Blog: Are you Prepared for ICD-10?

January 16, 2015

by Luke Wagner.

Your practice needs to start the financial planning and investment process for ICD-10 so you don’t have to rely on others for your continued success. The first focus of your financial planning should be on business expenses. With delays in reimbursements expected, cash reserves will be needed to keep the practice operational. Determine your medical supplies expenses, payroll, rent, utilities, and essentially everything needed to perform day to day operations and plan for a minimum of six months worth of cash reserves. The next step is to identify and execute cost saving measures before the ICD-10 change. Reducing your expenses in advance will help relieve the pressure caused by ICD-10.

If it appears that your practice may have difficulty building the required reserves, you may want to consider a bank loan or line of credit. The bankers will be more open minded if you start the dialog now rather than when emergency cash is needed to keep the business running. It never hurts to know and understand your options for raising cash.

Prepare both your business and providers for the costs associated with the extra time that will be needed to complete charge documentation. Are providers being reimbursed for trips to the office to remedy documentation issues? Are your providers going to need extra training for ICD-10? According to MGMA, the top reason for expected decreases in revenues for ICD-10 is due to incomplete physician documentation. Incomplete documentation is a hidden cost to your practice, and if not prepared for, could be a major factor in increased expenses on your budget.

Take control of your practice and the planning for ICD-10. Perform a self-assessment of your expenses, set financial goals and priorities, and then plan your course. Strategic planning in the past was measured in years. However, with ICD-10 you will need to measure it in months.

Financial Impacts of ICD-10

As you probably have heard or know, there will be a substantial cost associated with the implementation of the ICD-10. Costs and cash flow disruptions will vary widely depending your number of clients and specialties, but some estimates have been valued in the millions of dollars.

Almost immediately your company is going to see an increase in the number of claims denied. The Centers for Medicare & Medicaid Services (CMS) estimates that in the early stages of ICD-10 implementation, denial rates will rise by 100 to 200 percent. Even more difficult to comprehend, CMS is estimating days in A/R will grow by 20 to 40 percent.  Essentially, the CMS is saying be prepared for delays in reimbursement and cash flow coming to a near trickle.

McKesson has developed an excellent tool for you to evaluate your practice and the cash flow impact of ICD-10 ( If you have a client that generates $24,000,000 in net collections, according to McKesson, the practice can expect up to $3,300,000 in cash flow disruptions. Your business will need to figure out ways to pay rent, utilities, employees and keeping your clients happy while having a 17% reduction of cash flows for the first year. At times, as much as 40% of your claims could be in denial and not being paid in a timely manner.

As mentioned previously, you will need to determine your medical supplies expenses, payroll, rent, utilities, essentially everything needed to perform day to day operations and plan for a minimum of six months’ worth of cash reserves. That may sound like a lot of cash reserves, but you better to be safe than sorry in the end.


Luke Wagner is EMP’s Director of Financial Management & Analytics.





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