ICD-10 represents the tenth revision for the “International Classification of Diseases.” Considering the potential impacts of this revision, one might ask whether ICD-10 more appropriately means “I Can’t Decide whether we need 10 extra days of cash on hand (DCOH).” This modification is requiring health systems to make additional investments in systems and training, and it could result in potential lags in receivables remittance as ICD-10 is integrated into daily patient processes.
Recent experience with government health care systems has not engendered confidence that all will go smoothly when the switch is thrown in October 2015 (recently extended from October 2014). Should government payment systems fail to smoothly remit patient receivables, health care organizations may need to draw on investment portfolios to tide them over until things are ironed out.
This coding system change will increase the number of billing codes for health providers and insurers from 14,000 to nearly 69,000. Cash-flow disruptions during the switchover are a distinct possibility. Therefore, a cash-flow contingency plan appears warranted.
Even a three- to four-week disruption of receivables could reduce a provider’s balance sheet strength. For example, based on Moody’s data, we estimate that a one-month delay in reimbursements could drain around 18 days of cash from a balance sheet, assuming only government systems were affected (Exhibit 1). And based on a sampling of Mercer’s current health care investment clients, we estimate a potential cash drain of about 15 days.