[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

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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

[[Page 3334]]

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

[[Page 3336]]

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.

[[Page 3339]]

    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

[[Page 3340]]

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

[[Page 3341]]

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.

[[Page 3342]]

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

[[Page 3345]]

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.

[[Page 3346]]

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

[[Page 3353]]

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

[[Page 3354]]

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

[[Page 3355]]

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

[[Page 3356]]

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]
BILLING CODE 4120-01-P