cash flow squeeze

If you are a doctor or health care professional, you are probably very familiar with the ICD (for those outside the field, it stands for International Classification of Diseases and is the system of codes used for medical billing and reimbursement purposes). The United States medical system is slooooooowly transitioning from using ICD-9 codes to ICD-10 (most industrialized countries made this switch several years ago), with a compliance deadline of October 1, 2015.  (The deadline is October 1st)  If you are not in healthcare, please be prepared to be empathetic toward your medical providers after October 1st, as they will be stressed with a major cash flow problem!

This transition is much needed–the more specific data that the updated version will provide is expected to improve diagnostic trends and responses to epidemic outbreaks and bioterrorism events–but it also comes with some major headaches as systems are updated and physicians are educated on how to implement the new codes in their practices.

Submitting claims is the primary revenue stream for most medical practices.  In order for a claim to be paid, there are many components:  EMR Software, Medical Billing Software, Clearing Houses and all the Insurance Payers (Medicare, Blue Cross, Humana, etc.).  All of these “components” have had to invest a lot of money to transition to ICD-10.  The Department of Health and Human Services published a regulation requiring this update back in 2009.  It has been delayed for many years.  However, it seems very unlikely that it will be delayed again this year.

On the financial side, this is also going to cause CASH FLOW problems. Medical billing is already a fraught process that can cause cash flow problems.  It is not uncommon that it can take (on average) 30 days for a claim to be paid, 30% might be rejected, and 49% of patients don’t pay their bills.  The 49% of patients that are not paying their bills is likely due to the patient not even being billed correctly or at all by the doctor for the balance due. The patient may not understand why they owe the money and the doctor’s office may not even follow up or have a good collection process in place.  In today’s environment, it is a challenge for a doctor to get paid for your office visit!

The ICD-10 transition is estimated to cause a huge increase (as much as 100 to 200%according to studies by Medicare/Medicaid!) in claim denials, making this tricky process even more difficult to manage.  In order for a claim to be paid, it has to be processed correctly through the EMR software, to the Billing software, to the Clearing House, and to the Insurance Payer.  There is an opportunity for a claim to be denied/rejected or its processing slowed down at any one of these components, as each will have challenges with accepting the new codes.

The cash flow experts at Centennial Revenue Management can be valuable partners in this transition, helping medical practices navigate these changes. Our financial forecasting and modeling tool will give you an accurate projection of what your cash flow will look like going into this transition so that you can proactively reduce expenses and create strategies to offset the decline in revenue. We can also help you model the effect of lines of credit or restructuring debt.
Make sure you aren’t caught out when the new coding goes into effect! Protect yourself against a predicted decline in revenue by working with Centennial Revenue Management on cash flow forecasting. Contact Debra Robinson at for a free consultation.