Just a month or two ago the message was clear: there will not be another delay in ICD-10 readiness and implementation on October 1st, 2014. However, on March 31st the House of Representatives passed H.R. 4302, which contained a provision for a one-year delay in ICD-10 readiness and implementation. The unfortunate reality is that these decisions can be repealed as easily as they were enacted. This creates uncertainties for mid-size independent practices trying to create a budget and run normal business operations.
Even with the delay, planning for ICD-10 should continue to be a major factor in the financial objectives for your practice. While fear of bankruptcy for such a change might be extreme, the likelihood of some rocky cash flow and payroll challenges is real and present. For some clinics, this may already be the case on a month to month basis. Getting advice from your partners is wise. Outsource Receivables serves as a great resource for mid-size independent practices who don’t have the bandwidth to support the work-flow, technology and reporting requirements that ultimately impact cash flow. In addition, having access to a credit line can further level out the uncertainties of clinic business fluctuations and reimbursement uncertainties.
According to the AMA, the costs of implementing ICD-10 for physician practices could be as high as $56,639 to $226,105 for small practices. A medium-sized practice could run $213,364 to $824,735. According to the AMA, denied claims will play a significant role with CMS estimating that claims denial rates could increase 100 percent to 200 percent in the early stages of coding with ICD-10. While ORI can put the processes in place to address the denied claims most efficiently, a strong banking relationship can give relief while the temporary losses from unpaid claims is addressed.
ORI recommends having robust claims denial processes in place. When a claim is denied, having a filtering system that efficiently routes claims to different staff, such as a coding versus a payer versus a medical records issue. In addition, having a physician communications protocol in place for timely edits is crucial. Some rejected and denied claims may need a specific physicians review while other rejects and denials are repetitive and across physicians. If the issue impacts multiple physicians, then having a properly setup EMR messaging system and training on its use, as well as agreement on how the messages, will be relayed is important.
Even with the best preparation, some things will inevitably go wrong. The AAFP recommends that practices have at least a three-month cash reserve and even more cash reserves if feasible. The following tips will help practices identify items that need consideration and action for expanded capital and increased cash flow flexibility. Considering these tips will allow your practice to be in good standing both before and after the October 2015 conversion. Getting your finances in line now will be one less thing to worry about later when you are six months in advance of the transition.
Get an understanding of your overall capital requirements: Having a handle on where your business requires capital and where the dollars will come from is a great first step. Your bank can construct term loans to address capital expenditures and help work them into an overall strategy for the business.
Cash flow tools: A business credit card can be used to manage operational expenses and can be paid off prior to incurring interest. There are also banking programs that offer extended 50 day billing cycles that provide extra days in the cycle to more effectively manage cash flow.
Working capital arrangements: Having a strong understanding of your accounts receivables and the average time it takes to collect is basic to running your practices finances. The impact of ICD-10 can only be negative initially so if your receivables and days of service outstanding are already in rough shape don’t wait. Get a second opinion and consider an outsourcing model. Assess your working capital line of credit and have a plan in place to manage available cash reserves. Don’t wait to talk to your banker about a new line of credit or an increase in your existing line.
Find a bank that specializes in the industry: Perhaps your bank has a dedicated staff accounts manager specifically for medical practices, or programs that meet the unique needs of medical practices. Don’t just settle for who you have always used for banking and make sure and get a second opinion. They can help provide needed options and ultimately design financing plans that meet and exceed your short, medium and long-term needs.
Be prepared when you meet with your banker: Have all of the necessary documents ready, such as tax returns for the last three years, year to date financials, A/R reports, and existing debts or credit lines. Don’t come empty handed; have an action plan to show your thought process.
After getting the news about the second ICD-10 delay, it is hard to say what other surprises there will be that impact mid-size independent medical practices in the next few years. Having collaborative partners surrounding you, like your bank and outsourcing partner, can mean the difference between surviving and thriving. Start by getting an assessment of your A/R and a second opinion from Outsource Receivables.
Brian Robinson, Controller