The International Statistical Classification of Diseases and Related Health Problems (“ICD”) is a standard diagnostic tool developed by the World Health Organization (“WHO”) for epidemiology, health management, and clinical purposes. While the tenth iteration, ICD-10, was endorsed in 1990 and came into use back in 1994, the U.S. has been slow to adopt the new standards and continues to use the outdated ICD-9 version to this day.
On October 1, 2014, the ICD-9 code sets used to report medical diagnosis and inpatient procedures will be replaced by ICD-10 code sets. The transition will be required for everyone covered by the Health Insurance Portability Act (“HIPAA”), although it doesn’t affect CPT coding for outpatient procedures and physician services. In this article, we’ll take a look at how this change is creating opportunities for companies like CodeSmart Holdings Inc. (OTCQB: ITEN).
ICD-10 Involves Significant Changes
The differences between ICD-9 and ICD-10 are significant, according to the American Heart Association (“AHA”). For example, ICD-10-CM codes are three to seven characters and total 68,000, while ICD-9-CM codes are only three to five digits and total 14,000 codes. These increased number of codes, greater number of potential characters per code, and increased code specificity will require significant planning, training, and upgrades where necessary.
Any ICD-9 codes used in transactions for services or discharges on or after the October 2014 deadline will be rejected as non-compliant and will not be processed. While medical care organizations are encouraged to setup lines of credit to mitigate cash flow interruptions, proper training and implementations in advance could go a long way towards avoiding any problems and ultimately any revenue or profit implications that they may entail.
CodeSmart Leads Education Efforts
CodeSmart Holdings is a leading provider of ICD-10 education and compliance services in the United States. Endorsed by over 60 colleges and universities around the world, CodeSmart University is an online program for existing coders, new coders, clinicians, and healthcare roles of all types, offering education to the millions of people in healthcare and also to consumers via interactive education and live professors that guide students through the programs of study.
In addition to its online university training, the company provides ICD-10 transition, outsource coding, coding audits, critical documentation improvements and revenue cycle continuum services to medical organizations. These services will likely become increasingly in demand as the October 2014 deadline approaches and medical organizations realize the extent of training and services needed in order to comply with ICT-10 rules.
Significant Growth Potential Ahead
CodeSmart Holdings aims to capitalize on a tremendous shortage of ICD-10 coders resulting from the large amount of work that needs to be done to comply with the new standard. While there are a handful of companies offering online training, CodeSmart is the only publicly traded company that houses all of these operations under the same roof. And on the technical side, its programs are highly rated and among the top programs in the country.
By the end of this year, the company aims to enroll 500 to 1,000 students, while management projects this will grow to approximately 5,000 to 10,000 students by next year. The company’s programs charge each new coder $4,100 and each existing coder $1,500 for the program, which implies that revenues could reach at least $12 million and up to $41 million next year. And, one analyst report from July 2013 projects that these revenues could scale to around $100 million by 2016.
Potential Investment Opportunity
CodeSmart Holdings represents an attractive potential investment opportunity, given the pending ICD-10 changeover and analyst projections. With a market capitalization of just $35 million and the potential for FY 2014 revenues to scale beyond that point, investors in the online education space – including companies like DeVry Inc. (NYSE: DV) or Apollo Group Inc. (NASDAQ: APOL) – may want to take a closer look at the stock ahead of these upcoming catalysts.