Health Reform Aside, Healthcare Industry Still Faces Major Challenges

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 |  Includes: ACN, ANTM, ATHN, CERN, DELL, HPQ, IBM, MDRX, UNH
by: Sydney Williams

Regardless of how reform legislation plays out, the health care industry still has stormy seas to navigate in the months ahead. Business intelligence technology and regulatory compliance will feature prominently among these navigational challenges.

Expect health information consultancies to benefit strongly, as payers and providers increasingly seek external advice.

Last week, Milliman, an actuarial consultancy, blasted a warning shot across the industry's bow. In its survey on ICD-10 readiness, it reported that 70 percent of respondents, mostly health plans, indicates little or no prepared action.

The International Classification of Diseases, or "ICD", is a coding system that connects the entire $2.5 trillion industry. Payers and providers use it to communicate on reimbursement and administrative transactions, as well as care delivery procedures, including documentation of a patient's visit, research activities, public health reporting, and quality reporting.

A year ago, the Department of Health and Human Services ("HHS") mandated its adoption by October 1, 2013—late in coming, as the rest of the world has already switched from the earlier ICD-9 version.

The differences between ICD-9 and ICD-10 are stark. Whereas ICD-9—nearly 30 years old—provides about 13,000 diagnosis and 3,000 procedure codes, ICD-10 provides 68,000 and 87,000 codes, respectively. The format and syntax of the two systems vary substantially, as well.

Many industry insiders, in fact, compare its implementation to the time, effort and dollars spent on Y2K.

For providers, and a typical three-physician practice, the Medical Group Management Association estimates an average cost of $84,000 in system upgrades. At the same, HHS is also mandating that these practices meaningfully use certified electronic health records, and comply with new HIPAA regulations.

Many practices, as a result, confront not only severe financial challenges, especially in a pressured reimbursement environment, but also significant workflow disruptions, with potential impact on patient care.

Three-physician practices constitute about one of every two practices, and 80 percent of all outpatient visits. Any grassroots upheaval will impact the system as a whole.

Just as share prices of health IT vendors performed strongly throughout 2009, shares in health information consultancies could gain in 2010. Since January last year, Allscripts-Misys Healthcare Solutions (NASDAQ:MDRX) is up over 130 percent. Cerner Corporation (NASDAQ:CERN) is nearly 150 percent higher.

Among the large health information consultancies, Accenture (NYSE:ACN), IBM (NYSE:IBM) and even Dell (NASDAQ:DELL) and Hewlett-Packard (NYSE:HPQ) could all see increasing demand for their services.

Disclosure: No Positions