Costly Compliance

LYNNE JETER

Costly Compliance | U.S. Department of Health & Human Services, HHS, HIPAA, ICD-9, 5010, Nachimson, William F. Jessee, American Health Information Management Association, AHIMA, Medical Group Management Association, MGMA

Dr. William F. Jessee, MGMA President and CEO

New Rule Proposed by HHS Would Create Financial Burden for Healthcare Providers

WASHINGTON, D.C. — When the U.S. Department of Health & Human Services (HHS) proposed a controversial new rule last August that would require all physician practices and clinical laboratories to use a new coding set as the standard code set for coding diagnoses on all HIPAA standard transactions, the news did not go over well with healthcare providers.

This proposed update of the ICD-9 code set would result in costly compliance, they said, noting the proposed rule expands diagnosis codes by a factor of five.

Compounding this burden for practices, the proposed rule for the new HIPAA transactions standards (5010 version) also was released in August.

Even though healthcare industry leaders agree that the 5010 standard must be in place prior to ICD-10, and the Department's own advisory group, the National Committee for Vital and Health Statistics (NCVHS), recommended a minimum 2-year implementation period to test and verify the standards are needed, and that work on ICD-10 should not begin until two years after the deadline for the 5010 version HIPAA transactions standards, HHS suggested imposing an 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, according to a new cost study initiated by a broad group of provider organizations and conducted by Nachimson Advisors.

These groups—The American Academy of Dermatology, American Academy of Professional Coders, American Association of Neurological Surgeons, American Association of Orthopaedic Surgeons, American Clinical Laboratory Association (ACLA), American Medical Association (AMA), American Optometric Association, American Physical Therapy Association, American Society of Anesthesiologists, and the Medical Group Management Association (MGMA)—have asked HHS to carefully reassess its plan to rapidly adopt ICD-10 and extend the implementation time frame, based on results of the study.

Group leaders say costs associated with implementing ICD-10 in such a short time frame are markedly higher than what the Centers for Medicare and Medicaid Services (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.

According to the study, cost estimates for practices and laboratories to implement ICD-10 would total nearly $300,000 for a 10-physician practice to move to ICD-10. These expenses include $178,000 for increased documentation costs, $65,000 for increases in claim inquiries and reduction in cash flow, some $15,000 for practice management and billing system software upgrades, $12,000 for business process analysis, nearly $10,000 for new claim form (superbill) software, and nearly $5,000 for estimated total training costs.

The study also estimates the total cost to implement ICD-10 for a small, 3-physician practice is $83,290. For a large, 100-physician practice, the estimated costs to implement ICD-10 is more than $2.7 million.

"We're 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, president and CEO of MGMA. "If HHS's proposed 2011 time frame 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."

AMA board chairman Joseph M. Heyman, MD, said 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 healthcare 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're committed to improving the healthcare 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."

A sizable unnamed national laboratory referred to in the study estimates its upfront cost of implementing ICD-10-CM at approximately $40 million, including IT and education costs, based roughly on estimating that ICD-10-CM will be twice as difficult to implement as the 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.

The study indicated this laboratory expects the implementation to take three to four years after HIPAA upgrades (such as 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, according to the study.

"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 ACLA president Alan Mertz. "We're hopeful that HHS will review this study closely and revise their compliance strategy to correspond with a more appropriate timeline."

Not everyone agrees with the study's findings.

"The American Health Information Management Association (AHIMA) has problems with the underlying assumptions upon which the Nachimson study referenced by the Medical Group Management Association is based," said AHIMA CEO Linda L. Kloss, MA, RHIA. "Obviously, the cost of implementation for ICD-10 will only grow the longer we delay initiating that process."