[Federal Register Volume 59, Number 43 (Friday, March 4, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-4900]


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[Federal Register: March 4, 1994]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Health Care Financing Administration

42 CFR Parts 405 and 424

[BPD-610-F]
RIN 0938-AE06

 

Medicare Program; Diagnosis Codes on Physician Bills

AGENCY: Health Care Financing Administration (HCFA), HHS.

ACTION: Final rule.

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SUMMARY: This final rule implements certain provisions of section 
1842(p) of the Social Security Act regarding diagnosis codes on 
physician bills. Under this final rule, each bill or request for 
payment for a service furnished by a physician under Medicare Part B 
must include appropriate diagnostic coding for the diagnosis or the 
symptoms of the illness or injury for which the Medicare beneficiary 
received care.

DATES: Effective date: This final rule is effective April 4, 1994.

FOR FURTHER INFORMATION CONTACT:
Pat Brooks, R.R.A. (410) 966-5318.

SUPPLEMENTARY INFORMATION:

I. Background

    Medical services are furnished to Medicare beneficiaries by 
providers, suppliers, physicians, and other specified practitioners. 
Title XVIII of the Social Security Act (the Act) defines the term 
physician. Under section 1861(r) of the Act, the term physician, 
subject to limitations concerning the scope of practice by each State 
and other provisions of title XVIII of the Act, means a doctor of--(1) 
Medicine or osteopathy; (2) Dental surgery or dental medicine; (3) 
Podiatry; (4) Optometry; or (5) Chiropractic.
    Under provisions of section 1848(g)(4) of the Act, as added by 
section 6102(a) of the Omnibus Budget Reconciliation Act of 1989 (Pub. 
L. 100-239), effective for services furnished on or after September 1, 
1990, each physician must submit a standard claim form (HCFA-1500) 
directly to the Medicare carrier on behalf of the beneficiary, 
regardless of whether the physician provided the services on an 
assignment-related basis. (Under Medicare Part B, a physician may bill 
the patient directly for the physician's services, thus requiring the 
beneficiary to seek reimbursement from Medicare. Alternatively, under 
section 1842(b)(3)(B) of the Act, when a physician furnishes services 
on an assignment-related basis, the physician bills Medicare directly 
in exchange for the physician's agreement to accept the Medicare 
approved amount as payment in full. (Rules concerning assignment of 
claims are found at Secs. 424.55, 424.56 and 424.70 et seq.) The HCFA-
1500, which is also used by most third-party payers, including Medicaid 
and other Federal government health insurance programs, is, in effect, 
an itemized bill.
    Before September 1, 1990, if a physician was not paid directly by 
Medicare for physician services, the physician either billed the 
Medicare beneficiary directly or billed another third-party payer. The 
beneficiary then sought payment from Medicare for expenses incurred in 
obtaining covered physician's services by submitting a Patient's 
Request for Medicare Payment (HCFA-1490 S) to the carrier. This form 
directs the beneficiary to attach itemized bills from his or her 
physician to the form. In limited cases, as provided under section 
1842(b)(6)(B) of the Act and 42 CFR part 424 when a third party made 
payment to the physician, the third party sought reimbursement from 
Medicare for this payment by submitting a Request for Medicare Payment 
by Organizations which Qualify to Receive Payment for Paid Bills (HCFA-
1490 U). We required the physician to fill out Part II of this form, 
which was similar to an itemized bill.
    Previously, each bill or request for payment for physician services 
furnished to a Medicare beneficiary had to include, among other 
information, a narrative description of the diagnosis or the nature of 
the illness or injury for which the beneficiary received care. Although 
prior to April 1, 1989 there was no requirement for diagnostic coding 
(that is, a description of the diagnosis or the nature of the illness 
or injury in a numeric code), many physicians routinely provided this 
information. In addition, all physicians provided a narrative 
description of procedures, medical services, and supplies that were 
furnished to a beneficiary.

II. Legislation Requiring Diagnostic Coding

    Section 202(g) of the Medicare Catastrophic Coverage Act of 1988 
(Pub. L. 100-360), enacted July 1, 1988, added paragraph (p) to section 
1842 of the Act. Under the provisions of section 1842(p)(1) of the Act, 
each bill or request for payment for physician services under Medicare 
Part B must include the appropriate diagnostic code ``as established by 
the Secretary'' for each item or service for which the Medicare 
beneficiary received treatment.
    The conference report that accompanied Public Law 100-360 explained 
clearly the purpose of the requirement for physician diagnostic coding. 
After rejecting a Senate provision that would have required the use of 
diagnosis codes on all prescriptions, because they felt that the 
requirement would have been ``unduly burdensome,'' the conferees agreed 
to require diagnostic coding for physician services under Part B. They 
explained their reasons for this requirement as follows: ``This 
information would be available for immediate use for utilization review 
of physician services and could be used in the future to facilitate 
drug utilization review by merging Part B with drug claims data.'' H.R. 
Conf. Rep. No. 661, 100th Cong., 2nd Sess. 191 (1988).
    Section 1842(p)(2) of the Act authorizes a denial of payment for a 
bill submitted by a physician on an assignment-related basis if it does 
not include the appropriate diagnostic coding.
    Section 1842(p)(3) of the Act directs the Secretary to impose 
penalties if a physician who is not paid on an assignment-related basis 
fails to provide the appropriate diagnostic coding on the bill to the 
Medicare beneficiary. That is, section 1842(p)(3)(A) of the Act 
provides for a civil money penalty not to exceed $2,000 if the 
physician knowingly and willfully fails to provide the appropriate 
diagnostic coding. Section 1842(p)(3)(B) of the Act provides for a 
sanction under 1842(j)(2)(A) of the Act if the physician ``knowingly, 
willfully, and in repeated cases fails, after being notified by the 
Secretary of the obligations and requirements of this subsection,'' to 
furnish appropriate diagnostic coding. Section 1842(p)(3) of the Act 
does not prohibit the payment of an unassigned claim solely because the 
physician did not provide diagnosis codes. As explained in section I of 
the preamble, effective for services furnished on or after September 1, 
1990, regardless of whether they provide services on an assignment 
related basis, physicians submit claim forms directly to the Medicare 
carrier. The provisions of section 1848 of the Act, as added by 6102(a) 
of Public Law 101-239, do not affect the penalties set forth in this 
rule for failure to include diagnostic coding on physician bills. This 
final rule implements the provisions of section 1842 (p)(1) and (p)(2) 
of the Act.

III. Provisions of the Proposed Rule

    On July 21, 1989 we published a proposed rule (54 FR 30558) to 
implement the provisions of section 1842(p)(1) of the Act. We proposed 
that each bill or request for payment for physician services under Part 
B would have to include appropriate diagnostic coding ``as established 
by the Secretary,'' relating to the nature of the illness or injury for 
which the Medicare beneficiary received care.
    As noted above, generally, physician services furnished directly to 
a beneficiary are paid under Medicare Part B. In addition, under the 
regulations set forth at subpart D of 42 CFR part 405, we make payments 
to hospitals under Part A for physician services related to the 
supervision and teaching of interns and residents who participate in 
the care of hospital inpatients. Also, the proposed rule did not apply 
to suppliers or other providers whose services are covered under Part 
B.
    We proposed that a physician would be required to furnish diagnosis 
codes instead of the narrative description that was previously 
required. We proposed to deny payment for a bill or request for payment 
for physician services furnished on an assignment-related basis if the 
bill or request for payment does not contain the appropriate diagnostic 
coding. This would not be true for a claim for physician services not 
furnished on an assignment-related basis. In other words, if the 
beneficiary seeks Medicare reimbursement for payment for physician 
services, we proposed not to deny payment solely because the claim does 
not contain diagnosis codes. If enough information were provided to 
enable a carrier to process the claim, it would be processed without 
the diagnosis codes. As explained in section II of the preamble, 
section 1842(p)(3)(B) of the Act provides for a sanction under section 
1842(j)(2)(A) of the Act if the physician ``knowingly, willfully, and 
in repeated cases fails, after being notified by the Secretary of the 
obligations and requirements of this subsection,'' to furnish 
appropriate diagnostic coding.
    We proposed to use the International Classification of Diseases, 
Ninth Revision, Clinical Modification (ICD-9-CM) as the most 
appropriate diagnostic coding system.
    The ICD is a classification system developed by the World Health 
Organization (WHO) for recording morbidity and mortality information 
for statistical purposes, for indexing hospital records by diseases, 
and for storing and retrieving data. Effective with the Twentieth World 
Assembly of WHO, nomenclature regulations were adopted on May 22, 1967. 
Article 21(b)(2) of these regulations specifies that ``members 
compiling mortality and morbidity statistics shall do so in accordance 
with the current revision of the International Statistical 
Classification of Diseases, Injuries and Causes of Death as adapted 
from time to time by the World Health Assembly. This Classification may 
be cited as the `International Classification of Diseases'.'' The 
United States is signatory to the WHO's agreements, which include the 
above nomenclature regulations binding the United States to the use of 
the ICD system for official government health statistical purposes. The 
nomenclature regulations became effective on January 1, 1968.
    The clinical modification of the ninth revision to ICD (that is, 
ICD-9-CM) is a coding system for reporting diagnostic information and 
procedures performed on patients in hospitals or other types of health 
care delivery systems.
    ICD-9-CM was developed under the guidance of the National Center 
for Health Statistics (NCHS) to adapt the ninth revision of the ICD 
classification system to the needs of hospitals in the United States. 
The modifications were intended to provide a mechanism to present a 
clinical picture of the patient. Thus, ICD-9-CM codes are more precise 
than those included in ICD-9 since greater detail is needed to describe 
the clinical picture of a patient than for statistical groupings and 
trend analysis.
    Effective January 1979, after nearly two years of development by 
numerous national experts on clinical technical matters, the ICD-9-CM 
became the single classification system intended for use by hospitals 
in the United States. This system replaced several earlier related but 
somewhat dissimilar classification systems. Once the ICD-9-CM 
classification system was in place, several errors and omissions were 
noted. Consequently, in September 1980 a second edition of ICD-9-CM was 
published. The preface to the second edition noted that the continuous 
maintenance of ICD-9-CM is the responsibility of the Federal 
government. The preface also stated that no future modifications to 
ICD-9-CM would be made by the Federal government without considering 
the opinions of representatives of major users of the classification 
system.
    In September 1985, the ICD-9-CM Coordination and Maintenance 
Committee (the Committee) was formed. This is a Federal 
interdepartmental committee that maintains and updates the ICD-9-CM. 
This includes approving new coding changes, developing errata, addenda, 
and other modifications to the ICD-9-CM to reflect newly developed 
procedures and technologies and newly identified diseases. The 
Committee is also responsible for promoting the use of Federal and non-
Federal educational programs and other communication techniques with a 
view toward standardizing coding applications and upgrading the quality 
of the classification system.
    The Committee is co-chaired by NCHS and HCFA. NCHS has primary 
responsibility for the ICD-9-CM diagnosis codes included in Volume 1--
Diseases: Tabular List, and Volume 2--Diseases: Alphabetic Index. HCFA 
has primary responsibility for the ICD-9-CM procedure codes included in 
Volume 3--Procedures: Tabular List and Alphabetic Index.
    The Committee encourages participation in the development of 
diagnosis and procedure codes by health-related organizations, 
organizations in the coding field, and other members of the public. 
During each Federal fiscal year (FY), the Committee holds three public 
meetings during which coding changes are discussed. Taking into account 
the public comments made at each meeting and the public correspondence 
received after each meeting, the Committee formulates recommendations, 
which must be approved by the co-chair agency heads, the Administrator 
of HCFA and the Director of NCHS, before adoption for general use. 
Coding changes approved by the Committee and agency heads are published 
annually in the Federal Register.
    Only official volumes and addenda of ICD-9-CM are to be considered 
in the assignment of diagnosis codes for Medicare patients. HCFA is not 
responsible for mistakes made by businesses in the replication of these 
official volumes and addenda, which are then sold to the public. 
Official addenda have become effective on May 1, 1986, and subsequently 
on October 1 of each year from 1986 through the present. Another 
addendum, containing the Human Immunodeficiency Virus (HIV) Infection 
Codes, became effective for Medicare patients discharged on or after 
July 1, 1988.
    Before publication of the proposed rule on July 21, 1989, the GPO 
exhausted its supply of previously published addenda and announced that 
it had no plans to reprint more copies. However, the private sector 
continues to publish changes to the ICD-9-CM coding system annually by 
October 1st. The GPO also announced that it would no longer provide 
addenda except to subscription purchasers of the third edition. ICD-9-
CM, third edition, was published in March 1989; automatic addenda 
updates expired in 1991. The third edition incorporates all addenda 
that were previously published. We stated in the July 21, 1989 proposed 
rule that if a physician had not yet obtained ICD-9-CM, second edition, 
and had not updated the set with the addenda, he or she should obtain 
the recently updated Volumes 1 and 2 (that include all the addenda) (54 
FR 30560). The American Health Information Management Association 
(AHIMA), previously known as the American Medical Records Association 
(AMRA), the national professional association of medical records 
practitioners, and the American Hospital Association (AHA) have 
indicated that they intend to reprint these future addenda and make 
them available for sale.
    The price for Volumes 1 and 2 of ICD-9-CM, fourth edition, is 
$65.00 for delivery within the United States and $81.25 for delivery 
outside of the United States. A purchaser must furnish an address other 
than a post office box because the volumes will be delivered only to a 
place of business or a residence. When ordering, the purchaser should 
enclose a check, money order, or Visa or Mastercard account name, 
number, and expiration date. Checks should be made out to the 
Superintendent of Documents.
    Updated volumes 1 and 2 may be purchased by writing to the 
following address: ICD-9-CM, Fourth Edition, Volumes 1 and 2, P.O. Box 
371954, Pittsburgh, PA 15250-7954. (Telephone orders may be placed 
through the GPO order desk at (202) 783-3238.)
    Section 424.32 sets forth the basic requirements for all claims. 
(The term ``claim'' is used when referring to the regulatory language 
instead of the term ``bill or request for payment''.) In 
Sec. 424.32(a), all claims (including those filed directly with 
Medicare by physicians, beneficiaries or other persons or entities for 
physician services furnished to Medicare beneficiaries) must be filed 
in accordance with HCFA instructions. Section 424.34 provides 
additional requirements for claims filed with Medicare by 
beneficiaries. Under Sec. 424.34(b)(4), the itemized bill must include 
a listing of services in sufficient detail to permit determination of 
reasonable charges. We proposed to make the following changes to the 
regulations text:
     Revise Sec. 424.32(a) to state specifically that a claim 
for physician services must include appropriate diagnostic coding using 
ICD-9-CM.
     Revise Sec. 424.34(b)(4) to state specifically that an 
itemized bill furnished by a physician to a beneficiary for physician 
services must include appropriate diagnostic coding using ICD-9-CM.
     Add to Sec. 424.3 the definition of ICD-9-CM, which means 
the International Classification of Diseases, Ninth Revision, Clinical 
Modification.
    Coding and reporting requirements and instructions for diagnostic 
coding were developed in order to take into account circumstances 
unique to care furnished by physicians. These coding and reporting 
requirements and instructions for completing bills and requests for 
payment were developed before publication of the proposed rule and were 
distributed to the carriers on March 3, 1989. The carriers then mailed 
this information, in the form of a Medicare Bulletin, to the physicians 
whom they service. During preparation of these procedures and 
instructions, we consulted with the American Medical Association (AMA) 
and provided the AMA an opportunity to comment on the material.
    In the proposed rule, we proposed a limited grace period during 
which payments would not be denied and sanctions would not be imposed 
for failure to use diagnosis codes. We provided for a 6-month grace 
period until October 1, 1989 to allow physicians and their office staff 
to obtain training and purchase books. On August 8, 1989, we notified 
carriers of the extension of the grace period through a memorandum from 
the HCFA Bureau of Program Operations. For the convenience of the 
reader, we published the coding and reporting requirements as an 
appendix to the proposed rule.
    AHIMA offered nationwide training classes and training materials 
for physician office staff for ICD-9-CM diagnostic coding, as did the 
AMA.
    Suggestions concerning modification of the ICD-9-CM codes, or 
additions to the existing codes, may be submitted in writing to the 
following address: National Center for Health Statistics, 6525 Belcrest 
Road,room 9-58, Hyattsville, MD 20782.
    In this final rule, we are adopting the requirements as stated in 
the proposed rule without modification.

IV. Discussion of Public Comments

    In response to the proposed rule, we received 35 timely items of 
correspondence. Comments were received from physicians, professional 
health-related organizations, universities and colleges, medical 
facilities, state governments, laboratories, durable medical equipment 
suppliers and pharmaceutical companies.
    Although the majority of commenters were not opposed to the 
diagnostic coding requirement in general, they were concerned with 
certain aspects of the proposed rule.

A. Coding Issues

    Comment: One commenter inquired about the possibility of an 
indefinite delay of the ICD-9-CM diagnostic coding requirement. Another 
commenter asserted that the diagnostic coding requirement should not be 
implemented until final regulations are published, which should allow 
for a training period of 60 days before any adverse actions.
    Response: The original implementation date of April 1, 1989 was 
extended by a 60-day grace period to allow physicians and their office 
staffs to purchase coding books and to obtain coding training. This 
grace period was further extended until October 1, 1989, at which time 
we required all physicians to use ICD-9-CM codes on bills or requests 
for payment. On August 8, 1989, we notified carriers of the extension 
through a memorandum from the HCFA Bureau of Program Operations. In 
total, we allowed a 6-month grace period. We believe we provided a 
reasonable time period for physicians and their staffs to prepare for 
the new coding requirements.
    Comment: The American Psychiatric Association disagreed with HCFA 
that the ICD-9-CM is the only classification system acceptable for 
Medicare claims. They urged HCFA to allow the use of the Diagnostic and 
Statistical Manual of Mental Disorders, Third Edition, Revised (DSM-
III-R) coding system for mental disorders. The American Medical 
Association also supports the DSM-III-R coding system for use by 
psychiatrists.
    Response: DSM-III-R was designed to be compatible with ICD-9-CM, 
but the two systems are not identical. Systems such as DSM-III-R 
address only certain types of diagnoses, and cannot be used universally 
by all types of practitioners to code all types of diagnoses on claims 
submitted to Medicare. In fact, ICD-9-CM provides for greater 
specificity in coding mental disorders that DSM-III-R. Within the 
``mental disorders'' range (codes 290-319) there are an additional 218 
specific codes available in ICD 9-CM that are not in DSM-III-R. Thus, 
we continue to believe that the ICD-9-CM system is the only 
comprehensive diagnostic coding system that is suitable for Medicare 
claims.
    Comment: The College of American Pathologists stated that the ICD-
9-CM coding system is limited in its description of disease states. The 
commenter asserted that the Systematized Nomenclature of Medicine 
(SNOMED), which it publishes, is more specific.
    Response: The SNOMED is an excellent coding system. However, as 
stated above, the Department of Health and Human Services is signatory 
to the WHO's nomenclature regulations binding the United States to use 
of the ICD for official government purposes. Even though ICD-9-CM has 
recognized limitations, it can be updated as the need arises via the 
ICD-9-CM Coordination and Maintenance Committee.
    Comment: One laboratory recommended that the burden of furnishing 
the proper diagnosis codes be placed on the physician ordering a test 
rather than the supplier of the service. The commenter expressed a 
concern that the laboratory performing the test should not be held 
responsible for performing a test that Medicare later determines to be 
not medically necessary.
    Response: The proposed rule and this final rule address the 
requirement for diagnostic coding of only physicians' bills. This new 
coding requirement does not apply to bills from laboratories (except 
for physician laboratory services--see Sec. 405.556).
    Comment: One commenter suggested that referring physicians provide 
a reason for the biopsy or referral. It requested that this practice be 
encouraged and emphasized through carrier communication with the 
physicians.
    Response: We have always encouraged that the referring physician 
communicate the reason for the referral or specimen so the proper 
medical interpretation is made or test is performed. We will continue 
to encourage carrier to convey this message to the physician community.
    Comment: Three commenters were concerned that providing for only 
four diagnostic codes on the form HCFA-1500 is insufficient in many 
cases to adequately describe a patient's condition.
    Response: Since the implementation of the diagnostic coding 
requirement, we have received few complaints concerning the form HCFA-
1500. Thus, we believe that four diagnosis codes are sufficient in most 
instances. We note that this regulation is not intended to change the 
structure of the form HCFA-1500. Moreover, our contractors' claims 
processing systems, as currently constructed, would not be able to 
accommodate more than four diagnosis codes on a single claim.
    The use of codes instead of a narrative description should enhance 
the physician's ability to describe the patient's condition with 
greater precision. If there are cases where the use of four codes is 
not sufficient, we suspect that they would arise when more than one 
procedure has been performed (for example, psychological counseling 
provided to a trauma patient). In such cases, the physician could 
submit one claim for the procedure that relates to four or fewer 
diagnoses, and submit another claim for the other procedures with their 
attendant diagnoses.
    Comment: The American Ambulance Association requested that the 
final rule specify that the coding requirements do not apply to 
ambulance services.
    Response: This final rule provides only that each bill or request 
for payment for physician services must include diagnostic coding. 
These provisions do not apply to ambulance services.
    Comment: One commenter interpreted the proposed rule to imply that 
physicians must now submit claims for services that they would not have 
normally billed under the previous guidelines. The commenter requested 
that HCFA clarify this point in the final rule.
    Response: Although the ICD-9-CM coding system permits 
classification of many services for which specific codes could be used, 
the mere presence of an ICD-9-CM code does not, of itself, mean that a 
bill or request for payment must include the code for that service. If 
a physician generally would not have submitted a bill or request for 
payment for a particular service prior to the physician diagnostic 
coding requirement, the physician may not be required to submit a bill 
for that service under the new rules. For instance, HCFA did not mean 
to imply, under an example in the guidelines published in the proposed 
rule (54 FR 30564), that a bill should be submitted for a service for 
X.3, attention to surgical dressings and sutures, if this service is 
included in the surgeon's global charge. However, if this service is 
performed by another physician, unrelated to the surgeon, it might be 
appropriate for the second surgeon to use this code to describe the 
reason for the encounter.
    Comment: One commenter suggested that HCFA clarify in the final 
rule whether the new regulations supersede or supplement individual 
carrier coding policies since there are conflicts between the new and 
old coding practices.
    Response: The requirements in this final rule supersede any 
individual carrier coding policies. Those carrier coding policies have 
been changed to comply with the requirements of this final rule.
    Comment: Both the AMA and the American Society of Internal Medicine 
stated that supplying codes for signs and symptoms without also 
supplying codes indicating diagnoses that the physician has ruled out 
will not accurately describe the patient's conditions and explain the 
reasons for the care provided. Another commenter recommended that we 
allow the use of ``suspected'' and ``rule out'' codes.
    Response: The coding guidelines state that each visit must be coded 
to describe the specific reason that the patient sought care or 
treatment. The guidelines also state: ``Do not code diagnosis 
documented as ``suspected,'' ``rule out,'' ``probable,'' or 
``questionable'' as if they are established. Rather, code the condition 
to the highest degree of certainty for that encounter/visit to reflect 
symptoms, signs, abnormal test results, or other reasons for the 
visit.'' To require coding of ``probable,'' ``suspected,'' 
``questionable,'' or ``rule out'' conditions as if the conditions 
existed would lead to significant overcounting of conditions. This 
inaccurate recording would distort data and would artificially distort 
disease statistics. Therefore, physicians should report diagnosis codes 
for symptoms and signs but should exclude codes for diagnoses that the 
physician either suspects or rules out.
    Comment: Several commenters asked how they should code for 
situations in which a patient presents disabling symptoms but no 
diagnosis exists for the patient. They recommended that the diagnosis 
codes include codes for symptoms.
    Response: Diagnosis codes should reflect the diagnosis, condition, 
problem, or other reason for the encounter or visit shown in the 
medical record to be chiefly responsible for the services provided. 
However, the carrier will also accept codes for symptoms when no other 
more definite code can be given to describe the reason for the visit of 
the patient. This is explained further in guideline number four of the 
Appendix--Claims Review and Adjudication Procedures, published with the 
proposed rule (54 FR 30564, July 21, 1989).
    Comment: Two commenters suggested that correlating the ICD-9-CM 
diagnosis codes and the CPT-4 procedures codes is a redundant effort 
since a procedure may be performed as the result of several conditions. 
They urged that the requirement be deleted.
    Response: Correlating the narrative diagnosis and the CPT-4 
procedure code is a requirement of the Medicare carrier, and has been a 
standard requirement for years. It has only been modified by the new 
physician diagnostic coding requirements. Physicians must now correlate 
the ICD-9-CM code, instead of the narrative, to the CPT-4 code.
    Comment: One commenter stated that suppliers cannot be required to 
include diagnostic coding on Part B bills even though they often 
provide the diagnostic codes identified by the physician on bills for 
equipment and supplies.
    Response: We have never required suppliers to include diagnostic 
coding on their Part B bills. Section 1842(p)(1) of the Act requires 
physicians, as defined in section 1861(r) of the Act, and subject to 
limitations concerning the scope of practice by each State and other 
provisions of title XVIII of the Act, to furnish diagnostic coding. 
That is, only doctors of medicine or osteopathy, dental surgery or 
dental medicine, podiatry, optometry, or chiropractic must furnish 
diagnostic coding. Durable medical equipment suppliers are not included 
in this requirement.
    Comment: One commenter inquired why his or her carrier included 
messages in the explanation of the Medicare benefit worksheet regarding 
both diagnostic coding requirements (ICD-9-CM) and procedural coding 
requirements (CPT-4) since the proposed rule (54 FR 30559, July 21, 
1989) stated that there is no current requirement for diagnostic 
coding.
    Response: The statement on page 54 FR 30559 referred to the policy 
before implementation of section 1842(p)(1) of the Act that requires 
physician diagnostic coding instead of the written narrative that was 
previously required. We are now conforming the regulations to the 
previously issued administrative instructions.
    The CPT-4 coding (part of the HCFA Common Procedural Coding System) 
describes physician services and supplies, not diagnoses. If either 
fields 23 or 24c on the form HCFA-1500 are blank, the carrier will 
communicate with the physician via the explanation of the Medicare 
benefit worksheet requesting completion of this information.
    Comment: A commenter asserted that as an incentive all bills or 
requests for payment without ICD-9-CM codes should be rejected and that 
properly coded bills and requests for payment should be expedited.
    Response: The Act specifically provides for denial of payment for a 
bill submitted by a physician on an assignment-related basis if it does 
not include the appropriate diagnostic code. For a claim for an item or 
service not submitted on an assignment-related basis, the Act 
authorizes the Secretary to impose a civil money penalty, not to exceed 
$2,000, against a physician seeking payment who knowingly and willfully 
fails to promptly provide the appropriate diagnostic coding on the bill 
to the Medicare beneficiary upon the request of the Secretary or a 
carrier. If the physician knowingly, willfully, and in repeated cases 
fails, after being notified by the Secretary of the statutorily 
prescribed obligations, to include the requisite diagnostic codes, the 
physician may also be subject to administrative sanctions. However, the 
payment of an unassigned claim may not be prohibited solely because the 
physician has not furnished the diagnosis codes.
    We considered, but rejected, the idea of expediting properly coded 
bills and requests for payment since we do not handle properly coded 
bills for Part A services in a special manner. Properly coding bills is 
a standard requirement to receive payment for services. However, 
payment would occur more quickly for properly coded bills because there 
would be no need for resubmission because of errors in coding.
    Comment: A clinical laboratory stated that bills and requests for 
payment with diagnostic coding can be processed electronically at a 
much lower cost to Medicare than we projected in the proposed rule.
    Response: The cost projections in the proposed rule for 
electronically processed claims are the expected costs for physicians 
to comply with the requirement for diagnostic coding on all bills and 
requests for payment rather than the costs of the carriers in 
processing the bills and requests for payment.
    Comment: One association asked the implied meaning of the statement 
``* * * (diagnostic coding) could be used for prepayment screens'' (54 
FR 30559, July 21, 1989). The commenter asked where the ICD-9-CM and 
CPT-4 information is being collected and what future plans are being 
implemented for the use of the information. The association was 
informed by its carrier that the carrier does not believe the ICD-9-CM 
and CPT-4 codes will eventually be used for a prospective payment 
system for physicians.
    Response: Billing information is compiled by each carrier and then 
electronically transmitted to HCFA's Bureau of Data Management and 
Strategy in Baltimore, Maryland. This Bureau is largely responsible for 
performing HCFA's mathematical and statistical programming and for 
managing HCFA's statistical data bases to support program decisions by 
various HCFA components. Current and possible applications for the ICD-
9-CM and CPT-4 coding information include answering research queries 
from private sources, development of quality assurance monitoring 
mechanisms, assessment of the impact of proposals that affect health 
care financing programs, or special research and evaluation studies. 
The Bureau uses diagnostic coding information to design and develop 
periodic statistical tabulations to assess the characteristics of 
beneficiaries and the utilization and cost of program benefits. The 
CPT-4 codes also are now used for payment purposes under the fee 
schedule for physician services.
    Comment: One commenter was concerned about the increased costs for 
manpower and the reformatting of her billing system associated with 
implementation of the diagnostic coding requirement.
    Response: We cannot predict the increased costs or manpower that an 
individual office would incur as a result of the diagnostic coding 
requirement. However, in the impact analysis to this final rule, we 
discuss our estimate of the aggregate costs associated with coding 
training and ICD-9-CM coding books. Also, as discussed in the impact 
analysis, we now estimate that about 90 percent of physicians included 
diagnostic coding on bills before it was required by section 1842(p) of 
the Act. These physicians may not have experienced as significant an 
increase in costs as physicians who did not code before the requirement 
was established.
    Comment: One commenter stated that since general practitioners care 
for the whole patient, it is sometimes difficult to find an applicable 
diagnosis even after looking through 2,000 pages of codes. The 
physician recommended that we allow three digit codes to be used for 
procedures for which physicians routinely charge less than $200.
    Response: We are aware that general practitioners are responsible 
for coding a wide range of diagnoses. To determine the correct code, 
Volume 2, Index, must be consulted first. After the correct code has 
been determined, Volume 1 is then referenced to determine if there are 
other coding conventions that apply, such as ``Includes'' or 
``Excludes'' notes.
    We cannot accept the recommendation to allow the use of three digit 
codes in any circumstance where an applicable four or five digit code 
exists. Codes must be used to their highest level of specificity; this 
may include some three digit codes. If diagnoses are coded to the 
highest level, using the same data base for all bills and requests for 
payment will permit meaningful trend analysis and data comparisons.
    Comment: Several commenters stated that the estimate of 1 minute to 
code a bill or request for payment is too short. The estimate does not 
consider the time a physician spends with office staff to select the 
correct diagnosis code.
    Response: The estimate of 1 minute to code a bill or request for 
payment was made by AHIMA based on their professional coding experience 
and expertise. We believe that this is a realistic figure for several 
reasons. First, there are many physicians who are specialists, and who 
will use only a small portion of the coding manuals during their normal 
course of business. We anticipate that these physicians and their 
office staffs will quickly identify those parts of the coding books 
that apply to their practice. Additionally, many offices have developed 
reference lists pertaining to the codes frequently used in their 
particular practices. Once this list has been developed, very little 
physician involvement is required for the coding process.
    The amount of time necessary for the physician to work with his or 
her clerical staff in the selection of the correct diagnosis code(s) 
was not factored into the estimate of 1 minute. That estimate reflected 
the use of the code book or reference list and the documentation 
process, whether manual or key entry. We anticipate that the diagnosis 
code(s) will become as familiar to the office staffs as the recording 
of the narrative diagnostic language, and that completion of the 
billing form will proceed as smoothly as it did prior to the 
implementation of this diagnostic coding requirement.

B. Patient Information and Confidentiality

    Comment: The American Psychiatric Association (APA) stated that 
there may be instances when the diagnosis information provided to the 
patient (particularly in non-assigned claims) could have an adverse 
impact on the patient and course of treatment. The APA suggests that 
HCFA have an exceptions process that allows the physician to determine 
whether diagnosis information should be directly provided to the 
patient.
    Response: We agree, and note that there is already an established 
procedure for such situations. The physician should file the form HCFA-
1500 on behalf of the beneficiary as required by section 1848(g)(4) of 
the Act. The form should include the appropriate diagnostic codes and 
should be forwarded to the Medicare carrier. If a physician determines 
that diagnostic information should not be released directly to a 
patient, the physician may furnish bills to the patient without 
diagnostic information. In addition to psychiatric diagnoses, 
physicians also may choose to use this procedure for terminal illnesses 
or other conditions of a sensitive nature.
    Comment: The APA expressed a concern that HCFA should have a 
mechanism in place to assure that diagnostic information is kept 
confidential and not released to third parties except when permitted by 
law. It recommended that the regulations be amended to include privacy 
protection.
    Response: We share the APA's concerns about the confidentiality of 
patient information. To assure that the beneficiary is protected, when 
we release medical data, the data do not include any patient-specific 
identifiers. Patient-specific medical data in the custody of HCFA and 
its intermediaries and carriers are fully protected by the Privacy Act 
(5 U.S.C. 552a).

C. Utilization Review

    Comment: A pharmaceutical company is concerned that utilization 
review of physician services and future drug utilization review may be 
less effective because of the limitation of four diagnostic codes on 
the bill or request for payment.
    Response: Utilization review of physician services will be enhanced 
by the diagnostic coding requirement since the information can be 
categorized by code and made available for immediate use. At this time, 
we have no plans to implement a drug utilization review program using 
the diagnostic coding information on the form HCFA-1500. We will 
consider the effect of the four diagnostic code limitations if we 
propose a drug utilization review program.
    Comment: One commenter questioned the possibility of the physician 
diagnostic coding requirement eventually becoming a tool to standardize 
physician practice patterns nationwide without physician input.
    Response: The information obtained from the ICD-9-CM codes will be 
used for compiling statistical information. Any new requirements or 
procedures would not be implemented without physician input and, if 
appropriate, a notice of proposed rulemaking.
    Comment: One commenter asserted that the ICD-9-CM coding system is 
a bulky, unreliable system for gathering data.
    Response: The ICD-9-CM coding system was developed under the 
guidance of the National Center for Health Statistics for greater 
specificity in reporting illnesses and injuries in the United States. 
The ICD-9-CM coding system is the best system available for recording 
the diagnoses of Medicare beneficiaries. The system is not considered 
unreliable by most users; however, errors do occur as a result of 
physicians' incorrect application of the codes.
    To help make the coding system meet the needs of all users, we 
welcome input from interested physicians, organizations and the public 
through the ICD-9-CM Coordination and Maintenance Committee meetings.
    Comment: One commenter asked for the name of an agency that can 
give advice and answer questions concerning coding issues.
    Response: The AHA is the official clearinghouse for questions 
concerning the ICD-9-CM system. They accept written questions and will 
provide a written reply. The AMA is also providing ICD-9-CM coding 
advice to its members through their CPT Clearing House Hotline (312) 
464-4737. In addition, each carrier has designated a contact person to 
answer the concerns raised by the physicians they service. We encourage 
close communication between a physician and the carrier to avoid coding 
problems.
    Comment: Several commenters expressed concern that requiring coding 
to the fifth digit is burdensome and will require a more skilled person 
to properly code the diagnoses. One commenter stated that prior to the 
new physician diagnostic coding requirement, coding by physicians was 
generally limited to three digits.
    Response: We did not anticipate a significant burden upon 
physicians as a result of coding to the fifth digit level when the 
proposed rule was published, and have not had complaints from the 
physician community since that time. We continue to believe that most 
physicians or their office staff create reference lists of diagnoses 
encountered most often. Since 1979, the ICD-9-CM coding system has been 
in use and has contained five digit codes. Thus, we do not agree that 
coding by physicians previously was limited to three digits.
    Comment: One commenter asserted that it would be advantageous if 
the format requirements for submitting bills or requests for payment 
are published with the proposed rule.
    Response: The Medicare Carriers Manual explains how to fill out 
bills and requests for payment. Basically, the only format requirement 
for the diagnostic coding is to put each appropriate code in the space 
that is provided for those codes under the heading ``Nature of Illness 
or Injury.''
    The form HCFA-1500 and accompanying sections of the Carriers Manual 
are already subject to public comment, pursuant to the Paperwork 
Reduction Act of 1980. In accordance with that Act, OMB reviews the 
form HCFA-1500 and its instructions at least once every 3 years. The 
Department publishes a notice in the Federal Register that informs the 
public of OMB's review and solicits comments for OMB's consideration in 
the course of its review.
    Comment: The AMA stated that pathologists have expressed a concern 
that failure to list a second diagnosis after V72.6, Laboratory 
examination, may lead to medical necessity review problems. The AMA 
requested that we inform the carriers that V72.6 code meets the 
Medicare coding requirements.
    Response: We agree that in many instances one code (V72.6) will 
explain the reason for the patient's encounter. Carriers should 
identify a way of determining the proper coverage policy issue through 
the use of a screen. We recommend that all laboratory claims begin with 
the code V72.6, Laboratory examination. However, by supplying a second 
code to describe the reason for the referral, the bill or request for 
payment can clearly be identified as referrals to evaluate symptoms, 
signs, or diagnoses, instead of being part of a routine physical 
examination that is not covered by Medicare.
    Comment: One commenter inquired about how the ``V'' codes should be 
sequenced for diagnostic services on the bill or request for payment.
    Response: Ancillary diagnostic services, which are coded beginning 
with a ``V,'' are provided in laboratories and radiology offices if the 
patient's main reason for the visit is to get an x-ray, (V72.5, 
Radiological examination, not elsewhere classified), or to have a test 
conducted (V72.6, Laboratory examination.) The condition for which the 
patient sought treatment will be reflected in the additional diagnoses. 
In coding ancillary diagnostic services, it may be helpful to question 
the reason for the encounter. The reason for the encounter is that the 
patient visited the laboratory or radiology office to have either an 
analysis performed or an x-ray taken.

D. Training

    Comment: One commenter stated that HCFA's estimate that 70 percent 
of physicians and office staff will need ICD-9-CM coding training is a 
gross underestimate.
    Response: We do not believe that our estimate of 70 percent of 
physicians and office staff in need of coding training was too low. In 
fact, we believe that most physicians and office staff did not require 
coding training. Immediately after implementation of the diagnostic 
coding requirement, medical review at the intermediary level did not 
reveal significant coding problems. Since that time, the majority of 
physician bills using ICD-9-CM coding have passed intermediary edits 
for accuracy. In addition, many physicians did not need training since 
they submitted ICD-9-CM codes prior to April 1989 due to the 
requirements of third party payers for non-Medicare patients. We 
believe that the lack of coding problems indicates that, if anything, 
we may have overestimated the proportion of physicians and office staff 
that needed training.
    Comment: One commenter suggested that HCFA require the Medicare 
carriers to provide ICD-9-CM training and technical assistance to 
physicians and providers.
    Response: The Medicare carriers were required by HCFA to provide 
initial ICD-9-CM coding training prior to the April 1, 1989 
implementation date. A National Carriers Training program was held in 
February 1989 in preparation for the training done in each State by 
each carrier. The National Carriers Training was conducted by AHIMA, 
with input on the program from the AMA. Subsequently, each carrier was 
responsible for conducting its own training program on a state-by-state 
basis. In many cases, carriers worked with the State medical societies 
in conducting the training. Diagnostic coding training for physicians 
and physician office staffs has been ongoing since the implementation 
of this requirement, especially through courses and sessions sponsored 
by the private sector. For further information concerning coding 
training, physicians can contact their State medical society, the AMA, 
AHIMA, their State component of the medical record or medical health 
information association, or their carrier.

E. Sanctions Process and Civil Money Penalties

    Comment: One commenter indicated that the sanction provisions for 
noncompliance with the coding requirements are illogical since coding 
bills or requesting payment with ICD-9-CM codes is essentially a 
clerical function. The civil monetary penalties and sanction actions by 
the Office of Inspector General are perceived as excessive since 
clerical errors of omission and inaccurately coded diagnoses will be 
inevitable. Another commenter recommended that the sanctions process 
should not apply to the ICD-9-CM coding requirement.
    Response: Coding is a task routinely delegated by physicians to 
billing clerks or staff. However, this delegation does not relieve the 
physician of the responsibility to submit bills or requests for payment 
that meet the requirements of the law.
    Comment: One medical association questioned whether the carrier 
considers the remarks on the explanation of the Medicare benefit (EOMB) 
form an advisement of a violation (for not including diagnostic coding 
on a bill or request for payment) that will be referred to the OIG for 
investigation and possible sanctions. The commenter asked why the 
carrier includes a remark in the EOMB stating that they will process 
this claim but will not process future claims. The association suggests 
that the message on the EOMB should contain a more complete and 
accurate statement.
    Response: Messages that appear on the EOMB have been revised and 
are more clear and explanatory. It is not our intent to put the 
beneficiary at risk by not paying a bill or request for payment lacking 
an ICD-9-CM code. For claims submitted by physicians who do not accept 
assignment, the carrier will process the bill or request for payment as 
usual, substituting a ``dummy'' code for the ICD-9-CM coding.
    The carrier will collect physician-specific information about the 
quantity of the dummy codes generated per physician. When a threshold 
of ten bills or requests for payment is reached, the carrier is 
instructed to contact the physician in order to explain the necessity 
of providing diagnostic coding and to help with training. If the 
physician subsequently knowingly, willfully, and in repeated cases 
fails to supply the requested codes, the Office of the Inspector 
General may invoke a civil money penalty.

F. Availability of the ICD-9-CM

    Comment: Two commenters expressed concern that the Government 
Printing Office (GPO) does not stock a sufficient supply of the ICD-9-
CM coding books, which results in a 4-to-8 week delay in receiving the 
books.
    Response: ICD-9-CM books are in stock at the special address 
mentioned elsewhere in this preamble. We are aware of the potential 
demand and have an adequate supply. All orders are sent by priority 
mail.

V. Impact Analysis

    Unless the Secretary certifies that a final rule will not have a 
significant economic impact on a substantial number of small entities, 
we generally prepare a regulatory flexibility analysis that is 
consistent with the Regulatory Flexibility Act (RFA) (5 U.S.C. 601 
through 612) . For purposes of the RFA, all physicians are considered 
to be small entities.
    The statutory requirement that physicians use diagnostic coding has 
been in effect since April, 1989, and we believe that the vast majority 
of physicians were already using ICD-9-CM coding even before that time. 
Thus, the economic impact of this final rule on the physician community 
should be minimal.
    In the proposed rule, we prepared a voluntary impact analysis and 
voluntary regulatory flexibility analysis because of our inability to 
quantify with any degree of precision the estimated costs of these 
provisions and the large number of physicians who were affected by the 
provisions of section 1842(p) of the Act. These provisions require that 
each bill or request for payment for a service furnished by a physician 
include appropriate diagnostic coding related to the illness or injury 
for which the Medicare beneficiary received treatment. Under section 
1842(p) of the Act, a physician who is to be paid on an assignment-
related basis will not be paid if he or she fails to include 
appropriate diagnostic coding on the bill. In this final rule we have 
revised the impact analysis based on public comment.
    With one exception, any effects of this final rule will be a direct 
result of the legislative provisions in section 1842(p) of the Act. The 
exception is a result of the discretion that section 1842(p)(1) of the 
Act provides the Secretary in the choice of which system to use to code 
diagnoses. We chose to use ICD-9-CM because it is the only 
comprehensive coding system that includes all possible diagnoses for 
Medicare beneficiaries. For that reason, it is already widely used by 
physicians. Furthermore, we are already using ICD-9-CM in the Medicare 
program for classifying DRGs for payment under the inpatient hospital 
prospective payment system. Therefore, we believe that it is the 
easiest coding system for physician use.
    Before April 1, 1989, physicians were not required to provide ICD-
9-CM or any other type of diagnostic codes on their Medicare bills or 
requests for payment. Therefore, we believe that physicians who were 
not coding before the provisions of section 1842(p) of the Act were 
affected through increased paperwork, the cost of training themselves 
and their staff, and the probable need to purchase Volumes 1 and 2 of 
the ICD-9-CM, fourth edition.
    As of December 31, 1986, there were 569,160 physicians practicing 
in the United States (Physician Characteristics and Distribution in the 
U.S., 1986. Department of Data Release Services, Division of Survey and 
Data Resources, American Medical Association, 1987). In the proposed 
rule, we estimated that at least 30 percent of physicians used ICD-9-CM 
codes before the requirements of section 1842(p) were established, 
presumably because of requirements of other third party payers that 
ICD-9-CM diagnosis or procedure codes be used on their claims. Thus, we 
estimated that up to 70 percent of practicing physicians did not report 
codes before the requirement was established (that is, approximately 
398,000 physicians).
    In this final rule, we have revised our estimate of the number of 
physicians who reported ICD-9-CM codes before the requirements of 
section 1842(p) of the Act were established. As stated in section III 
of this preamble, we provided for a 6-month grace period following the 
statutory implementation date of April 1, 1989, during which no claims 
would be denied for lack of coding. The grace period ended on October 
1, 1989. It has been our experience that, when grace periods are 
established, providers usually do not comply with the required 
provisions until the end of the grace period, presumably because of 
lack of training or need for a preparation period. In this case, 
however, approximately 90 percent of the claims were coded using ICD-9-
CM during the first month of the grace period, and the compliance rate 
remained at approximately 90 percent for the duration of the grace 
period. Moreover, intermediary review of these claims revealed no 
significant coding problems. Since the number of physicians that 
complied with the coding requirement remained stable throughout the 
grace period, we believe that the number of physicians who reported 
codes during the grace period is indicative of the number of physicians 
who were reporting codes before the requirement was established. 
Therefore, we now estimate that approximately 90 percent of physicians 
reported ICD-9-CM codes before April, 1989 (that is, approximately, 
512,000 physicians). The discussion below reflects this revised 
estimate.
    If all the physicians who did not report ICD-9-CM codes before 
April 1989 needed new coding books, ICD-9-CM Volumes 1 and 2 at a cost 
of $65.00 per set, the total cost would have been approximately 
$3,700,000. In practice, however, we believe that not all of these 
physicians needed to purchase new coding books. For example, some 
physicians belonged to group practices, some worked for hospitals and 
do not have their own patients, and some already owned coding books. 
For purposes of this impact analysis, however, we assume that all 
physicians who did not code before April, 1989 purchased new coding 
books.
    In the proposed rule, in calculating costs of training and coding 
for physicians who did not code before April 1989, we estimated the 
average wages of a physician's office staff person at $4.50 an hour. In 
response to the July 21, 1989 proposed rule, we received several 
comments stating that we had underestimated the average hourly wages 
for a physician's office staff member. We agree that our estimate of 
$4.50 per hour was too low. In this final rule, we are revising our 
estimate of the hourly rate based on comments received on the proposed 
rule and our examination of the hourly wages of physicians' office 
staff in the monthly publication ``Employment and Earnings'' (U.S. 
Department of Labor Bureau of Labor Statistics, ``Employment and 
Earnings'' Vol. 37, No. 4, April 1990, p. 131 (Washington, DC)). Our 
revised estimate of the typical wage for a staff person at the time the 
requirement was established is $9.65 per hour.
    Based on claims data, we believe there were approximately 320.1 
million physician claims processed for the period from April 1, 1989 to 
March 31, 1990. We estimated that the clerical cost of coding each 
claim was $0.16 for a total of $51,216,000 for the first year that the 
requirement was in effect. We arrived at the $0.16 figure by assuming 
an hourly rate of the typical physician's office staff person to be 
$9.65 per hour, as explained above. We believe that it takes 1 minute 
to code a claim, therefore $9.65 divided by 60 minutes results in a 
$0.16 cost per claim. However, we believe that 90 percent of the claims 
were being coded prior to April 1, 1989. Thus, 10 percent of the cost 
of coding claims (approximately $5,120,000) can be attributed to the 
provision of section 1842(p) of the Act.
    We anticipated that each physician that did not report ICD-9-CM 
codes before April 1, 1989 would either send one or more persons for 
training, or may have determined that formal training was not needed. 
Some of those physicians may not have sent any staff since they are in 
a group practice, (in which case, one staff member may represent 
several physicians), or because they work for hospitals (in which case 
they would not submit Part B claims.)
    Below, in two examples, we are providing the extremes of estimated 
training costs using the same methodology as set forth in the impact 
analysis of the proposed rule. In the first example, we assume that all 
physicians who did not code prior to April 1989 sent, on average, one 
of their office staff to attend a half-day session sponsored by a 
national firm. We anticipated that the cost of such a training session 
could have been as high as $100.00. Thus, for this estimate, we are 
assuming a cost of $100.00. Furthermore, we assume the physicians paid 
an hourly rate of $9.65 per hour to their employees while they attended 
the coding session. Given these assumptions, we estimated training 
costs as follows:
    (All estimates are rounded to the nearest $10,000.)


Half-day (4 hours) at $9.65 per hour=$38.60; $38.60 x                   
 57,000 employees..........................................   $2,200,000
Session cost $100.00 x 57,000 employees....................    5,700,000
                                                            ------------
    Total training costs...................................   $7,900,000
                                                                        

    In the second example, we assume that physicians who did not code 
before the requirement was established in April 1989 sent, on average, 
one of their office staff to coding sessions sponsored by carriers or 
insurance companies at no cost. Assuming that the office employee was 
paid $9.65 an hour, we estimated the total training costs as follows:


Half-day (4 hours) at $9.65 per hour=$38.60; $38.60 x                   
 57,000 employees..........................................   $2,200,000
Session costs..............................................            0
                                                            ------------
    Total training costs...................................   $2,200,000
                                                                        

    Below, we show the total estimated first year costs for the two 
examples.
     For the first example, the total estimated first year 
costs consisted of:


Coding costs...............................................   $5,120,000
Training...................................................    7,300,000
Books......................................................    3,700,000
                                                            ------------
    Total..................................................  $16,720,000
                                                                        

     For the second example, the total estimated first year 
costs consisted of:


Coding costs...............................................   $5,120,000
Training...................................................    2,200,000
Books......................................................    3,700,000
                                                            ------------
    Total..................................................  $11,020,000
                                                                        

    Therefore, we estimate that first year training costs were between 
$11 million and $16 million. The cost of updated books will be an 
ongoing expense. Training costs will be recurring to the extent that 
staff turnover will occur. Coding costs will be ongoing. However, we 
believe that coding time and costs will probably be reduced with 
experience.
    Section 1102(b) of the Act requires the Secretary to prepare a 
regulatory impact analysis if a final rule will have a significant 
impact on the operations of a substantial number of small rural 
hospitals. Such an analysis must conform to the provisions of section 
604 of the RFA. For purposes of section 1102(b) of the Act, we define a 
small rural hospital as a hospital that is located outside of a 
Metropolitan Statistical Area and has fewer than 50 beds.
    We are not preparing a rural impact statement since we have 
determined, and the Secretary certifies, that this final rule will not 
have an impact on a significant number of small rural hospitals.
    This final rule was reviewed by the Office of Management and 
Budget.

V. Paperwork Reduction Act

    Regulations at Sec. 424.32(a) and Sec. 424.34(b) contain 
information collection and recordkeeping requirements that are subject 
to review by the Office of Management and Budget under the Paperwork 
Reduction Act of 1980 (44 U.S.C. 3501 through 3511). These regulations 
and the information collection and record keeping requirements apply to 
the requirement that a physician provide appropriate diagnostic coding 
on each bill or request for payment for a physician service furnished 
under Medicare Part B. Public reporting burden for this collection of 
information is estimated to average one minute per submitted Part B 
claim. This includes time spent reviewing instructions, searching 
existing data sources, gathering and maintaining needed data, and 
completing and reviewing the collection of information. The information 
and record keeping requirements associated with this final rule have 
been approved by the Office of Management and Budget in accordance with 
the Paperwork Reduction Act of 1980 (approval number 0938-0008).

List of Subjects

42 CFR Part 405

    Administrative practice and procedure, Health facilities, Health 
professions, Kidney diseases, Medicare, Reporting and recordkeeping 
requirements, Rural areas, X-rays.

42 CFR Part 424

    Assignment of benefits, Physician certification, Claims for 
payment, Emergency services, Plan of treatment.

    I. 42 CFR part 405, subpart E is amended as set forth below:

PART 405--FEDERAL HEALTH INSURANCE FOR THE AGED AND DISABLED 
Subpart E--Criteria for Determination of Reasonable Charges; 
Payment for Services of Hospital Interns, Residents, and 
Supervising Physicians

    A. The authority citation for Subpart E continues to read as 
follows:

    Authority: Secs. 1102, 1814(b), 1832, 1833(a), 1834 (a) and (b), 
1842 (b) and (h), 1848, 1861(b), (v), and (aa) 1862(a)(14), 1866(a), 
1871, 1881, 1886, 1887, and 1889 of the Social Security Act as 
amended (42 U.S.C. 1302, 1395f(b), 1395k, 1395l(a), 1395m (a) and 
(b), 1395u (b) and (h), 1395 w-4, 1395x(b), (v), and (aa), 
1395y(a)(14), 1395cc(a), 1395hh, 1395rr, 1395ww, 1395xx, and 
1395zz).

    B. In Sec. 405.512 paragraph (c) introductory text is republished 
and paragraph (c)(8) is revised to read as follows:


Sec. 405.512  Carriers' procedural terminology and coding systems.

* * * * *
    (c) Guidelines. The following considerations and guidelines are 
taken into account in evaluating a carrier's proposal to change its 
system of procedural terminology and coding:
* * * * *
    (8) Compatibility of the proposed system with the carriers methods 
for determining payment under the fee schedule for physicians' services 
for services which are identified by a single element of terminology 
but which may vary in content.
* * * * *
    II. 42 CFR part 424 is amended as set forth below:

PART 424--CONDITIONS FOR MEDICARE PAYMENT

    A. The authority citation for part 424 is revised to read as 
follows:

    Authority: Secs. 216(j), 1102, 1814, 1815(c), 1835, 1842 (b) and 
(p), 1861, 1866(d), 1870 (e) and (f), 1871, and 1872 of the Social 
Security Act (42 U.S.C. 416(j), 1302, 1395f, 1395g(c), 1395n, 1395u 
(b) and (p), 1395x, 1395cc(d), 1395gg (e) and (f), 1395hh, and 
1395ii)

Subpart A--General Provisions

    B. In Sec. 424.3, the introductory text is republished and a 
definition for ``ICD-9-CM'' is added in alphabetical order to read as 
follows:


Sec. 424.3  Definitions.

    As used in this part, unless the context indicates otherwise--
    ICD-9-CM means International Classification of Diseases, Ninth 
Revision, Clinical Modification.
* * * * *

Subpart C--Claims for Payment

    C. In Sec. 424.32, paragraph (a) is revised to read as follows:


Sec. 424.32  Basic Requirements for all claims.

    (a) A claim must meet the following requirements:
    (1) A claim must be filed with the appropriate intermediary or 
carrier on a form prescribed by HCFA in accordance with HCFA 
instructions.
    (2) A claim for physician services must include appropriate 
diagnostic coding using ICD-9-CM.
    (3) A claim must be signed by the beneficiary or the beneficiary's 
representative (in accordance with Sec. 424.36(b)).
    (4) A claim must be filed within the time limits specified in 
Sec. 424.44.
* * * * *
    D. In Sec. 424.34, the introductory text of paragraph (b) is 
republished and paragraph (b)(4) is revised to read as follows:


Sec. 424.34  Additional requirements: Beneficiary's claim for direct 
payment.

* * * * *
    (b) Itemized bill from the hospital or supplier. The itemized bill 
for the services, which may be receipted or unpaid, must include all 
the following information:
* * * * *
    (4) A listing of the services in sufficient detail to permit 
determination of payment under the fee schedule for physicians' 
services; for itemized bills from physicians, appropriate diagnostic 
coding using ICD-9-CM must be used. (For example, a bill for ambulance 
service must specify the pick-up and delivery points.)
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare--Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: November 22, 1993
Bruce C. Vladeck,
Administrator, Health Care Financing Administration.
    Dated: January 24, 1994.
Donna E. Shalala,
Secretary.
[FR Doc. 94-4900 Filed 3-3-94; 8:45 am]
BILLING CODE 4120-01-P