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October 2007, ASC X12N/ DEPARTMENT OF HEALTH AND different than the effective date, is the 005010X223A1. (Incorporated by HUMAN SERVICES date on which entities are required to reference in § 162.920.) have implemented the policies adopted Office of the Secretary (c) For the period on and after January in this rule. The compliance date for this regulation is October 1, 2013. 1, 2012, the standards identified in 45 CFR Part 162 paragraph (b)(2) of this section. FOR FURTHER INFORMATION CONTACT: [CMS–0013–F] Denise M. Buenning, (410) 786–6711 or ■ 18. Add a new Subpart S to read as Shannon L. Metzler, (410) 786–3267. follows: RIN 0958–AN25 I. Background HIPAA Administrative Simplification: Subpart S—Medicaid Pharmacy A. Statutory Background Subrogation Modifications to Medical Data Code Set Standards To Adopt ICD–10–CM and The Congress addressed the need for Sec. ICD–10–PCS a consistent framework for electronic 162.1901 Medicaid pharmacy subrogation transactions and other administrative AGENCY: Office of the Secretary, HHS. transaction. simplification issues in the Health 162.1902 Standard for Medicaid pharmacy ACTION: Final rule. Insurance Portability and subrogation transaction. Accountability Act of 1996 (HIPAA), SUMMARY: This final rule adopts Public Law 104–191, enacted on August § 162.1901 Medicaid pharmacy modifications to two of the code set 21, 1996. HIPAA has helped to improve subrogation transaction. standards adopted in the Transactions the Medicare and Medicaid programs, and Code Sets final rule published in The Medicaid pharmacy subrogation and the efficiency and effectiveness of the Federal Register pursuant to certain the health care system in general, by transaction is the transmission of a provisions of the Administrative claim from a Medicaid agency to a payer encouraging the development of Simplification subtitle of the Health standards and requirements to facilitate for the purpose of seeking Insurance Portability and reimbursement from the responsible the electronic transmission of certain Accountability Act of 1996 (HIPAA). health information. health plan for a pharmacy claim the Specifically, this final rule modifies the Through subtitle F of title II of that State has paid on behalf of a Medicaid standard medical data code sets statute, the Congress added to title XI of recipient. (hereinafter ‘‘code sets’’) for coding the Social Security Act (the Act) a new diagnoses and inpatient hospital Part C, titled ‘‘Administrative § 162.1902 Standard for Medicaid procedures by concurrently adopting pharmacy subrogation transaction. Simplification.’’ Part C of title XI of the the International Classification of Act now consists of sections 1171 The Secretary adopts the Batch Diseases, 10th Revision, Clinical through 1180. Section 1172 of the Act Standard Medicaid Subrogation Modification (ICD–10–CM) for diagnosis and the implementing regulations make Implementation Guide, Version 3, coding, including the Official ICD–10– any standard adopted under Part C Release 0 (Version 3.0), July 2007, CM Guidelines for Coding and applicable to: (1) Health plans; (2) National Council for Prescription Drug Reporting, as maintained and health care clearinghouses; and (3) Programs, as referenced in § 162.1902 distributed by the U.S. Department of health care providers who transmit any (Incorporated by reference at § 162.920): Health and Human Services (HHS), health information in electronic form in hereinafter referred to as ICD–10–CM, connection with a transaction for which (a) For the period on and after January and the International Classification of 1, 2012, for covered entities that are not the Secretary has adopted a standard. Diseases, 10th Revision, Procedure Section 1172(c)(1) of the Act requires small health plans; Coding System (ICD–10–PCS) for any standard adopted by the Secretary (b) For the period on and after January inpatient hospital procedure coding, of the Department of Health and Human 1, 2013 for small health plans. including the Official ICD–10–PCS Services (HHS) to be developed, Guidelines for Coding and Reporting, as (Catalog of Federal Domestic Assistance adopted, or modified by a standard maintained and distributed by the HHS, Program No. 93.778, Medical Assistance setting organization (SSO), except in the hereinafter referred to as ICD–10–PCS. Program) (Catalog of Federal Domestic cases identified under section 1172(c)(2) Assistance Program No. 93.773, Medicare— These new codes replace the of the Act. Under section 1172(c)(2)(A) Hospital Insurance; and Program No. 93.774, International Classification of Diseases, of the Act, the Secretary may adopt a Medicare—Supplementary Medical 9th Revision, Clinical Modification, standard that is different from any Insurance Program) Volumes 1 and 2, including the Official standard developed by an SSO if it will ICD–9–CM Guidelines for Coding and substantially reduce administrative Approved: December 11, 2008. Reporting, hereinafter referred to as costs to health care providers and health Michael O. Leavitt, ICD–9–CM Volumes 1 and 2, and the plans compared to the alternatives, and Secretary. International Classification of Diseases, the standard is promulgated in [FR Doc. E9–740 Filed 1–15–09; 8:45 am] 9th Revision, Clinical Modification, accordance with the rulemaking BILLING CODE 4150–28–P Volume 3, including the Official ICD–9– procedures of subchapter III of chapter CM Guidelines for Coding and 5 of Title 5 of the United States Code. Reporting, hereinafter referred to as Under section 1172(c)(2)(B) of the Act, ICD–9–CM Volume 3, for diagnosis and if no SSO has developed, adopted, or procedure codes, respectively. modified any standard relating to a DATES: The effective date of this standard that the Secretary is authorized regulation is March 17, 2009. The or required to adopt, section 1172(c)(1) effective date is the date that the does not apply. policies herein take effect, and new Section 1172 of the Act also sets forth policies are considered to be officially consultation requirements that must be adopted. The compliance date, which is met before the Secretary may adopt

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standards. The SSO must consult with extend the time for compliance for small covered entities than modified or new the following organizations in the health plans. code sets. Please refer to the August 17, course of the development, adoption, or 2000 final rule for details of that B. Regulatory Background: Adoption modification of the standard: National discussion, as well as a discussion of and Modification of HIPAA Code Sets Uniform Billing Committee (NUBC), the utilizing ICD–10–CM and ICD–10–PCS National Uniform Claim Committee The Transactions and Code Sets final as a future HIPAA standard code set (65 (NUCC), the Workgroup for Electronic rule (65 FR 50312) published in the FR 50327). Please refer to the August 17, Data Interchange (WEDI), and the Federal Register on August 17, 2000 2000 final rule; ‘‘Standards for Privacy American Dental Association (ADA). (hereinafter referred to as the ‘‘August of Individually Identifiable Health For a standard that was not developed 17, 2000 final rule’’) implemented some Information’’ (65 FR 82462), published by an SSO, the Secretary is required to of the requirements of the in the Federal Register on December 28, consult with each of the above-named Administrative Simplification subtitle 2000; Standards for Privacy of groups before adopting the standard. of HIPAA, by adopting standards for Individually Identifiable Health Under section 1172(f) of the Act, the eight electronic transactions for use by Information; Final Rule (67 FR 53182) Secretary must also rely on the covered entities (health plans, health published in the Federal Register on recommendations of the National care clearinghouses, and those health August 14, 2002; and ‘‘the Modification Committee on Vital and Health care providers who transmit any health to Code Set Standards To Adopt ICD– Statistics (NCVHS) and consult with information in electronic form in 10–CM and ICD–10–PCS’’ proposed rule appropriate Federal and State agencies connection with a transaction for which (hereinafter referred to as the ‘‘August and private organizations. the Secretary has adopted a standard). 22, 2008 proposed rule’’) (73 FR 49796), Section 1173(a) of the Act requires the We established these standards at 45 published in the Federal Register on CFR parts 160, subpart A, and 162, Secretary to adopt transaction standards August 22, 2008 for further information subparts A, and I through R. The and data elements for the electronic about electronic data interchange and ‘‘Modifications to Electronic Data exchange of health information for the regulatory background. Transaction Standards and Code Sets’’ certain health care transactions. Under final rule, published on February 20, II. ICD–9–CM sections 1173(b) through (f) of the Act, 2003 (68 FR 8381) (hereinafter referred The 9th revision of the International the Secretary is required to adopt to as the ‘‘February 20, 2003 final rule’’), Classification of Diseases (ICD–9) was standards for: Unique health identifiers, modified the implementation originally developed and maintained by code sets, security standards for health specifications for several adopted the World Health Organization (WHO). information, electronic signatures, and transactions standards, among other While it was originally designed to the transfer of information among health provisions. Please refer to the August classify causes of death (mortality), the plans. 17, 2000 final rule and the February 20, scope of ICD–9 was expanded, through Section 1174 of the Act requires the 2003 final rule for detailed discussions the development of the U.S. clinical Secretary to review the adopted of electronic data interchange and an modification, to include non-fatal standards and adopt modifications as analysis of the public comments diseases (morbidity). The Centers for appropriate, but not more frequently received during the promulgation of Disease Control and Prevention (CDC) than once every 12 months in a manner both rules. developed and maintains a clinical which minimizes disruption and cost of In the August 17, 2000 final rule, we modification of ICD–9 for diagnosis compliance. The same section requires also adopted standard code sets for use codes which is called ‘‘ICD–9–CM the Secretary to ensure that procedures in those transactions, including: Volumes 1 and 2.’’ The Centers for exist for the routine maintenance, • International Classification of Medicare & Medicaid Services (CMS) testing, enhancement, and expansion of Diseases, 9th Revision, Clinical maintains an additional clinical code sets, along with instructions on Modification (ICD–9–CM) Volumes 1 modification of ICD–9 for inpatient how data elements encoded before any and 2 (including the Official ICD–9–CM hospital procedure codes, which is modification may be converted or Guidelines for Coding and Reporting) as called ‘‘ICD–9–CM Volume 3.’’ The translated to preserve the information maintained and distributed by the Secretary adopted CDC’s ICD–9–CM in value of any pre-existing data elements. Department of Health and Human 1979 for morbidity applications. ICD–9– Section 1175(b) of the Act provides Services (HHS), for coding diseases, CM has been used since 1983 as the for a compliance date not later than 24 injuries, impairments, other health basic input for assigning diagnosis- months after the date on which an problems and their manifestations, and related groups for Medicare’s Inpatient initial standard or implementation causes of injury, disease, impairment, or Prospective Payment System. ICD–9– specification is adopted for all covered other health problems. CM Volumes 1 and 2, and ICD–9–CM entities except small health plans, for • ICD–9–CM Volume 3 (including the Volume 3 were adopted as HIPAA code which the statute provides for a Official ICD–9–CM Guidelines for sets in 2000 for reporting diagnoses, compliance date not later than 36 Coding and Reporting) as maintained injuries, impairments, and other health months after the date on which an and distributed by HHS, for procedures problems and their manifestations, and initial standard or implementation or other actions taken for diseases, causes of injury, disease, impairment, or specification is adopted. If the Secretary injuries, and impairments on hospital other health problems in standard adopts a modification to a HIPAA inpatients reported by hospitals transactions. standard or implementation regarding prevention, diagnosis, specification, the compliance date for treatment, and management. A. ICD–9–CM, Volumes 1 and 2 the modification may not be earlier than ICD–9–CM Volumes 1 and 2, and (Diagnosis) the 180th day of the period beginning ICD–9–CM Volume 3 were already CDC developed ICD–9–CM, Volumes on the date such modification is widely used in administrative 1 and 2. It produced a clinical adopted. The Secretary may consider transactions when we promulgated the modification to the WHO’s ICD–9 by the nature and extent of the August 17, 2000 final rule, and we adding more specificity to its diagnosis modification when determining decided that adopting these existing codes. ICD–9–CM diagnosis codes are compliance dates. The Secretary may code sets would be less disruptive for three to five digits long, and are used by

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all types of health care providers, 1985 as an open forum for receiving information and detail within the codes including hospitals and physician public comments on proposed code than ICD–9–CM, facilitating timely practices. The code set is organized into revisions, deletions, and additions. The electronic processing of claims by chapters by body system. For a Committee is co-chaired by CDC and reducing requests for additional discussion of the structure of the ICD– CMS; CDC maintains ICD–9–CM information. 9–CM diagnosis code sets, please refer Diagnosis Codes (Volumes 1 and 2), and ICD–10–CM also includes significant to the August 22, 2008 proposed rule CMS maintains ICD–9–CM Procedure (73 FR 49798). Codes (Volume 3). improvements over ICD–9–CM in As discussed in the August 22, 2008 coding primary care encounters, B. ICD–9–CM, Volume 3 (Procedures) proposed rule (73 FR 49805), we will re- external causes of injury, mental Inpatient hospital services procedures name the ICD–9–CM Coordination and disorders, neoplasms, and preventive are currently coded using ICD–9–CM Maintenance Committee as the ICD–10 health. The ICD–10–CM code set reflects Volume 3, which was adopted as a Coordination and Maintenance advances in medicine and medical HIPAA standard in 2000 for reporting Committee at the point when ICD–10 technology, as well as accommodates inpatient hospital procedures. Current becomes the new HIPAA standard. Until the capture of more detail on Procedural Terminology, 4th Edition that time, the ICD–9–CM Coordination socioeconomics, ambulatory care (CPT–4) and Healthcare Common and Maintenance Committee will conditions, problems related to lifestyle, Procedure Coding System (HCPCS) are continue to update and maintain ICD– and the results of screening tests. It also used to code all other procedures. The 9–CM. For a discussion of maintaining provides for more space to ICD–9–CM procedure codes, which are and updating code sets, please refer to accommodate future expansions, maintained by CMS, are three to four the August 22, 2008 proposed rule (73 laterality for specifying which organ or digits long and organized into chapters FR 49798–49799). part of the body is involved as well as by body system (for example, expanded distinctions for ambulatory musculoskeletal, urinary and circulatory III. ICD–10 and the Development of systems, etc.). For a discussion of the ICD–10–CM and PCS and managed care encounters. structure of the ICD–9–CM procedure The ICD–10 code sets provide a B. ICD–10–PCS Procedure Codes code set, please refer to the August 22, standard coding convention that is 2008 proposed rule (73 FR 49798). flexible, providing unique codes for all CMS developed a procedure coding substantially different health system, ICD–10–PCS. ICD–10–PCS has C. Limitations of ICD–9–CM conditions. It also allows new no direct relationship to the basic ICD– In the August 22, 2008 proposed rule procedures and diagnoses to be easily 10 diagnostic classification, which does (73 FR 49799), we discussed the incorporated as new codes for both not include procedures, and has a shortcomings of ICD–9–CM. The ICD–9– existing and future clinical protocols. totally different structure from ICD–10– CM code set is 29 years old, its ICD–10–CM and ICD–10–PCS provide CM. ICD–10–PCS is sufficiently detailed approximately 16,000 procedure and specific diagnosis and treatment to describe complex medical diagnosis codes are insufficient to information that can improve quality procedures. This becomes increasingly continue to allow for the addition of measurements and patient safety, and important when assessing and tracking new codes, and, because it cannot the evaluation of medical processes and the quality of medical processes and accommodate new procedures, its outcomes. ICD–10–PCS has the outcomes, and compiling statistics that capacity as a fully functioning code set capability to readily expand and capture are valuable tools for research. ICD–10– is diminished. Many chapters of ICD–9– new procedures and technologies. CM are full, and in others the PCS has unique, precise codes to A. ICD–10–CM Diagnosis Codes hierarchical structure of the ICD–9–CM differentiate body parts, surgical procedure code set is compromised. CDC’s National Center for Health approaches, and devices used. It can be This means that some chapters can no Statistics (NCHS) developed the ICD– used to identify resource consumption longer accommodate new codes, so any 10–CM code set, following a voluntary differences and outcomes for different additional codes must be assigned to consensus-based process and working procedures, and describes precisely other, topically unrelated chapters (for closely with specialty societies to what is done to the patient. ICD–10–PCS example, inserting a heart procedure ensure clinical utility and subject matter codes have seven alphanumeric code in the eye chapter of the code set). expert input into the process of creating characters and group together services The ICD–9–CM code set was never the clinical modifications, with into approximately 30 procedures designed to provide the increased level comments from a number of prominent identified by a leading alpha character. of detail needed to support emerging specialty groups and organizations that There are 16 sections of tables that needs, such as biosurveillance and pay- addressed specific concerns or determine code selection, with each for-performance programs (P4P), also perceived unmet clinical needs character having a specific meaning. known as value-based purchasing or encountered with ICD–9–CM. NCHS (See section V of the August 22, 2008 competitive purchasing. For a detailed also had discussions with other users of proposed rule (73 FR 49802–49803) for discussion of the shortcomings of the the ICD–10 code set, specifically a chart that compares ICD–9–CM, ICD– nursing, rehabilitation, primary care ICD–9–CM code set, please refer to the 10–CM, and ICD–10–PCS codes.) August 22, 2008 proposed rule (75 FR providers, the National Committee for 49799). Quality Assurance (NCQA), long-term As explained in the August 22, 2008 care and home health care providers, proposed rule (73 FR 49801), to our D. Maintaining/Updating ICD–9–CM and managed care organizations to knowledge, no SSO has developed, (Volumes 1, 2, and 3) solicit their comments about the ICD–10 adopted, or modified a standard code Recognizing the need for ICD–9–CM code set. There are approximately set that is suitable for reporting medical to be a flexible, dynamic statistical tool 68,000 ICD–10–CM codes. ICD–10–CM diagnoses and hospital inpatient to meet expanding classification needs, diagnosis codes are three to seven procedures for purposes of the ICD–9–CM Coordination and alphanumeric characters. The ICD–10– administrative transactions. Maintenance Committee was created in CM code set provides much more

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IV. Summary of Proposed Provisions inpatients reported by hospitals: reassignment of codes that are no longer and Analysis of and Responses to prevention, diagnosis, treatment, and used. Public Comments management. • Modify the structure of ICD–9–CM Comment: Commenters to provide for the assignment of In the August 22, 2008 proposed rule overwhelmingly supported our proposal additional codes. (73 FR 49796), we solicited comments to adopt ICD–10–CM and ICD–10–PCS • Continue to assign new procedures from stakeholders and other interested as code sets under HIPAA, replacing the to the two, previously unassigned parties on the proposed adoption of ICD–9–CM Volumes 1 and 2, and the overflow chapters of ICD–9–CM, ICD–10–CM and ICD–10–PCS code sets. ICD–9–CM Volume 3 code sets, chapters 00 and 17, and once those We received 3,115 timely public respectively, citing the benefits we chapters are filled, no new codes should submissions from all segments of the described in the August 22, 2008 be created that cannot be assigned to the health care industry including proposed rule. Some commenters appropriate body system chapter. providers, physician practices, pointed out that the United States, with • Adopt the American Medical hospitals, coders, standards its continued use of ICD–9–CM, is Association’s Physicians’ Current development organizations, vendors, behind the rest of the world which has Procedural Terminology (CPT) for State Medicaid agencies, State agencies, already migrated to ICD–10, and that coding inpatient hospital procedures. corporations, tribal representatives, ICD–9–CM’s basic structure is flawed • Wait and adopt the ICD–11 code healthcare professional and industry and outdated, and cannot accommodate set. Two commenters stated that by the trade associations, and disease-related new medical technology and time the United States has achieved advocacy groups. terminology. Commenters agreed that proficiency using ICD–10–CM and ICD– Some comments were received ICD–9–CM Volume 3 is running out of 10–PCS, the rest of the world will be timely, but were not relevant to the space, and that this space limitation using ICD–11, and our nation’s coding August 22, 2008 proposed rule and were curtails the ability to capture accurate reporting system will once again be not considered in our responses. Those reimbursement and quality data for incompatible with that of other comments referred to general Medicare health care documentation. A few countries. • program operations; a call for the commenters noted that, as providers Decouple the coding of diseases at development of a single payer health migrate toward the use of electronic the point of patient care from the care system in the United States; general health records (EHRs), use of the more classification of diseases for secondary economic issues; a request for robust ICD–10–CM and ICD–10–PCS uses of medical record data by finalization of HIPAA standards that codes will be necessary to support developing a U.S. Disease-Entity Coding were not included in the August 22, EHRs’ more detailed information System (USDECS) instead of adopting 2008 proposed rule; a request to adopt requirements. Another commenter ICD–10–CM. coding guidelines for CPT codes; noted that waiting to move to ICD–10– One commenter erroneously comments on another unrelated notice CM and ICD–10–PCS incurs its own interpreted our proposed adoption of of proposed rulemaking; and other costs as the underlying data used for ICD–10–PCS as a proposal to replace issues that are outside of the purview of patient care improvement, institutional CPT codes in the ambulatory setting. the August 22, 2008 proposed rule. The quality reviews, medical research and Another commenter said we should relevant and timely submissions within reimbursement becomes increasingly recognize that hospital outpatient the scope of the August 22, 2008 unreliable. departments are currently required to proposed rule that we received tended Response: We are amending report using HCPCS and CPT codes, but to provide multiple detailed comments § 162.1002 to adopt ICD–10–CM and that some hospitals have elected to code on our proposals. ICD–10–PCS as medical data code sets these hospital outpatient medical Brief summaries of each proposed under HIPAA, replacing ICD–9–CM, records using ICD–9–CM procedure provision, a summary of the public Volumes 1 and 2, and ICD–9–CM codes. comments we received (with the Volume 3. Response: None of the suggested exception of specific comments on the Comment: We also received a number alternatives adequately address the economic impact analysis), and our of comments stating that we should not shortcomings of ICD–9–CM that were responses to the comments are set forth adopt ICD–10–CM and ICD–10–PCS as identified and discussed in the August below: code sets under HIPAA. Several 22, 2008 proposed rule. The majority of commenters said that the ICD–9–CM commenters supported our analysis of A. Adoption of ICD–10–CM and ICD–10– code set is adequate to meet current these shortcomings. As we noted in the PCS as Medical Data Code Sets Under coding needs, making ICD–10–CM and August 22, 2008 proposed rule (73 FR HIPAA ICD–10–PCS unnecessary. These 49827), we do not believe that extending In § 162.1002(c)(2), we proposed to commenters said that current ICD–9– the life of ICD–9–CM by assigning codes adopt ICD–10–CM (including the CM codes do not have serious to unrelated chapters or purging and official guidelines) to replace ICD–9–CM limitations, and perhaps simply need reassigning codes that are no longer Volumes 1 and 2 (including the official some modifications to alleviate any used is a long-term solution, and it coding guidelines), for coding diseases; limitations that ICD–9–CM might have. would perpetuate confusion for coders injuries; impairments; other health A number of commenters said that we and data users if hierarchy and code set problems and their manifestations; and should not adopt ICD–10–CM and ICD– structure were to continue to be set causes of injury, disease and 10–PCS because the cost associated with aside in the issuance of new codes. impairment, or other health problems. the transition from ICD–9–CM to ICD– Gaining space in ICD–9–CM by annually In § 162.1002(c)(3), we proposed to 10–CM and ICD–10–PCS would be a purging codes that are not used is adopt ICD–10–PCS (including the burden to industry. However, they did problematic because, while it creates official guidelines) to replace ICD–9–CM not offer specific alternative solutions. space, this space may not necessarily be Volume 3 (including the official coding Other commenters offered a number in the same chapters in which codes are guidelines) for the following procedures of different alternatives, including: needed. As no one asserted that this or other actions taken for diseases, • Create additional space in ICD–9– purging process would open up injuries, and impairments on hospital CM through the annual elimination and sufficient capacity to assign new codes

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

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

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commenters suggested that 95 percent of the ICD–10–CM and ICD–10–PCS code We further note that many health plans covered entities be successfully sets. At the same time, NCVHS supported a 2013 compliance date. converted to Version 5010 prior to the recognizes the wide-reaching impacts of Since the complexity of ICD–10 start of ICD–10 implementation. the transition to ICD–10–CM and ICD– implementation will be much higher for One commenter stated that the 10–PCS, and in doing so, implies that health plans (because after health plans adoption of ICD–10–CM should be any implementation plans and update systems to utilize ICD–10 codes, delayed until the Diagnostic and timetables should be structured as to be they will also have to develop claims Statistical Manual of Mental Disorders, realistic for the industry as a whole. processing edits based on those codes) Fifth Edition (DSM–V) has been In establishing the ICD–10 than for individual providers and released. compliance date, we have sought to coders, we take the support of health Response: We recognize that the select a date that achieves a balance plans for a 2013 compliance date as an compliance date issue is crucial to the between the industry’s need to indication of the reasonableness of this successful implementation of ICD–10. implement ICD–10 within a feasible timeline. We have assessed the comments amount of time, and our need to begin carefully, balancing the benefits of reaping the benefits of the use of these It is also important to note that, while earlier implementation against the code sets; stop the hierarchical NCVHS recommended that Level 1 potential risk of establishing a deadline deterioration and other problems activities for Version 5010 and ICD–10 that does not provide adequate time for associated with the continued use of the should not overlap, it is inevitable that, successful implementation and ICD–9–CM code sets; align ourselves as covered entities embark on thorough testing. We cannot consider a with the rest of the world’s use of ICD– requirements analysis for Version 5010, compliance date for ICD–10 without 10 to achieve global health care data they will identify ICD–10 issues as a considering the dependencies between compatibility; plan and budget for the natural offshoot of those efforts. Thus, implementing Version 5010 and ICD– transition to ICD–10 appropriately; and even if entities choose not to begin full- 10. We recognize that any delay in mitigate the cost of further delays. scale ICD–10 implementation efforts attaining compliance with Version 5010 We believe that an October 1, 2013 until Version 5010 has reached Level 2 would negatively impact ICD–10 ICD–10 compliance date achieves that compliance, they will likely begin that implementation and compliance. The balance, being 2 years later than our phase with a preexisting knowledge lack of information on cost estimate proposed October 2011 ICD–10 base about ICD–10, and will also have impacts also supports a later ICD–10 compliance date and providing a total of identified lessons learned and best compliance date to allow the industry to nearly 5 years from the publication of practices that will inform those later spread out any unanticipated costs over the Version 5010 final rule through final activities. a longer period of time. compliance with ICD–10. The 32 We also note that the Diagnostic and Pursuant to a regulation published in months from completion of Level 1 Statistical Manual of Mental Disorders, this same edition of the Federal testing for Version 5010 in January 2011 Fifth Edition (DSM–V) is projected to be Register, the Version 5010 compliance (at which point Level 1 ICD–10 released in 2012 by the American date has now been established as activities can begin) to the October 1, Psychiatric Association (APA). CDC is January 2012, to afford the industry an 2013 compliance date for ICD–10 working with APA to ensure that ICD– additional year, for a total of 3 years to should allow the industry ample time to 10–CM and DSM–V codes match, and achieve compliance with Version 5010. effect systems changeovers and testing that the timing of this projected release From our review of the industry so as to become fully compliant with the would conform with the commenter’s testimony presented to NCVHS and ICD–10–CM and ICD–10–PCS code sets. comments received on our August 22, We note that those requesting request that the ICD–10 compliance date 2008 proposed rule, it appears that 24 compliance dates of 2014 and later did occur after the release of DSM–V. months (2 years) is the minimum not suggest methods for mitigating the We are adopting the ICD–10–CM and amount of time that the industry needs negative effects of delaying compliance, ICD–10–PCS as medical data code sets to achieve compliance with ICD–10 including the increased implementation under HIPAA, replacing ICD–9–CM once Version 5010 has moved into costs which may result from the Volumes 1 and 2, and Volume 3, with external (Level 2) testing. increase in the number and size of a compliance date of October 1, 2013, We believe that the spirit and intent legacy systems that will need to be and have updated the draft ICD–10/ of the NCVHS letter recommends that updated; delay in achieving the benefits Version 5010 implementation timeline the Secretary move the industry forward identified in the August 22, 2008 which previously appeared in the on the adoption and implementation of, proposed rule; and the impacts of proposed rule (73 FR 49807) to read as and compliance with, Version 5010 and continued degradation of the code sets. 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 activities (external testing with trading part- 01/11: Begin initial compliance activities (gap analysis, de- ners and move into production; dual processing mode) for Versions 5010 and sign, development, internal testing). D.0.

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TIMELINE FOR IMPLEMENTING VERSIONS 5010/D.0 AND ICD–10—Continued

Version 5010/D.0 ICD–10

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 approaches to implementing ICD–10 We agree with commenters that the October 1 compliance date should such as those used in Canada and maintenance of two code sets for a be changed to better align with the Australia, specifically, staggered significant span of time such that, on health care industry’s regularly implementation of the new codes either any specific date of service in that time scheduled annual system changeovers. by geographic region, by covered entity frame one could submit, process and/or Response: The commenter did not category, and/or allowing for a later receive payment on a claim based on reference specific system changeovers, implementation date for small entities. ICD–9–CM or the ICD–10–CM and ICD– suggest an alternative date, or specify Other commenters pointed out that 10–PCS code sets would raise the regularly scheduled system changes diagnosis and procedure codes affect the considerable logistical issues and add to to which it refers, so we are unable to amount of payment, and that dual the complexity of the ICD–10 code set assess the validity of the comment. We processing (that is, the possibility that a implementation. One would need to received no other comments opposed to claim for services provided on a given employ/operate duplicate coding staffs an October 1 date. The October 1 date date being processed for reimbursement and systems. For example, we was selected to ensure that the ICD–10 at two different rates based on two code understand that Medicare’s systems will compliance date would coincide with sets) would add significant complexity. not allow the use of two different code sets for services provided on the same the effective date of the Medicare IPPS Response: Implementation of ICD–10 date, and we presume that other covered update. will require significant business and entities’ systems were likewise not Comment: A number of commenters technical changes for all covered designed with such capacities. Even if urged that the compliance date for the entities. HIPAA health care claims attachment such coding and processing capabilities standard not coincide with the Level 1 We acknowledge that ICD–9–CM were available, the biller would have to implementation activities related to codes will continue to be used only for ensure that claims indicated the coding either Version 5010 or ICD–10. the period of time during which old system under which they were Response: We will take this into claims (those with dates of service prior generated, and the recipient would need consideration in establishing a to October 1, 2013) continue through the to put measures in place to avoid compliance date in the health care payment cycle. We do not believe that processing on the wrong system. We claims attachment standard final rule. this period during which covered believe that this would impose a very entities will be maintaining the ability significant burden on plans and C. Implementation Period to work in two code systems is what providers/suppliers. The availability Comment: A minority of commenters commenters meant by ‘‘dual and use of crosswalks, mappings and disagreed with our proposal to establish processing.’’ Rather, we believe that guidelines should assist entities in a single compliance date for ICD–10. commenters utilized the term ‘‘dual making the switchover from ICD–9 to Some commenters suggested a variety of processing’’ to mean the provider’s ICD–10 code sets on October 1, 2013, alternatives for phased-in or staggered ability to use their own discretion in without the need for the concurrent use implementation of the ICD–10–CM and deciding whether to submit claims of both code sets in claims processing, ICD–10–PCS code sets in order to using ICD–9 or ICD–10 code sets after medical record and related systems with alleviate the impact of implementation. the October 1, 2013 compliance date. respect to claims for services provided A number of these commenters Such use of more than one code set for on the same day. Furthermore, although suggested that we allow ‘‘dual coding diagnoses or procedures, the Act gives the Secretary the authority processing’’: in other words, acceptance whether in a medical record or claim, to extend the time for compliance for of either ICD–9 or ICD–10 code sets on would cause significant business small health plans if the Secretary any given claim for a specified period of process duplication. It could result in determines that it is appropriate, we time. They expressed concern about different information being shared about believe that different compliance dates having a single date on which all a patient because the ICD–10 code set is based on the size of a health plan would covered entities would have to convert so much more robust than ICD–9, and also be problematic, since a provider to ICD–10, and stressed the need for the code for a given diagnosis/procedure has no way of knowing if a health plan testing between trading partners to does not necessarily match one code to qualifies as a small health plan or not. ensure that claims are properly one code between the code sets. As stated in the August 22, 2008 processed. They also pointed out that While HHS could elect to provide for proposed rule (73 FR 49806), a phased- covered entities would have to maintain some sort of ‘‘staggered’’ in implementation of ICD–10 that dual processes in any case to process implementation dates, we have allows for payment systems to accept old claims. concluded that it would be in the health both ICD–9 and ICD–10 codes for Other commenters proposed that the care industry’s best interests if all services rendered on the same day ICD–10–CM diagnosis and ICD–10–PCS entities were to comply with the ICD– would constitute a significant burden on procedure codes be implemented at 10 code set standards at the same time the industry. We continue to believe different times. A few commenters to ensure the accuracy and timeliness of that, based on our previous HIPAA suggested adopting other nations’ claims and transaction processing. standards implementation experience

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and in consideration of the complexities 1, 2013 compliance date will allow of service, which for purposes of of the U.S. health care system’s multi- various payment systems to correctly inpatient facilities means the medical payer system, allowing both code edit the codes and make payments codes in effect at the time of patient systems to be used and reported at the based on the payment and coding discharge. For example, if a patient is same time (i.e., for services/procedures system in effect at that time, and is admitted in September and the patient performed on the same day) would sufficiently far in the future to provide is discharged on or after the October 1 create confusion in processing and all sectors of the industry adequate time compliance date, the hospital would interpreting coded data, and claims to implement the code sets. have to assign the codes in effect on could likely be denied for services, or As described in section XI.D of the October 1. Several commenters returned as errors if processing errors August 22, 2008 proposed rule (73 FR requested that inpatient hospital resulted in edits that indicated too many 49827), a number of phase-in facilities use the version of the codes in or too few digits. It would be more compliance options for ICD–10–CM and effect at the date of admission instead of costly for the various health care ICD–10–PCS were considered and the date of discharge because this would payment systems used in the United rejected because of the nature of the benefit inpatient facilities that use States to accept and process claims with U.S. multi-payer system. Phased-in interim billing. They proposed that both ICD–9 and ICD–10 code sets. ICD–10–CM and ICD–10–PCS hospitals that did not use interim billing Providers would have to maintain both compliance based on staggered dates set could continue to use the date of coding systems, and there would be by geography over extended periods of discharge for determining the version of significant system implications in trying time would require plans (especially ICD code sets to be used for coding. to determine which coding system was national plans), and possibly multi-state Response: It has been a long standing being used to report the coded data. chain or national providers/suppliers or practice for inpatient facilities to use the Adopting diagnosis and procedure health care entities that were vertically version of ICD codes in effect on the codes at different times would result in integrated, to maintain and operate both date of discharge. Most hospitals do not similar system problems, namely ICD–9 and ICD–10 coding systems for code their records for billing purposes pairing an ICD–9 diagnosis code with an an extended period of time. The time until the patient is discharged. Much ICD–10 procedure code, or vice versa. frame during which covered entities information is gathered through the For more examples of problems will need to learn and use the new ICD– process of inpatient treatment. Tests are associated with maintaining the two 10 codes, while at the same time performed, surgeries may be completed, coding systems concurrently, please continuing to work with the old ICD–9 and additional diagnoses may be refer to the August 22, 2008 proposed codes, should be minimized because assigned. Therefore, the documentation rule (73 FR 49806). during this period there is an increase is more complete by the time a patient Allowing the industry to use ICD–10– in the chance of errors in payments, and is discharged. At this point the hospital CM and ICD–10–PCS codes voluntarily such confusion and uncertainty in the coder assigns the codes that are in effect would also result in confusion. Systems provider/supplier community could on the date of discharge. All of our would not be able to recognize whether result in undesirable delays in national inpatient data is based on this the code was an error made in an ICD– processing claims that should be practice. We do not agree that changing 9 code entry, or actually an ICD–10 avoided to the extent possible. We this practice would be of benefit to code, again causing rejection errors. believe that maintaining dual systems hospitals, and maintain that the We continue to believe it is in the concurrently for an extended period of opposite would be true, and is counter industry’s best interest, and that time would impose a very significant to the implementation of a single, includes small health plans, to have a burden on plans and providers/ consistent ICD–10 implementation date. single compliance date for ICD–10–CM suppliers. In the August 22, 2008 Furthermore, using the date of and ICD–10–PCS. This will reduce the proposed rule (73 FR 49827), we also admission for some types of claims burden on both providers and insurers referenced the Canadian and Australian coding, and date of discharge for other who will be able to edit on a single new experience with their geographic types of claims coding would also coding system for claims received for phased-in ICD–10 implementation greatly disrupt national data and create encounters and discharges occurring on approach, and the problems they problems in analyzing what has, until or after October 1, 2013, instead of reported that were inherent in that this point in time, been a consistent having to maintain two coding systems approach. We have received no new approach to coding medical records. over an extended period of time. information on other countries’ Hospitals engaged in interim billing will Providers and insurers would use ICD– experience with the implementation of not see any change from their current 9–CM edits and payment logic for their respective version of ICD–10 that practices. They will continue to use the claims relating to encounters and would lead us to reverse our initial code set in effect for services occurring discharges occurring prior to the date of conclusion that a phased-in approach prior to October 1, 2013 and will use the compliance, and the ICD–10–CM and based on geographic boundaries is not next year’s update (in this case, ICD–10– ICD–10–PCS edits and payment logic for in the best interests of the industry. CM and ICD–10–PCS for 2013) for all claims relating to encounters and Therefore, in consideration of the many services occurring on or after October 1, discharges occurring on or after the problems inherent with these phased-in 2013. ICD–10 compliance date. They would and/or staggered implementation Therefore, we will not change the not have the burden of selectively alternatives, we are adopting October 1, current practice followed by inpatient applying either the ICD–9–CM or ICD– 2013 as the compliance date for the facilities of coding based on the date of 10–CM edits and logic to claims before ICD–10–CM and ICD–10–PCS medical discharge. the compliance date, and as a result, we data code sets. have not established dates for Level 1 E. Coding Guidelines and Level 2 testing compliance for ICD– D. Date of Admission Versus Date of Comment: Several commenters 10 implementation. We encourage all Discharge Coding expressed the need for ICD–10 coding industry segments to be ready to test Comment: We proposed to follow the guidelines to be developed and their systems with ICD–10 as soon as it current practice of implementing new maintained. Some commenters is feasible. We believe that the October code set versions effective with the date incorrectly pointed out that guidelines

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were not available, while others were and pointed out the importance of such CDC developed one such bi- aware of the ICD–10 guidelines that are crosswalks for implementation. Other directional mapping between ICD–9– posted on the CMS and CDC Web sites. commenters stated that they would CM diagnosis codes and ICD–10–CM. Commenters expressed concern that the require ‘‘additional bi-directional This mapping, and an accompanying ICD–10–CM guidelines on CDC’s Web mapping developed by a single guide explaining how to use the page were created in 2003, and stated authoritative national source prior to mapping, are available on CDC’s Web that they are ‘‘draft’’ guidelines that implementation,’’ to prevent loss of data page at http://www.cdc.gov/nchs/about/ have not been updated. Commenters integrity. Commenters expressed otheract/icd9/icd10cm.htm, as well as further indicated that this lack of concern about possible crosswalk and the CMS Web page at http:// finalized coding guidelines will make it mapping errors, the lack of a crosswalk www.cms.hhs.gov/ICD10/02_ICD–10- difficult for software and systems between ICD–10–CM and the ICD–10 PCS.asp. vendors to develop ICD–10 products code set for international data CMS developed bi-directional and for covered entities to begin training comparability, and about the ability of mappings between ICD–9–CM Volume 3 staff. Commenters also stated that there available crosswalks to serve as a useful and ICD–10–PCS, along with an should be a single, authoritative source tool in data conversion. Some accompanying guide explaining how to for ICD–10 coding guidelines to avoid commenters stated there should be an use the 2008 mappings, which are variations in the interpretation and use extension of the timeline for ICD–10 posted to the CMS Web page at http:// of the codes. These commenters compliance due to the limited www.cms.hhs.gov/ICD10/ _ _ questioned whether the implementation availability and utility of the existing 01m 2009 ICD–10-PCS.asp#TopOfPage. of ICD–10 should be delayed until such crosswalks. Several commenters CDC’s mapping was highly successful time as the guidelines can be updated. recommended that HHS inform industry as a clinical equivalent was reported to Response: We agree that it is stakeholders how often these mappings be possible in all but 0.6 percent of ICD– important to have an official set of ICD– will be updated and how they will be 10–CM codes. In those 0.6 percent of 10 coding guidelines, and that they be maintained. One commenter asked ICD–10–CM codes, a new diagnosis properly maintained. CMS, CDC, AHA whether companies may develop their concept was introduced into ICD–10– and AHIMA joined forces some time ago own proprietary mapping systems and if CM that was not previously found in under a long-standing memorandum of this could impact the compliance dates. ICD–9–CM. Therefore, in 0.6 percent of understanding to develop and approve We also received a comment that, if the ICD–10–CM codes, there were no the guidelines for ICD–9–CM code set ICD–10 is implemented, we should similar codes in ICD–9–CM to which the coding and reporting. These provide a crosswalk between the ICD–10–CM code could be mapped, and ‘‘Cooperating Parties’’ conduct annual Ambulatory Payment Classification this is clearly indicated in the GEM mappings. However, there are general reviews of these guidelines and develop (APC) groups and the Medicare equivalence mappings for over 99 new guidelines as needed, considering Severity—Diagnosis Related Groups percent of all ICD–10–CM codes and for stakeholder input obtained through (MS–DRGs). public meetings of the ICD–9–CM 100 percent of the ICD–10–PCS codes. Response: We agree that crosswalks Coordination and Maintenance The ICD–9–CM Coordination and between ICD–9–CM and ICD–10–CM Committee, and through input Maintenance Committee reported on the and ICD–10–PCS will be critical. submitted from AHA and AHIMA use of the GEM mapping in converting Section 1174(b)(2)(B)(ii) of the Act states members. Only those guidelines the MS–DRGs from ICD–9–CM to ICD– approved by the Cooperating Parties are that if a code set is modified under this 10–CM codes. A complete report of this official and posted to CDC and CMS subsection, the modified code set shall activity is included in the September Web sites, and this has proven to be an include instructions on how data 24–25, 2008 ICD–9–CM Coordination effective approach to guideline elements of health information that and Maintenance Committee meeting development and maintenance. The were encoded prior to the modification summary which can be found at Cooperating Parties will finalize a 2009 may be converted or translated so as to http://www.cms.hhs.gov/ version of the Official ICD–10–CM preserve the informational value of the ICD9ProviderDiagnosticCodes/ coding guidelines, which will be posted data elements that existed before the 03_meetings.asp#TopOfPage. to CDC’s Web site in January 2009. modification. Any modification to a The use of the GEM mappings to Updated coding guidelines for ICD–10– code set under this subsection shall be convert the MS–DRGs from ICD–9–CM PCS are included in the Reference implemented in a manner that to ICD–10 codes demonstrates that the Manual already posted to CMS’ Web site minimizes the disruption and cost of GEM mappings are extremely accurate at http://www.cms.hhs.gov/ICD10/ complying with such modification. and useful. The GEM mappings were Downloads/pcs_refman.pdf. Given the In anticipation of that possible need able to convert 95 percent of the ICD– imminent availability of updated coding if/when ICD–10 code sets were to be 9–CM diagnosis codes in the digestive guidelines, we do not believe that it adopted, authoritative, detailed bi- part of the MS–DRGs to the appropriate would be appropriate to further delay directional (that is, they can be used to ICD–10–CM and ICD–10–PCS codes. For the adoption of the ICD–10 code sets translate from the old code to the new, these digestive system MS–DRGs, the pending the issuance of the updated or from the new to the old) crosswalks, GEM mappings automatically converted guidelines. or mappings, which we refer to as 99 percent of the ICD–9–CM digestive General Equivalency Mappings (GEMs), system diagnoses codes and 91 percent F. ICD–10 Mappings and Crosswalks have been developed between ICD–9– of the ICD–10–PCS procedure codes to Comment: Many commenters CM Volumes 1 and 2 and ICD–10–CM the appropriate digestive system ICD–10 emphasized the importance of reliable and the ICD–9–CM Volume 3 and ICD– codes. Five percent required some crosswalks between ICD–9–CM and 10–PCS. These mappings were additional analysis, and we believe that ICD–10–CM and ICD–10–PCS. Some developed with stakeholder input into future experience will increase that rate commenters incorrectly stated that there their creation and maintenance, and of conversion. We trust that these will were no crosswalks available between discussed at public meetings of the ICD– be of great assistance to the industry in ICD–9–CM and ICD–10–CM and ICD– 9 Coordination and Maintenance converting payment, quality and other 10–PCS diagnosis and procedure codes Committee. types of systems from ICD–9–CM to

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ICD–10–CM and ICD–10–PCS and vice nchs/about/otheract/icd9/icd10cm.htm have any bearing on the determination versa. by the end of 2009. of a final compliance date for ICD–10– There may be value in annually CMS will use mappings to convert the CM and ICD–10–PCS. revising these bidirectional mappings to Medicare-Severity Diagnosis Related allow for conversions between ICD–9– Groups (MS–DRGs) from ICD–9–CM to G. ICD–10 Education and Outreach CM codes and the ICD–10–CM and ICD– ICD–10–CM and ICD–10–PCS. MS– Comment: Many commenters stated 10–PCS codes as the ICD–10 code sets DRGs are used by Medicare to that the proposed October 2011 ICD–10 are updated annually after their determine hospital payments under the compliance date would not allow for adoption. The ICD–9–CM Coordination Inpatient Prospective Payment System proper industry education and outreach and Maintenance Committee is the (IPPS). This conversion was discussed and that the tight timeline would public forum used to discuss updates to at the September 24, 2008 ICD–9–CM constitute a major burden to the ICD–9–CM and it will be used to discuss Coordination and Maintenance industry. Commenters expect that updates to the ICD–10 coding system, as Committee meeting. This presentation certified coders would need detailed well as the mapping between the can be found at: http:// education in order to identify the proper systems. As previously discussed, this www.cms.hhs.gov/ codes for accurate billing. Some Committee will be re-named the ICD–10 ICD9ProviderDiagnosticCodes/ commenters said regular physician Coordination and Maintenance 03_meetings.asp#TopOfPage. We expect office staff would need to become Committee once ICD–10 is that CMS will have converted all MS– certified coders, and current certified implemented. The Committee will DRGs to ICD–10 by October 2009, and coders would need to get recertified, continue to discuss issues such as will share those results with payers and incurring a costly exam fee. mappings to the prior coding system, providers at a future ICD–9–CM Many commenters recommended that ICD–9–CM. The Committee will discuss Coordinating and Maintenance significant education and outreach for the need to continue updating these Committee meeting. The adoption of the ICD–10 would be needed, and they mappings for a minimum of 3 years after final ICD–10 version of MS–DRGs will suggested a number of strategies, the ICD–10–CM and ICD–10–PCS final be subject to rulemaking. We encourage including the need for national compliance date. Should the industry anyone who has particular concerns associations to collaborate on education recommend that this period be extended about possible errors in the crosswalks efforts; a need for a consistent set of by several years, then we would and/or mappings to share them with messages and/or materials from a anticipate that the mappings will CMS and CDC through the ICD–9–CM national authoritative source; continue to be updated through the Coordination and Maintenance recognition that different audiences/ auspices of the Committee, and will Committee so that mappings can be entities (for example, inpatient hospital seek input from industry stakeholders updated as we move forward toward coders) may need different levels of through the Committee as to whether implementation. training; that in-person training should these mappings are beneficial to We disagree that we should develop supplement Internet training and industry, and whether mappings to a crosswalk between APCs and MS– printed documents; and that CMS ICD–9–CM should be updated for an DRGs when ICD–10 is implemented. We should provide funding for ICD–10 additional period of time. do not have a crosswalk between the training for State Medicaid program CMS also has developed a current APCs, which are based on CPT staff. reimbursement mapping that can be codes, and MS–DRGs, which are based Response: As stated in the August 22, used to update payment systems that on ICD–9–CM codes. The IPPS, which 2008 proposed rule (73 FR 49807), with gives the ICD–10–CM code that best relies on MS–DRGs, and the hospital the publication of this final rule, we will matches the previously used ICD–9–CM outpatient prospective payment system begin to proactively conduct outreach code. This reimbursement mapping will (OPPS), which relies on APCs, were and education activities which include, allow other payers to more quickly developed to reimburse providers in but are not limited to, roundtable determine how they want to classify a different settings, are maintained conference calls with industry particular ICD–10 code within their separately, and undergo separate formal stakeholders, development of FAQs, fact payment system. Should payers want to rulemaking each year. sheets, and other supporting education consider refinements to their payment Finally, CDC fully intends to produce and outreach materials for industry systems based on the additional detail a crosswalk between ICD–10 and ICD– partner dissemination. We also provided by ICD–10, they may do so. 10–CM, addressing the need for anticipate that there will be extensive The complete ICD–10–CM and ICD–10– international data comparability, and industry-sponsored educational PCS GEMs may also assist in those cases this crosswalk will be completed and opportunities through various where additional information is needed, made available one year prior to the stakeholder associations. As part of our which is not found in the more ICD–10 compliance date. CDC already education and outreach efforts, we will streamlined reimbursement mapping. uses ICD–10 to report cause of death, work closely with industry stakeholders For details of the discussion of the and it is anticipated that this crosswalk to make subject matter experts available reimbursement mappings at the ICD–9– will be of great interest to those engaged to them, and to expeditiously help CM Coordination and Maintenance in international data reporting. stakeholders disseminate relevant Committee, please access the CMS Web Any additional tools will certainly information at the national, regional and site at http://www.cms.hhs.gov/ assist in the implementation of ICD–10, local level that will be useful to them in ICD9ProviderDiagnosticCodes/ and both CMS and CDC will continue to educating their respective members. 03_meetings.asp#TopOfPage. make improvements and refinements to Comment: One commenter expressed CMS will post to this same Web site their publicly available mappings and the belief that implementing ICD–10 the reimbursement mapping file along post them for others to use. Other will exacerbate the current shortage of with the 2009 versions of the GEMS and vendors may develop products to assist clinical coders. Other commenters the 2009 version of ICD–10–PCS by the in analyzing codes or converting data, stated that we did not account for the end of 2009. CDC will be posting the but we do not see any reason why the impact to formal training programs for 2009 version of the ICD–10–CM GEMs availability of such products, whether degree and national certificates that will to their Web site at http://www.cdc.gov/ proprietary or non-proprietary, would need to be updated or redeveloped.

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Response: We have received no ICD–10. AHA has announced that it will system to a trading partner. We indication from industry and/or begin to include ICD–10 information in welcome the opportunity to work with technical school representatives that the its Coding Clinic in advance of the industry on any voluntary testing of the changeover from ICD–9 to ICD–10 codes actual ICD–10–CM and ICD–10–PCS workflows, productivity, and other might contribute to the existing shortage implementation date. practical considerations of the of clinical coders and, in fact, increased CMS has been working collaboratively changeover from ICD–9–CM to ICD–10– marketplace demand for coders as a with the Cooperating Parties to develop CM in the ambulatory setting that could result of the adoption of ICD–10–CM additional ICD–10 educational materials result in the development of ‘‘lessons and ICD–10–PCS may lead to more which will be posted at: http:// learned’’ that might be disseminated to enrollment in coding curriculums. www.cms.hhs.gov/ICD10/05_ assist this industry segment with a School representatives have indicated Educational_Resources.asp#TopOfPage. smooth transition to ICD–10. With regard to testing the utility of the their readiness to adapt to any needed H. Testing ICD–10 curriculum changes and ICD–10–CM and ICD–10–PCS code sets anticipate that they will be able to Comment: A minority of commenters themselves, we refer to the results of the produce ‘‘ICD–10 ready’’ clinical coders stated that ICD–10–CM and ICD–10– AHA–AHIMA ICD–10–CM field testing upon graduation from their respective PCS need more testing prior to reported to NCVHS on September 23, institutions. We anticipate that implementation. Some commenters 2003, involving 6,177 medical records educational venues offering coding recommended pilot testing, with one of coded by credentialed coding courses are already familiar with those commenters stating that pilot professionals. A copy of this report can making annual updates to curriculums testing should take place before the be found at http://www.ncvhs.hhs.gov/ to reflect yearly code set revisions. The issuance of a final rule, on the 030923ag.htm. final compliance date of October 1, 2013 assumption that information gained We believe that there has been should afford educational institutions through pilot testing could be used to successful, independent field testing of ample time to change their curriculums, inform the development of a final rule. the utility and functionality of ICD–10– seek out appropriate educational A few commenters stated that more CM and ICD–10–PCS, and that no materials and related resources, and internal and external training would be additional testing of this nature is graduate ICD–10 competent coders. needed beyond that which we described necessary. Some hospitals may require coders to in the August 22, 2008 proposed rule. Another commenter said that additional I. ICD–10 Code Set Development and have a certification from a national Utility professional association. While time—between six months to a year— desirable, this does not appear to be a should be added to the final Version Comment: Several commenters stated requirement for coders working in 5010 compliance date to allow for that countries such as Canada and physician offices or other ambulatory testing. Australia have not developed such settings. We understand that many Response: Any pilot testing of ICD– extensive clinical modifications to certified coders must meet annual 10–CM and ICD–10–PCS would medical code sets compared to those continuing educational requirements or demonstrate its integration into business used in the U.S. because their versions authorities to maintain their processes and/or systems, and not the of the ICD–10 code sets are not used in certifications. As we have no coding appropriateness of its adoption as a ambulatory settings. Commenters certification requirements or authorities, HIPAA standard through the notice and recommended that a process be we recommend that those concerned comment rulemaking process. undertaken to streamline and/or with future certification standards Furthermore, were pilot testing to significantly reduce the number of ICD– contact the applicable professional demonstrate a need for additional codes, 10 codes to make adoption easier. organizations. etc., these changes could be handled Response: Unlike the United States, We agree with commenters that it is through the code set maintenance other countries do not use ICD–10 codes important that consistent and accurate process, without the need for further for reimbursement purposes. The level ICD–10–CM and ICD–10–PCS materials rulemaking to accomplish such changes. of detail in the United States’ clinical are developed to assist with national Therefore, we see no reason to pilot test modification version of the ICD–10 code training and education. We also agree ICD–10–CM and ICD–10–PCS before set has resulted in an increased number that it is important that educational issuing a final rule. of codes, and is commensurate with the training be a collaborative effort among In the development of the August 22, complexities of our multi-payer health all interested stakeholders. We will 2008 proposed rule (73 FR 49807) draft care system. The United States’ clinical continue to collaborate with other timetable, we accounted for testing with modifications have been derived in part stakeholder organizations on outreach both internal and external partners as with the input of clinical specialty and education on the transition from part of the generally accepted industry groups that have requested this level of ICD–9 to ICD–10, taking into implementation process for the specificity. If the United States is consideration the contextual and timing implementation of these medical data moving toward an electronic healthcare needs of different industry segments, code sets as adopted HIPAA standards. system and increasingly using codes for including hospitals, providers, coders, This follows similar implementation quality purposes, there is a need to etc., in a way that will ensure all plans undertaken for previously capture more precise information, not affected entities have the resources adopted and implemented HIPAA less. ICD–10–CM and ICD–10–PCS will needed to properly code. standards. Such testing is a way to greatly support these efforts. Both AHA and AHIMA will take lead determine whether, once systems The Canadian health care system and roles in developing additional, more changeovers are in place, transactions the United States health care system are detailed technical training materials for using the ICD–10–CM and ICD–10–PCS very different. Canada does not have the coders. AHA also plans to continue code sets would be successfully and same data needs as the United States. their training support activities by accurately processed within a HIPAA The Canadian version of ICD–10, called updating their education materials to covered entity’s own systems, as well as ICD–10–CA, has been implemented in ICD–10 and will change the name of whether that entity can successfully hospitals, hospital-based ambulatory their publication to Coding Clinic for transmit such information from its own care centers, day surgery centers and

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

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those changes would also be associated with meeting the ICD–10–CM U.S. to adopt ICD–10 classifications for incorporated into ICD–10–CM as and ICD–10–PCS code set standards is reporting and surveillance. necessary. not discussed in this final rule; • ICD codes are core elements of however, the burden associated with many HIT systems, making the V. Provisions of the Final Regulations these standards is accounted for in the conversion to ICD–10 necessary to fully For the most part, this final rule Version 5010 final rule, CMS–0009–F, realize benefits of HIT adoption. incorporates the provisions of the published elsewhere in this Federal For a more detailed discussion of the August 22, 2008 proposed rule. Those Register. The inclusion of other limitations of ICD–9–CM, please refer to provisions of this final rule that differ standards referenced in the Version section III.B in the preamble of the from the August 22, 2008 proposed rule 5010 final rule, namely the National August 22, 2008 proposed rule (73 FR are discussed as follows. Council of Prescription Drug Programs 49799). As noted in the August 22, 2008 In § 162.1002(b), we have revised the (NCPDP) Telecommunications Standard proposed rule, no other viable year ‘‘2011’’ to read ‘‘2013’’ in this Version D.0, and the NCPDP Batch alternatives to adopting ICD–10 were regulation. Standard Medicaid Subrogation identified. The costs and benefits for In § 162.1002(c), we have revised the Implementation Guide, Version 3, moving from ICD–9–CM to ICD–10–CM year ‘‘2011’’ to read ‘‘2013’’ in this Release 0, has no impact on that and ICD–10–PCS were assessed within regulation. analysis’ ability to address the PRA the requirements of the Executive In § 162.1002(c)(3), we have removed burden of ICD–10–CM and ICD–10–PCS. Orders and Acts cited in the regulatory the term ‘‘Classification’’ and replaced it The burden associated with meeting impact analysis. with ‘‘Coding’’ in this regulation. the Version 4010 standards is contained A. Overall Impact VI. Collection of Information in the following affected sections: We examined the impacts of this final Requirements § 162.1102, § 162.1202, § 162.1301, rule as required by Executive Order Under the Paperwork Reduction Act § 162.1302, § 162.1401, § 162.1402, 12866 on Regulatory Planning and of 1995, we are required to provide 30- § 162.1501, § 162.1502, § 162.1602, Review (September 30, 1993, as further day notice in the Federal Register and § 162.1702, and § 162.1802. The affected amended), the Regulatory Flexibility solicit public comment before a sections are currently approved under Act (RFA) (September 19, 1980, Pub. L. collection of information requirement is OCN 0938–0866 with an expiration date 96–354) (as amended by the Small submitted to the Office of Management of July 31, 2011; however, the Version Business Regulatory Enforcement and Budget (OMB) for review and 5010 final rule provides for the revision Fairness Act of 1996, Pub. L. 104–121), approval. In order to fairly evaluate of the requirements contained in the section 1102(b) of the Social Security whether an information collection aforementioned affected sections to Act, sections 202 and 205 of the should be approved by OMB, section update the adopted HIPAA transaction Unfunded Mandates Reform Act of 1995 3506(c)(2)(A) of the Paperwork standard to Version 5010. As OCN (Pub. L. 104–4), Executive Order 13132 Reduction Act of 1995 requires that we 0938–0866 was issued for the current on Federalism (August 4, 1999), and the solicit comment on the following issues: version of this HIPAA standard, we Congressional Review Act (5 U.S.C. • The need for the information have submitted to OMB a revised 804(2)). collection and its usefulness in carrying version of information collection Executive Order 12866 (as amended out the proper functions of our agency. request (OCN 0938–0866) for its review by Executive Order 13258 and Executive • The accuracy of our estimate of the and approval of the information Order 13422, which modifies the list of information collection burden. collection requirements associated with criteria used for regulatory review) • The quality, utility, and clarity of the implementation of the Version 5010 directs agencies to assess all costs and the information to be collected. standards, and ultimately, the benefits of available regulatory • Recommendations to minimize the implementation of ICD–10–CM and alternatives and, if regulation is information collection burden on the ICD–10–PCS. Included as part of the necessary, to select regulatory affected public, including automated revised Information Collection approaches that maximize net benefits collection techniques. Requirement (ICR) are detailed (including potential economic, Section 162.1002 of 45 CFR explains instructions on the implementation of environmental, public health and safety the implementation and continued use ICD–10–CM and ICD–10–PCS. These effects, distributive impacts, and of the International Classification of information collection requirements are equity). A regulatory impact analysis Diseases, Tenth Revision, Clinical not effective until approved by OMB. (RIA) must be prepared for major rules Modification (ICD–10–CM) for diagnosis VII. Regulatory Impact Analysis (RIA) with economically significant effects coding, and the International Statement of Need ($100 million or more in any 1 year). We Classification of Diseases, Tenth consider this to be a major rule, as it Revision, Procedure Coding System The objective of this regulatory will have an impact of over $100 (ICD–10–PCS) for inpatient hospital impact analysis (RIA) is to summarize million on the economy. Accordingly, procedure coding for the period on and the costs and benefits of moving from we have prepared an RIA. after October 1, 2013. The burden ICD–9–CM to ICD–10–CM and ICD–10– Section 202 of the Unfunded associated with the implementation and PCS code sets in the context of the Mandates Reform Act of 1995 (UMRA) continued use of ICD–10–CM and ICD– current health care environment. also requires that agencies assess the 10–PCS is the time and effort required The following are the three key issues anticipated costs and benefits before to update information systems for use that we believe necessitate the need to issuing any rule that includes a Federal with updated HIPAA transaction and update from ICD–9–CM to ICD–10–CM mandate that could result in code set standards. Specifically, the and ICD–10–PCS: expenditures of $100 million in 1995 entities must comply with the ASC X12 • ICD–9–CM is out of date and dollars (updated annually for inflation) Technical Reports Type 3, Version running out of space for new codes. in any 1 year by State, local, or tribal 005010 (Version 5010) standards, which • ICD–10 is the international standard governments, in the aggregate, or by the accommodate the use of the ICD–10–CM to report and monitor diseases and private sector. That threshold level is and ICD–10–PCS code set. The burden mortality, making it important for the currently approximately $130 million.

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

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

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

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

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

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

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

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

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

TABLE 1—GOVERNMENT COSTS $ MILLION

Govern- Cost annualized Change ment 3%, 7% agency 3.00% 7.00%

Systems/Software Modifications and Updates:

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TABLE 1—GOVERNMENT COSTS $ MILLION—Continued

Govern- Cost annualized Change ment 3%, 7% agency 3.00% 7.00%

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

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

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

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

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

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sets within their respective instruments. process and systems impacts of ICD–9– B. Regulatory Flexibility Analysis Commenters also stated that durable CM, and subsequently ICD–10–CM and 1. Final Regulatory Flexibility Analysis medical equipment (DME) providers ICD–10–PCS, on these and similar would be impacted because they are instruments have already been Section 604 of the Regulatory required to submit diagnosis codes identified. The costs associated with the Flexibility Act (RFA) requires agencies when billing DME supplies and implementation of ICD–10 relative to to analyze options for regulatory relief Medicare Part B covered services. these instruments will be accounted for of small entities if a final rule has a Response: In the August 22, 2008 through CMS’s ongoing ICD–1CM and significant impact on a substantial proposed rule (73 FR 49805), we ICD–10–PCS internal planning and number of small entities. For purposes addressed the adoption of ICD–10–CM analysis activities and will be shared of the RFA, small entities include small and ICD–10–PCS as medical data code with the industry once these costs have businesses, nonprofit organizations, and sets under HIPAA and, therefore, did been projected. small governmental jurisdictions. Most not specifically address the potential We acknowledge that many hospitals and most other providers and impacts of ICD–10 adoption on non- uncertainties exist regarding the suppliers are small entities, either by HIPAA entities. transition to ICD–10–CM and ICD–10– being nonprofit status or by qualifying Neither RAND nor Nolan addresses PCS, and that the costs and benefits as small businesses under the Small impacts of ICD–10 on non-HIPAA associated with the transition as Business Administration’s (SBA’s) size entities. On page 2 of the October 2003 outlined in this final rule may not fully standards (having revenues of $7.0 Nolan study on ICD–10 implementation capture all of the impacts to the million to $34.5 million in any 1 year). (http://www.renolan.com/healthcare/ industry. In order to account for this For details, see the SBA’s Web site at icd10study_1003.pdf), it notes that the uncertainty, we included low, high and http://sba.gov/idc/groups/public/ study ‘‘excludes many providers such as primary estimates of the costs and documents/sba_homepage/ nursing homes, clinical labs and durable benefits of transitioning to ICD–10–CM serv_sstd_tablepdf.pdf (refer to Sector medical equipment vendors. Similarly, and ICD–10–PCS. These estimates may 62). a large number of payer organizations also include some uncertainty in that In addition, section 1102(b) of the Act have been excluded such as third party the costs and benefits may be higher or requires us to prepare a regulatory administrators, clearinghouses, and lower than even our low and high impact analysis if a rule may have a many small and medium insurers. estimates. significant impact on the operations of These providers and payer entities were Some examples of uncertainty include a substantial number of small rural excluded because they were unable to the acknowledgment that our estimates hospitals. This analysis must conform to develop initial cost estimates needed in for physician training may not the provisions of section 604 of the the study.’’ We believe that, as with accurately reflect the number of RFA. For purposes of section 1102(b) of Nolan’s observations in their 2003 physicians who may require or request the Act, we define a small rural hospital report, this is still the case. We heard training on ICD–10–CM and ICD–10– as a hospital that is located outside of from a handful of commenters who PCS, because we received conflicting a metropolitan statistical area and has stated that the adoption of ICD–10 will estimates from stakeholders during the fewer than 100 beds. have a ripple effect on life insurers, ICD–10–CM and ICD–10–PCS proposed As stated in the August 22, 2008 worker’s compensation programs, third rule comment period. Additionally, proposed rule (73 FR 49828), we party administrators and similar some industry studies have determined determined that about 200 nonprofit entities, but they did not offer any that productivity losses will be time- health care organizations that offer 213 quantitative data that could be used to limited, while others have opined that health plans are considered small refine the impact analysis calculation of productivity losses may be continuous. entities under the RFA because of their their costs associated with the adoption We also recognize that the ICD–10– non-profit status, and that 97 percent of of ICD–10. According to our analysis of CM and ICD–10–PCS proposed rule did all physicians’ practices and clinics also 2005 data from the National Academy of not account for all of the systems that qualify as small entities under the RFA. Social Insurance’s report on benefits, may be impacted by the ICD–10–CM In the August 22, 2008 proposed rule coverage and costs of worker’s and ICD–10–PCS transition. Due to the (73 FR 49819), we showed the compensation programs, more than complexity of the U.S. health care distribution of the transition costs to the $26.2 billion in medical benefits were system, it is very difficult to determine ICD–10 codes for providers, suppliers, paid out in 2005, at an employer cost of the number and all the types of systems payers and software and system design $88.8 billion, but the administrative that will need to be updated for ICD– firms. For calculating the impact on costs associated with worker’s 10–CM and ICD–10–PCS use. However, small entities, entities were grouped by compensation programs are not we anticipate that, upon publication of the North American Industry available from this source. this final rule, the industry will begin its Classification System (NAICS) and were From a benefits perspective, we do requirements gathering, development presented at the firm level. The NAICS know that Chapter 20 of ICD–10, and planning activities for the ICD–10– figures were adjusted based on the ‘‘External Causes of Morbidity (V01– CM and ICD–10–PCS transition. We also medical inflation factor we applied to Y98),’’ provides for the classification of acknowledge that the ICD–10–CM and all costs. Data were collected primarily environmental events and external ICD–10–PCS benefits estimates may by inpatient and outpatient categories. circumstances as the cause of injury, include some uncertainty. We did not To allocate the transition costs, we used and other adverse effects. These codes receive many comments on the benefits an available base which served as a are more precise and describe a wider estimates that were provided in the proxy to the sub-groupings of inpatient range of causes of injuries, which August 22, 2008 proposed rule. and outpatient providers and suppliers. should be quite helpful to worker’s However, we fully anticipate that once For the task of allocating the transition compensation programs in determining the ICD–10–CM and ICD–10–PCS code costs, we used the revenue-receipts the exact cause of an injury. sets are implemented, and the industry reported in the Services Annual Survey With regard to OASIS, IRF–PAI and becomes more familiar and comfortable and the National Health Expenditure the post-acute care payment reform with their use, benefits may be easier to Accounts, published by the U.S. Census demonstration project, the business measure. Bureau. We grouped providers and

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

TABLE 2—ESTIMATED IMPACT OF ICD–10 TRANSITION COST ON INPATIENT AND OUTPATIENT PROVIDERS AND SUPPLIERS [Adjusted for Inflation]

Percent Revenue/ Percent of ICD–10 ICD-10 NAICS Provider/supplier type Firms receipts revenue costs costs of ($ millions) receipts ($ millions) revenue receipts

622 ...... Hospitals (General Medical and Surgical, Psy- 4,409 653,033 81.45 254.14 0.03 chiatric and Drug and Alcohol Treatment, Other Specialty). 623 ...... Nursing Facilities (Nursing care facilities, Residen- 22,867 148,716 18.55 57.88 0.03 tial mental retardation, mental health and sub- stance abuse facilities, Residential mental retar- dation facilities, Residential mental health and substance abuse facilities, Community care facili- ties for the elderly, Continuing care retirement communities).

Subtotal ...... 27,276 801,749 100 312.02 0.03

6211 ...... Office of Physicians (firms) ...... 189,542 330,889 61.60 1,171.92 0.03 6214 ...... Outpatient Care Centers (Family Planning Centers, 13,624 73,966 13.80 26.09 0.03 Outpatient Mental Health and Drug Abuse Cen- ters, Other Outpatient Health Centers, HMO Medical Centers, Kidney Dialysis Centers, Free- standing Ambulatory Surgical and Emergency Centers, All Other Outpatient Care Centers). 6215 ...... Medical and Diagnostic Laboratories ...... 7,811 37,253 6.93 13.14 0.03 6216 ...... Home Health Services ...... 14,512 47,007 8.75 16.58 0.03 6219 ...... Other Ambulatory Care Services (Ambulance and 5,872 24,593 4.58 8.67 0.03 Other). N/A ...... Durable Medical Equipment ...... 404,293 23,709 4.41 8.36 0.03

Subtotal ...... 635,654 537,417 100 1,244.76 0.03

524114, 524292 Health Insurance Carriers and Third Party Adminis- 4,578 723,412 100 197.60 0.01 trators 4. 5415 ...... Computer System Design and Related Services ..... 97,556 200,695 100 115.30 0.01

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 Bu- reau 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 sub- totaled by ambulatory provider plus DME suppliers (NAICS 62111–6219) and inpatient providers (NAICS 622, 623) and the percent of the sub- totaled 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 up- grading their information systems.

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

Annual % Small small entity % Small Revenue/ Small entity entity Total ICD– share of entity imple- NAICS Payers and system design and related services Firms Small receipt receipts receipts 10 costs ICD–10 mentation entities ($ millions) (in millions of total (in costs cost/ $) receipts millions $) (in revenue- millions $) receipts

524114, Health Insurance Carriers and Third Party Administrators ...... 4,578 3,449 723,412 18,309 2.53 197.60 1.2 0.01 524292 5415 Computer Systems Design and Related Services ...... 97,556 96,948 200,695 107,048 53.34 115.3 15.4 0.01

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

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

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was being used in claims submission, 3. Conclusion impact assumptions based on the and which payers are capable of Regulatory Flexibility Analysis section accepting the new codes. The result We did not receive any data or of the proposed rule at 73 FR 49827. would be massive claims processing information to substantiate arguments Based on the foregoing analysis, the delays and lagging reimbursements to that our impact analysis of the potential Secretary certifies that this final rule providers. effects of ICD–10 implementation on will not have a significant economic small entities was flawed. We, therefore, impact on a substantial number of small maintain our small entity ICD–10 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 procedures ...... $49.77 $65.24 $199.09 $260.95 $99.54 $130.47 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 procedures ...... 41.32 54.15 165.26 216.61 82.63 108.31 Improved disease management ...... 25.73 33.73 102.93 134.91 51.46 67.45

BILLING CODE 4120–01–P

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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 new procedures ...... 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 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 procedures...... 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 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 millions) ...... $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

TABLE 8—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES, FROM FY 2011 TO FY 2025 [in millions]

Source Low High citation Category Primary estimate estimate estimate (RIA, (millions) (millions) (millions) preamble, 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 and global disease ...... RIA 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 budget’’ ...... N/A ...... N/A N/A From whom to whom? ...... N/A ...... N/A N/A Annualized monetized transfers: ‘‘off-budget’’ ...... N/A ...... N/A N/A From whom to whom? ...... N/A ...... N/A N/A

List of Subjects in 45 CFR Part 162 Hospitals, Incorporation by reference, ■ For the reasons set forth in this Medicaid, Medicare, Reporting and preamble, the Department of Health and Administrative practice and recordkeeping requirements. Human Services amends 45 CFR part procedures, Electronic transactions, 162 as follows: Health facilities, Health Insurance,

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PART 162—ADMINISTRATIVE (c) For the period on and after October Guidelines for Coding and Reporting), REQUIREMENTS 1, 2013: as maintained and distributed by HHS, (1) The code sets specified in for the following procedures or other ■ 1. The authority citation for part 162 paragraphs (a)(4), (a)(5), (b)(2), and (b)(3) actions taken for diseases, injuries, and is amended to read as follows: of this section. impairments on hospital inpatients Authority: Secs. 1171 through 1180 of the (2) International Classification of reported by hospitals: Social Security Act (42 U.S.C. 1320d–1320d– Diseases, 10th Revision, Clinical (i) Prevention. 9), as added by sec. 262 of Pub. L. 104–191, Modification (ICD–10–CM) (including 110 Stat. 2021–2031, and sec. 105 of Pub. L. (ii) Diagnosis. The Official ICD–10–CM Guidelines for (iii) Treatment. 110–233, 122 Stat. 881–922, and sec. 264 of Coding and Reporting), as maintained Pub. L. 104–191, 110 Stat. 2033–2034 (42 (iv) Management. U.S.C. 1320d–2(note)). and distributed by HHS, for the following conditions: (Catalog of Federal Domestic Assistance ■ 2. Section 162.1002 is amended by (i) Diseases. Program No. 93.778, Medical Assistance revising paragraph (b) introductory text (ii) Injuries. Program) (Catalog of Federal Domestic and adding paragraph (c) to read as (iii) Impairments. Assistance Program No. 93.773, Medicare— Hospital Insurance; and Program No. 93.774, follows. (iv) Other health problems and their Medicare—Supplementary Medical manifestations. Insurance Program) § 162.1002 Medical data code sets. (v) Causes of injury, disease, * * * * * impairment, or other health problems. Dated: December 11, 2008. (b) For the period on and after (3) International Classification of Michael O. Leavitt, October 16, 2003 through September 30, Diseases, 10th Revision, Procedure Secretary. 2013: Coding System (ICD–10–PCS) [FR Doc. E9–743 Filed 1–15–09; 8:45 am] * * * * * (including The Official ICD–10–PCS BILLING CODE 4120–01–P

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