ICD-10 conversion had minimal impact on hospitals’ denial rates, report finds

Physicians Credentialing |Doctor Provider Credentialing

Written by Kelly Gooch | June 29, 2016

After three delays and much industry opposition, the United States’ healthcare industry transitioned Oct. 1, 2015, to ICD-10, increasing the number of diagnostic codes from 13,000 to 68,000.

The transition was expected to have far-reaching, disruptive consequences, such as delays in billing and coding, the potential for increased payer denials and accounts receivable and the possibility of decreased cash collections.

However, new data shows the conversion minimally impacted cash collections, initial denial rates and days in accounts receivable, according to a report from public accounting, consulting and technology firm Crowe Horwath.

This data came from Crowe Revenue Cycle Analytics, a benchmarking solution that compiles and organizes a daily feed of transactional-level data from the patient accounting systems of nearly 600 hospitals. These reports outline findings based on an assessment of key performance indicators related to billing and coding, accounts receivable and denials. The Crowe report details the analysis of data examined through March 31.

Here are four findings from the report.

1. On average, there was minimal impact on cash collections, initial denial rates and days in accounts receivable due to the ICD-10 conversion; however, there were delays in inpatient billing and coding, Crowe said. This resulted in a 10.1 percent increase in inpatient discharge and not final billed days from October through December 2015, compared to the same period in 2014.

2. Crowe observed a temporary increase in denial claim adjustment reason code 11, indicating the diagnosis is inconsistent with the procedure, for a small number of hospitals. As a percentage of total gross patient services revenue, this denial reason code spiked from October through December 2015.

Brian Sanderson, managing principal of Crowe healthcare services, said in a prepared statement this increase could be a result of using the new classification system, but healthcare organizations must still closely monitor their denial performance to limit revenue cycle cash leakage. He explained, “Providers need the tools to perform root cause analysis and understand the true financial impact of denials to their organization, beyond assessing trending by payer and denial category. Prioritizing denial prevention efforts depends on accurately calculating the financial impact, including the resource costs of resolving existing denials and preventing future denials.”

3. Crowe specialists observed that most calculated hospital denials realization gaps, which determines overall cash leakage from denials with respect to initial denial rates, range from 3.1 percent to 7.7 percent of gross patient services revenue, including some greater than 11 percent.

4. In most cases, Crowe said, its calculated denials realization gap indicates more cash leakage is occurring than the final denial write-offs indicate. According to the report, this typically occurs due to using contractual and administrative adjustment codes that are used instead of the correct final denial write-off codes in cases where collections departments are unable to successfully resolve denied accounts.

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