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ICD-10: Minimizing the Financial Hit

Rene Letourneau, for HealthLeaders Media, December 16, 2013

With the go-live date rapidly approaching, hospitals and health systems need to make ICD-10 a priority if they want to avoid costly surprises and setbacks.

This article appears in the December issue of HealthLeaders magazine.

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.

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