers of Medicaid and Medicare Services (CMS), includes working with practice management system and outside vendors to develop and test processes and systems using ICD-10 codes, creating a comprehensive test scheduling plan, and working with health plans and billing clearinghouses.
In terms of more comprehensive testing, one-third of respondents indicated that they are currently conducting end-to-end testing. More than one-quarter (28 percent) stated that they plan on conducting end-to-end ICD-10 compliance testing, while three percent stated that they would not.
“Nearly three-quarters (74 percent) of respondents said that they have yet to or are not planning on conducting testing that involves external entities, such as health plans, providers and trading entities,” said Cafran. “This proves somewhat problematic when you consider the importance of ensuring that the process will function smoothly on day one. The recent roll out of the Affordable Care Act from a technical aspect should give health plans and providers all the motivation they need in determining just how important it is to put the new system through its paces.”
About the study
KPMG LLP conducted a series of webcasts from October 17 through December 9, 2013 and included a series of survey questions pertaining to ICD-10 readiness. Responses were gathered from health plans; healthcare providers, mostly affiliated with hospitals and health systems; large physician groups and nurses. The survey was launched at the conclusion of each webcast.
About KPMG Healthcare & Life Sciences
KPMG LLP is a leader in healthcare convergence, assisting organizations across the Healthcare and Life Science ecosystem to work together in new ways to transform the business of healthcare. With more than 1,500 U.S. partners and professionals supported by a global network of in 150 countries, we offer a market leading portfolio of tools and services focused on helping our clients adapt to regulatory change; design and implement new business models, and leverage technology, data and analytics to guide them on their path to convergence. A replay of each webinar can be found by clicking here.
About KPMG LLP
KPMG LLP, the audit, tax and advisory firm (www.kpmg.com/us), is the U.S. member firm of KPMG International Cooperative (“KPMG International”). KPMG International’s member firms have 155,000 professionals, including more than 8,600 partners, in 155 countries.