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Financial impact of ICD-10 medical procedure codes

The changeover to the ICD-10 code set in 2015 will be costly—so much so that large organizations like the RAND Corporation realized it early on.

Their early research predicted the conversion to ICD-10 could cost the health care industry between $475 million and $1.5 billion over ten years, costs that would come from staff training, loss of productivity, and changing systems. On the plus side, however, the study also predicted great financial gain as a result of the changeover, assuming that, over the same ten years, the industry would gain between $700 million to $7.7 billion in cost savings.1 This is an estimate that can't be ignored in the complicated world of medical billing and medical billing codes.

Other analysts have also studied the widespread financial impact of ICD-10. The Nachimson Advisors, a health care strategic planning firm, has conducted multiple studies focused on estimating costs by the size of each practice. The most recent study from February 2014 demonstrates the variability in costs and confirms the need to assess the ICD-10 impact on a practice specific basis in a number of key categories:2

The RAND prediction actually has smaller estimated costs than that of a more recent study. In 2011, the U.S. Department of Health and Human Services (HHS) estimated that the overall cost of transitioning from ICD-9 diagnosis and medical procedure codes to ICD-10 codes would be $1.64 billion. This estimate includes $357 million for staff training, $572 million for losses in productivity, and $713 for system changes. The good news is the HHS' savings prediction is greater too, estimating that health care entities will save more than $87.7 million annually—and as much as $3.95 billion by 2023.3

Overall impact on organizations
The worries of many health care entities go beyond just the financial ramifications of the transition. Some are concerned about the overall impact of converting to ICD-10 diagnosis and medical procedure codes, including the operational hassle, time spent training, and the necessary changes to systems.

The Centers for Medicare & Medicaid Services assessed and predicted the business areas that would be most impacted, considering operations, modifications to processes, and costs. The cost impacts were categorized as high (> $10,000,000), medium ($1,000,000 to $10,000,000), modest ($100,000 to $1,000,000), and minor (under $100,000).4

Here is the prediction on overall impact, per operation:

Highest areas of impact

  • Claims processing
  • CMS system repositories
  • Developing and implementing payment policies
  • Quality measures and payment initiatives
  • Developing and utilizing assessment tools
  • Risk adjustment
  • Quality improvement activities
Medium areas of impact
  • Appeals
  • Coordination of benefits
  • Medicare integrity
  • Medicare secondary payers
Modest areas of impact
  • Research
  • Demonstrations
  • Evaluations
  • Medicaid integrity
  • Medicaid policy and operations
  • Provider cost reporting

1 See "The Costs and Benefits of Moving to the ICD-10 Code Sets," RAND Corporation. March 2004, p. 17, http:// www.rand.org/pubs/technical_reports/2004/RAND_TR132.pdf.

2 "The Impact of Implementing ICD-10," Nachimson Advisors, LLC, October 8, 2008, pp. 3-5.

3 "5 Insights for Executives," Ernst and Young, May 2011, p.5, http://www.ey.com/Publication/vwLUAssets/ICD-10_final/$FILE/5_ICD-10.pdf.

4 "CMS ICD-10 Planning Initial Summary of AHIMA Executive Report." Centers for Medicare & Medicaid Services, http://www.cms.gov/Medicare/Coding/ICD10/downloads/AHIMASummary.pdf.

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