Federal Register, Volume 74 Issue 11 (Friday, January 16, 2009)

[Federal Register Volume 74, Number 11 (Friday, January 16, 2009)]
[Rules and Regulations]
[Pages 3328-3362]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-743]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of the Secretary

45 CFR Part 162

[CMS-0013-F]
RIN 0958-AN25

HIPAA Administrative Simplification: Modifications to Medical
Data Code Set Standards To Adopt ICD-10-CM and ICD-10-PCS

AGENCY: Office of the Secretary, HHS.

ACTION: Final rule.

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SUMMARY: This final rule adopts modifications to two of the code set
standards adopted in the Transactions and Code Sets final rule
published in the Federal Register pursuant to certain provisions of the
Administrative Simplification subtitle of the Health Insurance
Portability and Accountability Act of 1996 (HIPAA). Specifically, this
final rule modifies the standard medical data code sets (hereinafter
``code sets'') for coding diagnoses and inpatient hospital procedures
by concurrently adopting the International Classification of Diseases,
10th Revision, Clinical Modification (ICD-10-CM) for diagnosis coding,
including the Official ICD-10-CM Guidelines for Coding and Reporting,
as maintained and distributed by the U.S. Department of Health and
Human Services (HHS), hereinafter referred to as ICD-10-CM, and the
International Classification of Diseases, 10th Revision, Procedure
Coding System (ICD-10-PCS) for inpatient hospital procedure coding,
including the Official ICD-10-PCS Guidelines for Coding and Reporting,
as maintained and distributed by the HHS, hereinafter referred to as
ICD-10-PCS. These new codes replace the International Classification of
Diseases, 9th Revision, Clinical Modification, Volumes 1 and 2,
including the Official ICD-9-CM Guidelines for Coding and Reporting,
hereinafter referred to as ICD-9-CM Volumes 1 and 2, and the
International Classification of Diseases, 9th Revision, Clinical
Modification, Volume 3, including the Official ICD-9-CM Guidelines for
Coding and Reporting, hereinafter referred to as ICD-9-CM Volume 3, for
diagnosis and procedure codes, respectively.

DATES: The effective date of this regulation is March 17, 2009. The
effective date is the date that the policies herein take effect, and
new policies are considered to be officially adopted. The compliance
date, which is different than the effective date, is the date on which
entities are required to have implemented the policies adopted in this
rule. The compliance date for this regulation is October 1, 2013.

FOR FURTHER INFORMATION CONTACT: Denise M. Buenning, (410) 786-6711 or
Shannon L. Metzler, (410) 786-3267.

I. Background

A. Statutory Background

The Congress addressed the need for a consistent framework for
electronic transactions and other administrative simplification issues
in the Health Insurance Portability and Accountability Act of 1996
(HIPAA), Public Law 104-191, enacted on August 21, 1996. HIPAA has
helped to improve the Medicare and Medicaid programs, and the
efficiency and effectiveness of the health care system in general, by
encouraging the development of standards and requirements to facilitate
the electronic transmission of certain health information.
Through subtitle F of title II of that statute, the Congress added
to title XI of the Social Security Act (the Act) a new Part C, titled
``Administrative Simplification.'' Part C of title XI of the Act now
consists of sections 1171 through 1180. Section 1172 of the Act and the
implementing regulations make any standard adopted under Part C
applicable to: (1) Health plans; (2) health care clearinghouses; and
(3) health care providers who transmit any health information in
electronic form in connection with a transaction for which the
Secretary has adopted a standard.
Section 1172(c)(1) of the Act requires any standard adopted by the
Secretary of the Department of Health and Human Services (HHS) to be
developed, adopted, or modified by a standard setting organization
(SSO), except in the cases identified under section 1172(c)(2) of the
Act. Under section 1172(c)(2)(A) of the Act, the Secretary may adopt a
standard that is different from any standard developed by an SSO if it
will substantially reduce administrative costs to health care providers
and health plans compared to the alternatives, and the standard is
promulgated in accordance with the rulemaking procedures of subchapter
III of chapter 5 of Title 5 of the United States Code. Under section
1172(c)(2)(B) of the Act, if no SSO has developed, adopted, or modified
any standard relating to a standard that the Secretary is authorized or
required to adopt, section 1172(c)(1) does not apply.
Section 1172 of the Act also sets forth consultation requirements
that must be met before the Secretary may adopt

[[Page 3329]]

standards. The SSO must consult with the following organizations in the
course of the development, adoption, or modification of the standard:
National Uniform Billing Committee (NUBC), the National Uniform Claim
Committee (NUCC), the Workgroup for Electronic Data Interchange (WEDI),
and the American Dental Association (ADA). For a standard that was not
developed by an SSO, the Secretary is required to consult with each of
the above-named groups before adopting the standard. Under section
1172(f) of the Act, the Secretary must also rely on the recommendations
of the National Committee on Vital and Health Statistics (NCVHS) and
consult with appropriate Federal and State agencies and private
organizations.
Section 1173(a) of the Act requires the Secretary to adopt
transaction standards and data elements for the electronic exchange of
health information for certain health care transactions. Under sections
1173(b) through (f) of the Act, the Secretary is required to adopt
standards for: Unique health identifiers, code sets, security standards
for health information, electronic signatures, and the transfer of
information among health plans.
Section 1174 of the Act requires the Secretary to review the
adopted standards and adopt modifications as appropriate, but not more
frequently than once every 12 months in a manner which minimizes
disruption and cost of compliance. The same section requires the
Secretary to ensure that procedures exist for the routine maintenance,
testing, enhancement, and expansion of code sets, along with
instructions on how data elements encoded before any modification may
be converted or translated to preserve the information value of any
pre-existing data elements.
Section 1175(b) of the Act provides for a compliance date not later
than 24 months after the date on which an initial standard or
implementation specification is adopted for all covered entities except
small health plans, for which the statute provides for a compliance
date not later than 36 months after the date on which an initial
standard or implementation specification is adopted. If the Secretary
adopts a modification to a HIPAA standard or implementation
specification, the compliance date for the modification may not be
earlier than the 180th day of the period beginning on the date such
modification is adopted. The Secretary may consider the nature and
extent of the modification when determining compliance dates. The
Secretary may extend the time for compliance for small health plans.

B. Regulatory Background: Adoption and Modification of HIPAA Code Sets

The Transactions and Code Sets final rule (65 FR 50312) published
in the Federal Register on August 17, 2000 (hereinafter referred to as
the ``August 17, 2000 final rule'') implemented some of the
requirements of the Administrative Simplification subtitle of HIPAA, by
adopting standards for eight electronic transactions for use by covered
entities (health plans, health care clearinghouses, and those health
care providers who transmit any health information in electronic form
in connection with a transaction for which the Secretary has adopted a
standard). We established these standards at 45 CFR parts 160, subpart
A, and 162, subparts A, and I through R. The ``Modifications to
Electronic Data Transaction Standards and Code Sets'' final rule,
published on February 20, 2003 (68 FR 8381) (hereinafter referred to as
the ``February 20, 2003 final rule''), modified the implementation
specifications for several adopted transactions standards, among other
provisions. Please refer to the August 17, 2000 final rule and the
February 20, 2003 final rule for detailed discussions of electronic
data interchange and an analysis of the public comments received during
the promulgation of both rules.
In the August 17, 2000 final rule, we also adopted standard code
sets for use in those transactions, including:
International Classification of Diseases, 9th Revision,
Clinical Modification (ICD-9-CM) Volumes 1 and 2 (including the
Official ICD-9-CM Guidelines for Coding and Reporting) as maintained
and distributed by the Department of Health and Human Services (HHS),
for coding diseases, injuries, impairments, other health problems and
their manifestations, and causes of injury, disease, impairment, or
other health problems.
ICD-9-CM Volume 3 (including the Official ICD-9-CM
Guidelines for Coding and Reporting) as maintained and distributed by
HHS, for procedures or other actions taken for diseases, injuries, and
impairments on hospital inpatients reported by hospitals regarding
prevention, diagnosis, treatment, and management.
ICD-9-CM Volumes 1 and 2, and ICD-9-CM Volume 3 were already widely
used in administrative transactions when we promulgated the August 17,
2000 final rule, and we decided that adopting these existing code sets
would be less disruptive for covered entities than modified or new code
sets. Please refer to the August 17, 2000 final rule for details of
that discussion, as well as a discussion of utilizing ICD-10-CM and
ICD-10-PCS as a future HIPAA standard code set (65 FR 50327). Please
refer to the August 17, 2000 final rule; ``Standards for Privacy of
Individually Identifiable Health Information'' (65 FR 82462), published
in the Federal Register on December 28, 2000; Standards for Privacy of
Individually Identifiable Health Information; Final Rule (67 FR 53182)
published in the Federal Register on August 14, 2002; and ``the
Modification to Code Set Standards To Adopt ICD-10-CM and ICD-10-PCS''
proposed rule (hereinafter referred to as the ``August 22, 2008
proposed rule'') (73 FR 49796), published in the Federal Register on
August 22, 2008 for further information about electronic data
interchange and the regulatory background.

II. ICD-9-CM

The 9th revision of the International Classification of Diseases
(ICD-9) was originally developed and maintained by the World Health
Organization (WHO). While it was originally designed to classify causes
of death (mortality), the scope of ICD-9 was expanded, through the
development of the U.S. clinical modification, to include non-fatal
diseases (morbidity). The Centers for Disease Control and Prevention
(CDC) developed and maintains a clinical modification of ICD-9 for
diagnosis codes which is called ``ICD-9-CM Volumes 1 and 2.'' The
Centers for Medicare & Medicaid Services (CMS) maintains an additional
clinical modification of ICD-9 for inpatient hospital procedure codes,
which is called ``ICD-9-CM Volume 3.'' The Secretary adopted CDC's ICD-
9-CM in 1979 for morbidity applications. ICD-9-CM has been used since
1983 as the basic input for assigning diagnosis-related groups for
Medicare's Inpatient Prospective Payment System. ICD-9-CM Volumes 1 and
2, and ICD-9-CM Volume 3 were adopted as HIPAA code sets in 2000 for
reporting diagnoses, injuries, impairments, and other health problems
and their manifestations, and causes of injury, disease, impairment, or
other health problems in standard transactions.

A. ICD-9-CM, Volumes 1 and 2 (Diagnosis)

CDC developed ICD-9-CM, Volumes 1 and 2. It produced a clinical
modification to the WHO's ICD-9 by adding more specificity to its
diagnosis codes. ICD-9-CM diagnosis codes are three to five digits
long, and are used by

[[Page 3330]]

all types of health care providers, including hospitals and physician
practices. The code set is organized into chapters by body system. For
a discussion of the structure of the ICD-9-CM diagnosis code sets,
please refer to the August 22, 2008 proposed rule (73 FR 49798).

B. ICD-9-CM, Volume 3 (Procedures)

Inpatient hospital services procedures are currently coded using
ICD-9-CM Volume 3, which was adopted as a HIPAA standard in 2000 for
reporting inpatient hospital procedures. Current Procedural
Terminology, 4th Edition (CPT-4) and Healthcare Common Procedure Coding
System (HCPCS) are used to code all other procedures. The ICD-9-CM
procedure codes, which are maintained by CMS, are three to four digits
long and organized into chapters by body system (for example,
musculoskeletal, urinary and circulatory systems, etc.). For a
discussion of the structure of the ICD-9-CM procedure code set, please
refer to the August 22, 2008 proposed rule (73 FR 49798).

C. Limitations of ICD-9-CM

In the August 22, 2008 proposed rule (73 FR 49799), we discussed
the shortcomings of ICD-9-CM. The ICD-9-CM code set is 29 years old,
its approximately 16,000 procedure and diagnosis codes are insufficient
to continue to allow for the addition of new codes, and, because it
cannot accommodate new procedures, its capacity as a fully functioning
code set is diminished. Many chapters of ICD-9-CM are full, and in
others the hierarchical structure of the ICD-9-CM procedure code set is
compromised. This means that some chapters can no longer accommodate
new codes, so any additional codes must be assigned to other, topically
unrelated chapters (for example, inserting a heart procedure code in
the eye chapter of the code set). The ICD-9-CM code set was never
designed to provide the increased level of detail needed to support
emerging needs, such as biosurveillance and pay-for-performance
programs (P4P), also known as value-based purchasing or competitive
purchasing. For a detailed discussion of the shortcomings of the ICD-9-
CM code set, please refer to the August 22, 2008 proposed rule (75 FR
49799).

D. Maintaining/Updating ICD-9-CM (Volumes 1, 2, and 3)

Recognizing the need for ICD-9-CM to be a flexible, dynamic
statistical tool to meet expanding classification needs, the ICD-9-CM
Coordination and Maintenance Committee was created in 1985 as an open
forum for receiving public comments on proposed code revisions,
deletions, and additions. The Committee is co-chaired by CDC and CMS;
CDC maintains ICD-9-CM Diagnosis Codes (Volumes 1 and 2), and CMS
maintains ICD-9-CM Procedure Codes (Volume 3).
As discussed in the August 22, 2008 proposed rule (73 FR 49805), we
will re-name the ICD-9-CM Coordination and Maintenance Committee as the
ICD-10 Coordination and Maintenance Committee at the point when ICD-10
becomes the new HIPAA standard. Until that time, the ICD-9-CM
Coordination and Maintenance Committee will continue to update and
maintain ICD-9-CM. For a discussion of maintaining and updating code
sets, please refer to the August 22, 2008 proposed rule (73 FR 49798-
49799).

III. ICD-10 and the Development of ICD-10-CM and PCS

The ICD-10 code sets provide a standard coding convention that is
flexible, providing unique codes for all substantially different health
conditions. It also allows new procedures and diagnoses to be easily
incorporated as new codes for both existing and future clinical
protocols. ICD-10-CM and ICD-10-PCS provide specific diagnosis and
treatment information that can improve quality measurements and patient
safety, and the evaluation of medical processes and outcomes. ICD-10-
PCS has the capability to readily expand and capture new procedures and
technologies.

A. ICD-10-CM Diagnosis Codes

CDC's National Center for Health Statistics (NCHS) developed the
ICD-10-CM code set, following a voluntary consensus-based process and
working closely with specialty societies to ensure clinical utility and
subject matter expert input into the process of creating the clinical
modifications, with comments from a number of prominent specialty
groups and organizations that addressed specific concerns or perceived
unmet clinical needs encountered with ICD-9-CM. NCHS also had
discussions with other users of the ICD-10 code set, specifically
nursing, rehabilitation, primary care providers, the National Committee
for Quality Assurance (NCQA), long-term care and home health care
providers, and managed care organizations to solicit their comments
about the ICD-10 code set. There are approximately 68,000 ICD-10-CM
codes. ICD-10-CM diagnosis codes are three to seven alphanumeric
characters. The ICD-10-CM code set provides much more information and
detail within the codes than ICD-9-CM, facilitating timely electronic
processing of claims by reducing requests for additional information.
ICD-10-CM also includes significant improvements over ICD-9-CM in
coding primary care encounters, external causes of injury, mental
disorders, neoplasms, and preventive health. The ICD-10-CM code set
reflects advances in medicine and medical technology, as well as
accommodates the capture of more detail on socioeconomics, ambulatory
care conditions, problems related to lifestyle, and the results of
screening tests. It also provides for more space to accommodate future
expansions, laterality for specifying which organ or part of the body
is involved as well as expanded distinctions for ambulatory and managed
care encounters.

B. ICD-10-PCS Procedure Codes

CMS developed a procedure coding system, ICD-10-PCS. ICD-10-PCS has
no direct relationship to the basic ICD-10 diagnostic classification,
which does not include procedures, and has a totally different
structure from ICD-10-CM. ICD-10-PCS is sufficiently detailed to
describe complex medical procedures. This becomes increasingly
important when assessing and tracking the quality of medical processes
and outcomes, and compiling statistics that are valuable tools for
research. ICD-10-PCS has unique, precise codes to differentiate body
parts, surgical approaches, and devices used. It can be used to
identify resource consumption differences and outcomes for different
procedures, and describes precisely what is done to the patient. ICD-
10-PCS codes have seven alphanumeric characters and group together
services into approximately 30 procedures identified by a leading alpha
character. There are 16 sections of tables that determine code
selection, with each character having a specific meaning. (See section
V of the August 22, 2008 proposed rule (73 FR 49802-49803) for a chart
that compares ICD-9-CM, ICD-10-CM, and ICD-10-PCS codes.)
As explained in the August 22, 2008 proposed rule (73 FR 49801), to
our knowledge, no SSO has developed, adopted, or modified a standard
code set that is suitable for reporting medical diagnoses and hospital
inpatient procedures for purposes of administrative transactions.

[[Page 3331]]

IV. Summary of Proposed Provisions and Analysis of and Responses to
Public Comments

In the August 22, 2008 proposed rule (73 FR 49796), we solicited
comments from stakeholders and other interested parties on the proposed
adoption of ICD-10-CM and ICD-10-PCS code sets. We received 3,115
timely public submissions from all segments of the health care industry
including providers, physician practices, hospitals, coders, standards
development organizations, vendors, State Medicaid agencies, State
agencies, corporations, tribal representatives, healthcare professional
and industry trade associations, and disease-related advocacy groups.
Some comments were received timely, but were not relevant to the
August 22, 2008 proposed rule and were not considered in our responses.
Those comments referred to general Medicare program operations; a call
for the development of a single payer health care system in the United
States; general economic issues; a request for finalization of HIPAA
standards that were not included in the August 22, 2008 proposed rule;
a request to adopt coding guidelines for CPT codes; comments on another
unrelated notice of proposed rulemaking; and other issues that are
outside of the purview of the August 22, 2008 proposed rule. The
relevant and timely submissions within the scope of the August 22, 2008
proposed rule that we received tended to provide multiple detailed
comments on our proposals.
Brief summaries of each proposed provision, a summary of the public
comments we received (with the exception of specific comments on the
economic impact analysis), and our responses to the comments are set
forth below:

A. Adoption of ICD-10-CM and ICD-10-PCS as Medical Data Code Sets Under
HIPAA

In Sec. 162.1002(c)(2), we proposed to adopt ICD-10-CM (including
the official guidelines) to replace ICD-9-CM Volumes 1 and 2 (including
the official coding guidelines), for coding diseases; injuries;
impairments; other health problems and their manifestations; and causes
of injury, disease and impairment, or other health problems.
In Sec. 162.1002(c)(3), we proposed to adopt ICD-10-PCS (including
the official guidelines) to replace ICD-9-CM Volume 3 (including the
official coding guidelines) for the following procedures or other
actions taken for diseases, injuries, and impairments on hospital
inpatients reported by hospitals: prevention, diagnosis, treatment, and
management.
Comment: Commenters overwhelmingly supported our proposal to adopt
ICD-10-CM and ICD-10-PCS as code sets under HIPAA, replacing the ICD-9-
CM Volumes 1 and 2, and the ICD-9-CM Volume 3 code sets, respectively,
citing the benefits we described in the August 22, 2008 proposed rule.
Some commenters pointed out that the United States, with its continued
use of ICD-9-CM, is behind the rest of the world which has already
migrated to ICD-10, and that ICD-9-CM's basic structure is flawed and
outdated, and cannot accommodate new medical technology and
terminology. Commenters agreed that ICD-9-CM Volume 3 is running out of
space, and that this space limitation curtails the ability to capture
accurate reimbursement and quality data for health care documentation.
A few commenters noted that, as providers migrate toward the use of
electronic health records (EHRs), use of the more robust ICD-10-CM and
ICD-10-PCS codes will be necessary to support EHRs' more detailed
information requirements. Another commenter noted that waiting to move
to ICD-10-CM and ICD-10-PCS incurs its own costs as the underlying data
used for patient care improvement, institutional quality reviews,
medical research and reimbursement becomes increasingly unreliable.
Response: We are amending Sec. 162.1002 to adopt ICD-10-CM and
ICD-10-PCS as medical data code sets under HIPAA, replacing ICD-9-CM,
Volumes 1 and 2, and ICD-9-CM Volume 3.
Comment: We also received a number of comments stating that we
should not adopt ICD-10-CM and ICD-10-PCS as code sets under HIPAA.
Several commenters said that the ICD-9-CM code set is adequate to meet
current coding needs, making ICD-10-CM and ICD-10-PCS unnecessary.
These commenters said that current ICD-9-CM codes do not have serious
limitations, and perhaps simply need some modifications to alleviate
any limitations that ICD-9-CM might have. A number of commenters said
that we should not adopt ICD-10-CM and ICD-10-PCS because the cost
associated with the transition from ICD-9-CM to ICD-10-CM and ICD-10-
PCS would be a burden to industry. However, they did not offer specific
alternative solutions.
Other commenters offered a number of different alternatives,
including:
Create additional space in ICD-9-CM through the annual
elimination and reassignment of codes that are no longer used.
Modify the structure of ICD-9-CM to provide for the
assignment of additional codes.
Continue to assign new procedures to the two, previously
unassigned overflow chapters of ICD-9-CM, chapters 00 and 17, and once
those chapters are filled, no new codes should be created that cannot
be assigned to the appropriate body system chapter.
Adopt the American Medical Association's Physicians'
Current Procedural Terminology (CPT) for coding inpatient hospital
procedures.
Wait and adopt the ICD-11 code set. Two commenters stated
that by the time the United States has achieved proficiency using ICD-
10-CM and ICD-10-PCS, the rest of the world will be using ICD-11, and
our nation's coding reporting system will once again be incompatible
with that of other countries.
Decouple the coding of diseases at the point of patient
care from the classification of diseases for secondary uses of medical
record data by developing a U.S. Disease-Entity Coding System (USDECS)
instead of adopting ICD-10-CM.
One commenter erroneously interpreted our proposed adoption of ICD-
10-PCS as a proposal to replace CPT codes in the ambulatory setting.
Another commenter said we should recognize that hospital outpatient
departments are currently required to report using HCPCS and CPT codes,
but that some hospitals have elected to code these hospital outpatient
medical records using ICD-9-CM procedure codes.
Response: None of the suggested alternatives adequately address the
shortcomings of ICD-9-CM that were identified and discussed in the
August 22, 2008 proposed rule. The majority of commenters supported our
analysis of these shortcomings. As we noted in the August 22, 2008
proposed rule (73 FR 49827), we do not believe that extending the life
of ICD-9-CM by assigning codes to unrelated chapters or purging and
reassigning codes that are no longer used is a long-term solution, and
it would perpetuate confusion for coders and data users if hierarchy
and code set structure were to continue to be set aside in the issuance
of new codes. Gaining space in ICD-9-CM by annually purging codes that
are not used is problematic because, while it creates space, this space
may not necessarily be in the same chapters in which codes are needed.
As no one asserted that this purging process would open up sufficient
capacity to assign new codes

[[Page 3332]]

in the hierarchical sections in which the new codes ought to be placed,
purging and reassigning might only lead to coder confusion and further
contribute to the hierarchical instability of the code set. Moreover,
such action would destroy the ability to perform longitudinal research.
Modifying the existing ICD-9-CM code sets by adding more digits
and/or alpha characters was discussed as a possible alternative to
adoption of the ICD-10-CM and ICD-10-PCS code sets at public meetings
of the ICD-9-CM Coordination and Maintenance Committee; however, there
appears to be little industry support for this alternative. The
disruption resulting from adding a digit and/or alpha character to the
ICD-9-CM code set, and then trying to both refine and modify approaches
to assigning codes would result in nearly the same costs in
infrastructure and systems changes as a transition to ICD-10-PCS, but
with no significant improvement in the coding system.
In the August 22, 2008 proposed rule (73 FR 49804), we explained
that we did not consider the CPT-4 coding system to be a viable
alternative to ICD-10-CM and ICD-10-PCS code sets because CPT does not
adequately capture facility-based, non-physician services, and
commenters did not offer any new information to support that approach.
In the August 22, 2008 proposed rule, we did not propose the
replacement of CPT with ICD-10-PCS in the ambulatory setting. In the
August 17, 2000 final rule (65 FR 50312), we adopted the HCPCS and CPT
codes as the official procedure coding systems for outpatient
reporting. ICD-9-CM procedure codes are not a HIPAA standard for coding
in these settings, and while some hospitals may elect to double code
their outpatient records using both HCPCS and CPT, as well as ICD-9-CM
procedure codes for internal purposes, this is not a requirement. We do
not encourage this type of double coding, and do not believe that this
voluntary practice impacts the analysis of whether or not ICD-10-PCS
should be adopted.
We discussed waiting to adopt the ICD-11 code set in the August 22,
2008 proposed rule (73 FR 49805), noting that the World Health
Organization (WHO) has only begun preliminary work on ICD-11. There are
no firm timeframes established for completion of the ICD-11
developmental work, testing or release for use date. We are aware of
reports that the WHO's alpha version of ICD-11 may be available for
testing in 2010, with possible approval of ICD-11 for general worldwide
use in 2014. However, work cannot begin on developing the necessary
U.S. clinical modification to the ICD-11 diagnosis codes or the ICD-11
companion procedure codes until ICD-11 is officially released.
Development and testing of a clinical modification to ICD-11 to make it
usable in the United States will take an estimated additional 5 to 6
years. We estimated that the earliest projected date to begin
rulemaking for implementation of a U.S. clinical modification of ICD-11
would be the year 2020.
The suggestion that we wait and adopt ICD-11 instead of ICD-10-CM
and ICD-10-PCS does not consider that the alpha-numeric structural
format of ICD-11 is based on that of ICD-10, making a transition
directly from ICD-9 to ICD-11 more complex and potentially more costly.
Nor would waiting until we could adopt ICD-11 in place of the adopted
standards address the more pressing problem of running out of space in
ICD-9-CM Volume 3 to accommodate new procedure codes.
Finally, the development of a United States Disease-Entity Coding
System (USDECS), which would involve developing a totally new
classification system not based on any previous classification system
platforms, would require even more time than implementing ICD-11, and
would also hamper efforts to evaluate United States data in the context
of other countries' experiences.
Comment: A few commenters stated that HHS needs to ensure that the
use of ICD-10-CM and ICD-10-PCS code sets will not conflict with other
federally recognized standards.
Response: We assume the commenter is referring to Secretarially
recognized interoperability standards recommended by the Healthcare
Information Technology Standards Panel (HITSP), a cooperative
partnership between the public and private sectors formed to harmonize
and integrate standards that will meet clinical and business needs for
sharing information among organizations and systems. In some HITSP
interoperability specifications, including those for Electronic Health
Records, Laboratory Results Reporting and Biosurveillance, HITSP has
defined or identified specific interoperability standards, including
use of SNOMED-CT[supreg], to support interoperability of systems. As
discussed in the August 22, 2008 proposed rule (73 FR 49803), ICD-10-CM
and ICD-10-PCS are classification coding systems while SNOMED-
CT[supreg] is a clinically complex terminology standard. As we noted in
the August 22, 2008 proposed rule, we do not believe that SNOMED-
CT[supreg] is a suitable standard for reporting medical diagnoses and
hospital inpatient procedures for purposes of administrative
transactions. The numerous codes would be impractical to assign
manually and are not suited to the secondary purposes for which
classification systems like ICD-10 codes are used because of their size
and considerable granularity, complex hierarchies, and lack of
reporting rules. (See 73 FR 49803-49804). SNOMED-CT[supreg] is not a
substitute for ICD-10 as a coding system, but, as further noted in the
August 22, 2008 proposed rule, the benefits of using SNOMED-CT[supreg]
increase if such use is linked to a classification system such as ICD-
10-CM and ICD-10-PCS. Mapping would be used to link SNOMED-CT[supreg]
to ICD-10 code sets. Plans are underway to develop these crosswalks, so
a transition to ICD-10 code sets will ultimately facilitate realizing
the benefits of using the specified interoperability standards
including SNOMED-CT[supreg]. Moreover, it is the promulgation of
regulations, and not the HITSP process, that dictates which standards
are ultimately to be used for administrative transactions.
Comment: A number of commenters stated that quality performance
measures currently used for programs such as the Physician Quality
Reporting Initiative (PQRI) are based on ICD-9-CM diagnosis codes, and
it is unclear how the change to ICD-10 would impact those programs.
Response: We anticipate that the use of ICD-10-CM, with its greater
detail and granularity, will greatly enhance our capability to measure
quality outcomes. We acknowledge that quality performance outcome
measures are currently used for high-profile initiatives such as the
hospital pay-for-reporting program. The greater detail and granularity
of ICD-10-CM and ICD-10-PCS will also provide more precision for
claims-based, value-based purchasing initiatives such as the hospital-
acquired conditions (HAC) payment policy. Crosswalks that allow the
industry to convert ICD-9-CM codes into ICD-10-CM and ICD-10-PCS codes
(and vice versa) are already in existence. These crosswalks and others
that are developed during the implementation period will allow the
industry to convert payment systems, HAC payment policies, and quality
measures to ICD-10. We note that, under this rule, ICD-10 codes will
not be implemented as a HIPAA code set until 2013. Programs that offer
incentives that are based on performance outcome measures that may be
impacted by the changeover from ICD-9-CM to ICD-10-CM will

[[Page 3333]]

have sufficient time to plan for a smooth transition to ICD-10 coding.
Our own such preparation will include ICD-10 updates to the quality
measures as part of our routine regulatory process.

B. Compliance Date

In the August 22, 2008 proposed rule, we proposed October 1, 2011
as the compliance date for ICD-10-CM and ICD-10-PCS code sets for all
HIPAA covered entities. To illustrate our implementation timeline for
preliminary planning purposes, we also published in the proposed rule
(73 FR 49807) a draft implementation timeline for both Version 5010 and
ICD-10-CM and ICD-10-PCS.
Comment: While an overwhelming majority of commenters favored
adoption of ICD-10-CM and ICD-10-PCS, they expressed many different
positions regarding the compliance date. Most commenters disagreed with
the proposed October 1, 2011 compliance date, stating that it did not
provide adequate time for industry to train coders and complete systems
changeovers and testing.
In general, commenters expressed particular concern about the
industry's ability to implement both ICD-10 and the concurrently
proposed X12 Version 5010 transactions standards (Version 5010) in the
proposed timeframe. The commenters pointed out that this timeframe
would jeopardize plans' ability to process claims and could therefore
result in more unpaid or improperly paid claims. They also pointed out
that this compliance date would provide less time for adopting ICD-10-
CM and ICD-10-PCS than the actual amount of time it took industry to
implement other HIPAA standards, including the National Provider
Identifier. One commenter proposed incentive payments to HIPAA covered
entities to help them achieve compliance given the short compliance
timeframe.
NCVHS' September 26, 2007 recommendation on the implementation of
Version 5010 and ICD-10 was frequently cited by commenters as being the
benchmark against which they measured their own recommendations. Some
commenters stated that we should further consider the NCVHS
recommendation to the Secretary that there be a 2-year time gap between
the finalization of the implementation of Version 5010, and compliance
with ICD-10. A number of commenters interpreted the NCVHS
recommendation as being that of a 3-year time gap, and cited that as
their basis for supporting a 2013 or in some instances, a 2014
compliance date for ICD-10.
In fulfillment of part of its HIPAA-mandated responsibilities,
NCVHS submitted recommendations to HHS that suggested establishing two
different levels of compliance for the implementation of ICD-10-CM and
ICD-10-PCS codes sets relative to compliance with Version 5010. ``Level
1 compliance,'' as interpreted by NCVHS, would mean that the HIPAA
covered entity could demonstrate that it could create and receive ICD-
10-CM and ICD-10-PCS compliant transactions. ``Level 2 compliance,'' as
interpreted by NCVHS, would mean that HIPAA covered entities had
completed end-to-end testing with all of their trading partners. NCVHS
further recommended that no more than one implementation of a HIPAA
transaction or coding standard be in Level 1 at any given time, which
tacitly suggests that Level 2 testing for Version 5010 could, in NCVHS'
estimation, reasonably take place concurrently with initial Level 1
activities associated with ICD-10 implementation.
As commenters noted, the NCVHS letter stated that ``it is critical
that the industry is afforded the opportunity to test and verify
Version 5010 up to two years prior to the adoption of ICD-10.'' The
letter's Recommendation 2.2 further states that ``HHS should take under
consideration testifier feedback indicating that for Version 5010, two
years will be needed to achieve Level 1 compliance.''
A small number of commenters supported the proposed October 1, 2011
implementation date. They believed that the date was achievable, and
stressed that the benefits of ICD-10 are so significant that an
aggressive implementation timetable was justified because it would make
additional information available that would support health care
transparency, and thereby benefit patients, and that further delays in
implementation would result in increased implementation costs. Others
simply stated that the time had come for the U.S. to catch up with the
rest of the world in using ICD-10.
A smaller number of commenters supported an implementation date of
October 1, 2012. They, too, cited the benefits of ICD-10, and argued
that a one-year postponement of the proposed October 2011 date would
provide sufficient time in which the industry could achieve compliance
with ICD-10-CM and ICD-10-PCS. A few commenters explicitly noted that a
2012 implementation date would allow them adequate time to budget and
plan for the changeover. Other commenters stated that ICD-10 compliance
should come no earlier than October 2012; and still others recommended
an October 2012 compliance date if such a compliance date would allow
for a 3-year implementation timetable for ICD-10 following the Version
5010 compliance date.
A number of commenters suggested a compliance date of October 2013,
citing insufficient time in which to install and test ICD-10-CM and
ICD-10-PCS within their claims processing and other related IT systems,
the need for coder and provider education and outreach, and the time
needed for implementation of previous HIPAA standards. These commenters
stated that an October 2013 date would afford them with the minimum of
2 years after implementing Version 5010 that they said they needed in
order to comply with ICD-10-CM and ICD-10-PCS. The compliance date must
occur on October 1 of any given year in order to coincide with the
effective date of the annual Medicare Inpatient Prospective Payment
System (IPPS). A number of commenters supported a 2013 compliance date
as more realistic than the proposed 2011 date, and urged that we move
quickly to publish a final rule to adopt ICD-10-CM and ICD-10-PCS.
Other commenters simply noted that 2013 was a reasonable date that
would allow more time for effective implementation and training on the
proper use of code sets. Commenters noted that this date should give
HIPAA covered entities sufficient time to fully implement Version 5010
before moving on to ICD-10. A few other commenters noted that the
compliance date for ICD-10 should not be any earlier than 2013.
The majority of commenters, including individual providers and
industry associations, supported a compliance date of October 1, 2014
which they said could be less costly, allow more time for education,
and would better ensure that the desired benefits of the ICD-10-CM and
ICD-10-PCS code sets are achieved. The majority of submissions that
supported a 2014 compliance date were form letters submitted by members
representing the position of one industry professional association.
A few commenters suggested an implementation date of October 1,
2015 or beyond, once again citing their perceptions of the high cost of
the transition to ICD-10-CM and ICD-10-PCS, and the need for extensive
education and training.
Other commenters did not propose a specific compliance date, but
rather indicated the need for 3 years after the Version 5010 compliance
date. Other

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commenters suggested that 95 percent of covered entities be
successfully converted to Version 5010 prior to the start of ICD-10
implementation.
One commenter stated that the adoption of ICD-10-CM should be
delayed until the Diagnostic and Statistical Manual of Mental
Disorders, Fifth Edition (DSM-V) has been released.
Response: We recognize that the compliance date issue is crucial to
the successful implementation of ICD-10. We have assessed the comments
carefully, balancing the benefits of earlier implementation against the
potential risk of establishing a deadline that does not provide
adequate time for successful implementation and thorough testing. We
cannot consider a compliance date for ICD-10 without considering the
dependencies between implementing Version 5010 and ICD-10. We recognize
that any delay in attaining compliance with Version 5010 would
negatively impact ICD-10 implementation and compliance. The lack of
information on cost estimate impacts also supports a later ICD-10
compliance date to allow the industry to spread out any unanticipated
costs over a longer period of time.
Pursuant to a regulation published in this same edition of the
Federal Register, the Version 5010 compliance date has now been
established as January 2012, to afford the industry an additional year,
for a total of 3 years to achieve compliance with Version 5010.
From our review of the industry testimony presented to NCVHS and
comments received on our August 22, 2008 proposed rule, it appears that
24 months (2 years) is the minimum amount of time that the industry
needs to achieve compliance with ICD-10 once Version 5010 has moved
into external (Level 2) testing.
We believe that the spirit and intent of the NCVHS letter
recommends that the Secretary move the industry forward on the adoption
and implementation of, and compliance with, Version 5010 and the ICD-
10-CM and ICD-10-PCS code sets. At the same time, NCVHS recognizes the
wide-reaching impacts of the transition to ICD-10-CM and ICD-10-PCS,
and in doing so, implies that any implementation plans and timetables
should be structured as to be realistic for the industry as a whole.
In establishing the ICD-10 compliance date, we have sought to
select a date that achieves a balance between the industry's need to
implement ICD-10 within a feasible amount of time, and our need to
begin reaping the benefits of the use of these code sets; stop the
hierarchical deterioration and other problems associated with the
continued use of the ICD-9-CM code sets; align ourselves with the rest
of the world's use of ICD-10 to achieve global health care data
compatibility; plan and budget for the transition to ICD-10
appropriately; and mitigate the cost of further delays.
We believe that an October 1, 2013 ICD-10 compliance date achieves
that balance, being 2 years later than our proposed October 2011 ICD-10
compliance date and providing a total of nearly 5 years from the
publication of the Version 5010 final rule through final compliance
with ICD-10. The 32 months from completion of Level 1 testing for
Version 5010 in January 2011 (at which point Level 1 ICD-10 activities
can begin) to the October 1, 2013 compliance date for ICD-10 should
allow the industry ample time to effect systems changeovers and testing
so as to become fully compliant with the ICD-10-CM and ICD-10-PCS code
sets.
We note that those requesting compliance dates of 2014 and later
did not suggest methods for mitigating the negative effects of delaying
compliance, including the increased implementation costs which may
result from the increase in the number and size of legacy systems that
will need to be updated; delay in achieving the benefits identified in
the August 22, 2008 proposed rule; and the impacts of continued
degradation of the code sets. We further note that many health plans
supported a 2013 compliance date. Since the complexity of ICD-10
implementation will be much higher for health plans (because after
health plans update systems to utilize ICD-10 codes, they will also
have to develop claims processing edits based on those codes) than for
individual providers and coders, we take the support of health plans
for a 2013 compliance date as an indication of the reasonableness of
this timeline.
It is also important to note that, while NCVHS recommended that
Level 1 activities for Version 5010 and ICD-10 should not overlap, it
is inevitable that, as covered entities embark on requirements analysis
for Version 5010, they will identify ICD-10 issues as a natural
offshoot of those efforts. Thus, even if entities choose not to begin
full-scale ICD-10 implementation efforts until Version 5010 has reached
Level 2 compliance, they will likely begin that phase with a
preexisting knowledge base about ICD-10, and will also have identified
lessons learned and best practices that will inform those later
activities.
We also note that the Diagnostic and Statistical Manual of Mental
Disorders, Fifth Edition (DSM-V) is projected to be released in 2012 by
the American Psychiatric Association (APA). CDC is working with APA to
ensure that ICD-10-CM and DSM-V codes match, and that the timing of
this projected release would conform with the commenter's request that
the ICD-10 compliance date occur after the release of DSM-V.
We are adopting the ICD-10-CM and ICD-10-PCS as medical data code
sets under HIPAA, replacing ICD-9-CM Volumes 1 and 2, and Volume 3,
with a compliance date of October 1, 2013, and have updated the draft
ICD-10/Version 5010 implementation timeline which previously appeared
in the proposed rule (73 FR 49807) to read as follows:

Timeline for Implementing Versions 5010/D.0 and ICD-10
------------------------------------------------------------------------
Version 5010/D.0 ICD-10
------------------------------------------------------------------------
01/09: Publish final rule................. 01/09: Publish Final Rule
01/09: Begin Level 1 testing period
activities (gap analysis, design,
development, internal testing) for
Versions 5010 and D.0.
01/10: Begin internal testing for Versions
5010 and D.0.
12/10: Achieve Level 1 compliance (Covered
Entities have completed internal testing
and can send and receive compliant
transactions) for Versions 5010 and D.0.
01/11: Begin Level 2 testing period 01/11: Begin initial
activities (external testing with trading compliance activities (gap
partners and move into production; dual analysis, design,
processing mode) for Versions 5010 and development, internal
D.0. testing).

[[Page 3335]]

01/12: Achieve Level 2 compliance;
Compliance date for all covered entities.
This is also the compliance date for
Version 3.0 for all covered entities
except small health plans*.
10/13: Compliance date for
all covered entities.
------------------------------------------------------------------------
Note: Level 1 and Level 2 compliance requirements only apply to Version
5010, NCPDP Telecommunication Standard Version D.0, and NCPDP Medicaid
Subrogation Standard Version 3.0.

Comment: One commenter stated that the October 1 compliance date
should be changed to better align with the health care industry's
regularly scheduled annual system changeovers.
Response: The commenter did not reference specific system
changeovers, suggest an alternative date, or specify the regularly
scheduled system changes to which it refers, so we are unable to assess
the validity of the comment. We received no other comments opposed to
an October 1 date. The October 1 date was selected to ensure that the
ICD-10 compliance date would coincide with the effective date of the
Medicare IPPS update.
Comment: A number of commenters urged that the compliance date for
the HIPAA health care claims attachment standard not coincide with the
Level 1 implementation activities related to either Version 5010 or
ICD-10.
Response: We will take this into consideration in establishing a
compliance date in the health care claims attachment standard final
rule.

C. Implementation Period

Comment: A minority of commenters disagreed with our proposal to
establish a single compliance date for ICD-10. Some commenters
suggested a variety of alternatives for phased-in or staggered
implementation of the ICD-10-CM and ICD-10-PCS code sets in order to
alleviate the impact of implementation. A number of these commenters
suggested that we allow ``dual processing'': in other words, acceptance
of either ICD-9 or ICD-10 code sets on any given claim for a specified
period of time. They expressed concern about having a single date on
which all covered entities would have to convert to ICD-10, and
stressed the need for testing between trading partners to ensure that
claims are properly processed. They also pointed out that covered
entities would have to maintain dual processes in any case to process
old claims.
Other commenters proposed that the ICD-10-CM diagnosis and ICD-10-
PCS procedure codes be implemented at different times. A few commenters
suggested adopting other nations' approaches to implementing ICD-10
such as those used in Canada and Australia, specifically, staggered
implementation of the new codes either by geographic region, by covered
entity category, and/or allowing for a later implementation date for
small entities.
Other commenters pointed out that diagnosis and procedure codes
affect the amount of payment, and that dual processing (that is, the
possibility that a claim for services provided on a given date being
processed for reimbursement at two different rates based on two code
sets) would add significant complexity.
Response: Implementation of ICD-10 will require significant
business and technical changes for all covered entities.
We acknowledge that ICD-9-CM codes will continue to be used only
for the period of time during which old claims (those with dates of
service prior to October 1, 2013) continue through the payment cycle.
We do not believe that this period during which covered entities will
be maintaining the ability to work in two code systems is what
commenters meant by ``dual processing.'' Rather, we believe that
commenters utilized the term ``dual processing'' to mean the provider's
ability to use their own discretion in deciding whether to submit
claims using ICD-9 or ICD-10 code sets after the October 1, 2013
compliance date. Such use of more than one code set for coding
diagnoses or procedures, whether in a medical record or claim, would
cause significant business process duplication. It could result in
different information being shared about a patient because the ICD-10
code set is so much more robust than ICD-9, and the code for a given
diagnosis/procedure does not necessarily match one code to one code
between the code sets.
While HHS could elect to provide for some sort of ``staggered''
implementation dates, we have concluded that it would be in the health
care industry's best interests if all entities were to comply with the
ICD-10 code set standards at the same time to ensure the accuracy and
timeliness of claims and transaction processing.
We agree with commenters that maintenance of two code sets for a
significant span of time such that, on any specific date of service in
that time frame one could submit, process and/or receive payment on a
claim based on ICD-9-CM or the ICD-10-CM and ICD-10-PCS code sets would
raise considerable logistical issues and add to the complexity of the
ICD-10 code set implementation. One would need to employ/operate
duplicate coding staffs and systems. For example, we understand that
Medicare's systems will not allow the use of two different code sets
for services provided on the same date, and we presume that other
covered entities' systems were likewise not designed with such
capacities. Even if such coding and processing capabilities were
available, the biller would have to ensure that claims indicated the
coding system under which they were generated, and the recipient would
need to put measures in place to avoid processing on the wrong system.
We believe that this would impose a very significant burden on plans
and providers/suppliers. The availability and use of crosswalks,
mappings and guidelines should assist entities in making the switchover
from ICD-9 to ICD-10 code sets on October 1, 2013, without the need for
the concurrent use of both code sets in claims processing, medical
record and related systems with respect to claims for services provided
on the same day. Furthermore, although the Act gives the Secretary the
authority to extend the time for compliance for small health plans if
the Secretary determines that it is appropriate, we believe that
different compliance dates based on the size of a health plan would
also be problematic, since a provider has no way of knowing if a health
plan qualifies as a small health plan or not.
As stated in the August 22, 2008 proposed rule (73 FR 49806), a
phased-in implementation of ICD-10 that allows for payment systems to
accept both ICD-9 and ICD-10 codes for services rendered on the same
day would constitute a significant burden on the industry. We continue
to believe that, based on our previous HIPAA standards implementation
experience

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and in consideration of the complexities of the U.S. health care
system's multi-payer system, allowing both code systems to be used and
reported at the same time (i.e., for services/procedures performed on
the same day) would create confusion in processing and interpreting
coded data, and claims could likely be denied for services, or returned
as errors if processing errors resulted in edits that indicated too
many or too few digits. It would be more costly for the various health
care payment systems used in the United States to accept and process
claims with both ICD-9 and ICD-10 code sets. Providers would have to
maintain both coding systems, and there would be significant system
implications in trying to determine which coding system was being used
to report the coded data.
Adopting diagnosis and procedure codes at different times would
result in similar system problems, namely pairing an ICD-9 diagnosis
code with an ICD-10 procedure code, or vice versa. For more examples of
problems associated with maintaining the two coding systems
concurrently, please refer to the August 22, 2008 proposed rule (73 FR
49806).
Allowing the industry to use ICD-10-CM and ICD-10-PCS codes
voluntarily would also result in confusion. Systems would not be able
to recognize whether the code was an error made in an ICD-9 code entry,
or actually an ICD-10 code, again causing rejection errors.
We continue to believe it is in the industry's best interest, and
that includes small health plans, to have a single compliance date for
ICD-10-CM and ICD-10-PCS. This will reduce the burden on both providers
and insurers who will be able to edit on a single new coding system for
claims received for encounters and discharges occurring on or after
October 1, 2013, instead of having to maintain two coding systems over
an extended period of time. Providers and insurers would use ICD-9-CM
edits and payment logic for claims relating to encounters and
discharges occurring prior to the date of compliance, and the ICD-10-CM
and ICD-10-PCS edits and payment logic for all claims relating to
encounters and discharges occurring on or after the ICD-10 compliance
date. They would not have the burden of selectively applying either the
ICD-9-CM or ICD-10-CM edits and logic to claims before the compliance
date, and as a result, we have not established dates for Level 1 and
Level 2 testing compliance for ICD-10 implementation. We encourage all
industry segments to be ready to test their systems with ICD-10 as soon
as it is feasible. We believe that the October 1, 2013 compliance date
will allow various payment systems to correctly edit the codes and make
payments based on the payment and coding system in effect at that time,
and is sufficiently far in the future to provide all sectors of the
industry adequate time to implement the code sets.
As described in section XI.D of the August 22, 2008 proposed rule
(73 FR 49827), a number of phase-in compliance options for ICD-10-CM
and ICD-10-PCS were considered and rejected because of the nature of
the U.S. multi-payer system. Phased-in ICD-10-CM and ICD-10-PCS
compliance based on staggered dates set by geography over extended
periods of time would require plans (especially national plans), and
possibly multi-state chain or national providers/suppliers or health
care entities that were vertically integrated, to maintain and operate
both ICD-9 and ICD-10 coding systems for an extended period of time.
The time frame during which covered entities will need to learn and use
the new ICD-10 codes, while at the same time continuing to work with
the old ICD-9 codes, should be minimized because during this period
there is an increase in the chance of errors in payments, and such
confusion and uncertainty in the provider/supplier community could
result in undesirable delays in processing claims that should be
avoided to the extent possible. We believe that maintaining dual
systems concurrently for an extended period of time would impose a very
significant burden on plans and providers/suppliers. In the August 22,
2008 proposed rule (73 FR 49827), we also referenced the Canadian and
Australian experience with their geographic phased-in ICD-10
implementation approach, and the problems they reported that were
inherent in that approach. We have received no new information on other
countries' experience with the implementation of their respective
version of ICD-10 that would lead us to reverse our initial conclusion
that a phased-in approach based on geographic boundaries is not in the
best interests of the industry. Therefore, in consideration of the many
problems inherent with these phased-in and/or staggered implementation
alternatives, we are adopting October 1, 2013 as the compliance date
for the ICD-10-CM and ICD-10-PCS medical data code sets.

D. Date of Admission Versus Date of Discharge Coding

Comment: We proposed to follow the current practice of implementing
new code set versions effective with the date of service, which for
purposes of inpatient facilities means the medical codes in effect at
the time of patient discharge. For example, if a patient is admitted in
September and the patient is discharged on or after the October 1
compliance date, the hospital would have to assign the codes in effect
on October 1. Several commenters requested that inpatient hospital
facilities use the version of the codes in effect at the date of
admission instead of the date of discharge because this would benefit
inpatient facilities that use interim billing. They proposed that
hospitals that did not use interim billing could continue to use the
date of discharge for determining the version of ICD code sets to be
used for coding.
Response: It has been a long standing practice for inpatient
facilities to use the version of ICD codes in effect on the date of
discharge. Most hospitals do not code their records for billing
purposes until the patient is discharged. Much information is gathered
through the process of inpatient treatment. Tests are performed,
surgeries may be completed, and additional diagnoses may be assigned.
Therefore, the documentation is more complete by the time a patient is
discharged. At this point the hospital coder assigns the codes that are
in effect on the date of discharge. All of our national inpatient data
is based on this practice. We do not agree that changing this practice
would be of benefit to hospitals, and maintain that the opposite would
be true, and is counter to the implementation of a single, consistent
ICD-10 implementation date. Furthermore, using the date of admission
for some types of claims coding, and date of discharge for other types
of claims coding would also greatly disrupt national data and create
problems in analyzing what has, until this point in time, been a
consistent approach to coding medical records. Hospitals engaged in
interim billing will not see any change from their current practices.
They will continue to use the code set in effect for services occurring
prior to October 1, 2013 and will use the next year's update (in this
case, ICD-10-CM and ICD-10-PCS for 2013) for services occurring on or
after October 1, 2013.
Therefore, we will not change the current practice followed by
inpatient facilities of coding based on the date of discharge.

E. Coding Guidelines

Comment: Several commenters expressed the need for ICD-10 coding
guidelines to be developed and maintained. Some commenters incorrectly
pointed out that guidelines

[[Page 3337]]

were not available, while others were aware of the ICD-10 guidelines
that are posted on the CMS and CDC Web sites. Commenters expressed
concern that the ICD-10-CM guidelines on CDC's Web page were created in
2003, and stated that they are ``draft'' guidelines that have not been
updated. Commenters further indicated that this lack of finalized
coding guidelines will make it difficult for software and systems
vendors to develop ICD-10 products and for covered entities to begin
training staff. Commenters also stated that there should be a single,
authoritative source for ICD-10 coding guidelines to avoid variations
in the interpretation and use of the codes. These commenters questioned
whether the implementation of ICD-10 should be delayed until such time
as the guidelines can be updated.
Response: We agree that it is important to have an official set of
ICD-10 coding guidelines, and that they be properly maintained. CMS,
CDC, AHA and AHIMA joined forces some time ago under a long-standing
memorandum of understanding to develop and approve the guidelines for
ICD-9-CM code set coding and reporting. These ``Cooperating Parties''
conduct annual reviews of these guidelines and develop new guidelines
as needed, considering stakeholder input obtained through public
meetings of the ICD-9-CM Coordination and Maintenance Committee, and
through input submitted from AHA and AHIMA members. Only those
guidelines approved by the Cooperating Parties are official and posted
to CDC and CMS Web sites, and this has proven to be an effective
approach to guideline development and maintenance. The Cooperating
Parties will finalize a 2009 version of the Official ICD-10-CM coding
guidelines, which will be posted to CDC's Web site in January 2009.
Updated coding guidelines for ICD-10-PCS are included in the Reference
Manual already posted to CMS' Web site at http://www.cms.hhs.gov/ICD10/Downloads/pcs_refman.pdf. Given the imminent availability of updated
coding guidelines, we do not believe that it would be appropriate to
further delay the adoption of the ICD-10 code sets pending the issuance
of the updated guidelines.

F. ICD-10 Mappings and Crosswalks

Comment: Many commenters emphasized the importance of reliable
crosswalks between ICD-9-CM and ICD-10-CM and ICD-10-PCS. Some
commenters incorrectly stated that there were no crosswalks available
between ICD-9-CM and ICD-10-CM and ICD-10-PCS diagnosis and procedure
codes and pointed out the importance of such crosswalks for
implementation. Other commenters stated that they would require
``additional bi-directional mapping developed by a single authoritative
national source prior to implementation,'' to prevent loss of data
integrity. Commenters expressed concern about possible crosswalk and
mapping errors, the lack of a crosswalk between ICD-10-CM and the ICD-
10 code set for international data comparability, and about the ability
of available crosswalks to serve as a useful tool in data conversion.
Some commenters stated there should be an extension of the timeline for
ICD-10 compliance due to the limited availability and utility of the
existing crosswalks. Several commenters recommended that HHS inform
industry stakeholders how often these mappings will be updated and how
they will be maintained. One commenter asked whether companies may
develop their own proprietary mapping systems and if this could impact
the compliance dates. We also received a comment that, if ICD-10 is
implemented, we should provide a crosswalk between the Ambulatory
Payment Classification (APC) groups and the Medicare Severity--
Diagnosis Related Groups (MS-DRGs).
Response: We agree that crosswalks between ICD-9-CM and ICD-10-CM
and ICD-10-PCS will be critical. Section 1174(b)(2)(B)(ii) of the Act
states that if a code set is modified under this subsection, the
modified code set shall include instructions on how data elements of
health information that were encoded prior to the modification may be
converted or translated so as to preserve the informational value of
the data elements that existed before the modification. Any
modification to a code set under this subsection shall be implemented
in a manner that minimizes the disruption and cost of complying with
such modification.
In anticipation of that possible need if/when ICD-10 code sets were
to be adopted, authoritative, detailed bi-directional (that is, they
can be used to translate from the old code to the new, or from the new
to the old) crosswalks, or mappings, which we refer to as General
Equivalency Mappings (GEMs), have been developed between ICD-9-CM
Volumes 1 and 2 and ICD-10-CM and the ICD-9-CM Volume 3 and ICD-10-PCS.
These mappings were developed with stakeholder input into their
creation and maintenance, and discussed at public meetings of the ICD-9
Coordination and Maintenance Committee.
CDC developed one such bi-directional mapping between ICD-9-CM
diagnosis codes and ICD-10-CM. This mapping, and an accompanying guide
explaining how to use the mapping, are available on CDC's Web page at
http://www.cdc.gov/nchs/about/otheract/icd9/icd10cm.htm, as well as the
CMS Web page at http://www.cms.hhs.gov/ICD10/02_ICD-10-PCS.asp.
CMS developed bi-directional mappings between ICD-9-CM Volume 3 and
ICD-10-PCS, along with an accompanying guide explaining how to use the
2008 mappings, which are posted to the CMS Web page at http://www.cms.hhs.gov/ICD10/01m_2009_ICD-10-PCS.asp#TopOfPage.
CDC's mapping was highly successful as a clinical equivalent was
reported to be possible in all but 0.6 percent of ICD-10-CM codes. In
those 0.6 percent of ICD-10-CM codes, a new diagnosis concept was
introduced into ICD-10-CM that was not previously found in ICD-9-CM.
Therefore, in 0.6 percent of the ICD-10-CM codes, there were no similar
codes in ICD-9-CM to which the ICD-10-CM code could be mapped, and this
is clearly indicated in the GEM mappings. However, there are general
equivalence mappings for over 99 percent of all ICD-10-CM codes and for
100 percent of the ICD-10-PCS codes. The ICD-9-CM Coordination and
Maintenance Committee reported on the use of the GEM mapping in
converting the MS-DRGs from ICD-9-CM to ICD-10-CM codes. A complete
report of this activity is included in the September 24-25, 2008 ICD-9-
CM Coordination and Maintenance Committee meeting summary which can be
found at http://www.cms.hhs.gov/ICD9ProviderDiagnosticCodes/03_meetings.asp#TopOfPage.
The use of the GEM mappings to convert the MS-DRGs from ICD-9-CM to
ICD-10 codes demonstrates that the GEM mappings are extremely accurate
and useful. The GEM mappings were able to convert 95 percent of the
ICD-9-CM diagnosis codes in the digestive part of the MS-DRGs to the
appropriate ICD-10-CM and ICD-10-PCS codes. For these digestive system
MS-DRGs, the GEM mappings automatically converted 99 percent of the
ICD-9-CM digestive system diagnoses codes and 91 percent of the ICD-10-
PCS procedure codes to the appropriate digestive system ICD-10 codes.
Five percent required some additional analysis, and we believe that
future experience will increase that rate of conversion. We trust that
these will be of great assistance to the industry in converting
payment, quality and other types of systems from ICD-9-CM to

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ICD-10-CM and ICD-10-PCS and vice versa.
There may be value in annually revising these bidirectional
mappings to allow for conversions between ICD-9-CM codes and the ICD-
10-CM and ICD-10-PCS codes as the ICD-10 code sets are updated annually
after their adoption. The ICD-9-CM Coordination and Maintenance
Committee is the public forum used to discuss updates to ICD-9-CM and
it will be used to discuss updates to the ICD-10 coding system, as well
as the mapping between the systems. As previously discussed, this
Committee will be re-named the ICD-10 Coordination and Maintenance
Committee once ICD-10 is implemented. The Committee will continue to
discuss issues such as mappings to the prior coding system, ICD-9-CM.
The Committee will discuss the need to continue updating these mappings
for a minimum of 3 years after the ICD-10-CM and ICD-10-PCS final
compliance date. Should the industry recommend that this period be
extended by several years, then we would anticipate that the mappings
will continue to be updated through the auspices of the Committee, and
will seek input from industry stakeholders through the Committee as to
whether these mappings are beneficial to industry, and whether mappings
to ICD-9-CM should be updated for an additional period of time.
CMS also has developed a reimbursement mapping that can be used to
update payment systems that gives the ICD-10-CM code that best matches
the previously used ICD-9-CM code. This reimbursement mapping will
allow other payers to more quickly determine how they want to classify
a particular ICD-10 code within their payment system. Should payers
want to consider refinements to their payment systems based on the
additional detail provided by ICD-10, they may do so. The complete ICD-
10-CM and ICD-10-PCS GEMs may also assist in those cases where
additional information is needed, which is not found in the more
streamlined reimbursement mapping. For details of the discussion of the
reimbursement mappings at the ICD-9-CM Coordination and Maintenance
Committee, please access the CMS Web site at http://www.cms.hhs.gov/ICD9ProviderDiagnosticCodes/03_meetings.asp#TopOfPage.
CMS will post to this same Web site the reimbursement mapping file
along with the 2009 versions of the GEMS and the 2009 version of ICD-
10-PCS by the end of 2009. CDC will be posting the 2009 version of the
ICD-10-CM GEMs to their Web site at http://www.cdc.gov/nchs/about/otheract/icd9/icd10cm.htm by the end of 2009.
CMS will use mappings to convert the Medicare-Severity Diagnosis
Related Groups (MS-DRGs) from ICD-9-CM to ICD-10-CM and ICD-10-PCS. MS-
DRGs are used by Medicare to determine hospital payments under the
Inpatient Prospective Payment System (IPPS). This conversion was
discussed at the September 24, 2008 ICD-9-CM Coordination and
Maintenance Committee meeting. This presentation can be found at:
http://www.cms.hhs.gov/ICD9ProviderDiagnosticCodes/03_meetings.asp#TopOfPage. We expect that CMS will have converted all MS-
DRGs to ICD-10 by October 2009, and will share those results with
payers and providers at a future ICD-9-CM Coordinating and Maintenance
Committee meeting. The adoption of the final ICD-10 version of MS-DRGs
will be subject to rulemaking. We encourage anyone who has particular
concerns about possible errors in the crosswalks and/or mappings to
share them with CMS and CDC through the ICD-9-CM Coordination and
Maintenance Committee so that mappings can be updated as we move
forward toward implementation.
We disagree that we should develop a crosswalk between APCs and MS-
DRGs when ICD-10 is implemented. We do not have a crosswalk between the
current APCs, which are based on CPT codes, and MS-DRGs, which are
based on ICD-9-CM codes. The IPPS, which relies on MS-DRGs, and the
hospital outpatient prospective payment system (OPPS), which relies on
APCs, were developed to reimburse providers in different settings, are
maintained separately, and undergo separate formal rulemaking each
year.
Finally, CDC fully intends to produce a crosswalk between ICD-10
and ICD-10-CM, addressing the need for international data
comparability, and this crosswalk will be completed and made available
one year prior to the ICD-10 compliance date. CDC already uses ICD-10
to report cause of death, and it is anticipated that this crosswalk
will be of great interest to those engaged in international data
reporting.
Any additional tools will certainly assist in the implementation of
ICD-10, and both CMS and CDC will continue to make improvements and
refinements to their publicly available mappings and post them for
others to use. Other vendors may develop products to assist in
analyzing codes or converting data, but we do not see any reason why
the availability of such products, whether proprietary or non-
proprietary, would have any bearing on the determination of a final
compliance date for ICD-10-CM and ICD-10-PCS.

G. ICD-10 Education and Outreach

Comment: Many commenters stated that the proposed October 2011 ICD-
10 compliance date would not allow for proper industry education and
outreach and that the tight timeline would constitute a major burden to
the industry. Commenters expect that certified coders would need
detailed education in order to identify the proper codes for accurate
billing. Some commenters said regular physician office staff would need
to become certified coders, and current certified coders would need to
get recertified, incurring a costly exam fee.
Many commenters recommended that significant education and outreach
for ICD-10 would be needed, and they suggested a number of strategies,
including the need for national associations to collaborate on
education efforts; a need for a consistent set of messages and/or
materials from a national authoritative source; recognition that
different audiences/entities (for example, inpatient hospital coders)
may need different levels of training; that in-person training should
supplement Internet training and printed documents; and that CMS should
provide funding for ICD-10 training for State Medicaid program staff.
Response: As stated in the August 22, 2008 proposed rule (73 FR
49807), with the publication of this final rule, we will begin to
proactively conduct outreach and education activities which include,
but are not limited to, roundtable conference calls with industry
stakeholders, development of FAQs, fact sheets, and other supporting
education and outreach materials for industry partner dissemination. We
also anticipate that there will be extensive industry-sponsored
educational opportunities through various stakeholder associations. As
part of our education and outreach efforts, we will work closely with
industry stakeholders to make subject matter experts available to them,
and to expeditiously help stakeholders disseminate relevant information
at the national, regional and local level that will be useful to them
in educating their respective members.
Comment: One commenter expressed the belief that implementing ICD-
10 will exacerbate the current shortage of clinical coders. Other
commenters stated that we did not account for the impact to formal
training programs for degree and national certificates that will need
to be updated or redeveloped.

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Response: We have received no indication from industry and/or
technical school representatives that the changeover from ICD-9 to ICD-
10 codes might contribute to the existing shortage of clinical coders
and, in fact, increased marketplace demand for coders as a result of
the adoption of ICD-10-CM and ICD-10-PCS may lead to more enrollment in
coding curriculums. School representatives have indicated their
readiness to adapt to any needed ICD-10 curriculum changes and
anticipate that they will be able to produce ``ICD-10 ready'' clinical
coders upon graduation from their respective institutions. We
anticipate that educational venues offering coding courses are already
familiar with making annual updates to curriculums to reflect yearly
code set revisions. The final compliance date of October 1, 2013 should
afford educational institutions ample time to change their curriculums,
seek out appropriate educational materials and related resources, and
graduate ICD-10 competent coders.
Some hospitals may require coders to have a certification from a
national professional association. While desirable, this does not
appear to be a requirement for coders working in physician offices or
other ambulatory settings. We understand that many certified coders
must meet annual continuing educational requirements or authorities to
maintain their certifications. As we have no coding certification
requirements or authorities, we recommend that those concerned with
future certification standards contact the applicable professional
organizations.
We agree with commenters that it is important that consistent and
accurate ICD-10-CM and ICD-10-PCS materials are developed to assist
with national training and education. We also agree that it is
important that educational training be a collaborative effort among all
interested stakeholders. We will continue to collaborate with other
stakeholder organizations on outreach and education on the transition
from ICD-9 to ICD-10, taking into consideration the contextual and
timing needs of different industry segments, including hospitals,
providers, coders, etc., in a way that will ensure all affected
entities have the resources needed to properly code.
Both AHA and AHIMA will take lead roles in developing additional,
more detailed technical training materials for coders. AHA also plans
to continue their training support activities by updating their
education materials to ICD-10 and will change the name of their
publication to Coding Clinic for ICD-10. AHA has announced that it will
begin to include ICD-10 information in its Coding Clinic in advance of
the actual ICD-10-CM and ICD-10-PCS implementation date.
CMS has been working collaboratively with the Cooperating Parties
to develop additional ICD-10 educational materials which will be posted
at: http://www.cms.hhs.gov/ICD10/05_Educational_Resources.asp#TopOfPage.

H. Testing

Comment: A minority of commenters stated that ICD-10-CM and ICD-10-
PCS need more testing prior to implementation. Some commenters
recommended pilot testing, with one of those commenters stating that
pilot testing should take place before the issuance of a final rule, on
the assumption that information gained through pilot testing could be
used to inform the development of a final rule. A few commenters stated
that more internal and external training would be needed beyond that
which we described in the August 22, 2008 proposed rule. Another
commenter said that additional time--between six months to a year--
should be added to the final Version 5010 compliance date to allow for
testing.
Response: Any pilot testing of ICD-10-CM and ICD-10-PCS would
demonstrate its integration into business processes and/or systems, and
not the appropriateness of its adoption as a HIPAA standard through the
notice and comment rulemaking process. Furthermore, were pilot testing
to demonstrate a need for additional codes, etc., these changes could
be handled through the code set maintenance process, without the need
for further rulemaking to accomplish such changes. Therefore, we see no
reason to pilot test ICD-10-CM and ICD-10-PCS before issuing a final
rule.
In the development of the August 22, 2008 proposed rule (73 FR
49807) draft timetable, we accounted for testing with both internal and
external partners as part of the generally accepted industry
implementation process for the implementation of these medical data
code sets as adopted HIPAA standards. This follows similar
implementation plans undertaken for previously adopted and implemented
HIPAA standards. Such testing is a way to determine whether, once
systems changeovers are in place, transactions using the ICD-10-CM and
ICD-10-PCS code sets would be successfully and accurately processed
within a HIPAA covered entity's own systems, as well as whether that
entity can successfully transmit such information from its own system
to a trading partner. We welcome the opportunity to work with industry
on any voluntary testing of the workflows, productivity, and other
practical considerations of the changeover from ICD-9-CM to ICD-10-CM
in the ambulatory setting that could result in the development of
``lessons learned'' that might be disseminated to assist this industry
segment with a smooth transition to ICD-10.
With regard to testing the utility of the ICD-10-CM and ICD-10-PCS
code sets themselves, we refer to the results of the AHA-AHIMA ICD-10-
CM field testing reported to NCVHS on September 23, 2003, involving
6,177 medical records coded by credentialed coding professionals. A
copy of this report can be found at http://www.ncvhs.hhs.gov/030923ag.htm.
We believe that there has been successful, independent field
testing of the utility and functionality of ICD-10-CM and ICD-10-PCS,
and that no additional testing of this nature is necessary.

I. ICD-10 Code Set Development and Utility

Comment: Several commenters stated that countries such as Canada
and Australia have not developed such extensive clinical modifications
to medical code sets compared to those used in the U.S. because their
versions of the ICD-10 code sets are not used in ambulatory settings.
Commenters recommended that a process be undertaken to streamline and/
or significantly reduce the number of ICD-10 codes to make adoption
easier.
Response: Unlike the United States, other countries do not use ICD-
10 codes for reimbursement purposes. The level of detail in the United
States' clinical modification version of the ICD-10 code set has
resulted in an increased number of codes, and is commensurate with the
complexities of our multi-payer health care system. The United States'
clinical modifications have been derived in part with the input of
clinical specialty groups that have requested this level of
specificity. If the United States is moving toward an electronic
healthcare system and increasingly using codes for quality purposes,
there is a need to capture more precise information, not less. ICD-10-
CM and ICD-10-PCS will greatly support these efforts.
The Canadian health care system and the United States health care
system are very different. Canada does not have the same data needs as
the United States. The Canadian version of ICD-10, called ICD-10-CA,
has been implemented in hospitals, hospital-based ambulatory care
centers, day surgery centers and

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high-cost clinics (for example, dialysis and cancer clinics). National
ambulatory care reporting has not been fully implemented in Canada, but
some provinces have already expanded the use of ICD-10-CA beyond
hospital-based ambulatory care. ICD-9-CM was never implemented in
physician offices in Canada because each province had its own billing
system, but the provinces now fully intend to do so, and are moving in
that direction.
Each country uses its respective version of ICD-10 for its own
purpose, but common threads from other countries' ICD-10 implementation
experiences, such as systems changeovers, business process issues and
the timing of their conversions to ICD-10, can help inform our ICD-10
implementation experience in the United States. An increased number of
codes does not necessarily result in increased complexity in using the
coding system. Though training would be required in order to make full
use of the increased number and granularity of the codes, greater
specificity can mean the correct code is easier to determine because
there is less ambiguity. Not all HIPAA covered entities will use all of
the ICD-10-CM and ICD-10-PCS codes. Similar to the way a dictionary is
utilized, ICD-10-CM and ICD-10-PCS make available a full spectrum of
codes, and entities will selectively use only those codes that are
germane to their specific clinical area of practice or healthcare
operations.
We are also aware that, in many instances in the ICD-10-CM code
set, the 7th character is repetitive in nature. Taking this into
account, the remainder of the core codes amount to far fewer new codes
to learn. Therefore, we do not believe that reducing the number of ICD-
10-CM and ICD-10-PCS codes to make adoption easier is warranted, nor do
we believe that the code sets' size is a justification for not
implementing ICD-10-CM and ICD-10-PCS in a timely manner.
Comment: Some commenters stated that the ability to demonstrate
laterality already exists through modifiers available for use with ICD-
9-CM that allow the capture of duplicate claims.
Response: In the August 22, 2008 proposed rule (73 FR 49801), we
defined laterality as the ability to specify which organ or part of the
body is involved when the location could be on the right, left or
bilateral. The advantage of ICD-10-CM over ICD-9-CM code sets is that
ICD-10-CM accounts for laterality in the code set coding itself. ICD-9-
CM only allows for laterality indicators through means of an extra
modifier. These modifiers can only be used on outpatient claims to
further describe the HCPCS codes, which are used for reporting
physician and ambulatory procedures. HCPCS codes will continue to be
used for reporting physician and ambulatory procedures. Current claim
forms and systems do not allow for modifiers on the diagnosis codes in
any setting or for procedures in the inpatient setting. This problem is
corrected with both the ICD-10-CM and ICD-10-PCS codes. This improved
ability to convey laterality can reduce duplicate payments and/or
claims, and better inform research on conditions that may affect only
one area of the body; for example, a stroke.
We believe that the laterality inherent in ICD-10-CM provides
another reason to adopt ICD-10-CM and ICD-10-PCS code sets as HIPAA
standards.
Comment: Several commenters stated that there is a discrepancy
between the number of ICD-10-CM diagnosis codes stated in the August
22, 2008 proposed rule, and other previous citations. A commenter asked
if the ICD-9-CM 13,000 diagnosis codes and 3,000 procedure codes
referred to in the August 22, 2008 proposed rule are those that are
currently in use or include potential space for use in the future.
Response: The June 2003 version of ICD-10-CM contained 120,000
codes. That figure was used in both CMS and other industry
presentations because that was the number of codes in ICD-10-CM at that
time. A draft of the ICD-10-CM code set was posted to CDC's Web site
and CDC solicited comments on how to update and/or revise the coding
system. Based on those submitted comments, CDC made revisions to ICD-
10-CM that led to a reduction in the total number of ICD-10-CM codes
for use in the clinical modification developed for use in the United
States. A similar, annual process has been undertaken for ICD-10-PCS,
resulting in changes to the number of ICD-10-PCS codes as well.
The ICD-9-CM 13,000 diagnosis codes and 3,000 procedure codes
referenced in the August 22, 2008 proposed rule (73 FR 49802),
represent those codes that are currently in use. These codes are
updated each year by the ICD-9 Coordination and Maintenance Committee
and, therefore, the number of codes changes annually. For FY 2009,
there are 14,025 ICD-9-CM diagnosis codes and 3,824 ICD-9-CM procedure
codes in use.
Comment: Commenters stated that the annual ICD-9-CM code set
updates should cease one year prior to the implementation of ICD-10.
Also, they stated that such a ``freeze'' on code set updates would
allow for instructional and/or coding software programs to be designed
and purchased early, without concern that an upgrade would take place
just immediately before the compliance date, necessitating additional
updates and/or purchases.
Response: The ICD-9-CM Coordination and Maintenance Committee has
jurisdiction over any action impacting the code sets. Therefore, the
issue of consideration of a moratorium on updates to the ICD-9-CM, ICD-
10-CM and ICD-10-PCS code sets in anticipation of adoption of ICD-10-CM
and ICD-10-PCS will be addressed through the Committee at a future
public meeting.
Comment: One commenter noted that, while ICD-10-CM will incorporate
needed specificity and clinical information as compared to the ICD-9-CM
code set, the ICD-10-CM diagnosis code set in general does not include
``function diagnosis,'' the performance deficit for which an
occupational therapy intervention is provided. The commenter strongly
urged CMS to include in the ICD-10-CM code set a method of coding the
functional impairments of patients requiring rehabilitation services,
add specific functional diagnoses to ICD-10-CM codes, or adopt the use
of the International Classification of Functioning, Disability and
Health (ICF).
Another commenter stated that ICD-10-CM codes do not address the
need to stratify the level of severity of traumatic brain injuries.
Response: We agree with the commenter that ICD-10-CM, like ICD-9-
CM, does not include concepts that relate to difficulties with
activities of daily living, functional impairments, and disability.
Those concepts are found in the ICF, published by the World Health
Organization. The wide scale incorporation of ICF concepts, with
structural and definitional differences, into ICD-10-CM would be
inappropriate. The WHO acknowledged this when developing ICF as a
separate and distinct classification within the WHO Family of
International Classifications. While we agree that ICF has great
ability to more accurately and completely describe functioning and
disability concepts, its adoption as a HIPAA code set is beyond the
scope of this final rule.
The issue of coding of traumatic brain injury was discussed at the
September 24-25, 2008 meeting of the ICD-9-CM Coordination and
Maintenance Committee. It was stated at that time that the Committee
would address any changes to be made to ICD-9-CM for traumatic brain
injuries, and

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those changes would also be incorporated into ICD-10-CM as necessary.

V. Provisions of the Final Regulations

For the most part, this final rule incorporates the provisions of
the August 22, 2008 proposed rule. Those provisions of this final rule
that differ from the August 22, 2008 proposed rule are discussed as
follows.
In Sec. 162.1002(b), we have revised the year ``2011'' to read
``2013'' in this regulation.
In Sec. 162.1002(c), we have revised the year ``2011'' to read
``2013'' in this regulation.
In Sec. 162.1002(c)(3), we have removed the term
``Classification'' and replaced it with ``Coding'' in this regulation.

VI. Collection of Information Requirements

Under the Paperwork Reduction Act of 1995, we are required to
provide 30-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
the Office of Management and Budget (OMB) for review and approval. In
order to fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act
of 1995 requires that we solicit comment on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
Section 162.1002 of 45 CFR explains the implementation and
continued use of the International Classification of Diseases, Tenth
Revision, Clinical Modification (ICD-10-CM) for diagnosis coding, and
the International Classification of Diseases, Tenth Revision, Procedure
Coding System (ICD-10-PCS) for inpatient hospital procedure coding for
the period on and after October 1, 2013. The burden associated with the
implementation and continued use of ICD-10-CM and ICD-10-PCS is the
time and effort required to update information systems for use with
updated HIPAA transaction and code set standards. Specifically, the
entities must comply with the ASC X12 Technical Reports Type 3, Version
005010 (Version 5010) standards, which accommodate the use of the ICD-
10-CM and ICD-10-PCS code set. The burden associated with meeting the
ICD-10-CM and ICD-10-PCS code set standards is not discussed in this
final rule; however, the burden associated with these standards is
accounted for in the Version 5010 final rule, CMS-0009-F, published
elsewhere in this Federal Register. The inclusion of other standards
referenced in the Version 5010 final rule, namely the National Council
of Prescription Drug Programs (NCPDP) Telecommunications Standard
Version D.0, and the NCPDP Batch Standard Medicaid Subrogation
Implementation Guide, Version 3, Release 0, has no impact on that
analysis' ability to address the PRA burden of ICD-10-CM and ICD-10-
PCS.
The burden associated with meeting the Version 4010 standards is
contained in the following affected sections: Sec. 162.1102, Sec.
162.1202, Sec. 162.1301, Sec. 162.1302, Sec. 162.1401, Sec.
162.1402, Sec. 162.1501, Sec. 162.1502, Sec. 162.1602, Sec.
162.1702, and Sec. 162.1802. The affected sections are currently
approved under OCN 0938-0866 with an expiration date of July 31, 2011;
however, the Version 5010 final rule provides for the revision of the
requirements contained in the aforementioned affected sections to
update the adopted HIPAA transaction standard to Version 5010. As OCN
0938-0866 was issued for the current version of this HIPAA standard, we
have submitted to OMB a revised version of information collection
request (OCN 0938-0866) for its review and approval of the information
collection requirements associated with the implementation of the
Version 5010 standards, and ultimately, the implementation of ICD-10-CM
and ICD-10-PCS. Included as part of the revised Information Collection
Requirement (ICR) are detailed instructions on the implementation of
ICD-10-CM and ICD-10-PCS. These information collection requirements are
not effective until approved by OMB.

VII. Regulatory Impact Analysis (RIA) Statement of Need

The objective of this regulatory impact analysis (RIA) is to
summarize the costs and benefits of moving from ICD-9-CM to ICD-10-CM
and ICD-10-PCS code sets in the context of the current health care
environment.
The following are the three key issues that we believe necessitate
the need to update from ICD-9-CM to ICD-10-CM and ICD-10-PCS:
ICD-9-CM is out of date and running out of space for new
codes.
ICD-10 is the international standard to report and monitor
diseases and mortality, making it important for the U.S. to adopt ICD-
10 classifications for reporting and surveillance.
ICD codes are core elements of many HIT systems, making
the conversion to ICD-10 necessary to fully realize benefits of HIT
adoption.
For a more detailed discussion of the limitations of ICD-9-CM,
please refer to section III.B in the preamble of the August 22, 2008
proposed rule (73 FR 49799). As noted in the August 22, 2008 proposed
rule, no other viable alternatives to adopting ICD-10 were identified.
The costs and benefits for moving from ICD-9-CM to ICD-10-CM and ICD-
10-PCS were assessed within the requirements of the Executive Orders
and Acts cited in the regulatory impact analysis.

A. Overall Impact

We examined the impacts of this final rule as required by Executive
Order 12866 on Regulatory Planning and Review (September 30, 1993, as
further amended), the Regulatory Flexibility Act (RFA) (September 19,
1980, Pub. L. 96-354) (as amended by the Small Business Regulatory
Enforcement Fairness Act of 1996, Pub. L. 104-121), section 1102(b) of
the Social Security Act, sections 202 and 205 of the Unfunded Mandates
Reform Act of 1995 (Pub. L. 104-4), Executive Order 13132 on Federalism
(August 4, 1999), and the Congressional Review Act (5 U.S.C. 804(2)).
Executive Order 12866 (as amended by Executive Order 13258 and
Executive Order 13422, which modifies the list of criteria used for
regulatory review) directs agencies to assess all costs and benefits of
available regulatory alternatives and, if regulation is necessary, to
select regulatory approaches that maximize net benefits (including
potential economic, environmental, public health and safety effects,
distributive impacts, and equity). A regulatory impact analysis (RIA)
must be prepared for major rules with economically significant effects
($100 million or more in any 1 year). We consider this to be a major
rule, as it will have an impact of over $100 million on the economy.
Accordingly, we have prepared an RIA.
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also
requires that agencies assess the anticipated costs and benefits before
issuing any rule that includes a Federal mandate that could result in
expenditures of $100 million in 1995 dollars (updated annually for
inflation) in any 1 year by State, local, or tribal governments, in the
aggregate, or by the private sector. That threshold level is currently
approximately $130 million.

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Based on our analysis, we anticipate that the private sector would
incur costs exceeding $130 million per year beginning 3 years after the
publication of the final rule, and ending 3 years after implementation.
Our analysis indicates that the States' share of ICD-10 implementation
costs would not exceed $130 million over a 1-year period. In addition,
local or tribal governments will not experience costs exceeding $130
million over a 1-year period. We base our assessment on the fact that
we received no comments from local governments indicating cost impacts
exceeding $130 million over a 1-year period in response to the August
22, 2008 proposed rule, and the Indian Health Service (IHS) estimate of
costs to tribal governments totaling $12.3 million as detailed in Table
1 of this final rule.
In addition, under section 205 of the UMRA (2 U.S.C. 1535), having
considered three alternatives that are referenced in the preamble of
this final rule, HHS has concluded that the provisions in this final
rule are the most cost-effective alternative for implementing HHS's
statutory objective of administrative simplification.
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a proposed rule (and subsequent
final rule), that imposes substantial direct requirement costs on State
and local governments, preempts State law, or otherwise has Federalism
implications. Executive Order 13132 requires the opportunity for
meaningful and timely input by State and local officials in the
development of rules that have Federalism implications. HHS consulted
with appropriate local, State and Federal agencies, including tribal
authorities and Native American groups, as well as private
organizations. These private organizations included, among others,
WEDI, NUCB, NUCC, and the ADA in accordance with section 1178(c)(3) of
the Act.
In order to validate the fiscal and operational impact of this rule
on State Medicaid agencies, current data on costs for States to
implement a new code set would be necessary. We reference in the
preamble of this final rule industry studies that were conducted by
both Nolan and RAND that provide some insight into this information for
States.
HHS has examined the effects of provisions in this final rule as
well as the opportunities for input by the States. The Federalism
implications of this final rule are consistent with the provisions of
the Administrative Simplification subtitle of HIPAA by which HHS is
required by the Congress to promulgate standards for the interchange of
certain health care information through electronic means. Under section
1178(a)(1) of the Act, these standards generally preempt contrary State
law.
The States were invited to submit comment on this section and all
sections of the August 22, 2008 proposed rule.
The objective of this regulatory impact analysis is to summarize
the costs and benefits of moving from ICD-9-CM to ICD-10-CM and ICD-10-
PCS code sets in the context of the current health care environment.
We received numerous comments on our analysis of the costs and
benefits of transitioning from ICD-9 to ICD-10. In the August 22, 2008
proposed rule (73 FR 49830), we solicited additional data that would
help us determine more accurately the impact of ICD-10 implementation
on the various categories of entities affected by the proposed rule. We
solicited, but did not receive, comments regarding certain assumptions
upon which we based our impact analysis in the August 22, 2008 proposed
rule, including the inflation factor we applied to our assumed costs,
and the growth factor we applied to our assumed benefits. We also did
not receive comments regarding the number of, or specific impacts to,
third party administrators or design firms that may need to update
their systems or business processes to accommodate the ICD-10 code set.
In those cases where we did not alter our assumptions from those made
in the August 22, 2008 proposed rule, the relevant tables are
referenced but not reprinted in this final rule. Detailed summary
tables are provided herein with all of the costs and benefits
recalculated to reflect changes that were made in response to comments.
Although many commenters stated that we overstated the benefits of
transitioning from ICD-9 to ICD-10, they provided no data or
information to substantiate their assertions or to refute our benefits
analysis; therefore, this RIA continues to rely on the benefit
assumptions outlined in the proposed rule's RIA.
Many commenters stated that we underestimated the costs of
transitioning from ICD-9 to ICD-10.
In some instances, commenters included the cost of transition to
Version 5010 in their discussion of the costs for transitioning to ICD-
10. In those instances, we were unable to separate Version 5010
implementation costs from ICD-10 implementation costs. In other
instances, they provided Version 5010 implementation costs, but not
ICD-10 implementation costs. Regardless, in the majority of cases,
commenters did not provide data or information to substantiate their
cost estimates or to refute our cost estimates and regulatory impact
analysis. Where new information was provided that allowed us to improve
our cost estimates, we have outlined our rationale for the changes in
the following narrative and summary tables.
1. Use of the Rand Report
Comment: A few commenters stated that the RAND report should not
have been used as the basis for the impact analysis in the August 22,
2008 proposed rule because they asserted that the RAND report
underestimates ICD-10's systems impacts and the labor-intensive nature
of implementation activities. One commenter suggested that the Nolan
report, and not the RAND report, was the more accurate study, and
suggested that it should have been used as the primary source of data
for the August 22, 2008 proposed rule's impact analysis.
Response: The 2004 RAND and Nolan reports are considered by the
industry to be the benchmark studies for the transition from ICD-9-CM
to ICD-10, and both have been cited by other reports as the basis for
their ICD-10 cost assumptions. In the proposed rule (74 FR 49811), we
detailed the differences between RAND and Nolan's data sources,
assumptions and cost estimates on a wide variety of elements, including
training, productivity, system changes, contract renegotiations and
benefits. Each report considers some factors that the other does not,
uses different data gathered from a variety of sources at different
times, and cites some data that are not substantiated. The HHS intra-
agency workgroup analyzed both reports prior to developing its own
assumptions and conclusions, which served as the basis for the proposed
rule's analysis.
2. Estimated Costs--General
Comment: Many commenters expressed their general perceptions
regarding the costs of implementing ICD-10-CM and ICD-10-PCS. Some
commenters stated that they thought it was simply too expensive for
industry to implement ICD-10-CM and ICD-10-PCS in the current economic
climate. Several commenters suggested that more analysis of the costs
is needed, and recommended a variety of mechanisms, including a
provider office/hospital panel. Others expressed the need to monitor
and publicly report on the costs, benefits, and industry readiness
through an independent party such as NCVHS.

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Response: The estimates we developed for the August 22, 2008
proposed rule were based upon extensive analysis of publicly available
data by an HHS intra-agency workgroup representing many areas of
expertise. While the provisions and analysis offered in the August 22,
2008 proposed rule represented the best available information, we
solicited input on our assumptions, and anticipated that commenters
would provide any additional available data that was available that
would enable us to refine our estimates of the impacts associated with
the implementation of ICD-10-CM and ICD-10-PCS. While we did receive
input regarding specific assumptions, most commenters did not
substantiate their assertions that we underestimated costs and
overstated benefits with data that we could use to produce more
accurate estimates. In the cases where commenters provided updated,
substantiated data, we have discussed the new information and revised
our estimates accordingly.
We agree with commenters that NCVHS is an appropriate public body
through which to solicit and share industry information on costs and
implementation of, and compliance with, electronic transactions and
code sets. We trust that it will continue to be a valuable resource to
HHS and the industry as these code sets and other HIPAA standards are
implemented.
3. Training--Number of Coders
Comment: A number of commenters disagreed with our estimate of the
number of inpatient, full-time coders. In the August 22, 2008 proposed
rule, we estimated that there are 50,000 full-time, inpatient coders
based on AHIMA membership, and 179,230 part time coders, based on NAIC
data as shown on Table 7 of the August 22, 2008 proposed rule (73 FR
49815). We assumed that full-time coders likely work in the hospital
setting, and therefore would require training on both ICD-10-CM and
ICD-10-PCS. We further assumed that part time coders likely work in the
ambulatory setting, and therefore would require training only on ICD-
10-CM. Commenters representing two national coder associations
disagreed with the estimate that there are only 50,000 full-time
inpatient coders in the United States. Five members of a national coder
association commented that it is likely that the total number of coders
nationwide is approximately 150,000, of which 100,000 are certified
coders. However, they did not substantiate their assertion, nor
distinguish between the number of full-time inpatient and part-time
outpatient coders in this 150,000 figure. The other national coder
association stated that they did not have a more accurate estimate of
the number of full-time inpatient hospital coders, but simply wanted to
note that, in their opinion, the basis of the number of full-time,
inpatient coders used for our estimates in the proposed rule was
flawed. This commenter stated that our assumption that part-time coders
work in ambulatory settings, and that full-time coders work in
hospitals was inaccurate because there are many full-time coders who
practice in outpatient settings. They also recognized that estimating
the number of coders in the U.S. is very difficult, and that current
statistics for occupational classifications may not permit a fully
accurate estimate of the number of coders, or the settings in which
they work. Several commenters stated that there are other clinical
specialty organizations that certify their members as coders and that
those coders should also be included in our estimates.
A few commenters suggested that all coders would need additional
physiology and anatomy training in order to use the ICD-10 code sets.
Response: In the proposed rule (73 FR 49815), we discussed our
estimate of the number of full-time, inpatient coders. The Nolan study
estimated approximately 142,170 coders, but did not differentiate
between hospital coders (inpatient) and coders working in ambulatory
settings, and also did not provide the source for these data. Assuming
that full-time, inpatient coders were employed primarily by hospitals
and that these individuals would be represented by AHIMA's 50,000
membership, we used that number in calculating the number of full-time,
inpatient coders who would require training on both ICD-10-CM and ICD-
10-PCS.
In the August 22, 2008 proposed rule (73 FR 49815), we also
estimated, based on NAIC codes from the 2005 Statistics of U.S.
Businesses, that there are approximately 179,267 part-time coders. This
was based on our assumption that, for every 20 employees in an
ambulatory setting, there would be one part-time coder. We calculated
the estimated number of part-time coders in outpatient ambulatory
practices with 20 to 499 employees. This total of part-time coders,
179,267, plus the aforementioned 50,000 full-time, inpatient coders,
accounted for a total estimated coder universe of 229,267 coders who
would require ICD-10-CM and/or ICD-10-PCS training.
We also do not believe that coders will need additional training in
anatomy and physiology in order to use ICD-10 codes. Most, if not all,
coders already possess basic knowledge of anatomy and physiology either
through formal training or through on-the-job experience.
We understand that many hospitals require their coders to be
certified through an examination program and annual continuing medical
coding education offered by their professional associations and other
educational entities. If we were to assume, as some national coder
association members commented, that there are an estimated 100,000
certified coders, that they all are employed by hospitals, and that
there are 5,700 hospitals in the United States, we would conclude that
there are approximately 26 certified coders per hospital. We cannot
confirm that all hospitals require their coders to be certified, and
believe that the average of 26 certified coders per hospital is likely
too high and would skew our analysis of these estimated costs.
We acknowledge that while there may be more than 50,000 inpatient
coders, the 150,000 total coder estimate offered by some coder
association commenters does not distinguish between how many of those
may be inpatient coders versus outpatient coders. We also do not know
how many other clinical specialty certified coders may exist. We do
agree with both the commenters' and the RAND report's contention that,
because inpatient coders must also learn ICD-10-PCS in addition to ICD-
10-CM, we need to account for their increased training costs and
productivity losses, and therefore, we must attempt to assign a value
to the number of inpatient coders if we are to establish valid cost
estimates.
Therefore, we will retain our estimate of 229,267 coders in total
from the proposed rule. However, we will increase our estimate of
hospital coders from 50,000 to 60,000 coders. This shift decreases the
number of outpatient coders as shown in the proposed rule by 10,000, to
169,267, but still accounts for a total number of 229,267 coders. The
basis for these revised assumptions is derived from our research of the
U.S. Bureau of Labor Statistics (BLS) data. The BLS data show that, in
the category ``Medical Records and Health Information Technicians'',
which includes many coders, 60,000 of the individuals accounted for in
this category are employed by hospitals. We acknowledge concerns that
current statistics for occupational classifications may be inaccurate,
but absent other substantiated data, we must rely on the information
that is currently available and use our best judgment in arriving at a
conclusion based on that data.

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We note that our estimate of 229,267 coders in total is higher than
the estimates from the Nolan report and commenters. We considered
reducing our estimate accordingly, but decided to retain the higher
number to assure we have adequately addressed this cost.
4. Number of Coder Training Hours/Costs
Comment: In the August 22, 2008 proposed rule (FR 73 49815), we had
estimated that, based on RAND data, approximately 50,000 inpatient
coders who would need to learn both ICD-10-CM and ICD-10-PCS would
require about 40 hours of training. We also estimated that ambulatory
coders who would need to learn only ICD-10-CM would need only about 8
hours of training. We calculated the cost of ICD-10 code set training
for inpatient coders at $2,750 per coder, assuming $550 in training
costs and $2,200 in lost productivity, for a total of $137.51 million.
For the proposed rule's 179,000 coders in the ambulatory setting, we
estimated a cost of $110 in training costs and $440 each for lost work
time, for a total of $98.5 million.
Many commenters offered widely varying estimates as to the amount
of time required, and associated costs, for coding training. A few
commenters stated that the training time for coders outlined in the
proposed rule appeared to be reasonable. Another commenter stated that
we overstated training costs, and that ``train the trainer'' programs
could be effectively used to train coding leaders who would then
disseminate information to other colleagues, replacing the costs
already being incurred by hospitals to keep up with changes in ICD-9-
CM.
One commenter stated that an experienced coder would need as little
as 5 hours of ICD-10 training. The majority of commenters estimated
that it would take more than 40 hours of training, and more likely
between 40 to 60 hours for coders to train in ICD-10. Still another
commenter estimated that it would take between 60 to 80 hours of ICD-10
training for a coder in an ambulatory setting. Another commenter stated
that coders must attend anywhere from 10 to 30 hours of training
annually to earn continuing education credits to maintain their
professional credentials, and that this time and expense would offset
any ICD-10 training time and expense projections.
Commenters stated that coder training costs ranged from $150 per
coder to over $96,000 to train a health plan's coding staff. One
commenter stated that our estimated training cost of $31 per hour per
coder was too low, and can vary greatly depending on geographic region.
One commenter stated that we did not account for coder training-related
travel. Another commenter stated that our estimate of $550 per coder
for a week of training is low by industry standards, but that the
return on investment justifies any training expense.
Response: Commenters' estimates of the amount of time needed for
coder training, based on whether they worked full-time in inpatient
settings or part-time in ambulatory settings, varied greatly. Estimates
for coder training involve five distinct areas of consideration: The
training methodology; the clinical specialty; the number of inpatient
and outpatient coders; the number of hours for coder training; and the
cost per hour of training.
ICD-10 code set training will likely be offered by both commercial
entities and/or industry associations or other interested stakeholders,
and training can take many forms--self-directed internet or intranet,
webinars, video conferences, correspondence courses, seminars,
technical school and community college courses, seminars, etc. The
longer and more detailed the training and the setting (for example, in
person versus on-line training), the greater the impact on the cost of
training. However, more ``convenient'' training, such as that offered
on-line or through webinar, may also charge attendees a premium price
for training based on the convenience of on-line or webinar programs.
As one commenter noted, the use of a ``train the trainer'' approach to
training would greatly reduce training costs for a larger organization
that employs a number of coders and/or personnel who perform coding
functions and require ICD-10 code set training. Also, training may or
may not require travel and as such, there is no way to estimate travel
expenses as a result of attending training for ICD-10 coding.
We recognize that perhaps as many as 100,000 coders may be
certified, and already spend from 10 to 30 hours a year attending
training for which they receive continuing education credits to
maintain their certifications. These costs would likely already be
accounted for as part of that ongoing educational process, but again,
we have no way of knowing if these certified coders work in inpatient
and/or outpatient settings. Absent such data, an attempt on our part to
assign numbers of certified coders to one setting versus another would
likely be inaccurate.
We have carefully considered the comments received, and we
generally believe that some adjustments to our estimates for the number
of hours and costs of ICD-10 training for coders may be necessary.
Based on industry feedback regarding the need for more time than
the 40 hours of training we estimated for inpatient coders to learn
both ICD-10-CM and IC-10-PCS, we will increase our estimate of the
number of hours of training that inpatient coders will need to learn
ICD-10-CM and ICD-10-PCS from 40 hours to 50 hours, well within the
commenters' suggested range of as little as 5 hours of training, to a
maximum of 80 hours. As discussed above, we have estimated that there
are 60,000 inpatient coders who would require these 50 hours of
training. To account for geographic variations in costs, we will
increase our training costs only, by 15 percent, to a cost of $3,218.75
per coder, including $2,500 for lost productivity (based on the
increased number of training hours) and $718.75 in training costs, for
a total of $212.06 million, annualized at 3 percent and 7 percent, as
reflected in Table 4.
Based on similar feedback from the industry expressing concern
about the complexity of ICD-10-CM due to its size and structural
changes, and coder unfamiliarity, we also will increase from 8 to 10
hours the time that outpatient coders will need for ICD-10-CM training,
and calculate that 169,267 outpatient coders will require 10 hours of
ICD-10-CM training at a cost per coder of $644 ($500 in lost
productivity due to the increase in hours, and $143.75 in training, the
latter of which includes a 15 percent increase in estimated training
costs from the August 22, 2008 proposed rule), or a total of $119.69
million, annualized at 3 percent and 7 percent, as shown in Table 4.
We considered reducing the estimates in recognition of the fact
that almost half of the total number of coders are likely to receive
some ICD-10 training as part of their continuing education requirements
for maintaining certification. However, we elected to retain the higher
number to ensure that we have adequately addressed this cost.
5. Physician Training
Comment: In the August 22, 2008 proposed rule, we estimated, based
on RAND's assumption, that ten percent of all physicians, or about
150,000, would seek ICD-10 code set training. We made the assumption
that this training would take up to 4 hours, instead of RAND's estimate
of 8 hours, at a cost per hour of $137. Many commenters stated that we
underestimated the number of physicians that would need training on the
ICD-10 code sets, and the amount of time that training would take. Some
professional associations stated that all

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physicians will need ICD-10 code set training. A few commenters, citing
an industry-sponsored report on ICD-10 costs for physician practices,
estimated 12 hours of ICD-10 code set training would be required for
physicians.
In contrast, another national professional coder association
referenced their own study, showing that almost half of the respondents
reported that none of the physicians in their offices performed coding,
and of those physicians who did, they performed coding on only a small
portion of the ICD-9-CM code set. Other commenters confirmed that many
physicians do not code themselves, but rather rely on billers or other
staff, or use superbills for coding. However, several commenters stated
that, at a minimum, all physicians will need to be aware of the basic
guidelines and construct of the ICD-10 code set, or ``awareness
training'', provided through existing physician continuing education
and hospital-sponsored in-service training.
Response: In the August 22, 2008 proposed rule (73 FR 49809), we
discussed the differences between the RAND and Nolan report assumptions
relative to ICD-10 code set training for physicians. We also discussed
our rationale for our decision to base our estimates on 4 hours versus
RAND's 8 hours for physician ICD-10 training, because we assumed that
the majority of physicians used superbills and would not require 8
hours of training.
There appears to be a wide variance of opinions across all industry
segments as to how many physicians would need and/or want ICD-10 code
set training, and the length of that training. As discussed in the
coder training section of this impact analysis, we believe that there
are many factors that may influence this estimate, including geographic
region; clinical specialty; size of practice; and available resources
(superbills, electronic medical records, etc.)
We agree that physicians will want training on ICD-10 code sets,
but it is clear from commenters that the RAND estimate of only 10
percent of physicians wanting ICD-10 code set training may be too low.
In an effort to better estimate the costs of ICD-10 training for
physicians, while acknowledging commenters who stated that not all
physicians will need training due to use of superbills, staff and other
coding mechanisms, we will accept the Nolan study estimate of 754,000
physicians seeking a midpoint of 8 hours of ICD-10 training, at a cost
of $157.55 per hour (reflecting a 15 percent increase over the per hour
cost estimate of $137.00 per hour used in the August 22, 2008 proposed
rule), or $1,043.14 million, annualized at 3 percent and 7 percent as
shown in Table 4. We also will assume that the remainder of physicians
will either not seek ICD-10 code set training, or will need less
intensive ``awareness training'' which we anticipate will be available
through continuing medical education opportunities of which they likely
would have availed themselves absent the transition from ICD-9 to ICD-
10.
6. Training for Auxiliary Staff
Comment: In the August 22, 2008 proposed rule (73 FR 49816), we
estimated that, based on RAND data, there were some 250,000 code users.
We assume that, of these 250,000, only 150,000 work directly with codes
and would require 8 hours of training for an total training cost of
approximately $250 ($31.25 per hour x 8 hours). Some commenters
mentioned that we did not account for other staff that may need
training other than coders and physicians. Commenters stated that many
health care settings, especially small physician practices, do not
employ professional coders, but rather office staff who, along with
other duties, provide the coding needed for claim submission and
reimbursement purposes.
Commenters cited billing/administrative staff; clinicians and non-
physicians; clinical support staff, analytical and IT professionals;
coding specialists; labs; and ancillary staff as those additional staff
who will require training on the new codes. One commenter estimated
that for a health plan/payer, staff training could amount to $96,156,
not counting the cost of reference materials or training costs from
outside sources.
One commenter mentioned that code users can also include those who
use the codes for medical decisions and that they will need extensive
training on the new codes. Another commenter stated that the category
of ``code users'' represents individuals with a wide variety of roles
and responsibilities, so the level of training needed would depend on
how and to what extent the individual health professional use coded
data and potentially how the training is delivered. One commenter
disagreed with the number of code users that we outline in the proposed
rule, estimating that there are only 20,000 code users, but did not
substantiate the source of their information.
Response: In the August 22, 2008 proposed rule (73 FR 49815), we
used RAND data to define code users as people outside of health care
facilities--researchers, epidemiologists, consultants, auditors, claims
adjudicator, etc. Users could also include people within health care
facilities in areas such as senior management, clinicians, quality
improvement, utilization management, accounting, business office,
clinical departments, data analysis, performance improvement, corporate
compliance, data quality, etc. Additionally AHIMA defines a user of
coded data as anyone who needs to have some level of understanding of
the coding system, because they review coded data, rely on reports that
contain coded data, etc., but are not people who actually assign codes.
These could include the additional staff that will require training as
cited above.
In the August 22, 2008 proposed rule (73 FR 49816), we estimated
that there are approximately 250,000 code users, most likely employed
by payers but that, based on RAND data, only about 60 percent, or
150,000, would require ICD-10 code set training for the purpose of
actually assigning and/or interpreting codes. We believe that, given
all the categories of coders, both professional and non-professional,
physicians, other clinicians, auxiliary staff and the code users
definitions as shown above, we have adequately accounted for a broad
universe of potential code users and we maintain our original
assumption of the number and costs of training for code users.
As stated in the August 22, 2008 proposed rule (73 FR 49814), we
based our estimates on 2004 dollars because we used RAND study figures
based on 2004 dollars. For purposes of this analysis, we are updating
the value to 2007 dollars to be consistent with the updates to our
benefits analysis by applying the increases in the Consumer Price Index
(CPI-U) from 2004 to 2007. For the costs estimates, we divide the CPI-U
annual index for 2007 (the most recent data available) by 2004's index
to determine the adjustment factor in which to apply to each cost
estimate. This adjustment factor equals approximately 1.098. Since the
cost estimates for implementing ICD-10 are not tied to medical
services, we feel that the CPI-U is reasonable to use for adjusting
these 2004 costs for inflation. We are adjusting our estimate for code
user training costs that were based on RAND data from the estimate
shown in the August 22, 2008 proposed rule update to 2007 dollars for a
revised total of $41.18 million over 4 years, annualized at 3 percent
and 7 percent, as shown in Table 4.

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7. Productivity Losses
Comment: In the August 22, 2008 proposed rule (73 FR 49814), we
acknowledged that, while RAND did not consider the cost of cash flow
interruptions as a result of the adoption of ICD-10-CM and ICD-10-PCS,
we agreed with the Nolan study that the implementation of the new code
sets may cause serious cash flow problems for providers, and assumed
that payers would develop temporary payment policies to mitigate this
risk.
Many commenters agreed that, with the introduction of ICD-10, for a
period of time, we may see an increase in returned or rejected claims
which may cause physician practices and/or hospitals to spend more time
fixing billing problems. Many commenters mentioned that ICD-10 will
cause an increase of improperly paid claims and denied and/or rejected
claims, which will require additional audit work and investigation to
find and fix problems.
One commenter stated we underestimated the projected claim
rejection rate in the August 22, 2008 proposed rule, and that they
experienced a higher (20 to 30 percent) rejection rate when
implementing the NPI. Commenters disagreed with our statement in the
August 22, 2008 proposed rule (73 FR 49814) that it was the plans'
practice to advance periodic interim payments (PIPs) to providers who
might be affected by a claims processing slowdown. A few commenters,
citing an industry-sponsored report on ICD-10 costs, stated that
significant changes in reimbursement patterns according to severity of
diagnosis (which are determined based on ICD-10-CM codes) will disrupt
provider cash flows, and estimated the cost of cash flow disruption per
physician practice to be between $19,500 and $650,000.
Commenters stated that CMS should monitor and publish claim
rejection rates, issue clear and flexible Medicare advance payment
guidelines and mitigation strategies if provider cash flow is adversely
affected, and consider interim Medicare payments to hospitals if
payments are disrupted.
Response: In the August 22, 2008 proposed rule (FR 73 49817), we
accounted for the fact that the implementation of the new code sets is
expected to produce a temporary increase in coding errors on the part
of physicians, resulting in rejected and/or returned claims. We used
Medicare returned claims data for FYs 2004 through 2006, and identified
a spike pattern in Medicare returned claims 3 to 6 months following
introduction of annual ICD-9 code updates. We noted that we anticipated
that the percent of returned claims following the ICD-10 implementation
could be more than double the previous years' increase, and that
returned claims may peak at around 6-10 percent of pre-implementation
levels. We estimated a cost range from between $274 million to $1,100
million. We believe that our assumptions, based on three years' worth
of Medicare returned claims data, more closely reflects returned claims
experience, and therefore is more accurate than reliance on NPI
experience, which was likely caused by plans' inability to link
incoming NPIs with legacy identifiers.
We also reject the notion that significant changes in reimbursement
patterns based on severity of diagnosis will disrupt provider cash
flows. We do not anticipate that there will be any immediate changes to
reimbursements with the initial implementation of ICD-10-CM. Data
drives changes in reimbursements, and this data likely will not be
available for quite some time after the implementation of ICD-10-CM,
and thus reimbursement changes will be accomplished on an incremental
basis.
States have prompt payment laws that require that penalties be
assessed against health plans who do not issue payments for properly
submitted claims in a timely manner, and Medicare is also subject to
similar requirements. Therefore, it is in the best interests of all
plans to pay promptly to avoid these penalties. Moreover, the October
2013 compliance date for ICD-10 provides ample time for plans to
prepare and test their payment systems to allow for an orderly
transition.
As stated in the proposed rule (73 FR 49817), the implementation of
the new code sets is expected to produce a temporary increase of
physician coding errors. We received many concurrences with this
assumption but no additional or substantiated data to counter our
quantitative analysis at this time. Therefore, we maintain our estimate
based on our original costs, as stated in the August 22, 2008 proposed
rule.
Comment: One commenter disagreed with our analysis of coding
productivity in the August 22, 2008 proposed rule (73 FR 49817) because
they stated that the use of preprinted forms or touch-screens does not
constitute coding. One commenter also took issue with our estimate that
productivity losses during the first six months of ICD-10-CM
implementation will be reversed, stating instead that it will be a
long-term productivity loss. One commenter mentioned that the August
2008 proposed rule suggests an outpatient productivity rate of 3,525
claims per hour and that this is 100 times greater than what is
customary in some specialties and more than 10 times what is performed
in the most highly automated computer assisted coding operation.
Other commenters disagreed with our assumption that the average
time to code an outpatient claim could take one-hundredth of the time
for a hospital inpatient claim. Commenters stated that physician
offices would suffer productivity losses because ICD-10-CM training
would take physicians away from patient care, looking up new codes will
take more time, it will take longer to process notes and billings, and
practice workflows in general will be disrupted.
Response: In the August 22, 2008 proposed rule (73 FR 49816), we
acknowledged that coders' productivity will be directly affected
because of the need to learn new codes and definitions, and undoubtedly
some claims will require resubmission to payers as both providers and
payers adjust to the new codes. For outpatient productivity losses, we
assume the average time to code an outpatient claim could take one-
hundredth of the time for a hospital inpatient claim, taking into
account the wide variety of outpatient settings and coding forms.
Although commenters disagreed with this assumption, they did not
substantiate their comments with data that contradicted our assumptions
or analysis.
As stated in the August 22, 2008 proposed rule (73 FR 49816), many
physicians use, and will continue to use super-bills, which reduces the
coding time. We disagree with the commenter who stated that the use of
superbills or touch screens does not constitute coding. Coding is the
assignment of a code to a specific clinical condition or procedure; the
mechanisms used to do this, whether electronic or manual, may differ,
but codes are still assigned. We considered the variety of settings in
which coding is done and noted that most only focus on one or two
medical conditions (which would likely be clearly identified for the
coders by the physician) in our analysis in the August 22, 2008
proposed rule.
We are adjusting our cost estimate for outpatient productivity
losses from the estimate shown in the August 22, 2008 proposed rule to
account to update to 2007 dollars, for a revised total of $9.40 million
in 2014, the year after ICD-10 implementation, and this annualized cost
at 3 percent and 7 percent is reflected in Table 4.
Comment: A few commenters questioned our estimate of an additional
1.7 minutes to code an inpatient claim

[[Page 3347]]

in the first month of ICD-10-CM and ICD-10-PCS compliance, and the
associated productivity losses. None of the commenters stated whether
they deemed that estimate to be too high or too low.
Response: In the August 22, 2008 proposed rule (73 FR 49816), we
estimated an additional 1.7 minutes to code an inpatient claim that
includes an inpatient procedure in the first month of ICD-10-CM and
ICD-10-PCS compliance. This estimate was based upon analysis reported
in the RAND report. According to RAND, ICD-10-PCS was tested by two
clinical data-abstracting centers. One center found that ICD-10-PCS
which is used in inpatient settings, generated more codes and that each
record, on average, took longer to code than did ICD-9-CM (3.6 minutes
versus 1.9 minutes, or a difference of 1.7 minutes). We applied this
1.7 minute loss to 1.8 million inpatient claims requiring procedures
coding per month (20,000,000 claims per year divided by 12 months) at
$50 per hour, or $1.41 per claim, resulting in a productivity loss of
$2.7 million in the first month. After accounting for a monthly
increase in productivity of $450,000, and subtracting this from each
month's lost productivity, we arrived at a total inpatient productivity
loss of $8.90 million in 2014, the year after ICD-10 implementation.
None of the commenters indicated whether this estimate was too low
or too high. Therefore, we maintain our assumptions and our
productivity loss estimates as outlined in the proposed rule. We are
adjusting our estimate for inpatient productivity losses from that
shown in the August 22, 2008 proposed rule to update to 2007 dollars,
for a revised estimate of $9.77 million in inpatient coder productivity
losses, and annualized at 3 percent and 7 percent, as shown in Table 4.
Comment: Some commenters stated that the August 22, 2008 proposed
rule did not adequately account for the cost of updates to the CMS-1500
claim form and superbills. One commenter noted that, while 50 percent
of all physician practices use superbills, the conversion to the larger
ICD-10-CM code set will make superbills cumbersome and impractical. A
few commenters stated that the $55 superbill revision cost cited in the
proposed rule was too low. Another commenter stated that it took more
than 2 hours to convert a sample family practice superbill from ICD-9
to ICD-10, resulting in an unusable 9-page document. Another commenter
stated that superbill conversion could take up to 6 hours, with an
additional 4-6 hours for physician review, costs of $500 to $1,000 for
editing and new batch printing, and additional costs for disposal of
outdated superbills. A few commenters, citing an industry-sponsored
report on ICD-10 costs, estimated the expense for revising superbills
to be from between $2,985 for a small physician practice, to $99,500
for a large practice.
Response: Commenters erroneously interpreted our reference to
superbill costs in the August 22, 2008 proposed rule (73 FR 49817). In
that proposed rule, we estimated that the total cost of lost
productivity (time) for a coder to convert a practice's superbill would
be only about 2 hours' time or approximately $55, not the entire cost
of reprinting a supply of superbills. The 2003 field study conducted by
the American Health Information Management Association (AHIMA) and the
American Hospital Association (AHA) demonstrated that a superbill can
be converted to ICD-10-CM in a few hours, and that they are no larger
than existing superbills. Superbills generally do not list all of the
specific codes relevant to a particular condition but if this was the
case, the existing ICD-9-CM superbills would also be pages long.
The reprinting of superbills is an annual expense incurred by
providers. For example, one form manufacturer might charge a provider
anywhere from $100 for 2,500 1-part, white bond superbills, to $600 for
10,000, 3-part carbonless superbills. We also know that one major
medical center incurred an annual cost of approximately $93,000 for
their reprinting of superbills. However, because ICD-9-CM code sets are
updated annually, providers and hospitals would likely still incur
revision and reprinting, as well as disposal costs for unusable
superbills as an annual cost of doing business whether or not there was
a changeover from the ICD-9-CM code sets to the ICD-10-CM and ICD-10-
PCS code sets.
With respect to the CMS-1500 claim form, the National Uniform Claim
Committee (NUCC) which maintains this claim form, already expanded the
field for reporting diagnosis codes to accommodate the ICD-10 format in
their August 2005 revision of the claim form. It is therefore ready for
ICD-10 use with no additional cost.
Therefore, because we maintain that there will not be any
substantive additional costs for reprinting of superbills, and none for
the CMS-1500 claim forms resulting from the transition to ICD-10, we
will not make any revisions to our impact analysis based on superbill
and/or 1500 claim form costs. However, we are adjusting our cost
estimate to update to 2007 dollars, for a revised cost of $12.08
million in 2014, the year after ICD-10 implementation, annualized at 3
percent and 7 percent as shown in Table 4.
Comment: The industry's perceived need for increased medical
documentation was not addressed in the proposed rule because we did not
consider it to be a relevant cost. We received several comments that
the use of ICD-10-CM and ICD-10-PCS would cause physicians to order
unnecessary medical tests to provide more precise diagnoses or require
more documentation to the medical record, wasting medical resources,
and greatly increasing provider costs. Commenters stated that one must
use the most precise ICD-10 code every time to achieve the full
benefits of ICD-10. Another commenter stated that local claims
determination adjudication rules require claims coded with
``unspecified'' codes to be rejected.
Response: We agree that ICD-10-CM and ICD-10-PCS offer
significantly greater detail and specificity reflecting the nature of a
patient's medical condition. We also agree that there are substantial
benefits to be derived from the greater detail of ICD-10-CM when a
coder selects the most accurate code based on the available
documentation. This is true whether one is using ICD-9-CM codes or ICD-
10-CM codes. If one cannot assign a precise code, it is because the
medical record documentation is not available or because a clear
diagnosis has not been made and in that case, a more general, non-
specific code would be selected. Such codes are available in both ICD-9
and ICD-10. However, we disagree that physicians will be pressured to
perform unnecessary medical tests or include additional medical
documentation because they are using ICD-10-CM and ICD-10-PCS code
sets.
Physicians adhere to standards of care which, according to the AMA,
``is a duty determined by a given set of circumstances that present in
a particular patient, with a specific condition, at a definite time and
place.'' These standards of care include full documentation which,
according to the American Academy of Family Physicians (AAFP),
``includes fully describing the patient's medical history, physical
findings, (the physician's) diagnosis, the treatment plan and care
rendered.'' Physicians select codes that reflect the information that
they have available to them through patient history, physical findings
and clinically appropriate testing, which they have documented in the
patient's medical record based on the aforementioned standards of care.
Patient care and

[[Page 3348]]

treatment are not pre-determined by diagnostic coding; in fact,
diagnostic coding is determined from best practice patient care. A
poorly documented medical record can be problematic for a number of
reasons, but such deficient medical records are an issue of and by
themselves, and not contingent upon whether the code assigned is an
ICD-9-CM or an ICD-10-CM code.
Improved medical documentation is not predicated on the change from
ICD-9-CM to ICD-10-CM. Rather, improved medical documentation is being
driven by initiatives such as quality measurement reporting, value-
based purchasing and patient safety.
We view any potential improvements in medical record documentation
as a positive outcome of the move to ICD-10-CM and ICD-10-PCS. With
better and more accurate data, patient care can only be improved.
For some services, such as a particular drug or surgical procedure,
there may be a National Coverage Decision (NCD) or a Local Coverage
Decision (LCD) that requires the reporting of a list of specific
diagnosis codes. These coverage decisions sometimes include unspecified
codes but oftentimes they do not. In a handful of cases, the coverage
decision will list several specific diagnosis codes needed in order to
make payments, and physicians are aware of the services or surgeries to
which they apply. Under MS-DRGs, sometimes a lower payment results from
reporting an unspecified code. An unspecified code will still result in
a payment, but it might be a lower payment. The number of such cases
will not necessarily increase as a result of the adoption of ICD-10.
8. System Changes--Provider/Vendor
Comment: Commenters stated they would incur costs to implement ICD-
10-CM, including updating and/or replacing software and hardware.
Commenters disagreed with our assumption in the proposed rule that
vendors might provide their clients with updated ICD-10-compatible
software at little to no charge. One commenter stated that some vendors
charge upwards of $10,000 for similar software updates.
Response: In the August 22, 2008 proposed rule (73 FR 49818), we
assumed that large provider groups, chain providers and institutions,
such as large hospitals, are most likely to require changes to their
billing systems, patient record systems, reporting systems and
associated system interfaces. We also noted that the new codes may also
require the redesign of standard and special reports. Additionally,
small providers, who rely on superbills, as well as their home-grown
systems for capturing patient information and claims submission, may
only need to update their systems to accommodate the length of the new
code fields. Costs of updating provider systems will depend on the
degree of system integration; the need for outside technical
assistance; and the number of systems and system interfaces that must
be updated. Physician practices (and all providers) should begin
looking at their use of ICD-9-CM and use the transition to ICD-10 as an
opportunity to consider changes that will improve their processes and
workflows.
Although commenters do not agree that vendor-supplied software will
be provided to providers free-of-charge, we maintain that, for small
providers that are PC-based or have client-server systems, the provider
may not bear any immediate costs for the software upgrades. Practice
management systems will need to be revised to accommodate ICD-10 codes,
but this change will take place as a part of the migration to the
Version 5010 standards, and these costs have been accounted for in that
impact analysis.
Although we recognize that providers' systems will require
updating, we did not receive substantial information or data during the
August 22, 2008 proposed rule's public comment period that would lead
us to revise our cost analysis in this area. We are adjusting our cost
estimate as shown in the August 22, 2008 proposed rule to update to
2007 dollars, for a revised cost of $150.64 million over 4 years,
annualized at 3 percent and 7 percent as shown in Table 4.
Comment: In the August 22, 2008 proposed rule (73 FR 49805), we
cited a November 2002 joint letter to NCVHS from the AHA, Federation of
American Hospitals (FAH) and AdvaMed supporting the implementation of
ICD-10-CM and ICD-10-PCS as national standards. We also noted in the
proposed rule (73 FR 49818) that large institutions such as hospitals
will need to transition their systems to both ICD-10-CM and ICD-10-PCS,
at a cost ranging from $55 million to $220 million. One commenter
stated that few hospitals were aware of the impending transition to
ICD-10, and have not developed the multi-disciplinary teams necessary
for a successful transition. Other hospital commenters noted that they
use a combination of purchased software and in-house applications, and
both will require modifications for ICD-10 code sets for functions such
as code assignment, medical records abstraction, claims submission, and
other financial functions, at a heavy financial burden to them.
However, they did not contest our systems cost estimates. One commenter
noted that this large transition will require at minimum two hospital
budget cycles in order to properly plan and allocate resources.
Response: Hospital commenters did not submit any new data that
substantiated their assertions and would predispose us to revising our
large provider group cost projections, so we will continue to rely on
our estimate as outlined in the August 22, 2008 proposed rule. Given
the change of the ICD-10 compliance date to October 2013, we anticipate
that hospitals will have ample budget cycle time during which to plan
for their systems implementation of ICD-10-CM and ICD-10-PCS. Moreover,
the conversion of billing systems to accommodate ICD-10 codes will take
place as part of the migration to the Version 5010 standards, and these
billing system conversion costs have been accounted for in that impact
analysis.
Comment: We stated in the August 22, 2008 proposed rule (73 FR
49818) that, while many providers who use vendor-supplied software may
be able to defer the costs of software upgrades, the vendor industry
may have to bear, at least initially, the costs of such upgrades. Using
RAND's analysis, based on interviews conducted with industry experts,
we estimated cost of system changes for software vendors of
transitioning to ICD-10 to include the wide range of information and
billing systems and the configurations of provider systems. Commenters
stated we underestimated or did not account for all vendor software and
systems revision costs. These include patient accounting, practice
management and billing systems; encoders and grouper software; contract
management and reimbursement modeling programs; quality measurement
systems; software components of emergency departments, and ambulatory
and physician office systems that must be revised to accommodate the
use of the ICD-10 code sets. Commenters also stated that systems used
to model or calculate acuity, staffing needs, patient risk and patient
care; decision support systems and content; presentation of clinical
content for support of plans of care; and selection criteria within
electronic medical records would be impacted by the use of ICD-10 code
sets. Commenters stated that specifications for data file extracts,
reporting programs and external interfaces, analytic software that
performs business analysis or that provides decision support analytics
for financial and clinical

[[Page 3349]]

management; and business rules guided by patient condition or procedure
would also need to be revised for ICD-10 use. Commenters estimated an
average of 24 months for product development, and that vendor product
release cycles, typically between 18 to 36 months, do not usually match
regulatory compliance dates and the transition to ICD-10 may negatively
impact these cycles.
Response: While some commenters provided additional examples of
vendor systems that will need to be updated for the transition to ICD-
10, they did not provide us with any costs associated with those
systems. We are unable to determine at this point if those additional
systems can be applied to all vendors since vendors deal with many
types and sizes of providers and provider organizations.
We agree with commenters that there will be impacts to vendor
systems, and that it may be difficult to initially account for all
system changes because of the varying needs of individual providers.
We again point out that a portion of these costs will take place as
part of the migration to the Version 5010 standards and these system
costs have been accounted for in that impact analysis. However, based
on the comments we received which stated that the proposed rule did not
account for all of the vendor systems that will need to be updated to
accommodate the new code set, we have increased our estimate of
software vendor systems by 20 percent. Subsequently, we have increased
our software vendor system costs from the previous $96.05 million to
$115.29 million over a 4-year period, annualized at 3 percent and 7
percent as shown in Table 4.
9. System Changes--Plans
Comment: In the August 22, 2008 proposed rule (73 FR 49818), we
acknowledged that revisions to payer systems may be one of the largest
ICD-10 cost categories, at approximately $164.64 million, with a range
of $110 million to a $274 million cost, based on data from the RAND
report. We also acknowledged that not all payer system changes may have
been identified in our impact analysis. Commenters stated that payer
business process impacts resulting from implementation of ICD-10-CM and
ICD-10-PCS would include, among others, impacts to medical policy;
benefit design and coding; vendor management; data reporting; disease
and case management; trend analysis and quality assurance. Commenters
noted that edits will need to be updated to accommodate ICD-10's impact
on auto-adjudication systems. One commenter cited a 2000 industry white
paper that stated for each 100 hours spent on programming, payers must
spend an addition 30-35 hours preparing specifications, conducting
analysis and design sessions, performing testing and conducting other
implementation-related activities. Another commercial payer estimated
8,000 programming hours for their transition from ICD-9 to ICD-10, not
including specification changes or testing, while another plan
estimated that it would cost between $3.00 and $5.80 per plan member to
cover the cost of ICD-10 implementation. One commenter stated that
integrating the expanded ICD-10 code sets into their business systems
would be difficult, while another stated that detailed information on
how reimbursement programs will be affected should be made available to
payers at least one year before ICD-10-CM and ICD-10-PCS implementation
so that payers can plan for training, financial analysis and modeling.
Response: Commenters did not provide substantiated data that would
allow us to update our payer system cost estimates at this time.
We agree with commenters that there will be an impact to payer
systems, and that it may be difficult to initially pinpoint all of the
system changes because of the pervasive use of ICD-9 codes within payer
systems. As part of our internal analysis of CMS payment systems that
currently use ICD-9 code set data and would likely use ICD-10 code set
data, we conducted interviews with all CMS components and identified no
less than 20 systems across 30 business processes/areas that
potentially would be impacted. As an example of the internal
investigative process CMS undertook as part of our ongoing ICD-10
planning and analysis, CMS has shared this information with the
industry through its summary report at http://www.cms.hhs.gov/TransactionCodeSetsStands/Downloads/AHIMASummary.pdf. We expect that
once payers initiate similar ICD-10 planning and analysis activities,
they will identify both known and heretofore unknown impacts to their
payer systems, and can better evaluate them in terms of minimal,
medium, and high impacts relative to cost and risk.
As discussed in the August 22, 2008 proposed rule (73 FR 49800),
there are multiple ways for entities to integrate the ICD-10 code sets
into their business settings. As the codes are incorporated into
systems and processes, some providers, plans, and vendors may decide to
populate the new codes throughout their entire system all at once, or
translate the codes on a flow basis as they are used. Integration of
the codes in many cases will be determined by the extent to which the
available granularity is needed in transactions.
For purposes of this analysis, we acknowledge that the estimated
payer systems costs may exceed those identified in the August 22, 2008
proposed rule. Recognizing that these payer system costs may be
difficult to ascertain, and considering the comments submitted that
expressed concern regarding underestimation of payer system costs, we
have increased our estimate of payer systems costs by 20 percent based
on comments which stated that the August 22, 2008 proposed rule did not
account for all of the systems that will need to be updated to
accommodate the new code set. We believe that a 20 percent increase in
our estimate of payer system costs will recognize these potential
unaccounted system costs and better estimate ICD-10 implementation
costs. Therefore, we have increased our payer system costs from the
previous $164.64 million to $197.64 million over 4 years, annualized at
3 percent and 7 percent as shown in Table 4.
As information becomes available from industry, we anticipate that
it will be shared through advisory bodies such as NCVHS, and other
industry communication vehicles such as association Web sites,
newsletters, open door forums, conferences, etc. As information on the
impact of ICD-10 transition to CMS programs becomes available, CMS
plans to share information through official CMS communication vehicles
as appropriate, for purposes of informing the industry's ICD-10
implementation planning.
10. System Changes--Government
Comment: In the August 22, 2008 proposed rule (73 FR 49819), we
discussed potential costs to State Medicaid programs associated with
the transition from ICD-9 to ICD-10. We noted the limitations of our
analysis, and we estimated that it would cost approximately $102
million or about $2 million per State to transition their systems to
ICD-10-CM and ICD-10-PCS. The majority of comments focused on costs of
ICD-10-CM and ICD-10-PCS implementation to State Medicaid programs. A
number of commenters stated that the August 22, 2008 proposed rule did
not fully account for the impact of ICD-10-CM and ICD-10-PCS on State
Medicaid programs. In light of those additional unaccounted for costs,
some State Medicaid agencies stated that they would not be ready to

[[Page 3350]]

accept the new ICD-10 code sets by the proposed October 2011 compliance
date, resulting in rejected claims, claims paid inappropriately, and an
increase in adjustments and re-billing. Of the comments received
regarding the ICD-10-CM and ICD-10-PCS conversion costs for State
Medicaid agencies, none were able to offer any data to support their
assertions that these conversion costs were underestimated in the
August 22, 2008 proposed rule. Another commenter stated that Medicaid
paper claim forms will need to be reprinted for ICD-10 codes. Four
States stated that the transition to ICD-10 will increase their
Medicaid Management Information Systems (MMIS) replacement costs, and
that these updates could be jeopardized if their system transition from
ICD-9 to ICD-10 is made too quickly. They noted that changes to MMIS,
as well as legacy systems, may force them to initially run dual
systems. One State Medicaid agency recommended a provision that would
waive implementation of the ICD-10 code sets in any legacy system
scheduled for replacement.
One commenter stated the August 22, 2008 proposed rule did not
account for system conversions and training required for public
programs outside of Medicaid, including the use of ICD-10 in public
health reporting and surveillance systems. The commenter stated that
implementation of ICD-10 would result in legacy system migration costs,
and changes to longitudinal analysis for downstream data users,
including State employee health plans, some social service programs,
State health care, and university research and training programs. While
the commenter noted these impacts, they did not provide any data that
would cause us to further revise our analysis at this time. Tribal
government representatives expressed concern about their costs
associated with the implementation of ICD-10-CM and ICD-10-PCS, asking
that the ICD-10 compliance date be moved forward to October 2013 to
allow them time to achieve compliance.
A few commenters stated that we did not consult with local
governments on the impacts that might result from the transition from
ICD-9-CM to ICD-10-CM as required by Executive Order 13132.
Response: We agree with commenters that ICD-10 Medicaid cost
estimates were understated because they were based on a very limited
State survey. We anticipated that State Medicaid agencies would respond
with more accurate and complete data, but they were unable to do so,
with some citing current State budget uncertainties.
The ICD-10 compliance date of October 1, 2013 addresses State
Medicaid agencies' concerns about not being able to be ready to accept
claims with the new ICD-10 code set by the proposed October 1, 2011
date. State Medicaid agencies can approach the transition from ICD-9-CM
to ICD-10-CM and ICD-10-PCS either through installation of a new MMIS
system (of which 18 States are currently in various stages of
procurement) that would already accommodate the ICD-10-CM and ICD-10-
PCS codes; or through remediation of their current systems. Either way,
States are reimbursed by the Federal government for 90 percent of the
cost of ICD-10-CM and ICD-10-PCS modification to the State's Medicaid
system design, development, installation or enhancement, leaving 10
percent as the state's share of the expense.
This updated information, and discussions with Medicaid subject
matter experts regarding our experience with similar Medicaid
implementations with the States (Y2K and NPI, for example) leads us to
revise our estimates of the States' Medicaid program cost of ICD-10
implementation from $102 million, to a range of between $200 million to
$400 million. Taking the midpoint of that range, or $300,000,000, we
estimate that the average ICD-10 cost per State Medicaid program, at
their 10 percent cost share, to be $588,235, for a State Medicaid
program cost of $30 million. We estimate the remaining 90 percent cost
share to the Federal Medicaid program as an average of $5.294 million
per State, or a Federal Medicaid share of $270 million. Therefore,
based on this new information, we have increased by $270 million the
Federal government's share of the Medicaid system cost estimates, and
revised the State's 10 percent cost share to $30 million, with costs
annualized at 3 percent and 7 percent, respectively, as shown in Table
1.
At some Tribal programs, Medicare and Medicaid collections
represent half of the operating budget of the facility and any delay or
decrease in collections as a result of the transition from ICD-9-CM to
ICD-10-CM will have an impact on Tribal programs' ability to provide
services. The Indian Health Service (IHS) has jurisdiction over Tribal
health care programs and provides the Tribes with necessary system
upgrades to their Resource and Patient Management Systems (RPMS). IHS
will need to invest in systems changes for all 60 RPMS software
packages, integrate ICD-10-CM and ICD-10-PCS codes into their reports,
train staff on new codes, and test data transmissions with payers. IHS
was one of the first Federal agencies to recognize the impact of ICD-10
on their support of Tribal health services, and has taken these
expenses into consideration in their estimate of their ICD-10 costs, of
which the latest data were included in the proposed rule at 73 FR
49819.
HHS actively participated in NCVHS' public and open process for
soliciting input on ICD-10. In the August 22, 2008 proposed rule (73 FR
49799), we discussed the number of NCVHS hearings on ICD-10, and the
wide array of testifiers and comment submitters, including public
health representatives. The Public Health Data Standards Consortium
(PHDSC), which includes local and county health departments among their
members, as well as the National Association of City and County Health
Officials (NACCHO) were invited to testify. Their issues were addressed
by the National Association of Health Data Organizations (a not-for-
profit organization that addresses the collection, analysis,
dissemination, public availability, and use of health data) which
testified strongly in favor of moving to ICD-10 code set. The PHDSC and
the U.S. Joint Public Health Informatics Task Force, which includes
NACCHO, both submitted positive comments on our proposed rule, calling
for implementation of ICD-10 by no later than October 2012. NCVHS
considered all of this input, and made recommendations to adopt ICD-10-
CM and ICD-10-PCS to the Secretary. These recommendations were all
taken into consideration by HHS as it developed this rule.

Table 1--Government Costs $ Million
----------------------------------------------------------------------------------------------------------------
Cost annualized 3%, 7%
Change Government agency -------------------------------------------------
3.00% 7.00%
----------------------------------------------------------------------------------------------------------------
Systems/Software Modifications and
Updates:

[[Page 3351]]

CMS................... $31.41 $41.17
IHS................... 0.67 0.88
VA.................... 1.60 2.09
-------------------------------------------------------------------------
Subtotal.......................... ...................... 33.68 44.14
Training:
CMS................... 0.80 1.04
IHS................... 0.11 0.14
VA.................... 3.94 5.16
----------------------------------------------------------------------------------------------------------------
Subtotal.......................... ...................... 4.84 6.35
Planning:
CMS................... 0.34 0.44
IHS................... 0.25 0.33
VA.................... 0.21 0.27
Subtotal.......................... ...................... 0.80 1.04
Other (contractor provider inquiries). ...................... 1.06 1.38
State Medicaid Agencies............... ...................... 2.51 3.29
-------------------------------------------------------------------------
Total......................... ...................... 42.89 56.21
----------------------------------------------------------------------------------------------------------------

Comment: A commenter stated that we should consider suspending
Medicare Administrative Contractor (MAC) and RAC auditing for at least
12 months following the ICD-10 compliance date. One commenter stated
that during the transition from ICD-9 to ICD-10, provider coding errors
should not be used as a basis for prosecution under the False Claims
Act. Another commenter noted that CMS should not unfairly penalize
providers if the agency adopts a prospective budget neutrality
adjustment (BNA).
Response: These comments relate specifically to ICD-10-CM and ICD-
10-PCS implementation issues that will impact the Medicare program. We
will take these comments under consideration, and inform the industry
and other interested stakeholders through normal CMS communication
channels of any decisions made relative to these issues as we plan for
the transition from ICD-9-CM to ICD-10-CM and ICD-10-PCS.
11. Impact on Clinical Laboratories
Comment: A few commenters stated that neither the proposed rule nor
the RAND and Nolan ICD-10 reports addressed the impacts of ICD-10
adoption on clinical laboratories. Commenters stated that clinical
laboratories submit a large volume of small claims and rely on
providers to submit correct codes but that obtaining missing codes,
following up on and/or correcting invalid codes submitted by providers
is a large administrative burden. Commenters stated that, by using ICD-
10 codes, providers will be more likely to submit incorrect codes or
will fail to submit them at all. Commenters also mentioned that
pathologists will have to be trained in how they document the diagnoses
they submit in their pathology reports, which would require an increase
in medical documentation.
One commenter stated that, although they perceived an impact of the
adoption of ICD-10 on clinical laboratories, the 60-day public comment
period was not enough time for them to gather substantive data on that
impact.
One commenter suggested that clinical labs be exempt from the
requirement to adopt ICD-10-CM or at least not be required to utilize
the highest degree of specificity in diagnosis coding when submitting
claims.
According to some commenters, clinical laboratory systems that will
be impacted include: Order entry; laboratory billing, reporting, and
data warehousing; and programs, screens, reports, requisitions, forms
(printed and electronic), interfaces, contracts and policy manuals.
Additionally, commenters stated that use of ICD-10-CM will require more
highly qualified and more expensive specialists to translate
physicians' narratives into the appropriate ICD-10-CM coding.
Commenters also stated that clinical labs will be responsible for
educating providers as to the proper submission of diagnosis codes as
well as conducting business rule development, programming, testing and
implementation for hundreds of internal software programs, remapping
hundreds of external interfaces as well as conducting end-to-end
testing with trading partners.
An industry-sponsored report on ICD-10-CM and ICD-10-PCS costs
acknowledged that ICD-10 would have an impact on clinical laboratories,
but provided no substantiated data in support of that statement. The
report does mention that one large national laboratory has estimated
its up-front cost of implementing ICD-10-CM to be about $40 million,
including IT and education costs. However it does not provide how that
cost was derived, and we are unable to assess the basis for this
estimate or the extent to which it may include costs already included
in our assumptions.
Response: We addressed the impact of the adoption of ICD-10-CM on
clinical laboratories in two areas, part-time coders and laboratories
as small entities, and used the public information available to us at
the time of the development of the August 22, 2008 proposed rule as a
basis for our assumptions and our cost/benefit analysis. In the August
22, 2008 proposed rule (73 FR 49815), we acknowledged in Table 7
(``Ambulatory Entities Assumed To Employ Part-Time Coders Based on the
2005 Statistics of U.S. Businesses'') that 6,080 coders were likely
employed by medical and diagnostic laboratories (designated as North
American Industry Classification System or NAICS code 6215), and
included them in our estimate of the costs of coder training. We
assumed that these 6,080 coders would have training costs per coder of
$550, for an estimated cost of $3.344 million.

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In the August 22, 2008 proposed rule (73 FR 49828), we also noted
that approximately 92 percent of medical laboratories are assumed to be
small entities, with annual receipts below $9 million, and considered
them in our analysis of the impact on small entities. In Table 9
(``Estimated Impact of ICD-10 Transition Cost on Inpatient and
Outpatient Providers and Suppliers, Adjusted for Inflation''), we had
included NAICS code 6215, which was erroneously labeled ``Medical
Diagnostic and Imaging Services'' but is actually ``Medical and
Diagnostic Laboratories'', for which we allocated a portion of provider
systems costs based on a percent of laboratory revenues. In the August
22, 2008 proposed rule, we estimated this cost to be $5 million, for a
combined cost of $8.344 million ($3.344 million based upon 6,080
laboratory coders in Table 7 in the August 22, 2008 proposed rule at
$550 per coder + $5 million from Table 9 in the August 22, 2008
proposed rule). The August 22, 2008 proposed rule's Table 9 data for
medical and diagnostic laboratories is updated in this final rule from
$5 million to $13.14 million to account for the increase in costs, and
is reflected in Table 2 and our Table 6 cost summary (which includes
annualized costs at 3 percent and 7 percent), both of which appear in
this final rule. This accounts for provider follow-up productivity
losses as described by the commenters. Although commenters provided a
great deal of qualitative information as to the impact of the ICD-10-CM
transition on the clinical laboratory industry, and again, we
acknowledge that it will be impacted, we did not receive any
quantitative data from commenters to support a revision of our analysis
of the quantitative impact of the adoption of ICD-10-CM on clinical
laboratories.
Clinical laboratories cannot be exempted from the requirement to
adopt ICD-10-CM. All HIPAA covered entities need to be ICD-10-ready at
the same time to not disrupt claims payment and processing. Since
clinical laboratories utilize ICD codes for reimbursement and submit
claims to various payers, it is imperative that they implement ICD-10
at the same time as the rest of the health care industry. As to one
commenter's suggestion that laboratories not use the highest degree of
specificity in diagnosis coding when submitting claims, the use of the
ICD-10 codes do not drive the clinical care, as previously discussed in
this RIA. Laboratories should continue to code based on the information
at hand, or supplied by the provider or based on the clinical test
being conducted.
As we previously indicated in our discussion on medical
documentation in this final rule, we also disagree with commenters who
stated that pathologists would need additional training to provide
correct diagnosis as a result of using ICD-10 codes. While laboratories
will be responsible for working with providers to ensure proper
programming and testing, these are activities that they would undertake
on an ongoing basis with any new provider clients. The implementation
of ICD-10 in hundreds of internal software programs, and the remapping
hundreds of external interfaces as well as end-to-end testing with
trading partners are similar processes that all HIPAA covered entities
will be undertaking as they implement ICD-10, and are part of the
generally accepted ICD-10 system implementation process. Other than the
cost estimates for coder training and productivity losses, absent other
quantitative data from clinical laboratories on costs, we cannot at
this time project any more specific cost estimate relative to clinical
laboratories' transition from ICD-9-CM to ICD-10-CM and ICD-10-PCS.
12. Impact on Pharmacies
Comment: Some commenters stated that the ICD-10 proposed rule did
not account for the impact that the transition to ICD-10-CM and ICD-10-
PCS would have on the pharmacy industry. One commenter stated that the
adoption of the National Council of Prescription Drug Plans'
Telecommunications Standard Version D.0, and increased adoption of e-
prescribing, will cause an increase in diagnosis code use required by
payers.
A few commenters stated that between 40 and 50 percent of
prescription claim volume is associated with prescription refills. Some
commenters recommended that there be a one year staggered transition
period for pharmacies to implement ICD-10-CM so that authorized
prescription medication refill orders can complete the reorder cycle
uninterrupted. A commenter stated that for refills, pharmacies will not
be able to use an ICD-9 to ICD-10 crosswalk because of the lack of one-
to-one relationships but will have to contact physicians to obtain the
ICD-10-CM code the prescriber has assigned to the patient. Another
commenter stated that all prescription refills written prior to the
compliance date for ICD-10-CM should be exempted from having to use the
ICD-10-CM codes. Commenters also stated that ICD-9-CM codes are used by
pharmacy benefit managers (PBMs) for disease management reporting, and
for client reporting, benchmarking, and patient stratification.
Commenters stated that ICD-10-CM would impact the pharmacy industry for
training, systems and business process revisions, manual review of
systems, outreach to providers, consumer education, cost of manual
provider contact, and other considerations. Conversely, two other
commenters stated that ICD-9 codes are not heavily used in pharmacies,
and that impact would be minimal. None of the commenters were able to
provide substantiated data to support their qualitative impact claims.
Response: NCVHS held multiple hearings and solicited comments from
all industry segments regarding the potential impacts of ICD-10-CM on
their respective business processes and systems. During the ongoing
NCVHS process, representatives of the pharmacy industry did not
indicate that the transition from ICD-9-CM to ICD-10-CM codes would be
problematic and, therefore, we did not identify pharmacies as an
impacted industry segment in the August 22, 2008 proposed rule's
regulatory impact analysis. We now understand that ICD-9-CM codes are
currently used in pharmacy settings when the patient's drug benefit
plan may require a diagnosis code for purposes of prior authorization.
However, the pharmacist does not assign this diagnosis code; it must be
obtained by the pharmacist from the prescriber, just as it would if
ICD-9-CM codes were still in use. The adoption of NCPDP
Telecommunications Standard Version D.0 was overwhelmingly favored by
the pharmacy industry for its ability to better support Medicare Part D
requirements. We do not anticipate that the use of NCPDP
Telecommunication Standard Version D.0 or the ICD-10-CM code sets in
pharmacy settings will cause an increase in the requirement to use
codes to report supplies/services in e-prescribing transactions and
that, in fact, the use of such standards will enhance retail pharmacy
transactions through their greater specificity, reducing pharmacy call-
backs to physicians, and improving the efficiency of pharmacy claims
submissions and accurate payments. As with other coding situations,
ICD-9-CM codes will continue to be used up to and until the October 1,
2013 compliance date, at which time ICD-10-CM and ICD-10-PCS code sets
will be required.
With regard to ongoing prescription refills that are written prior
to, and refilled after the October 1, 2013 compliance date, we
anticipate that

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pharmacies will be able to use the reimbursement mappings posted to the
CMS Web site to translate ICD-9-CM codes into ICD-10-CM. These mappings
provide a one-to-one match of the closest ICD-9-CM to ICD-10-CM and
ICD-10-PCS codes for reimbursement purposes. We also anticipate that,
given the new compliance date of October 2013, this will afford the
pharmacy industry ample additional time to identify and fix any
outstanding refill issues.
Although commenters provided qualitative information as to the
impact of the ICD-10 transition on the pharmacy industry, we did not
receive any data that would allow us to offer any refined estimates of
quantitative impacts to the pharmacy industry.
13. Contract Renegotiation
Comment: A number of commenters stated that the cost of contract
renegotiations was not addressed in the proposed rule, and that once
contracts are opened to accommodate the ICD-10 transition, many
providers will want to review their negotiated rates based on revised
fee schedules. Other commenters stated that it is more cost effective
for payers and providers to renegotiate contracts in conjunction with
their renewal dates, whereas off-cycle negotiations demand additional
resources, analysis and time, which would be required under the
transition to ICD-10.
A commenter mentioned that for an entire network of hospital
contracts, 25 to 30 percent may be up for renewal in any given year.
Another commenter stated many high-volume providers have multi-year
agreements with negotiations taking months, and reimbursement terms can
be the most time-consuming part of the process. Other commenters
mentioned that extensive pricing analysis will be required prior to
entering contract renegotiations. One commenter stated it will be
difficult to price contracts because unknown provider billing patterns
will create financial uncertainty for providers and payers.
Other commenters mentioned that the new coding system will cause
differences in the classification of provider services and the
reporting of utilization patterns. Provider contracts will require
modification to account for subsequent reimbursement changes to achieve
budget neutrality.
Response: In the August 22, 2008 proposed rule (73 FR 49814), we
discussed the different approaches taken by RAND and Nolan with regard
to the cost of contract renegotiations. RAND stated that periodic
contract renegotiations are the norm in the health care payer industry,
with 1-year and 3-year contract cycles being quite common. RAND assumed
that the conversion to ICD-10-CM and ICD-10-PCS would introduce more
issues to negotiation, but would be far less likely to spur
negotiations when there otherwise would have been none.
Nolan assumed that, because ICD-10-CM and ICD-10-PCS represents
changes in the underlying diagnostic and procedural coding, many if not
all contracts based on code definitions and their associated
reimbursement rates will require development, negotiation, review and
ultimately agreement. Nolan assumed this will be a costly and time-
consuming process shared by payers and providers alike. The number of
contracts Nolan used for their analysis--5 to 20 per entity--is much
smaller than the millions of contracts the industry has estimated
because Nolan assumed that many contracts for physicians and provider
groups would be standardized and would be negotiated by contracting
staff rather than by physicians themselves. Nolan did not provide any
separate estimates for the costs of contract renegotiation to health
plans, assuming that these costs would be included in the health plans'
overall costs of ICD-10-CM and ICD-10-PCS implementation.
As discussed in the August 22, 2008 proposed rule (73 FR 49814), we
did not account for the costs of contract re-negotiations because we
shared RAND's assumption that providers and payers must regularly
renegotiate contracts in response to new policies. Contracts are
renegotiated to revise the terms of the contract, usually in response
to changes in policy that affect rates of reimbursement, and as we have
already noted, we do not anticipate that the ICD-10-CM and ICD-10-PCS
data that would constitute the basis for changes in reimbursement will
be available until some time after the initial implementation of ICD-
10-CM. Therefore, we believe that any cost of renegotiating contracts
will be spread out over time, be undertaken at the time of the
regularly scheduled contract renewal, and should be accounted for as a
cost of doing business.
14. Impact on Electronic Medical Records
Comment: In the August 22, 2008 proposed rule (73 FR 49829), we
discussed the impact of ICD-10 on electronic medical record (EMR)
systems. Many commenters stated that the EMRs systems will be too
costly to reprogram for ICD-10 code sets, but offered no examples of
what those costs might be. However, one commenter estimated that only 4
percent of physicians have an extensive, fully functioning EMR system,
and only 13 percent have a basic EMR system. Commenters stated the
complexity of system changeovers will delay EMR adoption, put stress on
practice operations and increase costs. One industry group stated that,
unlike other systems, not all ICD-10 hardware and software changes for
EMRs will be accommodated by the Version 5010 upgrade of vendor
applications.
Response: We agree that there will be costs associated with
reprogramming electronic medical record systems to accommodate the use
of ICD-10. However, as both commenters and the proposed rule noted, the
rate of adoption of EMRs among providers is currently very low, and the
transition to ICD-10-CM and ICD-10-PCS would affect only those
providers who now employ EMRs. As those providers have already made
their initial investment in their EMR system and are enjoying the
benefits associated with its use, we expect that they will make the
necessary upgrades to allow continued use of their system. For those
providers who anticipate purchasing EMR systems, they should verify
with their vendors that the systems they are considering can
accommodate ICD-10-CM and ICD-10-PCS codes. We also anticipate that
providers who need to migrate their EMR systems to ICD-10 will work
closely with their vendors to ensure successful transitions. We also
agree that, for clinical and administrative functions within EMR
systems that are not integrated into other systems that use Version
5010, separate hardware and/or software costs may be incurred. However,
absent data from vendors and providers, we cannot at this time project
any specific cost estimates relative to ICD-10 transition and EMRs.
15. General Benefits
Comment: Overall, most commenters agreed with the benefit
categories outlined in the August 22, 2008 proposed rule (73 FR 49821).
Some commenters stated that, although these benefits will eventually be
seen from the ICD-10 transition, their size was overestimated by the
August 22, 2008 proposed rule. However, no substantiated data was
provided by these commenters that would provide quantifiable
information to counter our assumptions or convince us to change our
analysis at this time.
While many commenters agreed with the benefits outlined in the
proposed rule, they also suggested other benefits that could be
realized through the

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transition to ICD-10. Commenters stated that these other benefits
included improvement in medical knowledge and technology; the ability
to substantiate the medical necessity of diagnostic and therapeutic
services; the ability to demonstrate the efficacy of using technology
for particular clinical conditions; and the ability to identify
complications and adverse effects through the use of technology.
Another commenter specifically mentioned that ICD-10-CM also permits
the identification of individual fetuses in multiple gestation
pregnancies which will make it possible for the first time to link a
coded condition to a specific fetus.
One commenter stated that while the discussion of the benefit of
``more accurate payments for new procedures'' in the proposed rule
seems to focus on Medicare payments, the benefit would apply to other
payers and health plans as well.
Conversely, some commenters questioned the benefits of ICD-10. A
few commenters questioned whether covered entities would really achieve
more accurate payments, fewer rejected claims and fewer improper
claims. Some commenters expressed doubt as to whether physician
practices specifically would achieve many of the stated ICD-10
benefits. Others noted that conversion to ICD-10 would make almost 30
years of longitudinal U.S. morbidity data derived from ICD-9 virtually
useless and it would be difficult to draw conclusions about trends in
ICD-9 or ICD-10 translated data when aggregate comparisons assume that
all hospitals are coding consistently. It was also noted that
information or benchmarks were not available from previous HIPAA
implementations that could validate or disprove the projected benefit
assumptions.
Some commenters stated that many of the projected benefits refer to
improvements in the procedure code classification system (ICD-10-PCS)
and are not directly tied to ICD-10-CM adoption.
Response: As outlined in the August 22, 2008 proposed rule, we were
conservative in our estimate of benefits. In many instances, we claimed
only a small percentage of our calculated full benefit, and in a number
of areas where we did not have quantifiable benefit data, we declined
to claim any benefit whatsoever. We agree with commenters who stated
that we did not account for all the benefits that could potentially be
realized through the use of ICD-10-CM and ICD-10-PCS. If benefits were
overestimated, as some commenters asserted, those assertions did not
indicate how or to what degree we may have overestimated benefits, nor
did they provide information that we could use to revise our benefits
estimates.
In the proposed rule, for the benefit growth factor pre-
implementation, we use the growth in national health care expenditures
for years 2005-2007, with year 2007 having an estimated growth rate of
1.212. For the growth projections for years 2012 and beyond, we use the
compounded growth in the U.S. population which is projected to grow at
0.008 per year.
In this final analysis we use the same approach, but rather than
2004 as the base year for the analysis, we now use expenditures from
2007 as the base year of the analysis. We then apply the 1.212 growth
rate adjustment to the 100 percent benefit value for each respective
benefit listed in Table 5, and use the resulting number to pro-rate the
phase-in amounts based upon the identified phase-in percentage assigned
for the first year in which the benefits first appear. Going forward
from the year in which the regulation is implemented, we applied the
population growth factor compounded by the number of years from the
implementation year of the regulation (2014). We now estimate benefits
at $4,539.63 million over 15 years, and annualized at 3 percent and 7
percent, as reflected in Table 7, compared with $3,950.74 million over
15 years in the August 22, 2008 proposed rule. Since the benefits
estimates are now based in 2007 dollars, we updated the cost numbers to
2007 dollar for comparability.
16. Education and Outreach
Comment: Commenters stated that while there should be a set of
basic ICD-10-CM and ICD-10-PCS training materials with consistent
messages, education should be designed for different learning levels
and audiences. Other commenters suggested the development of a detailed
provider education and outreach plan with emphasis on small physician
practices and software vendors; increasing the number of Medicare
customer service representatives and creating a separate toll free
hotline for ICD-10 questions; hosting regularly scheduled regional
calls with rural providers, independent clinical laboratories, key
stakeholders, physicians, and State and regional medical societies;
designating a central point person to guide ICD-10-CM and ICD-10-PCS
implementation and ensure consistency of materials; and development of
a public access Web site for ICD-10 interpretation and guidance.
Commenters also stated that academic medical centers and teaching
hospitals will be impacted by ICD-10-CM and ICD-10-PCS and should be
targeted for more intense educational outreach. Commenters recommended
that CMS should fund ICD-10 education and outreach programs, and pursue
both paid and earned ICD-10 educational advertising.
Response: In the August 22, 2008 proposed rule (73 FR 49807), we
detailed our intention to provide ICD-10 education and outreach to a
wide variety of health care entities, including Medicare contractors;
Fiscal Intermediaries, Carriers, and Medicare Administrative
Contractors; hospitals; physicians; other providers; and other
stakeholders. We stated that we will develop and make publicly
available a host of tools, including extensive ``Frequently Asked
Questions'' documents which will be updated as new questions and/or
information arise; fact sheets; and other supporting education and
outreach materials for partner dissemination. Other potential impacted
groups will be targeted, and activities will be developed, based on
this stakeholder input. We acknowledge that different health care
professionals and entities will have different information needs, and
we are beginning to address this need through educational materials
posted to http://www.cms.hhs.gov/MedLearn and http://www.cms.hhs.gov/ICD10/ Web sites. All materials go through extensive reviews from a
number of subject matter experts prior to dissemination to the public
to assure accuracy and consistency. Our free, ongoing series of
roundtable and open door forum discussions tailored to specific
audiences such as ESRD providers, rural providers, hospitals, etc. also
address a full spectrum of stakeholder segments and concerns, including
ICD-10, on a regularly scheduled basis.
Many stakeholders, through the August 22, 2008 proposed rule's
public comment process, expressed their willingness to assist in
disseminating information to their respective constituencies, and we
will take advantage of those offers of assistance, working closely with
industry in this regard.
17. Impacts on Training Programs
Comment: A commenter stated that the August 22, 2008 proposed rule
did not address possible coder shortages and the need to re-certify
coders. The commenter noted that implementing ICD-10 will exacerbate
the current shortage of clinical coders, and did not account for the
impact on formal

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training programs for degree and national certificates that will need
to be updated or redeveloped. Some commenters stated regular physician
office staff would need to become certified coders, and current coders
will need to recertify, incurring a costly exam fee. Commenters noted
that ICD-10-CM and ICD-10-PCS are too technical to teach in a short
amount of time. Other commenters stated that the October 2011 proposed
compliance date did not allow enough time for publishers to update and
revise medical coding and billing program texts and curriculum; and
allow institutions to purchase, install and test the new IT systems
needed to train medical coders.
Response: We have received no indication from industry, and have no
reason to believe, that the changeover from ICD-9-CM to ICD-10-CM and
ICD-10-PCS codes might contribute to the existing shortage of clinical
coders. In fact, increased marketplace demand for coders as a result of
adoption of ICD-10-CM and ICD-10-PCS may lead to more enrollment in
coding curriculums and, in turn, the graduation of more and better
qualified coders. Industry trade and technical school representatives
have indicated their readiness to adapt to any needed curriculum
changes as a result of the adoption of ICD-10, and anticipate that they
will be able to produce ``ICD-10 ready'' clinical coders upon
graduation from their respective institutions. As ICD-9-CM codes are
currently updated annually, we anticipate that educational venues
offering courses in coding would be familiar with making changes in
curriculum to reflect these revisions. The final compliance date of
October 1, 2013 should afford educational institutions sufficient time
to change their instructional coding curriculums, and seek out and
obtain appropriate educational materials and related resources.
Some hospitals may require their coders to be certified by
certifying bodies such as the various national professional
associations, and while desirable in the ambulatory setting, this does
not appear to be a requirement for coders working in physician offices
or other ambulatory settings. Coders must maintain annual continuing
educational requirements to maintain their certifications. As CMS has
no coding certification requirements, we refer those concerned with
future certification standards to contact their applicable professional
organizations.
18. Impact on Other HIT Initiatives
Comment: In the August 22, 2008 proposed rule (73 FR 49805-49806),
we detailed known health information technology (HIT) initiatives and
their relation to ICD-10 adoption and timing. Commenters stated that
there are too many other HIT initiatives that they are being asked to
embrace, creating too much competition for scant resources and time,
but did not offer any substantiated data concerning potential costs
associated with these other initiatives. Commenters noted that the
Medicare Improvements for Patients and Providers Act (MIPPA)
legislation creates e-prescribing incentives at the same time as the
proposed October 2011 ICD-10 implementation date. A few health plans
stated that there are multiple statewide requirements that also place
demands on their available resources that would otherwise be diverted
to ICD-10 implementation, but did not indicate costs associated with
these requirements. Some commenters asked that the final rule for
claims attachments be delayed until after the compliance date for ICD-
10-CM and ICD-10-PCS.
Response: Of the 11 initiatives listed in the August 22, 2008
proposed rule, 7 of them had compliance deadlines which have already
passed. These included HITSP interoperability specifications for use
cases; the NPI compliance date; publication of CCHIT criteria for
inpatient electronic health record products; publication of CCHIT
criteria for certifying health information technology networks and
systems; the NPI compliance date for small health plans; and a second
set of e-prescribing final standards under Medicare Part D and adoption
of the NPI for electronic prescribing transactions. Of the remaining 4
initiatives, 2 relate to compliance dates associated with the adoption
of Version 5010, NCPDP Telecommunications Standard D.0, and NCPDP
Medicaid Subrogation Standard 3.0, both of which are now projected for
January 2012 (the Medicaid Subrogation Standard for small health plans
only is projected for January 2013). The two remaining initiatives, the
compliance date in the proposed rule for a new HIPAA standard for the
healthcare claims attachment standard, and the proposed compliance date
for the claims attachment transaction for small health plans, were
scheduled for 2011 and 2012, respectively. We acknowledged in the
August 22, 2008 proposed rule that implementing ICD-10 codes sets will
require significant effort on the part of covered entities and their
vendors, and took other HIT initiatives into consideration in
establishing our proposed ICD-10 compliance date to sequence compliance
in a manner that would allow covered entities to concentrate their
efforts on ICD-10 implementation during the relevant period. For more
information on ICD-10's relation to and impact on other HIT
initiatives, see the discussion in the August 22, 2008 proposed rule
(73 FR 49805).
We believe that with the new ICD-10 compliance date of October 1,
2013, there will be ample time--an additional two years from the
proposed October 1, 2011 compliance date, and a year from the MIPPA
2012 e-prescribing deadline--for providers to prepare for the
changeover from ICD-9 to ICD-10.
We have stated publicly, and reiterate once again, that we will not
consider implementing a new HIPAA standard for claims attachment
transactions until after the compliance date for ICD-10.
With regard to commenters' assertions that there are multiple State
requirements that will compete with implementation of ICD-10, we
believe that these requirements are not new, but constitute updates to
existing State requirements that would need to be accomplished whether
or not ICD-10 was implemented, and for which entities affected by these
requirements are already prepared. The later compliance date of October
1, 2013 should allow ample time for HIPAA-covered entities to implement
ICD-10 while meeting any applicable State requirements, and should
allow for planning of future health information technology initiatives
to assure there is no overlap of HIPAA standards implementations.
19. Impact on Other Entities
Comment: Commenters noted that other non-HIPAA covered entities
would be impacted by the change from ICD-9 to ICD-10. They cited
worker's compensation programs, which would need to update their
systems that support EDI transactions, as well as the Version 5010 of
the 837 transaction standard for institutional claims and/or
encounters. Commenters noted that life insurers will have to enter new
diagnosis codes/conditions into their underwriting decisions.
Commenters stated that all reports sent from third party administrators
to employer sponsors of group health plans will need to be translated
into ICD-10 for longitudinal analysis to track financial and health
care quality performance. A commenter stated that the OASIS data set
for home health care, the inpatient rehabilitation patient assessment
instrument (IRF-PAI) and the post-acute care payment reform
demonstration project plan will all need to account for the cost of
transitioning to ICD-10 code

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sets within their respective instruments. Commenters also stated that
durable medical equipment (DME) providers would be impacted because
they are required to submit diagnosis codes when billing DME supplies
and Medicare Part B covered services.
Response: In the August 22, 2008 proposed rule (73 FR 49805), we
addressed the adoption of ICD-10-CM and ICD-10-PCS as medical data code
sets under HIPAA and, therefore, did not specifically address the
potential impacts of ICD-10 adoption on non-HIPAA entities.
Neither RAND nor Nolan addresses impacts of ICD-10 on non-HIPAA
entities. On page 2 of the October 2003 Nolan study on ICD-10
implementation (http://www.renolan.com/healthcare/icd10study_1003.pdf), it notes that the study ``excludes many providers such as
nursing homes, clinical labs and durable medical equipment vendors.
Similarly, a large number of payer organizations have been excluded
such as third party administrators, clearinghouses, and many small and
medium insurers. These providers and payer entities were excluded
because they were unable to develop initial cost estimates needed in
the study.'' We believe that, as with Nolan's observations in their
2003 report, this is still the case. We heard from a handful of
commenters who stated that the adoption of ICD-10 will have a ripple
effect on life insurers, worker's compensation programs, third party
administrators and similar entities, but they did not offer any
quantitative data that could be used to refine the impact analysis
calculation of their costs associated with the adoption of ICD-10.
According to our analysis of 2005 data from the National Academy of
Social Insurance's report on benefits, coverage and costs of worker's
compensation programs, more than $26.2 billion in medical benefits were
paid out in 2005, at an employer cost of $88.8 billion, but the
administrative costs associated with worker's compensation programs are
not available from this source.
From a benefits perspective, we do know that Chapter 20 of ICD-10,
``External Causes of Morbidity (V01-Y98),'' provides for the
classification of environmental events and external circumstances as
the cause of injury, and other adverse effects. These codes are more
precise and describe a wider range of causes of injuries, which should
be quite helpful to worker's compensation programs in determining the
exact cause of an injury.
With regard to OASIS, IRF-PAI and the post-acute care payment
reform demonstration project, the business process and systems impacts
of ICD-9-CM, and subsequently ICD-10-CM and ICD-10-PCS, on these and
similar instruments have already been identified. The costs associated
with the implementation of ICD-10 relative to these instruments will be
accounted for through CMS's ongoing ICD-1CM and ICD-10-PCS internal
planning and analysis activities and will be shared with the industry
once these costs have been projected.
We acknowledge that many uncertainties exist regarding the
transition to ICD-10-CM and ICD-10-PCS, and that the costs and benefits
associated with the transition as outlined in this final rule may not
fully capture all of the impacts to the industry. In order to account
for this uncertainty, we included low, high and primary estimates of
the costs and benefits of transitioning to ICD-10-CM and ICD-10-PCS.
These estimates may also include some uncertainty in that the costs and
benefits may be higher or lower than even our low and high estimates.
Some examples of uncertainty include the acknowledgment that our
estimates for physician training may not accurately reflect the number
of physicians who may require or request training on ICD-10-CM and ICD-
10-PCS, because we received conflicting estimates from stakeholders
during the ICD-10-CM and ICD-10-PCS proposed rule comment period.
Additionally, some industry studies have determined that productivity
losses will be time-limited, while others have opined that productivity
losses may be continuous.
We also recognize that the ICD-10-CM and ICD-10-PCS proposed rule
did not account for all of the systems that may be impacted by the ICD-
10-CM and ICD-10-PCS transition. Due to the complexity of the U.S.
health care system, it is very difficult to determine the number and
all the types of systems that will need to be updated for ICD-10-CM and
ICD-10-PCS use. However, we anticipate that, upon publication of this
final rule, the industry will begin its requirements gathering,
development and planning activities for the ICD-10-CM and ICD-10-PCS
transition. We also acknowledge that the ICD-10-CM and ICD-10-PCS
benefits estimates may include some uncertainty. We did not receive
many comments on the benefits estimates that were provided in the
August 22, 2008 proposed rule. However, we fully anticipate that once
the ICD-10-CM and ICD-10-PCS code sets are implemented, and the
industry becomes more familiar and comfortable with their use, benefits
may be easier to measure.

B. Regulatory Flexibility Analysis

1. Final Regulatory Flexibility Analysis
Section 604 of the Regulatory Flexibility Act (RFA) requires
agencies to analyze options for regulatory relief of small entities if
a final rule has a significant impact on a substantial number of small
entities. For purposes of the RFA, small entities include small
businesses, nonprofit organizations, and small governmental
jurisdictions. Most hospitals and most other providers and suppliers
are small entities, either by being nonprofit status or by qualifying
as small businesses under the Small Business Administration's (SBA's)
size standards (having revenues of $7.0 million to $34.5 million in any
1 year). For details, see the SBA's Web site at http://sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf (refer
to Sector 62).
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. This
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 100 beds.
As stated in the August 22, 2008 proposed rule (73 FR 49828), we
determined that about 200 nonprofit health care organizations that
offer 213 health plans are considered small entities under the RFA
because of their non-profit status, and that 97 percent of all
physicians' practices and clinics also qualify as small entities under
the RFA.
In the August 22, 2008 proposed rule (73 FR 49819), we showed the
distribution of the transition costs to the ICD-10 codes for providers,
suppliers, payers and software and system design firms. For calculating
the impact on small entities, entities were grouped by the North
American Industry Classification System (NAICS) and were presented at
the firm level. The NAICS figures were adjusted based on the medical
inflation factor we applied to all costs. Data were collected primarily
by inpatient and outpatient categories. To allocate the transition
costs, we used an available base which served as a proxy to the sub-
groupings of inpatient and outpatient providers and suppliers. For the
task of allocating the transition costs, we used the revenue-receipts
reported in the Services Annual Survey and the National Health
Expenditure Accounts, published by the U.S. Census Bureau. We grouped
providers and

[[Page 3357]]

suppliers by inpatient and outpatient groups reflecting the level at
which the data was available. In Column 3, we presented the revenue-
receipts for each type of provider-supplier, insurance carrier-third
party administrator, and computer design firm expected to bear
transition costs. Column 4 showed the percent of the two groups'
revenue-receipts each provider-supplier type comprised of the group's
total. In Column 5, we applied the percentages to the total ICD-10
transition costs for each provider-supplier type.
ICD-10-CM and ICD-10-PCS transition costs per entity are calculated
based on overall costs. As discussed in this final rule, we have
revised our August 22, 2008 proposed rule estimates for ICD-10-CM and
ICD-10-PCS training, productivity loss, and systems changes based on
industry comments received during the proposed rule's comment period.
We also have revised the data shown in the August 22, 2008 proposed
rule's Table 9 (73 FR 49820) to account for inflation. We applied our
revised costs to the number of firms and total revenue/receipts for
each provider-supplier type depicted in Table 2 below in order to more
accurately reflect the increase in the distribution of costs across
industry segments.
Table 2 ICD-10-CM and ICD-10-PCS costs for these provider-supplier
types now reflect a cost of $1,878.68 million, versus $1,087.70 million
in the August 22, 2008 proposed rule's Table 9 (73 FR 49420). We also
have now correctly designated NAICS Code 6512 as ``Medical and
Diagnostic Laboratories'' to reflect inclusion of laboratory data in
our regulatory impact analysis.

Table 2--Estimated Impact of ICD-10 Transition Cost on Inpatient and Outpatient Providers and Suppliers
[Adjusted for Inflation]
----------------------------------------------------------------------------------------------------------------
Percent ICD-
Revenue/ Percent of ICD-10 10 costs of
NAICS Provider/supplier type Firms receipts ($ revenue costs ($ revenue
millions) receipts millions) receipts
----------------------------------------------------------------------------------------------------------------
622.................... Hospitals (General 4,409 653,033 81.45 254.14 0.03
Medical and Surgical,
Psychiatric and Drug
and Alcohol
Treatment, Other
Specialty).
623.................... Nursing Facilities 22,867 148,716 18.55 57.88 0.03
(Nursing care
facilities,
Residential mental
retardation, mental
health and substance
abuse facilities,
Residential mental
retardation
facilities,
Residential mental
health and substance
abuse facilities,
Community care
facilities for the
elderly, Continuing
care retirement
communities).
----------------------------------------------------------------
Subtotal............... ...................... 27,276 801,749 100 312.02 0.03
----------------------------------------------------------------------------------------------------------------
6211................... Office of Physicians 189,542 330,889 61.60 1,171.92 0.03
(firms).
6214................... Outpatient Care 13,624 73,966 13.80 26.09 0.03
Centers (Family
Planning Centers,
Outpatient Mental
Health and Drug Abuse
Centers, Other
Outpatient Health
Centers, HMO Medical
Centers, Kidney
Dialysis Centers,
Freestanding
Ambulatory Surgical
and Emergency
Centers, All Other
Outpatient Care
Centers).
6215................... Medical and Diagnostic 7,811 37,253 6.93 13.14 0.03
Laboratories.
6216................... Home Health Services.. 14,512 47,007 8.75 16.58 0.03
6219................... Other Ambulatory Care 5,872 24,593 4.58 8.67 0.03
Services (Ambulance
and Other).
N/A.................... Durable Medical 404,293 23,709 4.41 8.36 0.03
Equipment.
----------------------------------------------------------------
Subtotal............... ...................... 635,654 537,417 100 1,244.76 0.03
----------------------------------------------------------------------------------------------------------------
524114, 524292......... Health Insurance 4,578 723,412 100 197.60 0.01
Carriers and Third
Party Administrators
\4\.
5415................... Computer System Design 97,556 200,695 100 115.30 0.01
and Related Services.
----------------------------------------------------------------
Subtotal............... ...................... 102,134 924,107 ........... 312.90 0.01
----------------------------------------------------------------------------------------------------------------
Total.................. ...................... 765,064 2,263,273 ........... 1,878.68
----------------------------------------------------------------------------------------------------------------
Table notes: Data for this table comes from the Statistics of U.S. Businesses 2005 tables for firms and
establishments presented by employee size, and from the Bureau of the Census Services Annual Survey for 2006
that provides annual receipt-revenues by NAICS. Both data sets are available from http://www.census.gov/econ/www.index.html. Data on the number of Durable Medical Equipment suppliers comes from the 2007b CMS Data
Compendium http://cms/hhs.gov/DataCompendium/17_2007_Data_Compendium.asp#TopOfPage.
Revenue data comes from the National Health Expenditures tables, 1960-2006, http://www.cms.hhs.gov/NationalHealthExpendData/02_NationalHealthAccountsHistorical.asp#TopOfPage. All accessed on 8-12-08. Firms
data come from http://www.census.gov/svsd/www/services/sas/sas_data/sas54.htm, accessed 8-12-08. Revenue and
receipts for each industry sector and sub-sector come from the Census Bureau Services Annual Survey for 2006
at B29. Revenue/receipt data for NAICS codes 6211-6219, 622 and 623 come from tables 8.1-8.10. Data for codes
5415 come from tables 6.1-6.21. Revenue/receipts are used to allocate ICD-10 implementation costs. Revenue/
receipts were subtotaled by ambulatory provider plus DME suppliers (NAICS 62111-6219) and inpatient providers
(NAICS 622, 623) and the percent of the subtotaled revenue/receipts for the provider/supplier was computed and
applied to the total ICD-10 implementation costs for each of two subtotaled groupings. ICD-10 costs for
ambulatory provider do not include the cost of system changes. Some costs, however, are included with
inpatient system changes since large multi-campus, integrated health care facilities are likely to include
their ambulatory care facilities in the cost of upgrading their information systems.

[[Page 3358]]

Practices of doctors of osteopathy, podiatry, chiropractors, mental
health independent practitioners with annual revenues of less than $6.5
million are considered to be small entities. We estimated that 92
percent of medical laboratories, 100 percent of dental laboratories and
90 percent of durable medical equipment suppliers are also small
entities under the RFA.
We also accounted for the impact of ICD-10 adoption on small
insurance carriers, third party administrators and system design and
related service firms. We first determined the number of entities that
meet the SBA size standard. For insurance carriers and third party
administrators, the SBA size standard is annual receipts of $6.5
million. For system design and related services firms, the SBA size
standard is annual receipts of $23 million.
The Statistics of U.S. Businesses data (http://www.census.gov/econ/www.index.html) used in the August 22, 2008 proposed rule at 73 FR
49820 shows 97,556 system design and related services firms (NAICS code
5415), providing software services, data processors, computer
facilities management services, computer system design services, custom
programming services as well as other computer-related services. Table
3 below outlines the impact of ICD-10-CM and ICD-10-PCS on payers and
computer design and related services. We have updated these data to
reflect our cost revisions and include them in our calculations of our
cost summary which appears in Table 6 of this final rule. We believe
that our analysis supports the conclusion that implementation of ICD-
10-CM and ICD-10-PCS will not impose a significant economic burden on
payers and computer design and related services firms.

Table 3--Impact on Payers and Computer Design and Related Services
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annual
Small % Small small
Revenue/ entity entity Total ICD- entity % Small entity
NAICS Payers and system design and Firms Small receipt ($ receipts receipts of 10 costs share of implementation
related services entities millions) (in total (in ICD-10 cost/ revenue-
millions $) receipts millions $) costs (in receipts
millions $)
--------------------------------------------------------------------------------------------------------------------------------------------------------
524114, Health Insurance Carriers and 4,578 3,449 723,412 18,309 2.53 197.60 1.2 0.01
524292 Third Party Administrators.......
5415 Computer Systems Design and 97,556 96,948 200,695 107,048 53.34 115.3 15.4 0.01
Related Services.................
--------------------------------------------------------------------------------------------------------------------------------------------------------

Because most medical providers are either non-profit or meet the
SBA's size requirements for ``small entities'' for purpose of
regulatory impact analyses, we generally consider all health care
providers and suppliers to be small entities. Table 9 in the August 22,
2008 proposed rule and the associated discussion (73 FR 49820) showed
that the transition to ICD-10-CM and ICD-10-PCS will not have a
significant impact on a substantial number of small health care
entities.
To come to this conclusion, as stated in the August 22, 2008
proposed rule, we estimated that small insurance carriers and third
party administrators would have an ICD-10 implementation cost of $4
million, or approximately $1 million per year, for the four years that
they would incur implementation costs.
A similar exercise for system design and related computer services
firms yielded a cost of $51.5 million over 4 years, or $12.9 million
per year. We stated that it is possible that we could be including more
firms than will actually be implementing the codes.
In the August 22, 2008 proposed rule, to test our analysis, we
assumed that burden would equal 3 percent of small entity revenue. This
is based on HHS' May 2003 guidance on proper consideration of small
entities in rule making (http://www.hhs.gov/execsec/smallbus.pdf.pdf)
that states that if a rule imposes a burden equal to or greater than 3
percent of a firm's revenues, it is significant. We assumed small
business market share would remain constant at 53 percent of the
overall business market for their NAIC classification, and that the
$12.9 million costs described above would be equally distributed among
the small entities. In describing our calculation we stated that we
took 3 percent of the total cost and computed the number of small
entities for which the cost of implementing the ICD-10-CM and ICD-10-
PCS codes would be a significant burden. This description of the
calculation was in error. What we did was to calculate the revenue
amount, of which the small entity share of the ICD-10-CM and ICD-10-PCS
implementation costs would equal 3 percent. That is, we divided $12.9
million by 3 percent to yield $430 million. Then, dividing the number
of small entities into the total small entity share of revenues yields
an average revenue amount per small entity of $1.104 million. Finally,
dividing the $430 million by the average revenue per small entity of
$1.104 million yields the number of small entities of 389. This number
represented the maximum number of small entities, if only that many
participated in the ICD-10-CM and ICD-10-PCS implementation, for which
the costs would be a significant burden.
Based on our revised estimate of costs for ICD-10 implementation,
computer systems design and related services' cost share has been
increased from $12.9 million to $15.4 million, the revenue level for
which the costs would equal 3 percent is increased to $513 million.
Again, dividing the average small entity revenue amount of $1.104
million into the $513 million yields the number of small entities (465)
for which the ICD-10-CM and ICD-10-PCS implementation would become a
significant burden if only that number of entities took part.
From this analysis we now estimate that if 465 or fewer small firms
provide computer systems design and related services, the burden of
ICD-10-CM and ICD-10-PCS implementation on them could be significant.
We also developed a scenario for a typical community hospital with
100 beds, 4,000 annual discharges and gross revenues of $200 million
(see 73 FR 49830 for the details on how we calculated this
implementation cost). We assumed that the hospital would experience a
productivity loss in the first 6 months after implementation (based on
the AHA/AHIMA 2003 ICD-10 field study and other countries' ICD-10
implementation experiences), totaling $1,233. We applied a similar
methodology to determine outpatient productivity losses, using RAND's
estimate that it would take \1/100\ of the time it takes to code an
inpatient claim to code an outpatient claim because outpatient claims
do not require the use of the ICD-10-PCS code set. We applied 0.17
extra minutes per claim, at a labor charge of $50 an hour, and a cost
per claim of $0.014. For the first month, the productivity loss for
inpatient coding is $15.28, with a total 6-month productivity loss of
$53. For systems changes and software upgrades, based on comments that
claimed our system implementation costs were too low, we increased the
costs to implement the

[[Page 3359]]

required changes from $300,000 to $1,000,000. For the sake of
presenting a ``worse case'' scenario, we assume all implementation
costs will be incurred or expensed within a 1-year period. This
contrasts with our assumption as outlined in this final rule's RIA
where we expect the costs to be incurred over a 4-year period. Along
with training and productivity losses, the cost for a typical community
hospital to implement the ICD-10 code sets will be $1,003,986. To
determine the percent of the hospital's revenue diverted to funding its
ICD-10 conversion, we divided the hospital's revenues of $200 million
by the cost to convert their systems to use the ICD-10 code sets to
obtain a result of 0.50 percent.
As previously discussed in this final rule, we considered
alternatives for small entities to adopting the ICD-10-CM and ICD-10-
PCS code sets. These included assigning new ICD-9-CM diagnosis and
procedure codes where needed using the remaining unassigned codes and
ignoring the hierarchy of the ICD-9-CM code set; using CPT-4 for coding
hospital inpatient procedures; and skipping ICD-10 and waiting until
ICD-11 is ready for use in the United States and adopting ICD-11 at
that time. We also considered phasing in the implementation of the new
codes by geographic region or by large versus small entities. Another
option was for small entities to maintain dual coding systems for a
period of time; or to delay implementation for small entities. All of
these options were reviewed and rejected for the reasons discussed in
the August 22, 2008 proposed rule at 73 FR 49826.
2. Response to Comments on Small Entities
Comment: For purposes of our analysis pursuant to the RFA,
nonprofit organizations are generally considered small entities;
however, individuals and states are not included in the definition of a
small entity. Because most medical providers are either nonprofit or
meet the SBA's size standard for small businesses for purposes of
regulatory analysis, we treat all medical providers as small entities.
Many commenters representing small physician practices and
healthcare-related associations stated that the cost of implementing
ICD-10-CM as early as October 2011, shortly after the NPI
implementation, might bankrupt small physician practices. Some
commenters disputed our cost estimates for small entities as being too
low, but none offered quantitative data on the impact of ICD-10 on
their small practices. Commenters generally made vague references to
anticipated costs due to delayed reimbursements, lost productivity and
costs of training, and outlays for software and hardware, and asked
that the compliance date be pushed back. Some commenters stated that
they will have difficulty integrating ICD-10 codes into their systems
and business functions.
One commenter stated that the number of ICD-10 codes makes printing
the code set in book form prohibitive, and that because of this, small
providers will be forced to purchase electronic systems and software.
Some commenters from small practices stated that they do not have
electronic systems to support ICD-10, and cannot afford to hire
additional staff or re-train existing staff in ICD-10 coding. A few
small practices stated that they will need additional time in which to
become compliant with the new code sets, while others disagreed, and
stated that allowing small practices to continue to use ICD-9 while
other industry segments use ICD-10 code sets would cause serious claims
processing and reimbursement problems.
Response: As detailed in the August 22, 2008 proposed rule (73 FR
49808), the Regulatory Flexibility Act (RFA) requires agencies to
analyze options for the regulatory relief of small entities. As
previously explained, our analysis presumed that all medical providers
were small entities. While we did not estimate that the cost of ICD-10
implementation per small physician practice would be substantial, we
did acknowledge that, given the large number of affected entities, the
aggregate total cost to the industry as a whole could be substantial.
Of those commenters identifying themselves as small practices, all
but one did not dispute the need to move to ICD-10, but stated the
timing of our proposed October 2011 compliance date was problematic
because small practices do not have the financial and/or other
resources (staff, technology, etc.) to quickly make the move from ICD-
9-CM to ICD-10-CM. As the compliance date has been moved to October
2013, we anticipate that this will afford small practices the time they
need to spread any costs associated with the implementation of ICD-10
in their practices over a longer period of time.
As discussed previously in this final rule, there are multiple ways
for small entities to integrate the ICD-10 code sets into their
business settings, either populating the new codes throughout their
entire system all at once, or integrating the codes on a flow basis as
they are used.
Additionally, any small practices may continue to submit paper
claims, using preprinted forms that include all of the appropriate
codes required for use in such practices. In most instances,
practitioners in small practices may assign the diagnosis themselves
and may include the ICD-10 code on the paper billing form. The use of
the ICD-10 code sets is not predicated on the use of electronic
hardware and software. The ICD-10 code set has already been produced in
a book version of ICD-10-CM that measures only 2 inches in depth; the
book version of ICD-10-PCS measures 1 inch in depth. Vendors have
indicated that they are in the process of developing both paper-based
and software products for purchase once ICD-10 is implemented. For
those small practices that have already migrated to electronic systems
and wish to purchase software, a CD of the ICD-10 code set will be made
available through the U.S. Government Printing Office (GPO). The ICD-9-
CM CD, also sold through the GPO, has been priced at less than $30 for
many years, and we expect an ICD-10-CM CD, when available, to be
comparably priced. We do not believe this purchase price to be
burdensome to small providers.
Also, as previously noted in this final rule, the ICD-10-PCS code
set is available at no charge on the CMS Web site at http://www.cms.hhs.gov/ICD10/02_ICD-10-PCS.asp#TopOfPage. The ICD-10-CM code
set is also available free of charge on the NCHS Web site at http://www.cdc.gov/nchs/about/otheract/icd9/icd10cm.htm. Both of these Web
sites also feature the previously referenced tools such as crosswalks
and guidelines for downloading at no charge.
As previously discussed in this impact analysis, we believe that
there will be a plethora of training opportunities through the
Internet, in-services, hospital-based training, association educational
programs, medical and medical specialty associations, etc., and that
the marketplace will make the appropriate ICD-10 training available to
small providers in the most efficient manner possible, recognizing that
solo practitioners and their staffs cannot afford extensive amounts of
time away from their offices to partake in training.
Finally, as previously discussed in this final rule, we agree with
commenters who stated a phased-in approach to ICD-10 implementation to
allow more time for small entities to transition to ICD-10 is not
feasible because the use of dual coding systems would result in
burdensome costs to industry, confusion as to which code set

[[Page 3360]]

was being used in claims submission, and which payers are capable of
accepting the new codes. The result would be massive claims processing
delays and lagging reimbursements to providers.
3. Conclusion
We did not receive any data or information to substantiate
arguments that our impact analysis of the potential effects of ICD-10
implementation on small entities was flawed. We, therefore, maintain
our small entity ICD-10 impact assumptions based on the Regulatory
Flexibility Analysis section of the proposed rule at 73 FR 49827. Based
on the foregoing analysis, the Secretary certifies that this final rule
will not have a significant economic impact on a substantial number of
small entities.

Table 4--Summary of Estimated Costs in $ Millions Annualized 3%, 7%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low High Primary
-----------------------------------------------------------------------------
3.00% 7.00% 3.00% 7.00% 3.00% 7.00%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Training:
Inpatient Coders............. $8.88 $11.64 $35.53 $46.57 $17.76 $23.28
Outpatient Coders............ 5.01 6.57 20.05 26.28 10.03 13.14
Code Users................... 2.26 2.96 4.61 6.04 3.45 4.52
Physicians................... 43.69 57.27 235.07 308.11 87.38 114.53
Productivity Losses:
Inpatient.................... 0.00 0.00 4.61 6.04 0.82 1.07
Outpatient................... 0.00 0.00 4.61 6.04 0.79 1.03
Physician Practices.......... 0.46 0.60 2.26 2.96 1.01 1.33
Improper and returned claims. 22.95 30.08 92.14 120.77 45.53 59.67
Systems Changes:
Providers.................... 4.61 6.04 18.43 24.15 12.62 16.54
Software Vendors............. 4.83 6.33 19.31 25.32 9.66 12.66
Payers....................... 8.28 10.85 33.11 43.40 16.56 21.70
Government Systems........... 21.44 28.11 85.77 112.42 42.89 56.21
--------------------------------------------------------------------------------------------------------------------------------------------------------

Table 5--Summary of Estimated Benefits in $ Millions Annualized 3%, 7%
----------------------------------------------------------------------------------------------------------------
Low estimate High estimate Primary estimate
-----------------------------------------------------------------------------
3% 7% 3% 7% 3% 7%
----------------------------------------------------------------------------------------------------------------
More accurate payments for new $49.77 $65.24 $199.09 $260.95 $99.54 $130.47
procedures.......................
Fewer rejected claims............. 48.88 64.07 195.51 256.26 97.76 128.13
Fewer improper claims............. 24.44 32.03 97.75 128.12 48.87 64.06
Better understanding of new 41.32 54.15 165.26 216.61 82.63 108.31
procedures.......................
Improved disease management....... 25.73 33.73 102.93 134.91 51.46 67.45
----------------------------------------------------------------------------------------------------------------

BILLING CODE 4120-01-P

[[Page 3361]]

[GRAPHIC] [TIFF OMITTED] TR16JA09.004

BILLING CODE 4120-01-C

Table 7--Annual Estimated Benefits Over 15 Years for ICD-10 (in $ millions) Discounted 3%, 7%
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Present Present
Year 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 value value
(3%) (7%)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
More-accurate payment for 0 0 0 0 21.88 58.41 72.89 85.12 97.46 109.93 122.55 135.34 148.32 161.51 174.94 $854.27 $564.25
new procedures.............
Fewer rejected claims....... 0 0 0 0 30.42 60.89 97.51 121.59 122.08 122.17 122.27 122.37 122.47 122.57 122.66 854.29 577.50
Fewer improper claims....... 0 0 0 0 15.22 30.44 48.75 60.79 61.03 61.08 61.13 61.18 61.23 61.28 61.33 427.12 288.73
Better understanding of new 0 0 0 0 29.18 77.88 97.19 97.5 97.58 97.66 97.74 97.81 97.89 97.97 98.05 727.42 496.71
procedures.................
Improved disease management. 0 0 0 0 9.92 19.86 52.99 66.08 66.34 66.4 66.45 66.5 66.56 66.61 66.66 447.49 300.31
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total Benefits (in $0.00 $0.00 $0.00 $0.00 $106.62 $247.48 $369.33 $431.08 $444.49 $457.24 $470.14 $483.20 $496.47 $509.94 $523.64 $3,310.58 $2,227.51
millions)..............
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Table 8--Accounting Statement: Classification of Estimated Expenditures, From FY 2011 to FY 2025
[in millions]
----------------------------------------------------------------------------------------------------------------
Low High Source citation
Category Primary estimate estimate estimate (RIA, preamble,
(millions) (millions) (millions) etc.)
----------------------------------------------------------------------------------------------------------------
BENEFITS:
Annualized monetized benefits:
7% Discount.......................... $244.6.................. $90.0 $269.4 RIA
3% Discount.......................... $277.3.................. $102.2 $305.4 RIA
Qualitative (unquantified) benefits.. Improved biosurveillance ........... ........... RIA
and global disease
management.
COSTS:
Annualized monetized costs:
7% Discount.......................... $253.4.................. $59.7 $278.8 RIA
3% Discount.......................... $222.5.................. $51.9 $24.8 RIA
Qualitative (unquantified) costs..... None.................... None None
Transfers:
Annualized monetized transfers: ``on N/A..................... N/A N/A
budget''.
From whom to whom?................... N/A..................... N/A N/A
Annualized monetized transfers: ``off- N/A..................... N/A N/A
budget''.
From whom to whom?................... N/A..................... N/A N/A
----------------------------------------------------------------------------------------------------------------

List of Subjects in 45 CFR Part 162

Administrative practice and procedures, Electronic transactions,
Health facilities, Health Insurance, Hospitals, Incorporation by
reference, Medicaid, Medicare, Reporting and recordkeeping
requirements.

0
For the reasons set forth in this preamble, the Department of Health
and Human Services amends 45 CFR part 162 as follows:

[[Page 3362]]

PART 162--ADMINISTRATIVE REQUIREMENTS

0
1. The authority citation for part 162 is amended to read as follows:

Authority: Secs. 1171 through 1180 of the Social Security Act
(42 U.S.C. 1320d-1320d-9), as added by sec. 262 of Pub. L. 104-191,
110 Stat. 2021-2031, and sec. 105 of Pub. L. 110-233, 122 Stat. 881-
922, and sec. 264 of Pub. L. 104-191, 110 Stat. 2033-2034 (42 U.S.C.
1320d-2(note)).

0
2. Section 162.1002 is amended by revising paragraph (b) introductory
text and adding paragraph (c) to read as follows.

Sec. 162.1002 Medical data code sets.

* * * * *
(b) For the period on and after October 16, 2003 through September
30, 2013:
* * * * *
(c) For the period on and after October 1, 2013:
(1) The code sets specified in paragraphs (a)(4), (a)(5), (b)(2),
and (b)(3) of this section.
(2) International Classification of Diseases, 10th Revision,
Clinical Modification (ICD-10-CM) (including The Official ICD-10-CM
Guidelines for Coding and Reporting), as maintained and distributed by
HHS, for the following conditions:
(i) Diseases.
(ii) Injuries.
(iii) Impairments.
(iv) Other health problems and their manifestations.
(v) Causes of injury, disease, impairment, or other health
problems.
(3) International Classification of Diseases, 10th Revision,
Procedure Coding System (ICD-10-PCS) (including The Official ICD-10-PCS
Guidelines for Coding and Reporting), as maintained and distributed by
HHS, for the following procedures or other actions taken for diseases,
injuries, and impairments on hospital inpatients reported by hospitals:
(i) Prevention.
(ii) Diagnosis.
(iii) Treatment.
(iv) Management.

(Catalog of Federal Domestic Assistance Program No. 93.778, Medical
Assistance Program) (Catalog of Federal Domestic Assistance Program
No. 93.773, Medicare--Hospital Insurance; and Program No. 93.774,
Medicare--Supplementary Medical Insurance Program)

Dated: December 11, 2008.
Michael O. Leavitt,
Secretary.
[FR Doc. E9-743 Filed 1-15-09; 8:45 am]
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