The ultimate measure of whether a provider's ICD-10 processes are working efficiently and effectively will be days in accounts receivable. There are four gauges, if you will, that when looked at together will indicate to a provider what direction those days in accounts receivable are headed.

Measuring ICD-10 PerformanceAs identified in a previous blog post, the four key performance indicators are: Days to Final Bill; Days to Payment; Denial Rate; and Reimbursement Rate. Our new website, ICD-10 Central, gives providers free and real-time access to what those KPIs are for more than 2,400 hospitals. Let's briefly talk about each of the four KPIs and why they're important.

  • Days to Final Bill (how long it takes a provider to generate a bill and send it to an insurer for payment)—This is the biggest potential problem area because of the introduction of the new coding system. Can providers generate a claim using ICD-10 at the same speed and efficiency as they did using ICD-9? We expect this number to slip a bit and then rebound relatively soon as providers get more proficient at using ICD-10. If a provider's number goes up and doesn't come down like everyone else, that's a red flag that needs investigation.
  • Days to Payment (how long it takes a provider to get paid after submitting a claim)—This is less about providers and more about payers and how well payers are handling the transition to ICD-10. Still, it's important for providers to watch because if their insurers aren't paying as fast as before, the providers can find themselves in a financial pickle. If this number goes up and doesn't return to normal soon, it's something the provider needs to discuss with its payers.
  • Denial Rate (how well providers are producing claims)—Providers mistakenly think this one is about their payers, but it's really about them. If providers are doing the coding right, in most cases, the claims will be accepted and paid. We expect the denial rate to creep up because of denials for medical necessity. The level of ICD-10 specificity required to prove out medical necessity requires a lot of work by providers. The number should eventually come back down. A provider whose denial rate goes up and stays up may not have enough FTEs with the right expertise doing the coding.
  • Reimbursement Rate (how many cents on the dollar providers get paid by insurers)—This number reflects and aggregates a provider's payer mix. Poor payers may slip as they struggle with ICD-10. Big payers – primarily large private carriers – are less likely to slip because they're more sophisticated and won't let ICD-10 impact their reimbursement rates either way.
Days to payment for hospitals with 250–400 beds was 46 in August 2015. —According to the latest data from RelayHealth Financial

Days in accounts receivable will be a manifestation of the KPIs, and the KPIs will be the result of ICD-10 processes. Did providers and payers put the right processes in place to make ICD-10 work? Providers must have processes in place to flag ICD-10 problem areas, loop that information back into the billing system and execute changes necessary to improve claims submission and their own business health.

If days in accounts receivable jump a provider may have a big problem in terms of cash flow. For providers that live check to check, that could determine whether they stay open, borrow money or shut down. For providers that don't, it still could mean not writing that big check for their new health IT install or replacement hospital project. Cash is king.

But by monitoring those four KPIs, providers will be able to predict what direction days in accounts receivable may go and take the appropriate actions to avoid heading down the wrong financial path.

Joshua Berman

About the author

Joshua Berman is director of analytics and ICD-10 at McKesson. Joshua is a seasoned health care technology professional with deep revenue cycle experience. Joshua has managed application development from collections to compliance, proprietary software, billing, enterprise wide implementations, and electronic data interchange.