ICD-10 Is Gonna Cost Me How Much?

Last February I asked every CIO I could corner at the annual Healthcare Information and Management Systems Society meeting what his or her organization was doing to prepare for ICD-10.

Sure, the deadline for the massive coding switch-over isn't until in October 2013. But I got the sense that even if folks weren't quite ready to brag about their progress preparing for ICD-10, they were at least starting to think about it with greater urgency.

A new Intelligence Report from HealthLeaders Media, ICD-10 Puts Revenue at Risk, backs that thesis: 84% have started their ICD-10 projects. Meanwhile, less than a third (29%) have moved beyond the assessment phase into implementation.

Of the organizations that have begun their assessments, 73% have completed a system/vendor readiness analysis; 64% have assessed training needs; 57% have done a documentation gap analysis; and 48% have completed a financial impact assessment.

That's worrisome, says Albert Oriol, vice president and chief information officer at Rady Children's Hospital and Health Center in San Diego and lead advisor for the report. "Anyone who isn't at least partway through [discovery/assessment] is behind," he told HealthLeaders Media's Senior Finance Editor Karen Minich-Pourshadi.  She examines the financial jitters ICD-10 is causing.

Oriol notes that without the assessment, organizations may be caught off guard by a bigger-than-expected price tag. "The cost is higher than they may think. We did our financial assessment and now we're discovering that it's double what we estimated," he says.

The survey suggests there's confusion about the cost of converting to ICD-10. Of those organizations that have completed the financial assessment, 32% expect to spend up to $1 million to prepare, while just 9% estimated a cost between $1.1 million and $5 million. Only 1% of respondents project an implementation cost between $5 million and $10 million. More than half either were uncertain about an estimate or had not completed one.

Those numbers "seem a little light," John Dragovits, CFO for Dallas-based Parkland Health and Hospital System, says in the report. Most organizations will fall into the $1.1 million–$5 million category, he predicts, while the cost to larger organizations such as his 720-bed system could exceed $5 million.

Regardless of where respondents were in the ICD-10 process, many said they expect to take a substantial revenue hit.

Of the 46% of respondents who expect revenue losses associated with ICD-10 implementation, 28% anticipate revenue loss between 6% and 10%, with another 12% expecting revenue losses at between 11%–20%. Nearly a quarter (23%) of respondents expect those losses to last one to two years, another 6% think it will be more than two years, and 7% expect the losses to become permanent.

Despite the immediate revenue hit, many organizations do expect that the ICD-10 conversion will ultimately pay for itself, with 25% estimating one to two years before achieving ROI. Still, 27% of healthcare leaders say they don't ever expect a return on the investment, and 26% are unsure.

In the report, Oriol closes with an interesting point: Healthcare leaders think the cost of implementing ICD-10 will be low and the potential loss of revenue will be high. So, he asks, why aren't hospitals getting on with it?