News Story

Cost Study: ICD-10 Rules Mean Hardship for Industry

New ICD-10 coding set rules, proposed by the US Department of Health and Human Services (HHS) for mandatory adoption by 2011, would dramatically increase costs for physician practices and clinical labs, according to a new cost study.

The study, initiated by a wide-ranging group of provider organizations and conducted by Nachimson Advisors, indicates the actual costs of implementing the controversial ICD-10 changes within 3 years will be significantly higher than initial estimates, and will place a major burden on providers. The groups behind the study are calling on HHS to reassess its proposed rule and extend the implementation time frame.

According to the study, the transition will require physicians to reduce patient time, strain existing resources, and cut plans for investments in advanced health information technology. The total estimated cost for a 10-physician practice to move to ICD-10 regulations will be more than $285,000, broken out as follows:

• Total training expenditures estimates —$4,745
• New claim form (superbill) software —$9,990
• Business process analysis—$12,000
• Practice management and billing system software upgrades—$15,000
• Increases in claim inquiries and reduction in cash flow—$65,000
• Increased documentation costs—$178,500

The study team also provided estimated transition costs for smaller and larger practices, as well as clinical laboratories. For a three-physician practice, the implementation expense will be more than $83,000; for a 100- physician practice, the costs of enacting the new rules will be more than $2.7 million. A large national laboratory might expect up-front costs of approximately $40 million, and a permanent increase in operational costs.

“The AMA is deeply concerned that HHS is rushing head-first into the transition to a complex coding system without fully recognizing the impact on the health care system,” said Joseph M. Heyman, MD, board chair, American Medical Association, in a statement. “Physicians, insurers, medical labs, and others are raising the alarm that the costs, documentation, and training required by ICD-10 will be significantly greater than HHS now recognizes. We are committed to improving the health care system, but we cannot let history repeat itself as CMS attempts to quickly implement yet another major HIPAA change without allowing time for physician education, software vendor updates, coder training, and testing with payers—steps that are needed for a smooth transition and cannot be rushed.” The HHS rule, proposed in August, updates the ICD-9 code set and expands diagnoses codes by a factor of five. The rule would require use of the new coding set for coding diagnoses on all HIPAA standard transactions by all physician practices and clinical laboratories. The controversy surrounding the rule stems from the accelerated implementation schedule. A new proposed rule for HIPAA transactions standards (5010 version), released in August, presents a series of challenges for physicians, and many industry experts and practitioners agree the standard should be in place for several years prior to any ICD- 10 changes. HHS, however, proposed a timeline that would mean simultaneous implementation. According to this study, and to objections lodged by a growing number of organizations, this will place tremendous hardship upon practices and laboratories.

Medical organizations initiating and supporting this cost study, and the recommendations for a revised timeline, include the American Academy of Dermatology, American Academy of Professional Coders, American Association of Neurological Surgeons, American Association of Orthopaedic Surgeons, American Clinical Laboratory Association, American Medical Association, American Optometric Association, American Physical Therapy Association, American Society of Anesthesiologists, and the Medical Group Management Association.