Life Science Compliance Update

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September 20, 2012

CMS Rule and 1 Year Delay on ICD 10 Promises More Time for a Smooth and Coordinated Transition

ICD 10
The Centers for Medicare & Medicaid Services (CMS) have officially pushed back the timeline for healthcare organizations to convert to the International Classification of Diseases, 10th Revision, Procedure Coding System (ICD–10–PCS) for inpatient hospital procedure coding, including the Official ICD–10–PCS Guidelines for Coding and Reporting, from October 1, 2013 to October 1, 2014.   

The U.S. remains one of the few developed countries that has not transitioned to ICD-10 or a clinical modification. ICD-9, which was implemented in the U.S. in 1979, is an antiquated code set that no longer adequately meets the challenge of a 21st century healthcare system. 

 ICD-10-CM/PCS classifications are the foundation for critical national healthcare initiatives such as meaningful use, value-based purchasing, payment reform, quality and quality reporting and patient and population safety. ICD-10-CM/PCS will yield information that will optimize health data, allow for a more uniform health information exchange and create a move to a reimbursement system based on quality and outcomes. 

“We believe the change in the compliance date for ICD-10 gives covered healthcare providers and other covered entities more time to prepare and fully test their systems to ensure a smooth and coordinated transition by all covered entities,” the U.S. Department of Health & Human Services (HHS) said in its 208-page rule.  The regulations are effective on November 5, 2012.  

According to an announcement, which comes on the heels of CMS’s unveiling of the final rule for Stage 2 of Meaningful Use, CMS also will establish a unique health plan identifier (HPID).  Currently, when a health care provider bills a health plan, that plan may use a wide range of different identifiers that do not have a standard format.  As a result, health care providers run into a number of time-consuming problems, such as misrouting of transactions, rejection of transactions due to insurance identification errors, and difficulty determining patient eligibility. The new rule will “greatly simplify these processes.” 

Health plans with the exception of small health plans must obtain an HPID by November 5, 2014. Small health plans must obtain an HPID by November 5, 2015.  Covered entities must use HPIDs in the standard transactions on or after November 7, 2016. An organization covered health care provider must comply with the implementation specifications in §162.410(b) by May 6, 2013.  HHS said providers can expect savings from two indirect consequences of HPID implementation: 

  • Decreased administrative time spent interacting with health plans;
  • Material cost savings after processes go from manual to electronic formats. 

“HPID’s anticipated 10-year return on investment for the entire healthcare industry is expected to be between $1.3 billion [and] $6 billion,” HHS said.  “These new standards are a part of our efforts to help providers and health plans spend less time filling out paperwork and more time seeing their patients,” HHS Secretary Kathleen Sebelius said. 

Response to CMS ICD-10 Delay 

The American Health Information Management Association (AHIMA) was pleased with CMS’s decision for a one-year delay.  “ICD-10-CM/PCS implementation is inevitable, but today's news gives the healthcare community the certainty and clarity it needs to move forward with implementation, testing and training,” AHIMA CEO Lynne Thomas Gordon said in a statement. “We realize that a few are still apprehensive about the implementation process, and that is why AHIMA remains committed to assisting the healthcare community with its transition to a new code set that will lead to improved patient care and reduced costs.”


Previously, the American Medical Association (AMA) expressed concern over the initial proposal of a one-year delay, calling for two years back in May.  While showing some support for CMS’ recent decision, AMA still expressed concern in its statement.  While AMA appreciated “the administration's decision to provide a one year delay in response to AMA advocacy, … we have urged CMS to do more to reduce the regulatory burdens on physician practices so physicians can spend more time with patients. The AMA recommended that CMS delay the move to ICD-10 by a minimum of two years.” 

The main argument in favor of delay: The sheer number of government programs and deadlines that health IT leaders and organizations face.  

As the AMA recognized, “The move toward ICD-10 comes at a time when physicians are dealing with the implementation of multiple Medicare incentive and penalty programs. Implementing ICD-10 alone requires physicians and their office staff to contend with 68,000 codes – a five-fold increase from the current 13,000 codes.  Physicians are also already trying to engage in new delivery and payment models.  The implementation of ICD-10 will create more challenges for physicians when our Medicare system is broken and cannot provide adequate funding to cover the cost of these additional administrative burdens.” 

The Medical Group Management Association (MGMA), “said in May that the ICD-10 process lacked several steps, and wanted to see a staggering of the implementation dates so that health plans and clearinghouses would be ready one year before providers,” FierceHealthIT reported.  MGMA also noted that HHS did not take particular care to prevent physician practices from experiencing “debilitating cash flow disruptions.” 

MGMA President and CEO Susan Turney said in a statement that the group wants to see ICD-10 pilot tested before it is rolled out.  She noted their lack of confidence in that critical trading partners, including Medicare and Medicaid, “will be ready in time to conduct testing well in advance of the October 2014 compliance date.”  The trade group was also “disappointed that CMS missed a significant administrative simplification opportunity to create true claims revenue cycle transparency with the Health Plan Identifier rule.  By not requiring health plans to enumerate at a more granular level, physicians will continue to face the burden of manually identifying these entities.” 

College of Healthcare Information Management Executives (CHIME) President and CEO Richard Correll said his organization was pleased with the delay—but adds that the industry can’t put off the coding overhaul much longer.  “[A]s HHS itself recognizes, a longer delay would significantly increase the costs of converting to ICD-10,” he said in a statement.  “[W]e urge the department to develop a clear path forward, with benchmarks, so that healthcare industry stakeholders can make the conversion in 2014.” 

The Health Information and Management Systems Society (HIMSS) also praised CMS for giving the industry just a little more breathing room to prepare for compliance.

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