Administrative Simplification: Change to the Compliance Date for the International Classification of Diseases, 10th Revision (ICD-10-CM and…
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Administrative Simplification: Change to the Compliance Date for the International Classification of Diseases, 10th Revision (ICD-10-CM and ICD-10-PCS) Medical Data Code Sets
EFFECTIVE DATE: These regulations are effective on
FOR FURTHER INFORMATION CONTACT:
Denesecia Green, (410) 786-8797.
Kamahanahokulani Farrar, (410) 786-2155.
SUPPLEMENTARY INFORMATION:
I. Executive Summary and Background
A. Executive Summary
1. Purpose
Prior to the enactment of the Protecting Access to Medicare Act of 2014 (PAMA) (Pub. L. 113-93) on
This final rule establishes
a. Need for the Regulatory Action
This final rule establishes
b.
Section 212 of PAMA, titled "Delay in Transition from ICD-9-CM to ICD-10 Code Sets" is the legal authority for the regulatory action.
2. Summary of the Major Provisions
As noted previously, this final rule changes the compliance date for ICD-10 from
3. Summary of Costs and Benefits
In the
We use the same rationale and methodology in our analysis of costs and benefits in the Regulatory Impact Analysis (RIA) of this final rule, and conclude that a delay of 1-year, as opposed to a longer delay, will be the least costly and most fiscally responsible way to implement the requirements of section 212 of PAMA. We estimate the cost of a 1-year delay to HIPAA covered entities will be
B. Background
In the
In late 2011 and early 2012, three issues emerged that led the Secretary to reconsider the compliance date for ICD-10: (1) The industry transition to ASC X12 Version 5010 did not proceed as effectively as expected; (2) providers became concerned that other statutory initiatives were stretching their resources; and (3) there was a lack of readiness for the ICD-10 transition, as indicated by industry surveys and polls. As a result, HHS published the 2012 ICD-10 Delay final rule in which the compliance date for ICD-10 was delayed from
II. Provisions of the Final Rule
Section 212 of PAMA provides that the Secretary may not adopt ICD-10 under HIPAA prior to
All segments of the health care industry have invested significant time and resources in financing, training, and implementing necessary changes to systems, workflow processes, and clinical documentation practices in order to prepare for ICD-10.
FOOTNOTE 1 ICD-10 Monitor: Exclusive: ICD-10 Implementation--Where Do We Really Stand? http://icd10monitor.com/enews/item/1220-exclusive-icd-10-implementation-where-do-we-really-stand?utm_source=Real%20Magnet&utm_medium=Email&utm_campaign=42358626. END FOOTNOTE
Additionally, we believe it is important to require implementation of ICD-10 as soon as the law permits because it will allow the industry to begin reaping the benefits of ICD-10 as soon as possible. ICD-10 provides greater specificity of diagnosis-related groups; improves quality measurement and reporting capabilities; improves tracking of illnesses; and reflects greater accuracy of reimbursement for medical services. ICD-10's granularity will improve data capture and analytics of public health surveillance and reporting, national quality reporting, research and data analysis, and provide detailed data to inform health care delivery and health policy decisions.
ICD-10 reflects the advances in medicine and medical technology that U.S. physician specialty groups called for as they provided extensive input into the development of the ICD-10-CM code-set to capture more precise codes for the conditions they treat. ICD-10 includes significant improvements over ICD-9-CM in coding primary care encounters, external causes of injury, mental disorders, and preventive health. For example, ICD-10 reflects improved diagnosis of chronic illness and identifies underlying causes, complications of disease, and conditions that contribute to the complexity of a disease, and captures the severity and stage of diseases such as chronic kidney disease, dementia, and asthma.
Finally, a 1-year delay, as opposed to a longer delay, is the least expensive option for the industry. As estimated in the 2012 ICD-10 Delay final rule /2/ and repeated in this final rule, a 1-year delay increases costs for covered entities by a range of 10 to 30 percent. We conclude that a delay beyond 1 year would be significantly more costly and have a damaging impact on the healthcare industry. For example, extending the delay beyond 1 year could render current ICD-10 system updates and releases obsolete, which would diminish the investments stakeholders have already made to prepare for the ICD-10 transition. Stakeholders would need to restart their system preparation and would not be able to leverage past system investments.
FOOTNOTE 2 Administrative Simplification: Adoption of a Standard for a Unique Health Plan Identifier; Addition to the National Provider Identifier Requirements; and a Change to the Compliance Date for the International Classification of Diseases, 10th Edition (ICD-10-CM and ICD-10-PCS) Medical Data Code Sets; Final Rule. http://www.gpo.gov/fdsys/pkg/FR-2012-09-05/pdf/2012-21238.pdf pages 50-53. END FOOTNOTE
In order to implement section 212 of PAMA, we are changing the compliance date for ICD-10 from
Our regulations at 45 CFR 162.1002(b) currently require compliance with ICD-9-CM through
III. Waiver of Proposed Rulemaking
Under 5 U.S.C. 553(b) of the Administrative Procedure Act (APA), we are required to publish a notice of proposed rulemaking (NPRM) in the
The
After section 212 of PAMA was enacted, many industry stakeholders asked the Secretary to clarify which ICD version could or must be used and when. Many interpreted section 212 of PAMA as requiring a delay of ICD-10 to
There are also a number of important business and implementation decisions that industry stakeholders have to make now. For example, budgeting, project management, and systems planning for the continued use of ICD-9-CM on
Covered entities will also have to accomplish systems and business process changes in a relatively short period of time. Many providers have programmed their IT systems to submit ICD-10 codes on
A seamless industry transition to a required code set is necessary in order to avoid payment disruptions. If covered entities are not prepared to accept and process ICD-9-CM codes on
In order to minimize industry disruption, it is important for the Secretary to announce the new compliance dates as soon as possible. Even with the extra few months this final rule affords, time is short. If we were to engage in full notice and comment rulemaking, covered entities would be left with uncertainty until a final rule could be published, which would be unlikely to happen prior to
IV. Collection of Information Requirements
This document does not impose information collection and recordkeeping requirements. Consequently, it does not require a review by the
V. Regulatory Impact Analysis
A. Statement of Need
As stated previously, section 212 of PAMA specifies that "[t]he Secretary of
B. Overall Impact
We have examined the impacts of this final rule as required by Executive Order 12866 on Regulatory Planning and Review (
Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Section 3(f) of Executive Order 12866 defines a "significant regulatory action" as an action that is likely to result in a rule: (1) Having an annual effect on the economy of
A regulatory impact analysis (RIA) must be prepared for major rules with economically significant effects (
In determining the costs of this final rule, we needed to establish, as a baseline, what costs would likely be incurred absent this final rule, and then compare this baseline to the costs of the ICD-10 delay announced in this final rule. The costs estimated in this RIA include costs to industry and government entities for an
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also requires that agencies assess anticipated costs and benefits before issuing any rule whose mandates require spending in any one year of
Executive Order 13132 establishes certain requirements that an agency must meet when it promulgates a final rule that imposes substantial direct requirement costs on State and local governments, preempts State laws, or otherwise has Federalism implications. We do not anticipate that the 1-year delay in the compliance date for ICD-10 will have a significant impact on State and local governments, preempt State laws, or otherwise have Federalism implications.
C. Anticipated Effects on Impacted Entities
ICD codes are used in nearly every sector of the health care industry. All HIPAA covered entities will be affected by a delay in the compliance date of ICD-10. Covered entities include all health plans, health care clearinghouses, and health care providers that transmit health information in electronic form in connection with a transaction for which the Secretary has adopted a standard.
While covered entities are required to transition to ICD-10, many other entities not covered by HIPAA also use ICD codes for a variety of purposes because their operational and business needs often intersect with those of covered entities. For practical and business purposes, we expect these non-covered entities will voluntarily transition to ICD-10. Entities that are not considered covered entities, but that may be affected by the transition to ICD-10, include: Workers' compensation programs and automobile and personal liability insurers, hardware and software vendors for health care practice management systems and electronic health record systems, researchers, public health organizations, educational institutions, and coding entities.
D. Scope and Methodology of the Impact Analysis for ICD-10
This RIA estimates the costs of a delay of compliance with ICD-10. In this RIA we are analyzing only the impact of a delay, not the impact of ICD-10 implementation, which we addressed in the 2008 ICD-10 proposed rule (73 FR 49476) and the
While we assume that a delay of the implementation of ICD-10 will affect a broad range of health care providers, as illustrated in Table 1, we only examine the costs and benefits of a delay on two types of health care providers: Hospitals and small providers. We do not analyze the impact on other providers, including, but not limited to, nursing and residential care facilities, dentists, or durable medical equipment (DME) suppliers, though we understand that there is likely to be an impact on most of these providers. As was the case for our impact analysis in the 2008 ICD-10 proposed rule, there continues to be very little publicly available data on the use of electronic data interchange (EDI) among dentists, DME suppliers, nursing homes, and residential care facilities. The lack of data for these types of health care providers has been noted in other studies on administrative simplification. /3/
FOOTNOTE 3 "Excess Billing and Insurance-Related Administrative Costs," by
We do not include an analysis of costs or benefits to health care clearinghouses and transaction vendors in this RIA. Transaction vendors are entities that process claims or payments for entities such as health plans. Not all transaction vendors meet the HIPAA definition of a health care clearinghouse, which constitute a subset of transaction vendors. Payment vendors also would be a type of transaction vendor--a transaction vendor that "associates" or "re-associates" health care claim payments with the payments' remittance advice for either a health plan or provider. For our purposes, transaction vendors do not include developers or retailers of computer software or entities that are involved in installing, programming or maintaining computer software. However, we did not calculate costs and benefits to health care clearinghouses and transaction vendors in this RIA because, as in our previous impact analyses in the
Although self-insured group health plans meet the HIPAA definition of "health plan," we did not include them in this impact analysis. While self-insured group health plans will be required to implement ICD-10, we assume that, with a few exceptions, such plans do not send or receive HIPAA electronic transactions because most are not involved in the day-to-day activities of a health plan, and outsource those services to third party administrators (TPAs) or transaction vendors.
We do delineate a cost to TPAs in this RIA. Although TPAs do not meet the definition of "health plans," and therefore are not required by HIPAA to use code sets such as ICD-10, as a practical matter they will need to make the transition in order to continue to conduct electronic transactions on behalf of self-insured group health plans. The impact of a delay of the compliance date of ICD-10 on TPAs will be similar to the commercial insurer cost/benefit impact profile as TPAs serve a similar function and will have to implement and test their systems in the same manner as health plans. Therefore, when we refer to "commercial health plans" in this RIA, we are including TPAs in the category of "small health plans" in the RIA.
In the 2012 ICD-10 Delay final rule (77 FR 22991) and in this RIA, we do not include the costs for software vendors, including software vendors for practice management and EHR systems, as they ultimately pass their costs to their clients.
1. Cost of a 1-Year Delay to Commercial Health Plans and TPAs
Health plans are a varied group in terms of size, and the cost of a delay is calculated using a range that reflects this variance. In terms of costs, commercial health plans are far along in their ICD-10 implementation and have devoted funds, resources, and staff to the effort. When PAMA was enacted, the majority of commercial health plans were in the external testing phase of their ICD-10 implementation plans. /4/ A 1-year delay of ICD-10 compliance will allow entities more time to thoroughly test, but the testing and the continued maintenance of contracts and personnel required for the transition will be 1- year longer than was budgeted.
FOOTNOTE 4 Twenty of the top 25 health insurance companies indicated that they were prepared to test with trading partners, according to a scan of their Web sites. The top 25 health insurance companies were identified by
Continued training, testing, and retention of personnel, and contracts are expected to be the primary costs associated with a 1-year delay for commercial health plans. Commercial health plans will perform additional work in preparing their systems to process ICD-9 coded claims for an additional year while also converting their systems to process ICD-10 coded claims on and after
2. Cost of a 1-Year Delay to
We believe many government health programs were prepared to be ICD-10 compliant on
It was estimated in the 2012 final rule that a 1-year delay of ICD-10 compliance would be reflected by additional work at an estimated total cost of
3. Cost of a 1-Year Delay to State Medicaid Agencies
State Medicaid Agencies (SMAs) completed a cost impact assessment for a 1-year delay in April of 2014. SMAs face similar costs as commercial health plans as a result of the 1-year delay of ICD-10. SMAs will incur costs due to contractual obligations which may require modifications, extensions, or procurements. Other costs to SMAs include the need to test ICD-10 codes in the new 2015 systems environment, which will be needed even by SMAs that have successfully tested to date. SMA resources will need to be maintained at full pre-implementation and go-live levels through 2015 in order to prepare for the
F. Cost of a 1-Year Delay to Providers
1. Hospitals and Large Providers
We expect that many hospitals and large provider organizations have already spent funds in preparation for the ICD-10 transition. As with health plans, a delay of the compliance date will add to their costs because large providers must maintain personnel staffing levels, make significant system changes; renegotiate the contracts necessary to extend preparations an extra year, and retest systems in the new 2015 systems environment. Likewise, large providers must maintain technological resources for an extra year.
According to our estimates in the 2012 ICD-10 delay final rule, the cost of a 1-year delay to hospitals and large physician practices will be
2. Small Providers
There are some surveys that estimate the associated costs for providers transitioning to ICD-10, and we referenced some of these studies in the 2012 ICD-10 Delay proposed rule (77 FR 22997). In that proposed rule, we did not estimate the cost to small providers of the 1-year delay because these costs were negligible.
Given the lack of statistically valid data regarding the resources small providers have expended, as well as their state of readiness for an
G. Summary of Costs of a 1-Year Delay of the Compliance Date of ICD-10
Except for estimates of the impact on
We summarize the range of low and high estimates of a 1-year delay of the compliance date for ICD-10 in Table 1. GOES
Table 1--Summary of Costs in 2015 of a 1-Year Delay in the Compliance Date of ICD-10 * Low High Mean (in (in (average) millions) millions) (in millions) Cost to Commercial Health Plans$547 $2,786 $1,667 Cost to Medicare 21 32 27 Cost to State Medicaid Agencies 169 182 176 Cost to Hospitals and Large Provider 422 3,849 2,136 Organizations Total Costs 1,161 6,850 4,007 * In 2014 Dollars.
H. Considered Alternatives to a 1-Year Delay of the ICD-10 Compliance Date
Section 212 of PAMA states that "the Secretary of
We considered a number of delays of different durations before establishing
As estimated in the 2012 ICD-10 Delay final rule /5/ and repeated in this final rule, a 1-year delay increases costs for covered entities by a range of 10 to 30 percent. As indicated in the RIA in this final rule, we estimate little to no benefit or cost savings in delays of ICD-10 beyond the minimum 1-year delay required by PAMA. Although industry readiness has not been studied, stakeholders representing a significant majority of the industry have reported that they invested significant time and resources and were prepared for the
FOOTNOTE 5 Administrative Simplification: Adoption of a Standard for a Unique Health Plan Identifier; Addition to the National Provider Identifier Requirements; and a Change to the Compliance Date for the International Classification of Diseases, 10th Edition (ICD-10-CM and ICD-10-PCS) Medical Data Code Sets; Final Rule. http://www.gpo.gov/fdsys/pkg/FR-2012-09-05/pdf/2012-21238.pdf pages 50-53. END FOOTNOTE
I. Regulatory Flexibility Analysis: Impact on Small Providers of a Delay in the Compliance Date of ICD-10
The Regulatory Flexibility Act (RFA) of 1980 (Pub. L. 96-354) requires agencies to describe and analyze the impact of the final rule on small entities unless the Secretary can certify that the regulation will not have a significant impact on a substantial number of small entities. According to the
As in the 2012 Delay final rule, we continue to assume for purposes of the RFA, that all physician practices are small entities. We conclude that a 1-year delay in implementation of the ICD-10 will affect a "substantial number" of small entities. However, we assert in this final rule, that the 1-year delay of the compliance date of ICD-10 will be more beneficial to small entities than it will be burdensome. The benefits are derived from the additional time that small entities will have for ICD-10 implementation. Therefore, we certify that the provisions in this final rule will not have a significant economic impact on a substantial number of small entities.
J. Accounting Statement and Table
The total costs of a 1-year delay of the compliance date will likely be incurred over a 12-month period. However, due to the range of impacted entities, including educational institutions, those 12 months may span different dates and different budget periods. Given the diverse approaches to budgeting in the industry, there is no precise way of calculating how much of the cost and cost avoidance falls outside of the
As required by OMB Circular A-4, /6/ Table 2 is an accounting statement showing the classification of the expenditures associated with the provisions of this final rule. Table 2 provides our best estimates of the costs and benefits associated with a 1-year delay of the compliance date of ICD-10.
FOOTNOTE 6 "Circular A-4,"
Table 2--Accounting Statement: Classification of Estimated Expenditures for 1-Year Delay of ICD-10 Compliance Date From FY 2014 to FY 2015 [In millions of dollars] Category Primary Minimum Maximum Source estimate estimate estimate citation (millions) (millions) (millions) (RIA, preamble, etc.) COSTS Annualized Monetized costs: 7% Discount$4,007.0 $1,161.0 $6,850.0 RIA. 3% Discount 4,007.0 1,161.0 6,850.0 RIA.
List of Subjects in 45 CFR Part 162
Administrative practice and procedures, Electronic transactions, Health facilities, Health insurance, Hospitals, Incorporation by reference,
For the reasons set forth in the preamble, the
PART 162--ADMINISTRATIVE REQUIREMENTS
1. The authority citation for part 162 continues to read as follows:
Authority: Secs. 1171 through 1180 of the Social Security Act (42 U.S.C. 1320d-1320d-9), as added by sec. 262 of Pub. L. 104-191, 110
2. Section 162.1002 is amended as follows:
A. In paragraph (b) introductory text by removing the date "
B. In paragraph (c) introductory text by removing the date "
Dated:
Administrator,
Approved:
Secretary,
[FR Doc. 2014-18347 Filed 7-31-14;
BILLING CODE 4120-01-P
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