News Feature | April 16, 2014

ICD-10 Delay A Positive For Non-Profit Hospitals

Christine Kern

By Christine Kern, contributing writer

ICD-10 Delay For Non-Profit Hospitals

Fitch Ratings sees delay as a positive credit development

According to FitchRatings, the one-year extension of the ICD-10 transition deadline for hospitals and payors is viewed as a positive credit development for not-for-profit hospitals. Although the majority of hospital providers Fitch rates were on-track for the Oct. 1 transition, the potential disruption to the revenue cycle could have a negative credit impact on the sector, particularly on lower rated credits. On April 1, President Obama signed the extension into law, giving providers and payors additional time to prepare for the change.

"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.”

The delay will have its own related financial costs for the healthcare industry, however. The American Health Information Management Association has estimated that the costs of another one-year delay of ICD-10 could top $6.6 billion, and that is in addition to the already incurred costs from the previous delay, not including the lost opportunity costs of failing to move to a more effective code set.

Meanwhile, the Advisory Board Company results of an ICD-10 readiness survey released last month 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.