Inside HIPAA 1050 and ICD-10 How Health Care Providers Can Plan for New Mandates

Health care businesses are entering a tumultuous year. With new provisions for patient records going into effect this month, and a shift to more complex medical coding requirements, many will have to make significant changes. Their practice methods, technology, and information systems will need to be adapted. Operations, patient notifications and permissions, and cash flow are all likely to be affected.

For some, the changes add another challenge to an already-difficult environment. With the sluggish economy, uncertain reimbursements, rising costs, high individual co-pay insurance plans, and an increasing number of regulations, many health care providers are already feeling a cash-flow strain.

That makes it even more important that they are aware of and able to meet current and future changes and mandates. By being prepared, health care providers, especially small operations, can minimize the impact of these new requirements on their practices and their bottom line.

Health care is a major part of the regional economy. The Northeast Census District ranks the sector No. 1 in overall employment, according to a report from the New England Health Institute. Virtually all health care businesses interact with multiple others, meaning these regulatory changes are likely to be felt more widely.

The first task for health care practices is to understand what’s happening right now. Specifically, on Jan. 1, Version 1050 of the Health Insurance Portability and Accountability Act (HIPAA) went into effect. Version 1050 mandates that health care providers have the ability to report when patient records are accessed and by whom, and to identify what part of the record was viewed. It applies to records that are shared with the patient’s permission as well as those that are breached.

Many health care practices have multiple systems that can store patient information. Few practices compile this information in a way that easily identifies the source of patient information.

The second big mandate involves the shift in medical coding systems from ICD-9 to ICD-10, which becomes effective in 2013. ICD-10 is far more complex, with the current number of codes — about 13,600 — rising to nearly 70,000. Clearly, retraining staff and updating IT systems will be a major undertaking.

These changes will have different impacts on physician practices, diagnostic facilities, home-care providers, residential centers, and public and not-for-profit health care organizations. For all, however, failure to comply with the new HIPAA standards and ICD-10 could result in a number of adverse consequences, from lost revenue to financial penalties.

Second, and more important, to survive and thrive in a fluid environment, health care providers need to assess their readiness and compliance, develop a plan, and identify relevant professional advisors. Small businesses in particular need to fully understand the potential impact on their operations and cash flow. To help prepare, health care organizations should consider the following two issues.

How Will It Impact My Business?

Do I know what’s required in terms of training and how diverting staff to be trained will affect operations? While some transition and preparedness costs, such as training, are quantifiable, there are also hidden costs, including a slowdown in productivity and lack of efficiency. These hidden costs might result in seeing fewer patients or require more time to do billing. Medical societies, state departments of health, and newly formed regional extension centers are all great resources for how to manage the transitions.

Do I Need to Change or Upgrade Any Hardware or Software?

Do I have enough cash to meet normal replacement needs plus any new ones? A key first step is a comprehensive audit of equipment and technology. If the most recent audit was conducted more than 12 months ago, it’s time for a new one. Right now, health care organizations should be looking at whether their equipment and systems are capable of meeting Version 1050 reporting requirements and the shift to ICD-10, as well as looking ahead.

An audit is also likely to uncover the extent to which a business’s equipment and IT systems are intertwined or compartmentalized. Create a map of all potential repositories of patient information. Equipment and systems that must be in compliance range from imaging equipment to billing software, and may be linked in complicated ways.

With the fast pace of technological change, more than a few businesses are likely to find that they need to upgrade, replace, or buy new hardware and software. Vendors can be a good resource, but health care business owners and managers should also draw on the knowledge of their bankers, specifically those with health care expertise.

Health care bankers can also help an organization think about how cash flow will be impacted, and if they have sufficient liquidity to accommodate a temporary revenue slowdown. Cash flow may tighten, for instance, as new or upgraded systems and equipment are installed, staff is trained, and billing and reimbursement cycles lengthen temporarily. In addition to providing lending advice and loan-product options, health care bankers are trained to customize loans to take into account installation, training, and new billing-cycle periods when assessing the loan amount.

Under these circumstances, cash management becomes even more important. Your banker should be a resource to help assess ways to accelerate cash capture through a change in collection methods and, in some cases, the addition of certain low-cost technology.

There’s no doubt that health care providers are facing a challenging present and an uncertain future. By planning ahead, updating equipment, getting staff up to speed, and marshaling professional advisors, they can be successful now and in the future.

Mary-Stuart B. Kilner is senior vice president and regional manager of specialty banking for Webster Bank.