ICD-10 Could Hurt Hospitals' Credit

By Katie Wike, contributing writer

ICD-10 transition could cause disruption in revenue streams, negatively impacting hospital credit scores

According to new research from Fitch Ratings, a drawn out ICD-10 transition could interrupt hospitals’ revenue streams and weaken credit scores. Becker’s Hospital Review reports that, although Fitch Ratings believes the majority of hospitals will be prepared for the Oct. 1 deadline, the transition process will be detrimental. Simultaneously changing the way payers and the government use coding is expected to add pressure to hospital cash flows and hurt provider credit ratings for those with weak liquidity positions or depressed profitability.

As iHealth Beat reports, this is bad news for non-profit hospitals as the transition affects all parts of the reimbursement system: coding, billing, and payment. Investment-grade hospitals with strong liquidity positions, however, will likely be able to endure the "short term pressure," according to the report. The transition is estimated to cost small practices $56,000 to $226,000, and $2 million to $8 million for large practices.

"Fitch does not believe ICD-10 implementation alone will be enough to lead to downgrades," the report's authors conclude. "However, revenue cycle disruptions due to ICD-10 implementation could place added rating pressure on hospitals with weak liquidity positions and/or depressed profitability ... or smaller hospitals with limited access to resources that would enable them to fully prepare for ICD-10 and absorb the associated revenue cycle disruptions."

“It is a challenging time as health care reform moves forward and other pressures, such as sequestration, inpatient volume declines, and reduced reimbursement, are being felt. ICD-10 conversion will bring additional costs at a time when hospital operations are already under pressure,” said Gary Sokolow, Director in the U.S. Public Finance Group in a press release.