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Agencies must prepare for cash flow disruptions due to ICD-10,
experts suggest

Agencies that don’t have six months’ worth of operating cash on hand should secure a line of credit to prepare for reduced productivity, claims delays and denials on and after Oct. 1, 2015. But many agencies don’t expect to have that much money available in time for the ICD-10 roll out and may lack a backup plan to deal with cash flow disruptions, according to a recent Home Health Line ICD-10 survey.

A line of credit, which can be provided by banks, is a source of additional cash that can be tapped at an agency’s discretion but the agency must pay interest on money withdrawn. Most credit card rates for customers with good credit scores are running at about 9 or 10%, says John Reisinger, owner of Innovative Financial Solutions for Home Health in Tampa, Fla. However, a reasonable rate could be 13% to 16%, and agencies with weak financials might see rates as high as the low 20s.

Agencies in need should seek a line of credit as soon as possible, Reisinger suggests. They’ll get a higher line of credit when they have a surplus, a profitable history and a successful business model, he adds.

Keep six months’ cash reserves with half that as the line of credit, Reisinger says. But the more money requested or the longer the time frame to be covered, the more difficult and costly it will be for your agency to obtain. When it comes to a backup plan for cash-flow emergencies, about 45% of respondents don’t have one. About 34% will prepare at least six months’ cash reserve, while about 26% will take out a line of credit. A small percentage — 8% — plan to take out a loan.

More than one-third of the 248 respondents to the survey say they’re concerned that ICD-10 will trigger claims delays and denials. In the same survey, 45% of respondents say they don’t have a backup plan to protect their agencies from cash flow disruptions caused by to ICD-10, which will bring new, complex codes and documentation requirements.

Survey data on ICD-10 concerns

Interested in what concerns your peers most about the ICD-10 transition? Check out this data based on Home Health Line survey data!

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