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New Study Finds ICD-10 Mandate Hardship for Health Care Providers

Typical 10-physician practice to spend $285,240 to comply with new federal mandate

(Washington, DC), Oct. 14, 2008 — A controversial proposed rule from the US Department of Health & Human Services (HHS) requiring all physician practices and other providers to adopt a new coding set – the ICD-10 code set – by 2011 would dramatically increase costs for physician practices and clinical laboratories, according to a new cost study initiated by a broad group of provider organizations and conducted by Nachimson Advisors. Armed with this new information, these groups call on HHS to carefully reassess its plan to rapidly adopt ICD-10 and extend the implementation time frame. The costs associated with implementing ICD-10 in such a short timeframe, are markedly higher than what CMS has estimated and will place a major burden on providers, taking valuable time away from their patients and straining other resources needed to invest in health information technology.

Cost estimates for practices and laboratories to implement ICD-10 were highlighted in the study. The total estimated cost for a 10-physician practice to move to ICD-10 would be more than $285,000.  These expenses include:

  • 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

For a small, three-physician practice, the total cost to implement ICD-10 is estimated to be $83,290, for a large, 100-physician practice the estimated costs to implement ICD-10 is more than $2.7 million.

“We are just now beginning to learn the increased costs on physician practices associated with moving to the ICD-10 code set – and they are staggering,” said William F. Jessee, MD, FACMPE, Medical Group Management Association president and CEO.  “If HHS’s proposed 2011 timeframe for implementing ICD-10 goes forward as planned, physician practices will have to cope with a crushing burden of added costs, duplicative systems, and confusion over health insurers’ coverage decisions. HHS’s proposed timeframe is unworkable for patients, physician practices and clinical laboratories and needs to be changed.”

This past August, HHS proposed a new rule that would require all physician practices and clinical laboratories to use this new coding set as the standard code set for coding diagnoses on all HIPAA standard transactions. This proposed update of the ICD-9 code set expands diagnosis codes by a factor of five. Compounding this challenge for practices, the proposed rule for the new HIPAA transactions standards (5010 version) also was released in August.

The health care industry agrees that the 5010 standard must be in place prior to ICD-10. Even the Department’s own advisory group, the National Committee for Vital and Health Statistics (NCVHS) recommended a minimum two-year implementation period to test and verify the standards is needed and that work on ICD-10 not begin until two years after the deadline for the 5010 version HIPAA transactions standards. However, HHS proposed an overly aggressive April 1, 2010 compliance date for the 5010 HIPAA transaction standards. The implementation of the 5010 standard and the ICD-10 code set together will have a profound impact on the operations of physician practices and clinical laboratories.

Joseph M. Heyman, M.D., board chair, American Medical Association (AMA) stated "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.  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."

Clinical Laboratories

In the study, Nachimson Advisors identified a large national laboratory as estimating its up-front cost of implementing ICD-10-CM to be approximately $40 million, including IT and education costs.  This is based roughly on estimating that ICD-10-CM will be twice as difficult as National Provider Identifier, and that the impact will reach across all of their main IT systems – order entry, laboratory, billing, reporting, data warehousing and client products.  This laboratory expects the implementation to take 3-4 years after HIPAA upgrades (i.e., implementation of the 5010 version of the HIPAA standard transactions) are complete.  However, the implementation of ICD-10-CM will result in a permanent increase in operational costs for large clinical laboratories due to the ongoing personnel expense associated with the hiring of hundreds of dedicated, certified translators.

“This study illuminates the fact that adopting ICD-10 will be far more costly for physician practices and clinical labs and much more complicated than HHS acknowledges in the proposed rule,” said Alan Mertz, president of the American Clinical Laboratory Association. “We are hopeful that HHS will review this study closely and revise their compliance strategy to correspond with a more appropriate timeline.”

Total Cost Summary of Costs

 


Typical Small Practice


Typical Medium Practice


Typical Large Practice

 
Education

 $2,405

$4,745

$46,280

Process Analysis

$6,900

$12,000

$48,000


Changes to Superbills

$2,985

$9,950

$99,500

 
IT Costs

$7,500

$15,000

$100,00


Increased Documentation Costs

$44,000

$178,500

$1,785,000

 
Cash Flow Disruption

$19,500

$65,000

$650,000

Total

$83,290

$285,195

$2,728,780

View fact sheet of study findings.

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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 retained Nachimson Advisors to assess the cost impact of the proposed ICD-10 rule on providers. 

 

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