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ICD-10 Jangles Financial Leaders' Nerves

Karen Minich-Pourshadi, for HealthLeaders Media, July 25, 2011

Nearly half of all financial leaders who took the recently released HealthLeaders Media Intelligence Report, ICD-10 Puts Revenue at Risk, anticipate a revenue loss of some kind from ICD-10. Even more salient: They anticipate losing margin over the next few years.

With expenses such the implementation of electronic medical record, HIPAA 5010 system changes, and the ICD-10 coding transition, healthcare organizations need to change their systems. To do that they need a lot of capital in a short period. And there are only so many ways hospitals and health systems can fund these:

  1. If financially stable, it could borrow from a lender.
  2. With a healthy operating margin, it could free up funds from the existing budget
  3. Put other capital projects on hold and use its capital budget on these initiatives.
  4. Pass costs on to patients and insurance companies by increasing cost of care.
  5. Use a combination of several of these.  

Regardless of which financial option healthcare leaders opt for, the fact remains that not getting all these initiatives completed on time will be costly. With the average healthcare organization operating with about a 2%-3% margin, as reported in the HealthLeaders Media 2011 Industry Survey, there's little room for financial losses and missing any of these mandates could be financially devastating.

In fact, in the HealthLeaders ICD-10 survey, 46% of respondents anticipate a revenue loss of some kind as a result of the ICD-10 transition and nearly half of those respondents believe their organizations will lose revenue of between 1%–10%, and 13% project a loss of between 11%–20%.

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