Revenue stream disruption caused by the ICD-10 conversion has the potential to negatively affect some nonprofit hospitals' credit ratings, according to a report from Fitch Ratings.
Fitch Ratings believes the majority of the rated organizations in the nonprofit healthcare sector will be prepared for the Oct. 1 deadline, and available assets will help offset the IT and training costs during the transition.
However, the transition is further complicated by payers' and the government's simultaneous switch to ICD-10. Although many hospitals are well-prepared, the sheer magnitude of the transition within the industry is likely to add pressure to hospitals' cash flows, and may cause downgrades in hospitals with weak liquidity positions or depressed profitability.
"It is a challenging time as healthcare reform moves forward and other pressures, such as sequestration, inpatient volume declines and reduced reimbursement are being felt," said Gary Sokolow, director of Fitch's U.S. Public Finance Group, in a news release. "ICD-10 conversion will bring additional costs at a time when hospital operations are already under pressure."
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