Apr. 8—The one-year extension of the deadline for hospitals and insurers to transition to ICD-10 was a positive credit development for not-for-profit hospitals, according to a new analysis from Fitch Ratings.

The one-year extension of the requirement that providers and insurers adopt the update code sets by October was signed into law April 1 as part of a package of healthcare provisions.

The Fitch report said the majority of hospitals the agency rates were expected to finish preparations for the switch to new codes by the previous Oct. 1 transition deadline. However, the potential disruption to the revenue cycle could have had a negative credit impact on the hospital sector, especially on lower-rated providers.

In the short term, the transition to ICD-10 will increase the complexity and challenge for many providers due to the fact that it features eight times the number of codes currently used for diagnosis, according to Fitch, although most providers were prepared after “substantial investment in technology and personnel.”

Processing Problems Possible

Continuing questions surround the readiness of both governmental and commercial insurers to adequately process claims and payments in a timely manner, according to Fitch.

“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 report said.

Some hospitals have participated in beta testing with payers, which entailed sending payers ICD-10 coded sets and receiving estimated reimbursement amounts. Additionally, the Centers for Medicare & Medicaid Services (CMS) also recently announced plans to conduct end-to-end testing with a small sample group of providers in late July.

“Fitch views this dual-coding testing positively and believes it will give these hospitals a distinct advantage in identifying weak points and correcting them,” the report noted about the delay.

Among the factors fueling Fitch’s concerns with the first coding set conversion hospitals will have to implement using an electronic platform are difficulties hospitals have had with recent IT upgrades. The report cited recent hospital replacements and upgrades in their patient billing technology systems, which resulted for “many” dropped bills and other issues that took months to correct. Those problems put “some pressure” on their financial performance, and Fitch expects similar IT issues with the ICD-10 conversion.

Now is a “challenging time” for the hospital sector, the credit rating agency stated. Fitch issued a negative 2014 outlook for U.S. not-for-profit hospitals and health care in December due to pressure on patient volume, continued uncertainty related to healthcare reform, and payment challenges.


Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter @rdalyhealthcare.

 

Publication Date: Tuesday, April 08, 2014