The Hidden Costs of ICD-10

The Hidden Costs of ICD-10

How payments may be adversely affected by continuing coding changes — and what you can do about it


In October 2015, the adoption of ICD-10-CM (diagnoses) and PCS (procedures) brought a dramatic change to diagnosis and procedure coding. With this change came good news and bad news.

The good news is that the new coding system was implemented and could be used in an orderly and timely manner. Facility and professional providers had been well-trained, systems were updated as needed, and most payers were able to process and pay claims almost immediately.

The bad news: The initial successes with ICD-10 may now be clouding hospitals’ current understanding of reimbursement — based not only on assignment of new codes but also on changing requirements for supporting documentation to demonstrate patient acuity and intensity of services.

One of the immediate goals after ICD-10 adoption was to ensure that coder accuracy and productivity remained sufficient to support claim generation and cash flow. The early results were reassuring. For most providers, productivity decreases were smaller than expected, and accuracy rates were acceptable.

But the focus on these two metrics could divert hospitals from paying sufficient attention to other indicators that may actually reveal more about their current revenue cycle performance under ICD-10. As a “stress test” to gauge how well your own organization is doing, you should review (1) your daily number of claims generated; (2) total daily revenue for submitted claims; (3) number of records requiring a physician clarification (queries); and (4) length of time between patient discharges / outpatient services and claims filed. For each of these benchmarks, your current performance should match or surpass your historical performance under ICD-9. If revenue cycle processes are taking longer to complete than before, you may experience slower payments and even a reduction in cash received.

The first ICD-10 payment hurdle involves the language used in diagnosis codes. ICD-10 is an “adjective-driven” coding system; to ensure that a diagnosis can be assigned and coded under this new system, providers must include more words and a more specific description than before. For example, under ICD-9, they could code a common diagnosis with just one word: “gout.” Now, they must also include information about such factors as the location, frequency and cause of the condition, such as: “chronic gout, left elbow, secondary to kidney failure.” Failing to satisfy these new requirements for increased specificity may have resulted in medical necessity denials by both government and commercial payers. If you’re not doing so already, you should track your facility (technical) and professional service denials by area of specialty, by service and by provider. After you identify and review these denials, you should provide further training and/or implement an improvement process to resolve the underpayments.

The electronic order entry document should be another important area of focus to ensure that a medically necessary diagnosis is recorded and received for an outpatient service. As payers (particularly Medicare) update their coverage policies, the order form or template within your electronic record should be reviewed by a knowledgeable coder, a clinical utilization review nurse, and a reimbursement specialist. The order document not only should allow for, but also should request, the full narrative description for diagnoses. Review all drop-down boxes and selection lists to ensure there is sufficient detail and space for complete diagnoses by the ordering provider. Ask physicians and clinicians on a frequent basis whether the ordering document is meeting their needs. Any outpatient service order that results in a “non-specified” or “not otherwise specified” diagnosis should be reviewed with the ordering provider to determine if a more complete or definitive diagnosis could have been recorded.

The determination of DRG assignment based on ICD-10 may represent the largest single cause of decreases in reimbursement for hospitals. Although acute care facilities have requested inpatient payment based on patient acuity and the intensity of services provided to inpatients for a number of years, demonstrating these levels of patient care through appropriate clinical documentation remains difficult. Payers have refined the ICD-10 diagnoses that meet “co-morbid” and “major co-morbid” conditions, and have even moved previously accepted higher-paying “surgical” DRGs into lower-paying “medical” DRGs. These varied and complex changes in DRG payment require research into the specific requirements of individual payer in order to ensure accurate payment. As an initial exercise, compare the total reimbursement received for your top 20 DRGs under the final year of ICD-9 payment to your fiscal year 2017 payments for these same DRGs. If your payments have decreased, investigate to determine the reason(s). By sharing your findings with patient care management and coding, you can improve clinical documentation and educate providers in ways that help you remediate any ICD-10 deficiencies.

The bottom line is that ICD-10 implementation overall has been a success — but it has not come without challenges and snares. To ensure that you optimize reimbursement — and maintain the health of your own bottom line — evaluate the operational areas where the hidden costs of ICD-10 may be lurking and correct any deficiencies you find before they become major problems for your revenue cycle.


Linda J. Corley, MBA, CPC, CPAR, CRCR

Vice President of Compliance

Xtend Healthcare


Linda Corley, MBA, CPC, CPAR, CRCR, has worked collaboratively with hospitals and physician offices for the past twenty-five years.  She has served as Controller of a university-owned, four-hospital group; and provided insight to clinical and financial staff members on compliant reimbursement. Linda is a credentialed coder and a frequent HFMA presenter. She is a previous college professor who taught financial processes for healthcare, health information management skills, and billing and collections courses. Linda also has more than 15 years’ experience on the national level of leading CDM Reviews, Coding and Billing Audits, and providing consulting services for revenue cycle improvement.  She has served as Corporate Compliance Officer for Perot Systems and for Dell Revenue Cycle Services.  Linda currently is Vice President of Compliance for Xtend Healthcare.

2018-01-05T08:44:05+00:00 January 5th, 2018|Local News|