ICD-10's impact on reimbursement

ICD-10 implementation has been delayed by the Centers for Medicare and Medicaid Services until October 2015. Despite past and potential future delays, providers must appreciate that many current managed care agreements likely include binding language that will impact reimbursement changes resulting from ICD-10 implementation, particularly for inpatient services.

Coding discussions to date fail to address that ICD-10 likely will require changes in how plans reimburse for certain services and how coverage is determined.

Under ICD-10, the number of diagnostic codes available for coding healthcare services will go from 13,000 to 68,000. For inpatient services, diagnosis and procedure codes are often grouped through software programs into diagnostic-related gro

ups (DRGs). These “groupers” are central to the claims and payment process for inpatient services because claims payment is based on the DRG. As part of ICD-10 implementation, new DRG “grouper” methodologies will be needed to translate the new codes into DRGs for payment.

For inpatient services, reimbursement rates based on a percentage of what Medicare pays likely will be least impacted. Reimbursement rates based on negotiated case rates tied to specific DRGs likely will be most impacted. As such, case rates will need to be adjusted or reassigned to DRGs within a new grouper methodology. 

Some managed care agreements may address ICD-10 conversion by requiring providers and the plan to comply with ICD-10 in claims submission and payment processes as of the implementation date. Agreements for reimbursement of inpatient services based on case rates tied to specific DRGs will require plans to implement new rates in conjunction with ICD-10 implementation. While it’s impossible to predict how such rates will need to change, agreements typically have multiyear terms with limited rights to terminate early.

NEXT: Revenue neutral

Revenue neutral

It may not be easy to determine what “revenue neutral” means when comparing what was paid for a service based on ICD-9 codes and a DRG grouper to the new DRG grouper based on ICD-10 codes. In fact, comparisons are impossible unless medical records are coded for both ICD-9 and ICD-10.

The agreement may permit the plan to decide what “revenue neutral” means and only give providers a right to dispute the interpretation. Providers may have a limited window to dispute, and may not have adequate data to assess the issue. Therefore, long-term agreements without an audit right or third-party review of “revenue neutrality” are problematic. This challenge is magnified if the agreement permits a plan to otherwise make rate changes, limiting a provider’s claim that ICD-10 conversion results in a material breach.

The ICD-10 conversion also will have a ripple effect on a managed care plan’s coverage and payment policies and reporting systems that are based on diagnostic codes, requiring updates for ICD-10 codes. Changes to such policies and reports may impact reimbursement as well.

Because significant payment disputes are possible, providers should proactively address the ICD-10 issues in their current contract negotiations. Provisions addressing grouper changes, specifically addressing ICD-10, those referencing “revenue neutral” requirements and provisions dealing with policy and manual compliance should be carefully evaluated in current contract reviews.

Jackie Selby and Bethany J. Hills are members of Epstein Becker Green's Health Care and Life Sciences practice and reside in the firm's New York offices.