Fitch: ICD-10 Delay a Positive for Non-for-Profit Hospitals

April 8, 2014
The one-year extension of the deadline for hospitals and payers to transition to ICD-10 is viewed as a positive credit development for not-for-profit hospitals, according to a report from Fitch Ratings, a New York City-based global rating agency.

The one-year extension of the deadline for hospitals and payers to transition to ICD-10 is viewed as a positive credit development for not-for-profit hospitals, according to a report from Fitch Ratings, a New York City-based global rating agency.

Under ICD-10, the number of codes used for diagnosis will expand by a factor of eight, which will increase coding complexity and likely challenge providers and payers in the near term, the report concluded. While a majority of providers have made the substantial investment in technology and personnel to be ready for the transition, the readiness of both governmental and commercial payers to adequately process claims and payments in a timely manner has been questioned, the report said. According to the agency, lower rated credits would be more susceptible to this risk and have less financial resources to absorb a potential delay in reimbursement.

While the majority of hospital providers Fitch rates are prepared for the Oct. 1 transition, the potential disruption to the revenue cycle could have a negative credit impact on the sector (particularly on lower rated credits). President Obama signed the extension into law on April 1, allowing more time for providers and payers to prepare for the change.

Fitch Ratings had previously expressed concern about the impact of the conversion to ICD-10 on not-for-profit hospitals. In March, a Fitch report said that while the financial impact of the conversion to ICD-10 is expected to be manageable for non-profit hospitals, the potential for revenue cycle disruption may have negative credit reverberations. "ICD-10 conversion will bring additional costs at a time when hospital operations are already under pressure," said Gary Sokolow, director in the U.S. Public Finance Group, in that report.

Various industry groups have expressed disappointment in the one-year delay, which was included in the Sustainable Growth Rate (SGR) "doc fix" bill just signed by President Obama. One of those associations, the Washington, D.C.-based American Health Information Management Association (AHIMA), expressed deep disappointment in the extension, estimating that another one-year delay of ICD-10 would likely cost the industry an additional $1 billion to $6.6 billion on top of the already incurred costs from the previous one-year delay.  This does not include the lost opportunity costs of failing to move to a more effective code set, AHIMA said.

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