Sequestration: Have you Felt the Effects?

What does sequestration mean for you and your practice? Most significantly, this means a 2% reduction in Medicare reimbursement for all services provided on or after April 1, 2013. This means that instead of Medicare payment at 80% of the allowed amount, they pay at 78% of the allowed amount. The patient is still responsible for 20%, and the provider of service has to adjust the 2%.

What Does This Look Like?

Prior to
Allowed Amount $161.61 $161.61
Medicare Payment $129.29 $126.70
Patient Payment $32.32 $32.32
Provider Paid $161.61 $159.02


The difference of $2.59 is not reimbursable by supplemental insurance, and the patient may not be billed for it. This is a “contractual obligation” and is shown on your Remittance Advices from Medicare with adjustment code “CO-223.”

What Does this Mean?

Declining revenue for Medicare providers will affect not only the provider, but their employees and patients as well. Reduction in Medicare fee schedule has become standard, however the additional 2% reduction on top of the usual reductions will become unsustainable for many providers.

The American Medical Association is projecting a loss of up to 766,000 jobs in the healthcare industry due to sequestration, (source: AMA: Sequestration Cuts Cause Real Pain for Medicare Patients, Physicians) and there is no near end in sight to the 2% fee schedule reduction.  Due to the further decline in fee schedule, it is more important than ever to ensure each claim is billed accurately for the highest reimbursement allowable, to keep on top of Accounts Receivable, and to keep communication open with patients on any out-of-pocket expenses.

ICD-10 Transition – Coming Up!

The United States is one of the last developed countries that still uses ICD-9 for diagnosis coding. ICD-10 has actually been around since 1994, and has been used in Australia, Canada, and many countries in Europe since the early 2000s.  Advances in diagnostic technology allows for more specificity, and ICD-10 offers a way to report to that level. Some main differences are:

  • Available codes jump from 13,000 with ICD-9 to 68,000 with ICD-10.
  • ICD-9 codes are mainly numeric (unless a “V” or an “E” code) and are 3-5 characters in length. ICD-10 are alpha-numberic, and 3-7 characters.
  • The additional characters in ICD-10 format specify the etiology, the anatomic site, and severity.

When new healthcare regulations and are set to roll out, the industry knows the deadline will likely be pushed back (sometimes multiple times). It is looking more certain that ICD-10 transition will be the exception to that rule, and October 1, 2014 will be the implementation date.

Will You Be Ready?

CMS has released suggested timelines , but each practice should really tailor their transition plan to fit their needs. Healthcare claims billing and reimbursement is a true collaboration between many players.  Here are a few of those players and how things may change due to ICD-10:

  • Clearinghouse and Software: Software programs will need to be updated to recognize and accept the new codesets, and your clearinghouse will also need to update their edits. Your clearinghouse should also be keeping you updated on payer readiness as it gets closer to implementation. In Charge Office Solutions takes care of this for their clients.
  • Office Staff: All office documentation that currently uses ICD-9 codes will need to be updated to accommodate for the new codeset. This may include superbills, lab orders,etc.
  • Healthcare Providers: Because each diagnosis must be coded to the highest level of specificity, Providers will need to become familiar with the level expected and document their encounters accordingly.
    EX:  Open wound of left cheek:
    ICD-9 “873.51” which specifies open wound of cheek, complicated.
    ICD-10  “S01.402A” specifies the first encounter for an open wound of left cheek and temporomandibular area.

In Charge Office Solutions will be working with each client to help ease the transition for their practice, and make it as seamless as possible. Rather than a burden, ICD-10 is a means to advance the accuracy of claims reporting and documentation.

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