Practice Economics

Line up credit now for possible ICD-10 cash crunch, experts advise


 

Cash shortfalls related to the Oct. 1 switchover to ICD-10 "could be potentially devastating for a lot of practices," according to Dr. Barbara McAneny. That’s why she is setting up a $4 million line of credit to pay the bills and protect her practice in case claims are rejected and income is held up.

Health IT expert Stanley Nachimson agreed with her: Now is the time to prepare financially for the coming of ICD-10.

A plan has to be developed well before Oct. 1, said Mr. Nachimson, who has studied the cost of ICD-10 implementation for the American Medical Association.

"You have got to prepare for ICD-10 or you risk significant payment disruptions," he said at the AMA National Advocacy Conference in Washington.

Dr. McAneny, managing partner and chief executive officer of the New Mexico Cancer Center in Albuquerque, said that she’s already started talking to her local banker. She said she has very little faith that the ICD-10 transition will be smooth, given her experience in moving from the Health Insurance Portability and Accountability Act 4010 standard to the 5010 standard in 2011.

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In preparation for the October 1 switchover to ICD-10, practices might want to increase their cash reserves, said Robert M. Tennant.

"That was a much smaller event," said Dr. McAneny, who is also a member of the AMA Board of Trustees . And, with the change in HIPAA standards, the Centers for Medicare & Medicaid Services allowed for several transitional periods, where the old format continued to be accepted.

Dr. McAneny recalled that in 2011, the test runs were fine, and that both the clearinghouse and payer said that her practice was ready. But when the transition started, "we got denials like mad," she said in an interview. Some payers made no payments for 2-3 months.

This time, a substantial line of credit should be enough to cover 4 months of payroll, she said, adding that she anticipates hiring more coders and paying her billing staff extra to potentially chase denials.

"This transition has the potential to be a major disrupter," Dr. McAneny said.

Robert M. Tennant, senior policy adviser at the Medical Group Management Association (MGMA), said that physicians need to figure out soon how they will cover cash shortfalls, in part, because they may have to jump through a lot of hoops to satisfy a bank’s demands. "The days of supereasy credit are probably gone," he said in an interview.

He suggested arranging a line of credit to cover at least 2 months of operating expenses. A bank’s willingness to extend credit will depend on several variables, including the age of the practice, how long it’s been in its location, whether the practice owns or rents space, and what type of collateral is available to secure the line. In some cases, physicians might need to put up personal collateral.

"The hope, of course, is that you won’t have to tap into that line of credit very much, if at all," he said.

And it’s important to find out sooner rather than later how much credit can be secured. If it’s not enough to cover a few months’ expenses, practices might want to increase their cash reserves, Mr. Tennant said.

It’s important to "clear the decks" of any claims for services prior to Oct. 1, he said. Health plans will likely be overwhelmed by the transition, and that could lead to delays in payment for ICD-9 claims.

Mr. Nachimson said that practices should reach out to their major payers to get as much information as possible on changes in coverage policies and reimbursement for unspecified codes. "What they’re doing has a major impact on you," said Mr Nachimson.

Although many are still hoping for a delay in ICD-10, Mr. Tennant urged physicians to plan for the Oct. 1 implementation, "It’s too big a gamble for the practice to assume the date is going to be moved," he said. "If you bet the house and you lose, you’re going to be in a world of financial hurt."

The MGMA is suggesting that physicians "assume the worst and hope for the best," especially since there’s no real downside to improving documentation of diagnoses and getting staff better training in coding, he said.

aault@frontlinemedcom.com

On Twitter @aliciaault

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