Healthcare Business News

ICD-10 costs higher than previously estimated, AMA report finds

By Andis Robeznieks
Posted: February 12, 2014 - 2:15 pm ET

Implementing the new ICD-10 procedural and diagnostic codes, which the CMS says must happen by Oct. 1, will be more expensive than previously estimated, according to new research. But costs will vary widely depending on practice circumstances.

The American Medical Association-funded report was written by consultants Carolyn Hartley, president and CEO of the Physicans EHR, and Stanley Nachimson, principal for Nachimson Advisors. The report updates Nachimson's widely quoted 2008 estimates, which the new report acknowledges were calculated when “no actual implementation experience existed” and before the health information technology industry received an infusion of billions of dollars from the American Reinvestment and Recovery Act of 2009.

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In 2008, Nachimson estimated ICD-10 implementation costs at $83,290 for small practices, $285,195 for medium-sized practices and more than $2.7 million for large ones.

The new estimates range from $56,639 to $226,105 for small practices; $213,364 to $824,735 for medium-sized practices; and about $2 million to more than $8 million for large practices.

“A major element in the cost is clearly the vendor/software upgrade category,” the authors concluded. “Practices fortunate enough to have no cost associated with a software upgrade, perhaps around one-third, will see their costs toward the lower end of our range.”

Robert Tennant, senior policy adviser at the Medical Group Management Association, said practices at the low end of the implementation-cost range are probably those that have in place expensive maintenance agreements that require vendors to make sure their systems are always in regulatory compliance. So, while these practices may not have to spend more money for implementation, they already spent a lot of money to be in that position—something smaller practices may not be able to do.

“It cost them a lot of money to get to zero,” Tennant said. “Also, the practices least able to buy new software, will have to buy new software.”

Tennant agreed that the implementation costs will vary tremendously from practice to practice, but he added that “however you slice it, it's going to be expensive.”

The report was based on interviews with practices, vendors and consultants, and the new projections take in account how moving to ICD-10 will require changes to codes and systems embedded in a practice's practice management systems or the PMS included in its electronic health record. This is further complicated by how practices must use 2014 certified EHR technology, or CEHRT, to meet meaningful-use requirements to receive payments from the EHR incentive program created by the Recovery Act.

“Ideally, the implementation of both software components should be synchronized,” the authors wrote. “In reality, the EHR vendors' release of Version 2014 CEHRT software is not aligned with ICD-10 compliant PMS software.”

Many EHR vendors plan to release ICD-10 compliant software in the first quarter of this year and 2014 certified EHR technology this summer, the authors noted. As a result, many practices will be using hybrid systems using ICD-9 coded data for meaningful-use reporting and ICD-10 coded content for billing.

The estimates also included refined calculations for the cost of education, billing, IT costs, increased documentation costs and cash flow disruptions.

The AMA and other organizations such as the Medical Group Management Association have been pushing back against the Oct. 1 implementation date, and the AMA cites the new report in a Feb. 12 letter (PDF) asking HHS Secretary Kathleen Sebelius to reconsider the CMS mandate on ICD-10 adoption. The AMA, which acknowledged in its letter that its position “is at odds with many other well-intended stakeholders in the healthcare industry,” has also launched a Twitter campaign using the hashtag #StopICD10.

Earlier this year, the MGMA released research (PDF) showing that only 9.4% of practices responding to a survey reported that they had made significant progress toward ICD-10 readiness. While that was double the 4.7% of practices that reported significant progress last year, this year's survey still had 38.4% of practices reporting that they had not yet started.

The American Health Information Management Association, which supports ICD-10 adoption, did not offer any contrasting cost estimates and said the organization does not track this type of information.

Follow Andis Robeznieks on Twitter: @MHARobeznieks

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