TrendSpotter: Ready for Another Unfunded Mandate?

March 1, 2009

We hate to say it, but there’s a big one coming: ICD-10. The new coding system will not take effect until 2013, but it’s still going to cost you. Here’s the scoop.


Now that the Department of Health and Human Services has published its final rule on the ICD-10 coding system (which, at press time, was still under review by the Obama administration), the healthcare industry is gearing up for the transition to the new code set with varying degrees of enthusiasm or resignation. Although physicians, coders, and insurers won their battle to delay introduction of ICD-10 by two years, to Oct. 1, 2013, the challenges of switching remain unchanged.

“We’re pleased that the government heeded our concern that the proposed timelines were too aggressive and would lead to significant disruption to the claims payment cycle,” says Robert Tennant, a senior policy advisor to the Medical Group Management Association. “But it’s still going to be a significant challenge for physician practices to comply with these mandates. Even though they have more time, it’s still going to be expensive.”

According to a study commissioned by the AMA, the MGMA, and eight other professional associations, the transition from ICD-9 to ICD-10, which has 10 times as many codes as its predecessor, will cost the average three-physician practice $83,290; a 10-doctor practice will have to come up with $285,000.

HHS estimates that the implementation cost will amount to only four-tenths of 1 percent of annual revenue for office-based physicians. But the government doesn’t include the cost of additional documentation under the new coding system. That will comprise nearly two-thirds of the ICD-10-related expense for a 10-doctor group, according to the provider coalition’s study.

Neither the AMA nor the MGMA opposes the move to ICD-10, which is used in other advanced countries and offers some benefits for public health and quality improvement. But they question whether physicians will derive any financial advantage from this costly switch-over.

According to HHS, “ICD-10 will also improve claims processing and payment, and, through the use of healthcare technology that utilizes ICD-10, assist healthcare practitioners in making treatment decisions by more precisely matching diagnoses and procedures to the appropriate code.” But it will require a lot of extra physician work to comply with the new coding requirements.

Even HHS acknowledges that claims-error rates could initially rise to between 6 percent and 10 percent for up to six months around the HHS implementation deadline. And, while HHS cites fewer rejected claims as a long-term benefit of ICD-10, because of its greater level of granularity, Tennant sees the “possibility of a significant disruption in claims” because practices might have to increase the specificity of codes.

It will take time to get providers to submit ICD-10 codes that convey the requisite amount of detail. Justine Handelman, managing director, federal relations, for the BlueCross BlueShield Association, expects Medicare carriers to demand that first, because CMS rules will require it as a condition of payment. But speaking on behalf of Blues plans that serve both Medicare and privately insured patients, she says, “We’re not going into this with the idea of making it more difficult to code or get paid. We want to have a transition that’s as smooth as possible.”

A new electronic transaction set, known as the 5010, will be required for the electronic submission of ICD-10-based claims and the exchange of other administrative data between providers and payers. The 5010 set must be in place and fully tested before the ICD-10 transition can take place. The federal deadline for this changeover is Jan. 1, 2012, but Tennant is doubtful that the whole industry will be aboard by then. Partly because software vendors were slow to update practice management systems, he notes, the current transaction set took several years to roll out - and still is not fully implemented.

The new transaction set and ICD-10 will require the modification of virtually all health information programs, including practice management systems and EMRs. The EMR programs will have to be rewritten because diagnostic codes underpin their decision support and E&M coding modules, says Mark Anderson, a health IT expert based in Montgomery, Texas. Only a few vendors that do business overseas have included ICD-10 in their software, Anderson says, and that’s only in programs designed for the payment systems of other countries.

The professional groups that opposed the original ICD-10 timetable also say that far more training of doctors and staff will be required than HHS has indicated. They maintain that practices will have to hire additional coders, and that doctors will have to spend 3 percent to 4 percent more time documenting visits than they do now. The additional coders and documentation time will be permanent costs, they contend.

The BlueCross BlueShield Association opposed the earlier HHS approach because it would be costly for its member plans to upgrade their systems so rapidly and because it feared that payments to providers and consumers would be disrupted. Just the adoption of the 5010 transaction set would be a “massive change,” Handelman says.

The American Hospital Association favored the initial HHS timetable, but is now glad that it’s been postponed for two years. “It’s beneficial for hospitals right now, given all the challenges that we’re facing with respect to our economy,” says George Arges, senior director of AHA’s health data management group. However, he argues, “The replacement of ICD-9 is long overdue. The benefits that would be derived from the adoption of ICD-10 far outweigh the investment cost to transition to ICD-10.”

Among those benefits, he says, would be a greater ability to monitor quality and improve performance. Moreover, Arges says the use of more detailed diagnosis codes would help hospitals get paid “more fairly,” under HHS’ new diagnosis-related-groups system, which added hundreds of DRGs to reflect the severity of each patient’s condition. And the use of the inpatient procedure codes that are part of ICD-10 will help hospitals judge the value of new medical technologies, he says.

The new classification system will increase the number of diagnosis codes from 13,000 to 68,000. About 87,000 inpatient procedure codes will be available, as compared with 4,000 today. CPT-4 ambulatory procedure codes will be unaffected.

Whatever the long-term benefits of ICD-10, Tennant says, “Physician practices, like other businesses, are facing significant challenges with the economic downturn. Obtaining capital to invest in software that permits them to use the 5010 and ICD-10 is going to be problematic.”

Both Tennant and Arges say the government should designate some of the money it plans to spend on health IT promotion for the ICD-10 transition. But so far, there’s no word on that from the Obama administration. Tennant would also like to see this unfunded mandate factored into future negotiations with Congress about Medicare reimbursement.

“If this is being done for the betterment of public health, then the public should help defray the cost,” he says.

Ken Terry is a New Jersey-based freelance writer and the author of the book “Rx for Health Care Reform.” He can be reached via physicianspractice@cmpmedica.com.

This article originally appeared in the March 2009 issue of Physicians Practice.