Costs of ICD-10 Could Exceed Previous Estimates by 300%

A new study suggests that the cost of implementing the ICD-10 code set could be as much as three times previously estimated for physician practices, prompting the AMA to call for a two-year grace period for physicians.

The study, updated by Nachimson Advisors from its 2008 study, estimates that costs (three physicians, two administrative staff) will range from $56,639 to $226,105 for the typical small practices; $213,364 to $824,735 for the typical medium size practice (10 physicians, one coder, 6 administrative staff); and from $2,017,151 to $8,018,364 for the typical large practice (100 physicians, 64 administrative staff, 10 coders).

The new report, commissioned by the AMA, provides more cost specificity for the three practice sizes than the previous report. Pre-implementation costs include training, assessment, vendor/software upgrades, process remediation, and testing. Post-implementation costs include productivity loss and payment disruption. The authors suggests that the costs of payment disruption be significant, approaching 15% of Medicare claims in the worst-case scenario.

The authors of the report say the revision was necessary in light of the fact that the HITECH Act had not yet been passed when the previous report was written, adding significant costs and changes to physician practice workflow. Complying with the federal meaningful use of health IT program overlaps the mandate to Implement ICD-10, which  will result in a five-fold increase in diagnosis codes from the current 14,000 codes to 68,000 codes.

“The markedly higher implementation costs for ICD-10 place a crushing burden on physicians, straining vital resources needed to invest in new health-care delivery models and well-developed technology that promotes care coordination with real value to patients,” said AMA President Ardis Dee Hoven, M.D., in a press release. “Continuing to compel physicians to adopt this new coding structure threatens to disrupt innovations by diverting resources away from areas that are expected to help lower costs and improve the quality of care.”

With the implementation deadline of October 1, 2014 looming, the AMA sent a letter citing the revised estimates to Secretary Kathleen Sebelius urging the U.S. Department of Health and Human Services to repeal the mandate to adopt ICD-10 by October 1 and replace it with a two-year implementation grace period, during which Medicare would need be allowed to deny payment based on the specificity of the ICD-10 code.

“Adopting ICD-10, while it may provide benefits to others in the health care system, is unlikely to improve the care physicians provide their patients and takes valuable resources away from implementing delivery reforms and health information technology. The AMA strongly urges CMS to reconsider the ICD-10 mandate,” wrote James L. Madara, MD, Executive VP, CEO, AMA.