American Association for Clinical Chemistry
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October 2008 Clinical Laboratory News: CMS Proposed Rule to Replace ICD-9 Coding Sets

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October 2008: Volume 34, Number 10

CMS Proposed Rule to Replace ICD-9 Coding Sets
Will the Healthcare System Be Ready?

By Joan Szabo 

In August, the Centers for Medicare and Medicaid Services published its long-awaited proposed rule outlining its plans to replace the ICD-9 coding sets used by physicians and hospitals to report patient diagnoses and inpatient procedures with the more detailed ICD-10 systems. CMS, hospital organizations, and medical device manufacturers have been advocating for this change for more than a decade, asserting that the current system has reached its capacity and is unable to provide the more specific data needed for billing, quality assurance, and research needs. Others, such as physician groups and private insurers, have suggested that the costs and complexity of the changes may outweigh the potential gains. Along with the ICD-10 proposed rule, CMS also published a proposal calling for an update in the electronic transaction standards, which are needed to accept the new codes.

The clock is now ticking on this major overhaul to the diagnostic coding system, and CMS wants healthcare providers to roll out the new system by October 2011, while the upgrade to the electronic transaction standards must be in place by 2010. The proposed change is expected to touch every provider who submits diagnostic codes and every payer that processes healthcare claims, say CMS officials. Those affected include health plans, healthcare clearinghouses, and providers transmitting any electronic health information. Entities within those organizations, such as health information management departments, patient financial services, information systems, and clinical systems, will also feel the impact of the change.

But many in the field say these deadlines are unworkable and want more time to complete the two proposals. “The proposed regulation simply does not give the industry the time necessary to implement ICD-10,” said William F. Jessee, MD, president and CEO of the Medical Group Management Association (MGMA), which represents medical group practices.

Don’t Wait, Get Ready Now

Medicare compliance and reimbursement experts say many organizations haven’t even begun to think about the new codes, even though they should be involved in planning for them now. They also recommend that organizations use the opportunity to undertake a complete system-wide assessment of technology so the coding sets can be successfully implemented in 3 years. “The most successful implementations will be those that begin early and think strategically. ICD-10 is more than just a change in coding; it will impact across IT, financial, and patient safety functions as well,” wrote Caroline Piselli, RN, in her article “What’s Your ICD-10 Plan?” (Journal of AHIMA 2005;76(2): 34–37).

Despite what is seen by many as an extreme challenge, CMS maintains that transitioning to the expanded ICD-10 codes is well worth the time and expense because the new codes offer a number of important benefits for all involved. “The greatly expanded ICD-10 code sets will enable HHS to fully support quality reporting, pay-for-performance, bio-surveillance, and other critical activities,” said HHS Secretary Michael Leavitt in a press release.

Even so, CMS says it does not expect benefits to begin until the year after implementation, but they will continue to increase each year thereafter, with l00% of the benefit being realized 5–6 years after implementation. Currently, the ICD-9-CM (clinical modification) codes that are used to report inpatient and outpatient diagnoses contain approximately 13,000 numeric diagnosis codes that use three to four numbers, while the ICD-10-CM contains approximately 68,000 alpha-numeric diagnosis codes with seven numbers, about five times as many as ICD-9-CM.

The National Center for Health Statistics at CDC maintains the ICD-10 CM code set. It is based on ICD-10, which was developed by WHO and is used internationally. According to Charles Root, PhD, founder and president of CodeMap, the ICD-9-CM codes are the ones used by just about everyone in the field and they represent the diagnostic section of the system, whereas the ICD-9-PCS (procedural coding system) and ICD-10-PCS define the code set used to report inpatient procedures.

But CMS maintains the PCS codes. The agency says ICD-10-PCS codes have seven alphanumeric characters and group together services into approximately 30 procedures identified by a leading alpha character. There will be approximately 87,000 ICD-10-PCS codes, compared with 4,000 in the ICD-9-CM coding system. In addition, the ICD-10-PCS codes will precisely define procedures with detail regarding body part, approach, any device used, and qualifying information.

Getting Ready for the Proposed Change to ICD-10
Steps to Make the Switch

It is not too early to begin planning for the proposed change to the ICD-10 coding system, according to Sue Bowman, director of Coding Policy and Compliance for the Chicago-based American Health Information Management Association, which represents health information management professionals. “A well-planned, well-managed implementation process will increase the chances of a smooth, successful transition.”

Here is a list of steps to follow when preparing for the change:

  • Create ICD-10 awareness throughout the organization or office. This includes educating senior management, information system personnel, clinical department managers, and medical staff on the coming transition to ICD-10.
  • Develop a budget for ICD-10 implementation, and conduct a detailed assessment of staff education needs.
  • Assess the impact of the change to new coding systems and identify key tasks and objectives. Major tasks may include creating an implementation planning team; identifying and budgeting for required information system changes; and assessing and budgeting clinician and code set user education.
  • Make the required information system changes and conduct follow-up assessment of documentation practices, and increase education of the organization’s coding professionals.
  • Be sure vendors are ICD-10-CM ready. Interact with all vendors to ensure each one is planning to provide a system update for the new code sets.
  • Finalize systems changes, testing of claims transactions with payers, intensive education of the organization’s coding professionals, monitoring of coding accuracy, and reimbursement with prospective payment systems results, including DRG assignment.

A free webinar covering the proposed coding change and its impact is available on the AHIMA website.

Too Much, Too Fast?

Although many in the healthcare field have been anticipating the proposed code changes for a number of years, not everyone agrees on how much time should be provided to implement the new coding system. Physician groups, private insurers, and laboratory groups are urging CMS to slow down the regulatory process. In a letter to HHS Secretary Leavitt, ACLA and more than 30 other provider groups asked for time to first adopt, test, and verify the proposed electronic transaction standards, used to record the procedures physicians provide to patients, before providers have to move to the ICD-10 codes.

In a statement responding to the new proposal, Scott P. Serota, BlueCross Blue Shield Association president and CEO, wrote, “The proposed timeline for implementation is completely inadequate. Rushing the process will result in a major meltdown in the healthcare industry including—unavoidably—inaccurate and delayed payments to providers and consumers, an inability to detect fraud and abuse, and unnecessarily high total costs of implementation due to the accelerated timeline.”

ICD-10 codes will have considerable impact on clinical documentation, administrative transactions, and quality-improvement programs, says MGMA. Research by the MGMA Legislative and Executive Advocacy Response Network (LEARN) found that 95% of respondents in medical practices said they would have to purchase software upgrades for their practice management systems or buy all new software to comply with the new codes.

“Although system change requirements may vary, all would need to support the expanded number of characters in the ICD-10-CM and the ICD-10-PCS,” stated CMS in the Federal Register. In implementing the ICD-10-CM and PCS coding systems, large providers and institutions will probably need to make changes to their systems as well as perform software upgrades, while small providers will require only software updates.

As far as the timeframe for implementing the code change is concerned, CMS, hospital organizations, and medical device manufacturers believe it is manageable. “America’s hospitals strongly support moving forward to ICD-10, a new coding system that will allow for better patient quality through improved health technology and data collection,” said American Hospital Association Executive Vice President Rick Pollack. “We urge CMS to quickly undertake the regulatory process to replace ICD-9-CM with ICD-10.”

In announcing the new proposal, CMS Acting Administrator Kerry Weems said, “We recognize that the transition to ICD-10 will require some upfront costs.” But each year of delay creates additional costs associated with not being able to measure more precisely the value of healthcare spending, he noted. (See Table, below).

Implementing ICD-10 Coding Sets
What Will It Cost?

Projected costs in millions of dollars.

Full-time Coders (inpatient)
Part-time Coders (outpatient)
Code Users
Productivity Losses
Coders (inpatient)
Coders (outpatient)
Physician Practices
Improper and returned claims
Systems Changes
Software Vendors
Government Systems
Source: Centers for Medicare & Medicaid Services

What’s Behind the Switch?

CMS offers a number of reasons for the code change. A major one is the outdated nature of the current coding system. The ICD-9 codes were developed 27 years ago by WHO, based on the medical knowledge of the 1970s. Every country in the world except the U.S. is currently using the ICD-10 coding system for mortality and morbidity purposes. “As of October 2002, 138 countries have adopted ICD-10 for coding and reporting mortality data, and 99 countries have adopted ICD-10 or a clinical modification for coding and reporting morbidity data,” CMS wrote in the Federal Register notice. CMS also says details for the advanced technology procedures currently being performed today were not available when ICD-9-CM was being developed. Numerous ICD-9-CM procedure codes are based on technology that is now outdated.

The agency also says conversion to ICD-10 is essential to development of a nationwide electronic health information environment. The current coding system is not able to handle several emerging uses such as pay-for-performance and biosurveillance, and it limits the precision of diagnosis-related groups as a result of very different procedures being grouped together in one code. DRGs are assigned based on diagnoses, procedures, age, sex, and the presence of complications or comorbidities.

Other drawbacks of the ICD-9 code set include the fact that the old coding system uses terminology inconsistently and lacks codes for preventive services. The ICD-9 system is expected to eventually run out of space, particularly for procedure codes.

According to the American Health Information Management Association (AHIMA), the proposed change will help the U.S. better maintain clinical data comparability with the rest of the world concerning the conditions prompting healthcare services. ICD-10 will make it easier to share disease and mortality data at a time when global data sharing is critical for public health. For example, ICD-10-CM would have better documented the West Nile virus complex for earlier detection and better tracking. CMS points out that because the U.S. is capturing morbidity data using the outdated ICD-9-CM, there are problems identifying new health threats such as anthrax, SARS, and monkeypox.

The Health Insurance Portability Act of 1996 (HIPPA) is another factor driving the proposed change. “One of the major purposes of HIPAA was to force everyone in the healthcare field to use electronic billing,” said Peter M. Kazon, ACLA counsel and senior counsel in the Washington, D.C. office of Alston & Bird. To reach that goal, healthcare organizations and providers must adopt the proposed electronic transaction standards (Version 5010). This version is essential to the use of the ICD-10 codes, says CMS.

In a separate proposed regulation, CMS set a deadline of April 1, 2010, for electronic transaction standards, used to record the procedures physicians provide to patients. This gives providers a year and a half after the national electronic transaction standards are upgraded to accept the new codes.

In the long term, Root believes the proposed changes will benefit everyone in the field, including labs, because the ICD-10 codes are more precise. “A lot of problems with lab tests being denied have to do with the fact that the codes are inaccurate, and some don’t exist,” he explained. The proposed changes should help some with this problem, but not completely, he added. That is because the CPT coding system, which often causes some of the claim denials for labs, will not be affected by the proposed changes. CPT codes will remain the coding system for physician services.

Preparing for Implementation

Just how much effort will be needed to prepare for the implementation of the ICD-10 coding sets? In its letter to HHS Secretary Levitt, ACLA maintained that the change is equivalent to the effort associated with transitioning the industry to a standard, electronic transactions environment that was mandated under HIPAA.

While healthcare organizations and practitioners have 3 years to prepare for the code change, wise organizations are looking at implementation details now, says Jay Jones, PhD, director of Chemistry and Regional Laboratories for Geisinger Health Systems in Danville, Pa. “This change has the potential for having a real financial impact on health care organizations that don’t have a good conversion plan in place,” he said.

A number of departments in the Geisinger system are already developing a strategy for implementing the proposed change. The departments include the admissions, medical records, billing, business, physician credentialing, laboratories, and radiology. “Labs, for example, will have to know how to code in order to get bills paid,” said Jones. The coding change also means there will be many more procedure codes that have to be coded properly under the DRGs. “It is going to have a huge impact in that area,” he predicted. Changes in DRGs are expected to take place after final implementation of the ICD-10 code sets so data can be collected.

An even bigger impact will be felt on the outpatient side of laboratories, notes Diane Shulski, team leader for Geisinger’s lab billing service. “Patients who are not in the hospital can go anywhere for lab work. Work is coming into your site and assessments are being sent in with individuals from outside your own organization. Physicians must be able to choose the appropriate codes,” she explained. This will involve a big educational campaign because there are so many more codes to choose from.

In addition, Kazon says it will be more important than ever for physicians to provide laboratories with the correct codes for diagnoses. “If they don’t receive the correct codes, laboratories won’t get paid,” he warned.

For More Information

To read the proposed ICD-10 rule, go to the Federal Register website, and click on “retrieve an FR page :49795-49832.” CMS is accepting comments on the proposal through October 21, 2008, with implementation scheduled for October 1, 2011.

Educating the Coders

A successful switch to ICD-10 will mean the nation’s coders will have to learn and understand the new system. Training coders for ICD-10 will require the development of a new curriculum, publication of curriculum materials, and most importantly, adequate workforce training to support the providers and billers under ICD-10, ACLA wrote to HHS.

Sue Bowman, director of coding policy and compliance for AHIMA says a good deal of training resources will be available. For example, CMS plans to proactively conduct outreach and education activities, as well as engage industry leaders and other stakeholder organizations to provide education and other resources to their members. AHIMA plans to provide educational resources and training for coders. Previous experience indicates that coders should be able to learn the new ICD-10-CM codes in 2–3 days of training, she says.

Even so, the transition to a new coding set will take some time to accomplish.

Kazon summed it up this way: “It is no longer a question of if the change will take place, but when it will happen. Right now there are a lot of pieces that must be put in place before implementation can go forward.”

Joan Szabo is a freelance writer in Great Falls, Va.