Reimbursement: New codes would impose "staggering" cost burden on practices, report says

The U.S. Department of Health and Human Services’ planned transition to a new set of health-care diagnosis and procedure codes could lead to big cost increases to physician practices of all sizes, according to a recently released report from Nachimson Advisors, a Maryland-based health-care information technology consulting group.

The cost to a typical small practice of switching to the International Classification of Diseases, Tenth Revision (ICD-10) code sets within the HHS’ time frame will be more than $83,000.  Nachimson says a typical small practice is one that consists of three physicians and two staff members.

In August, the HHS announced that it would update universal health-care diagnosis and procedure codes with the expanded ICD-10 set and will require providers to fully implement them by October 11, 2011. Providers currently use the ICD-9 set, which was developed 30 years ago. HHS has called ICD-9 “outdated,” due to what it calls the codes’ “limited ability” to accommodate new procedures and diagnoses. 

For a medium-sized practice, the cost increase of the transition to ICD-10 will be in excess of $285,000, according to the report. Nachimson defines a medium-sized practice as having 10 physicians, one full-time coder and six administrative staffers.

A number of medical groups, including the Medical Group Management Association have objected to HHS’ timeframe for adopting the new codes. The groups called for HHS to extend its timeframe for implementing ICD-10 codes.

“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,” says William F. Jessee, MD, MGMA’s president.  “If HHS’ 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.”

The report listed six key areas in which the transition to ICD-10 would increase costs to physician practices:

Staff education and training

Business-process analysis of health-plan contracts, coverage, and documentation

Changes to “superbills”

IT system changes

Increased documentation costs

Cash-flow disruption

Nachimson’s study was funded by the MGMA and several other groups, including the American College of Physicians and the American Medical Association.

HHS spokesman Joe Kuchler declined comment on Nachimson’s study.