ICD-10: Friend or Foe?

By Deb Bradley, David Paquette, Brian Boyce, and Dr. Rich Wheeler

“ICD-10…is a massive overhaul of the coding scheme and will require field size expansion, change to alphanumeric composition, and complete redefinition of code values and their interpretation. This will be the most significant overhaul of the medical coding system since the advent of the computer.”

– Workgroup for Electronic Data Interchange (WEDI) Subcommittee on ICD-10

The World Health Organization’s (WHO) International Classification of Diseases (ICD) is the standard diagnostic tool for health management, epidemiology, and clinical purposes. The ICD classifies diseases and health problems and monitors their incidence and prevalence throughout the world. It encodes health information to justify health service payments, develop healthcare reporting, and enhance analysis.

The Centers for Medicare and Medicaid Services (CMS) mandated an ICD upgrade from revision 9 to revision 10 under its Health Insurance Portability and Accountability Act (HIPAA) authority.

ICD-9 was first introduced in 1979. Since then, many new medical advances have developed that are not accounted for under the outdated ICD-9 coding structure. Due to its limitations, ICD-9 basically ran out of codes. The new revision, ICD-10, more than quadruples the number of diagnosis codes and represents a 15-fold increase in procedure codes compared with ICD-9. This expanded capability was designed to accommodate the rapid influx of new medical diagnoses and procedures.

WHO member states began using ICD-10 in 1994. The United States has not yet implemented this revision because of complexities in our healthcare system that differentiate us from the rest of the world. For example, we use the ICD codes sets as the basis for payment reimbursement, whereas other countries use the code sets mainly for reporting. Department of Health and Human Services Secretary Kathleen Sebelius recently announced a one-year delay until October 1, 2014, for required compliance.

The U.S. ICD-10 includes both diagnosis codes (ICD-10-CM, Clinical Modification for Diagnosis) and procedure codes (ICD-10-PCS, Procedure Coding System). The ICD-10 code set expands the number of available characters in a code and assigns meaning to the position of values within the code. The ICD touches on nearly every aspect of treatment, billing, and claims processing; and transition to ICD-10 represents significant costs for healthcare providers and payers. This article examines the advantages and challenges ICD-10 represents.

ICD-10 Advantages
ICD-10-PCS is much more logically organized than the ICD-9 procedure system: Each character represents a procedure group, body system, procedure type, body part, approach, or device. ICD-10-CM offers richer anatomical detail and, where appropriate, indicates the stage of treatment. Greater specificity yields enhanced analytics. Processed and viewed through an appropriate information management application, ICD-10 will transform the business of healthcare.

ICD-10 fuels healthcare transformation, especially in the clinical and financial areas. Clinically, advanced data quality and clinical granularity lead to opportunities for improvement in analytics. For example:

  • Data mining — Specificity about disease onset and acute-vs.-chronic status promote accurate patient identification for management programs and care coordination.
  • Increased predictive accuracy — Specificity of disease improves risk model predictions.
  • Quality management — Greater procedure coding accuracy promotes better analysis of quality measures and clinical protocol adherence.
  • Practice pattern review — Care quality assessment is better supported across clinical settings and conditions.
  • New technology assessment — ICD-10 provides flexibility to represent new procedures and technologies that ICD-9 cannot.
  • Illness severity and mortality modeling — The granularity of the diagnosis codes better characterizes a patient’s illness burden.
  • Pharmacy management — New diagnostic indicators support the identification of over- and underdosing and adverse effects, all by specific drug type.

ICD-10 creates opportunities to decrease reimbursement cycle time and improve payment accuracy. Today, hospitals cannot code many procedures accurately with ICD-9, leading to medical necessity reviews, requests for additional documentation, and payment delays. Procedure code expansion provides the level of detail payers require. Improved consistency and accuracy will lead to fewer ambiguously coded and rejected claims.

Table 1
Summary of Estimated One-Time Costs and Cumulative Costs*

  Personnel Cost Estimate
($ million)
Additional Cost of
Sequential Change
($ million)
Training Full-time coders
Part-time coders
Code users
Productivity losses Coders
System changes Providers
Software vendors

*Cumulative total of ten years of annual costs (undiscounted)
**CMS = Centers for Medicare and Medicaid Services

Combined with other claims information, ICD-10 will help identify the most cost-effective providers, thereby increasing their earning potential and lowering system costs. Accurate detailed medical record documentation has never been more important for maximizing reimbursement. The use of certified coders, who are trained in ICD-10, will be an important asset for healthcare providers. Finally, more accurate coded information will be available for electronic medical record applications and information exchange.

ICD-10 Challenges
Conversion to ICD-10 affects three primary cost areas: training, productivity losses, and system changes. Rand’s August 10, 2010, study of the conversion estimated the total cost will be between $425 million and $1.15 billion in initial costs and between $5 million and $40 million per year in lost productivity. Physicians, being most directly affected, will absorb most of the cost. It remains to be seen whether the benefits will outweigh the expense.

Healthcare reform makes multiple demands on physicians. Implementation of electronic medical records, adherence to meaningful use measures (the minimum requirements providers must meet through their use of certified electronic health record technology), and compliance with ICD-10 conversion all require time, effort, and money. Unlike meaningful use requirements, the ICD-10 mandate does not provide additional government financial support to physicians.

Furthermore, ICD-10 involves increased clinical, analytic, and financial risk. Upgrading to ICD-10 is not a simple conversion. CMS has provided General Equivalency Mappings (GEM) to help the industry make the transition between the old and new code sets by assisting with code translation. In reality, however, one ICD-9 code may translate into many ICD-10 codes for both diagnosis and procedure codes, complicating the process.

Changes to the code sets affect not only reimbursement but also financial and trend reporting, comparative analysis, and research data — resulting in multiple analytic discontinuities. Reimbursement groups, such as diagnosis-related group (DRG) software applications, rely on the input of diagnosis and procedure codes, and changing the familiar codes hospitals know and rely on can affect reimbursement dramatically. When selecting codes for billing, the availability of additional codes under ICD-10 creates uncertainty as to what new ICD-10 code has the same reimbursement level as the ICD-9 code.

ICD-10 will significantly affect multiple areas and industries, not just healthcare. In support of customer needs, Verisk Health has been preparing for the ICD-10 mandate since 2010, starting with assessment of its systems and changing applications to accommodate the new code sets. Mortgage risk analyses, for example, will need to be adjusted to account for the health of the applicant using the new codes. Workers' compensation analytics, although exempt from the initial ICD-10 mandate, will be more meaningful when combined with medical data that does use the new code sets. And crime analytics — dependent largely on procedure codes — will have increased potential for identification of criminal activity.

While there remains controversy over the value of ICD-10, after further comment and consideration, CMS has announced its decision to mandate implementation, with a new date of October 1, 2014.

Deb Bradley, RN, PAHM, is senior vice president of Client Solutions at Verisk Health, responsible for product management, training, clinical methodology, and research.

David Paquette, RN, MS, is a clinical analyst at Verisk Health, responsible for the clinical groupings, code updates, and ICD-10 mappings.

Brian Boyce, CPC, CPC-I, is vice president of Clinical and Coding Services at Verisk Health. Boyce leads the Clinical Coding team responsible for HCC and HEDIS chart review for Verisk Health’s Medicare clients.

Rich Wheeler, MD, CPC, is chief medical officer at Verisk Health, providing clinical support for the company’s clinical and product teams.