Illuminating CMS projections for 2014 with our estimated ICD-10 reimbursement risk rate of 4.6%, it appears negative financial impacts of ICD-10 could indeed equal Federal losses in the mortgage crisis. To get a sum equal to the loan portfolio write-down by the Freddie Mac and Fannie Mae, multiply the ICD-10 reimbursement risk factor 0.046 x $3.2 trillion = $148.2 billion. Across NHE categories the risk factor has specific meaning to different constituencies. Employer sponsored expenditures might shift by $44 billion, Medicare and Medicaid by $29 billion, and Out of Pocket Payments by $15 billion. Many hospitals are lucky to operate on a 2% net margin, so this top line reimbursement risk could make the difference between profit and loss.

A second business case should be about compliance. Many health care executives are hoping for a delay. While CMS insists there won’t be any delay, one of the first cracks in the dike of industry compliance just appeared regarding HIPAA 5010, a precursor to ICD-10. California Medicaid is asking healthcare providers to send ‘old’ HIPAA 4010 transactions for up to a year⁹ stating, “Medi-Cal is unlikely to meet the scheduled deadline of January 1, 2012 to accept the latest version of standard electronic healthcare transactions.” Since HIPAA 5010 provides the foundation for enrollment, eligibility, claims, remittance and other transactions that will use ICD-10, it will be interesting to see how CMS responds to this new development.

[Q&A: How meaningful use is clashing with ICD-10.]

California Medicaid doesn’t get to make the final decision, but what can CMS do to a state that is already running a deficit budget? A second crack in the dike appeared Friday October 14th when HHS Secretary Kathleen Sebelius wrote a letter to Congress asking to rescind part of healthcare reform known as "Community Living Assistance Services and Supports” (CLASS) program¹⁰ stating that it was actuarially unsound.

Don’t be fooled by California’s fiscal failures or rescinded healthcare reform initiatives. ICD-10 is not part of health care reform (also known as HR 3590, or the Patient Protection and Affordable Care Act). ICD-10 is a separate mandate by the Centers for Medicare and Medicaid (CMS) in August 2008 prior to the election of President Obama. Therefore, if ‘Obama care’ reform were repealed, ICD-10 is still forecasted to go into effect on time October 1, 2013. With all of the data available on the Internet about ICD-10 risk, the questions we should be asking are not whether you will have risk or whether you need to comply. Decide whom to involve within your organization, and who will lead the effort. Will you delegate to IT? If so, ensure IT facilitates business involvement. If the CFO leads, ensure that IT, clinical, and other stakeholders have a seat at the table. Second, decide whether you will address it as an innovation and quality improvement program or as regulatory compliance only. We call this ‘survive vs. thrive’ approach to ICD-10.

Like Y2K remediation in the 1990s, ICD-10 remediation will force an ancillary benefit. There are many aging and brittle transaction systems in health care that companies have postponed upgrading. It has been suggested that on September 11, 2001, the New York infrastructure (including subways, phone service, and financial transactions) were able to continue operation because of the redundant networks established in the event of Y2K bug impact and the contingency plans devised by companies.

Your IT department probably knows about these problems, but feels helpless to secure the business support and budget to improve systems because it is often seen as cost centers instead of valued partners and enablers of strategic advantage. If you make a business case to remediate and upgrade systems for regulatory compliance alone, that could be a partial win.