The one-year extension of the ICD-10 implementation deadline signed into law April 1 by President Obama is viewed as a "positive credit development" for not-for-profit hospitals, according to New York-based financial information services company Fitch Ratings.
While the majority of hospital providers that Fitch rates would have been prepared for the October 1, 2014 ICD-10 transition, the potential disruption to the revenue cycle would have had a negative credit impact on the sector--particularly on lower rated credits--said the ratings firm. The delayed deadline will allow more time for providers and payers to prepare for the code switchover, the company said.
"Under ICD-10, the number of codes used for diagnosis will expand by a factor of eight, which will increase coding complexity and likely challenge providers and payers in the near term," Fitch Ratings commented in a written statement. "While a majority of providers have made the substantial investment in technology and personnel to be ready for the transition, the readiness of both governmental and commercial payers to adequately process claims and payments in a timely manner has been questioned. In our view, lower rated credits would be more susceptible to this risk as they have less financial resources to absorb a potential delay in reimbursement."
Nevertheless, the ICD-10 delay is not without its own financial costs to the healthcare industry. The American Health Information Management Association has estimated that another one-year delay of ICD-10 would likely cost the industry as much as $6.6 billion on top of the already incurred costs from the previous delay--figures that the organization said do not include the lost opportunity costs of failing to move to a more effective code set.
At the same time, an ICD-10 readiness survey released last month by The Advisory Board Company found that nearly 95 percent of healthcare organizations were at or below budget for the October 1 ICD-10 transition, with the variance between budget and actual expenditures ranging from 5 percent to 15 percent.
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