ICD-10 Mandate to Break Physicians’ Bank

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The typical 10-physician practice will spend $285,240 to comply the new federal mandate to adopt the ICD-10 code set by 2011. The controversial proposal from HHS would significantly 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, Reisterstown, Md.

“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.”
—William F. Jessee, MD, FACMPE, MGMA CEO

Researchers estimated much higher costs associated with implementing ICD-10 than CMS estimates, reported in the last issue of RadInformatics. This will place a major burden on providers, taking valuable time away from their patients and straining other resources needed for investment in health IT. Armed with this new information, the coalition that sponsored the study has called on HHS to reconsider its plan to adopt ICD-10 so quickly and to extend the implementation time frame, saying that the resources required would take physicians away from their patients and would use precious capital better invested in IT.

Expenses included in the $285,240 compliance price tag for a 10-physician practice are:

Total training expenditures estimates: $4,745
New claim-form (superbill) software: $9,990
Business process analysis: $12,000
Software upgrades for practice management and billing systems: $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 cost to implement ICD-10 is more than $2.7 million.

William F. Jessee, MD, FACMPE, Medical Group Management Association president and CEO, says, “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. 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.”

The proposed update of the ICD-9 code set expands diagnosis codes by a factor of five, and while the code set ultimately will bring more precision to coding, the prospect of such a rapid implementation has unhinged many provider organizations. Compounding this challenge for practices, the proposed rule for the new HIPAA transactions standards (5010 version) also was released in August 2008. Health care experts overwhelmingly agree that the 5010 standard should be in place prior to the implementation of the ICD-10.

HHS, however, proposed an overly aggressive April 1, 2010, compliance date for the 5010 HIPAA transaction standards. Joseph M. Heyman, MD, AMA board chair, says, “The AMA is deeply concerned that HHS is rushing headfirst 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 implement yet another major HIPAA change quickly, without allowing time for physician education, software vendor updates, coder training, and testing with payors: steps that are needed for a smooth transition and cannot be rushed.” Nachimson Advisors identified a large national laboratory as estimating its up-front cost of implementing the ICD-10 clinical modification (ICD-10-CM) to be in the neighborhood of $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 its main IT systems—order entry, laboratory, billing, reporting, data warehousing, and client products.

“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,” Alan Mertz, president of