3328 Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations 

October 2007, ASC X12N/ 

005010X223A1. (Incorporated by 

reference in § 162.920.) 

(c) For the period on and after January 

1, 2012, the standards identified in 

paragraph (b)(2) of this section. 

■ 18. Add a new Subpart S to read as 

follows: 

Subpart S—Medicaid Pharmacy 

Subrogation 

Sec. 

162.1901 Medicaid pharmacy subrogation 

transaction. 

162.1902 Standard for Medicaid pharmacy 

subrogation transaction. 

§ 162.1901 Medicaid pharmacy 

subrogation transaction. 

The Medicaid pharmacy subrogation 

transaction is the transmission of a 

claim from a Medicaid agency to a payer 

for the purpose of seeking 

reimbursement from the responsible 

health plan for a pharmacy claim the 

State has paid on behalf of a Medicaid 

recipient. 

§ 162.1902 Standard for Medicaid 

pharmacy subrogation transaction. 

The Secretary adopts the Batch 

Standard Medicaid Subrogation 

Implementation Guide, Version 3, 

Release 0 (Version 3.0), July 2007, 

National Council for Prescription Drug 

Programs, as referenced in § 162.1902 

(Incorporated by reference at § 162.920): 

(a) For the period on and after January 

1, 2012, for covered entities that are not 

small health plans; 

(b) For the period on and after January 

1, 2013 for small health plans. 

(Catalog of Federal Domestic Assistance 

Program No. 93.778, Medical Assistance 

Program) (Catalog of Federal Domestic 

Assistance Program No. 93.773, Medicare— 

Hospital Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 

Approved: December 11, 2008. 

Michael O. Leavitt, 

Secretary. 

[FR Doc. E9–740 Filed 1–15–09; 8:45 am] 

BILLING CODE 4150–28–P 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Office of the Secretary 

45 CFR Part 162 

[CMS–0013–F] 

RIN 0958–AN25 

HIPAA Administrative Simplification: 

Modifications to Medical Data Code Set 

Standards To Adopt ICD–10–CM and 

ICD–10–PCS 

AGENCY: Office of the Secretary, HHS. 

ACTION: Final rule. 

SUMMARY: This final rule adopts 

modifications to two of the code set 

standards adopted in the Transactions 

and Code Sets final rule published in 

the Federal Register pursuant to certain 

provisions of the Administrative 

Simplification subtitle of the Health 

Insurance Portability and 

Accountability Act of 1996 (HIPAA). 

Specifically, this final rule modifies the 

standard medical data code sets 

(hereinafter ‘‘code sets’’) for coding 

diagnoses and inpatient hospital 

procedures by concurrently adopting 

the International Classification of 

Diseases, 10th Revision, Clinical 

Modification (ICD–10–CM) for diagnosis 

coding, including the Official ICD–10– 

CM Guidelines for Coding and 

Reporting, as maintained and 

distributed by the U.S. Department of 

Health and Human Services (HHS), 

hereinafter referred to as ICD–10–CM, 

and 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, as 

maintained and distributed by the HHS, 

hereinafter referred to as ICD–10–PCS. 

These new codes replace the 

International Classification of Diseases, 

9th Revision, Clinical Modification, 

Volumes 1 and 2, including the Official 

ICD–9–CM Guidelines for Coding and 

Reporting, hereinafter referred to as 

ICD–9–CM Volumes 1 and 2, and the 

International Classification of Diseases, 

9th Revision, Clinical Modification, 

Volume 3, including the Official ICD–9– 

CM Guidelines for Coding and 

Reporting, hereinafter referred to as 

ICD–9–CM Volume 3, for diagnosis and 

procedure codes, respectively. 

DATES: The effective date of this 

regulation is March 17, 2009. The 

effective date is the date that the 

policies herein take effect, and new 

policies are considered to be officially 

adopted. The compliance date, which is 

different than the effective date, is the 

date on which entities are required to 

have implemented the policies adopted 

in this rule. The compliance date for 

this regulation is October 1, 2013. 

FOR FURTHER INFORMATION CONTACT: 

Denise M. Buenning, (410) 786–6711 or 

Shannon L. Metzler, (410) 786–3267. 

I. Background 

A. Statutory Background 

The Congress addressed the need for 

a consistent framework for electronic 

transactions and other administrative 

simplification issues in the Health 

Insurance Portability and 

Accountability Act of 1996 (HIPAA), 

Public Law 104–191, enacted on August 

21, 1996. HIPAA has helped to improve 

the Medicare and Medicaid programs, 

and the efficiency and effectiveness of 

the health care system in general, by 

encouraging the development of 

standards and requirements to facilitate 

the electronic transmission of certain 

health information. 

Through subtitle F of title II of that 

statute, the Congress added to title XI of 

the Social Security Act (the Act) a new 

Part C, titled ‘‘Administrative 

Simplification.’’ Part C of title XI of the 

Act now consists of sections 1171 

through 1180. Section 1172 of the Act 

and the implementing regulations make 

any standard adopted under Part C 

applicable to: (1) Health plans; (2) 

health care clearinghouses; and (3) 

health care providers who transmit any 

health information in electronic form in 

connection with a transaction for which 

the Secretary has adopted a standard. 

Section 1172(c)(1) of the Act requires 

any standard adopted by the Secretary 

of the Department of Health and Human 

Services (HHS) to be developed, 

adopted, or modified by a standard 

setting organization (SSO), except in the 

cases identified under section 1172(c)(2) 

of the Act. Under section 1172(c)(2)(A) 

of the Act, the Secretary may adopt a 

standard that is different from any 

standard developed by an SSO if it will 

substantially reduce administrative 

costs to health care providers and health 

plans compared to the alternatives, and 

the standard is promulgated in 

accordance with the rulemaking 

procedures of subchapter III of chapter 

5 of Title 5 of the United States Code. 

Under section 1172(c)(2)(B) of the Act, 

if no SSO has developed, adopted, or 

modified any standard relating to a 

standard that the Secretary is authorized 

or required to adopt, section 1172(c)(1) 

does not apply. 

Section 1172 of the Act also sets forth 

consultation requirements that must be 

met before the Secretary may adopt 


sroberts on PROD1PC70 with RULES
Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations 3329 

standards. The SSO must consult with 

the following organizations in the 

course of the development, adoption, or 

modification of the standard: National 

Uniform Billing Committee (NUBC), the 

National Uniform Claim Committee 

(NUCC), the Workgroup for Electronic 

Data Interchange (WEDI), and the 

American Dental Association (ADA). 

For a standard that was not developed 

by an SSO, the Secretary is required to 

consult with each of the above-named 

groups before adopting the standard. 

Under section 1172(f) of the Act, the 

Secretary must also rely on the 

recommendations of the National 

Committee on Vital and Health 

Statistics (NCVHS) and consult with 

appropriate Federal and State agencies 

and private organizations. 

Section 1173(a) of the Act requires the 

Secretary to adopt transaction standards 

and data elements for the electronic 

exchange of health information for 

certain health care transactions. Under 

sections 1173(b) through (f) of the Act, 

the Secretary is required to adopt 

standards for: Unique health identifiers, 

code sets, security standards for health 

information, electronic signatures, and 

the transfer of information among health 

plans. 

Section 1174 of the Act requires the 

Secretary to review the adopted 

standards and adopt modifications as 

appropriate, but not more frequently 

than once every 12 months in a manner 

which minimizes disruption and cost of 

compliance. The same section requires 

the Secretary to ensure that procedures 

exist for the routine maintenance, 

testing, enhancement, and expansion of 

code sets, along with instructions on 

how data elements encoded before any 

modification may be converted or 

translated to preserve the information 

value of any pre-existing data elements. 

Section 1175(b) of the Act provides 

for a compliance date not later than 24 

months after the date on which an 

initial standard or implementation 

specification is adopted for all covered 

entities except small health plans, for 

which the statute provides for a 

compliance date not later than 36 

months after the date on which an 

initial standard or implementation 

specification is adopted. If the Secretary 

adopts a modification to a HIPAA 

standard or implementation 

specification, the compliance date for 

the modification may not be earlier than 

the 180th day of the period beginning 

on the date such modification is 

adopted. The Secretary may consider 

the nature and extent of the 

modification when determining 

compliance dates. The Secretary may 

extend the time for compliance for small 

health plans. 

B. Regulatory Background: Adoption 

and Modification of HIPAA Code Sets 

The Transactions and Code Sets final 

rule (65 FR 50312) published in the 

Federal Register on August 17, 2000 

(hereinafter referred to as the ‘‘August 

17, 2000 final rule’’) implemented some 

of the requirements of the 

Administrative Simplification subtitle 

of HIPAA, by adopting standards for 

eight electronic transactions for use by 

covered entities (health plans, health 

care clearinghouses, and those health 

care providers who transmit any health 

information in electronic form in 

connection with a transaction for which 

the Secretary has adopted a standard). 

We established these standards at 45 

CFR parts 160, subpart A, and 162, 

subparts A, and I through R. The 

‘‘Modifications to Electronic Data 

Transaction Standards and Code Sets’’ 

final rule, published on February 20, 

2003 (68 FR 8381) (hereinafter referred 

to as the ‘‘February 20, 2003 final rule’’), 

modified the implementation 

specifications for several adopted 

transactions standards, among other 

provisions. Please refer to the August 

17, 2000 final rule and the February 20, 

2003 final rule for detailed discussions 

of electronic data interchange and an 

analysis of the public comments 

received during the promulgation of 

both rules. 

In the August 17, 2000 final rule, we 

also adopted standard code sets for use 

in those transactions, including: 

• International Classification of 

Diseases, 9th Revision, Clinical 

Modification (ICD–9–CM) Volumes 1 

and 2 (including the Official ICD–9–CM 

Guidelines for Coding and Reporting) as 

maintained and distributed by the 

Department of Health and Human 

Services (HHS), for coding diseases, 

injuries, impairments, other health 

problems and their manifestations, and 

causes of injury, disease, impairment, or 

other health problems. 

• ICD–9–CM Volume 3 (including the 

Official ICD–9–CM Guidelines for 

Coding and Reporting) as maintained 

and distributed by HHS, for procedures 

or other actions taken for diseases, 

injuries, and impairments on hospital 

inpatients reported by hospitals 

regarding prevention, diagnosis, 

treatment, and management. 

ICD–9–CM Volumes 1 and 2, and 

ICD–9–CM Volume 3 were already 

widely used in administrative 

transactions when we promulgated the 

August 17, 2000 final rule, and we 

decided that adopting these existing 

code sets would be less disruptive for 

covered entities than modified or new 

code sets. Please refer to the August 17, 

2000 final rule for details of that 

discussion, as well as a discussion of 

utilizing ICD–10–CM and ICD–10–PCS 

as a future HIPAA standard code set (65 

FR 50327). Please refer to the August 17, 

2000 final rule; ‘‘Standards for Privacy 

of Individually Identifiable Health 

Information’’ (65 FR 82462), published 

in the Federal Register on December 28, 

2000; Standards for Privacy of 

Individually Identifiable Health 

Information; Final Rule (67 FR 53182) 

published in the Federal Register on 

August 14, 2002; and ‘‘the Modification 

to Code Set Standards To Adopt ICD– 

10–CM and ICD–10–PCS’’ proposed rule 

(hereinafter referred to as the ‘‘August 

22, 2008 proposed rule’’) (73 FR 49796), 

published in the Federal Register on 

August 22, 2008 for further information 

about electronic data interchange and 

the regulatory background. 

II. ICD–9–CM 

The 9th revision of the International 

Classification of Diseases (ICD–9) was 

originally developed and maintained by 

the World Health Organization (WHO). 

While it was originally designed to 

classify causes of death (mortality), the 

scope of ICD–9 was expanded, through 

the development of the U.S. clinical 

modification, to include non-fatal 

diseases (morbidity). The Centers for 

Disease Control and Prevention (CDC) 

developed and maintains a clinical 

modification of ICD–9 for diagnosis 

codes which is called ‘‘ICD–9–CM 

Volumes 1 and 2.’’ The Centers for 

Medicare & Medicaid Services (CMS) 

maintains an additional clinical 

modification of ICD–9 for inpatient 

hospital procedure codes, which is 

called ‘‘ICD–9–CM Volume 3.’’ The 

Secretary adopted CDC’s ICD–9–CM in 

1979 for morbidity applications. ICD–9– 

CM has been used since 1983 as the 

basic input for assigning diagnosisrelated groups for Medicare’s Inpatient 

Prospective Payment System. ICD–9– 

CM Volumes 1 and 2, and ICD–9–CM 

Volume 3 were adopted as HIPAA code 

sets in 2000 for reporting diagnoses, 

injuries, impairments, and other health 

problems and their manifestations, and 

causes of injury, disease, impairment, or 

other health problems in standard 

transactions. 

A. ICD–9–CM, Volumes 1 and 2 

(Diagnosis) 

CDC developed ICD–9–CM, Volumes 

1 and 2. It produced a clinical 

modification to the WHO’s ICD–9 by 

adding more specificity to its diagnosis 

codes. ICD–9–CM diagnosis codes are 

three to five digits long, and are used by 


sroberts on PROD1PC70 with RULES
3330 Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations 

all types of health care providers, 

including hospitals and physician 

practices. The code set is organized into 

chapters by body system. For a 

discussion of the structure of the ICD– 

9–CM diagnosis code sets, please refer 

to the August 22, 2008 proposed rule 

(73 FR 49798). 

B. ICD–9–CM, Volume 3 (Procedures) 

Inpatient hospital services procedures 

are currently coded using ICD–9–CM 

Volume 3, which was adopted as a 

HIPAA standard in 2000 for reporting 

inpatient hospital procedures. Current 

Procedural Terminology, 4th Edition 

(CPT–4) and Healthcare Common 

Procedure Coding System (HCPCS) are 

used to code all other procedures. The 

ICD–9–CM procedure codes, which are 

maintained by CMS, are three to four 

digits long and organized into chapters 

by body system (for example, 

musculoskeletal, urinary and circulatory 

systems, etc.). For a discussion of the 

structure of the ICD–9–CM procedure 

code set, please refer to the August 22, 

2008 proposed rule (73 FR 49798). 

C. Limitations of ICD–9–CM 

In the August 22, 2008 proposed rule 

(73 FR 49799), we discussed the 

shortcomings of ICD–9–CM. The ICD–9– 

CM code set is 29 years old, its 

approximately 16,000 procedure and 

diagnosis codes are insufficient to 

continue to allow for the addition of 

new codes, and, because it cannot 

accommodate new procedures, its 

capacity as a fully functioning code set 

is diminished. Many chapters of ICD–9– 

CM are full, and in others the 

hierarchical structure of the ICD–9–CM 

procedure code set is compromised. 

This means that some chapters can no 

longer accommodate new codes, so any 

additional codes must be assigned to 

other, topically unrelated chapters (for 

example, inserting a heart procedure 

code in the eye chapter of the code set). 

The ICD–9–CM code set was never 

designed to provide the increased level 

of detail needed to support emerging 

needs, such as biosurveillance and payfor-performance programs (P4P), also 

known as value-based purchasing or 

competitive purchasing. For a detailed 

discussion of the shortcomings of the 

ICD–9–CM code set, please refer to the 

August 22, 2008 proposed rule (75 FR 

49799). 

D. Maintaining/Updating ICD–9–CM 

(Volumes 1, 2, and 3) 

Recognizing the need for ICD–9–CM 

to be a flexible, dynamic statistical tool 

to meet expanding classification needs, 

the ICD–9–CM Coordination and 

Maintenance Committee was created in 

1985 as an open forum for receiving 

public comments on proposed code 

revisions, deletions, and additions. The 

Committee is co-chaired by CDC and 

CMS; CDC maintains ICD–9–CM 

Diagnosis Codes (Volumes 1 and 2), and 

CMS maintains ICD–9–CM Procedure 

Codes (Volume 3). 

As discussed in the August 22, 2008 

proposed rule (73 FR 49805), we will rename the ICD–9–CM Coordination and 

Maintenance Committee as the ICD–10 

Coordination and Maintenance 

Committee at the point when ICD–10 

becomes the new HIPAA standard. Until 

that time, the ICD–9–CM Coordination 

and Maintenance Committee will 

continue to update and maintain ICD– 

9–CM. For a discussion of maintaining 

and updating code sets, please refer to 

the August 22, 2008 proposed rule (73 

FR 49798–49799). 

III. ICD–10 and the Development of 

ICD–10–CM and PCS 

The ICD–10 code sets provide a 

standard coding convention that is 

flexible, providing unique codes for all 

substantially different health 

conditions. It also allows new 

procedures and diagnoses to be easily 

incorporated as new codes for both 

existing and future clinical protocols. 

ICD–10–CM and ICD–10–PCS provide 

specific diagnosis and treatment 

information that can improve quality 

measurements and patient safety, and 

the evaluation of medical processes and 

outcomes. ICD–10–PCS has the 

capability to readily expand and capture 

new procedures and technologies. 

A. ICD–10–CM Diagnosis Codes 

CDC’s National Center for Health 

Statistics (NCHS) developed the ICD– 

10–CM code set, following a voluntary 

consensus-based process and working 

closely with specialty societies to 

ensure clinical utility and subject matter 

expert input into the process of creating 

the clinical modifications, with 

comments from a number of prominent 

specialty groups and organizations that 

addressed specific concerns or 

perceived unmet clinical needs 

encountered with ICD–9–CM. NCHS 

also had discussions with other users of 

the ICD–10 code set, specifically 

nursing, rehabilitation, primary care 

providers, the National Committee for 

Quality Assurance (NCQA), long-term 

care and home health care providers, 

and managed care organizations to 

solicit their comments about the ICD–10 

code set. There are approximately 

68,000 ICD–10–CM codes. ICD–10–CM 

diagnosis codes are three to seven 

alphanumeric characters. The ICD–10– 

CM code set provides much more 

information and detail within the codes 

than ICD–9–CM, facilitating timely 

electronic processing of claims by 

reducing requests for additional 

information. 

ICD–10–CM also includes significant 

improvements over ICD–9–CM in 

coding primary care encounters, 

external causes of injury, mental 

disorders, neoplasms, and preventive 

health. The ICD–10–CM code set reflects 

advances in medicine and medical 

technology, as well as accommodates 

the capture of more detail on 

socioeconomics, ambulatory care 

conditions, problems related to lifestyle, 

and the results of screening tests. It also 

provides for more space to 

accommodate future expansions, 

laterality for specifying which organ or 

part of the body is involved as well as 

expanded distinctions for ambulatory 

and managed care encounters. 

B. ICD–10–PCS Procedure Codes 

CMS developed a procedure coding 

system, ICD–10–PCS. ICD–10–PCS has 

no direct relationship to the basic ICD– 

10 diagnostic classification, which does 

not include procedures, and has a 

totally different structure from ICD–10– 

CM. ICD–10–PCS is sufficiently detailed 

to describe complex medical 

procedures. This becomes increasingly 

important when assessing and tracking 

the quality of medical processes and 

outcomes, and compiling statistics that 

are valuable tools for research. ICD–10– 

PCS has unique, precise codes to 

differentiate body parts, surgical 

approaches, and devices used. It can be 

used to identify resource consumption 

differences and outcomes for different 

procedures, and describes precisely 

what is done to the patient. ICD–10–PCS 

codes have seven alphanumeric 

characters and group together services 

into approximately 30 procedures 

identified by a leading alpha character. 

There are 16 sections of tables that 

determine code selection, with each 

character having a specific meaning. 

(See section V of the August 22, 2008 

proposed rule (73 FR 49802–49803) for 

a chart that compares ICD–9–CM, ICD– 

10–CM, and ICD–10–PCS codes.) 

As explained in the August 22, 2008 

proposed rule (73 FR 49801), to our 

knowledge, no SSO has developed, 

adopted, or modified a standard code 

set that is suitable for reporting medical 

diagnoses and hospital inpatient 

procedures for purposes of 

administrative transactions. 


sroberts on PROD1PC70 with RULES
Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations 3331 

IV. Summary of Proposed Provisions 

and Analysis of and Responses to 

Public Comments 

In the August 22, 2008 proposed rule 

(73 FR 49796), we solicited comments 

from stakeholders and other interested 

parties on the proposed adoption of 

ICD–10–CM and ICD–10–PCS code sets. 

We received 3,115 timely public 

submissions from all segments of the 

health care industry including 

providers, physician practices, 

hospitals, coders, standards 

development organizations, vendors, 

State Medicaid agencies, State agencies, 

corporations, tribal representatives, 

healthcare professional and industry 

trade associations, and disease-related 

advocacy groups. 

Some comments were received 

timely, but were not relevant to the 

August 22, 2008 proposed rule and were 

not considered in our responses. Those 

comments referred to general Medicare 

program operations; a call for the 

development of a single payer health 

care system in the United States; general 

economic issues; a request for 

finalization of HIPAA standards that 

were not included in the August 22, 

2008 proposed rule; a request to adopt 

coding guidelines for CPT codes; 

comments on another unrelated notice 

of proposed rulemaking; and other 

issues that are outside of the purview of 

the August 22, 2008 proposed rule. The 

relevant and timely submissions within 

the scope of the August 22, 2008 

proposed rule that we received tended 

to provide multiple detailed comments 

on our proposals. 

Brief summaries of each proposed 

provision, a summary of the public 

comments we received (with the 

exception of specific comments on the 

economic impact analysis), and our 

responses to the comments are set forth 

below: 

A. Adoption of ICD–10–CM and ICD–10– 

PCS as Medical Data Code Sets Under 

HIPAA 

In § 162.1002(c)(2), we proposed to 

adopt ICD–10–CM (including the 

official guidelines) to replace ICD–9–CM 

Volumes 1 and 2 (including the official 

coding guidelines), for coding diseases; 

injuries; impairments; other health 

problems and their manifestations; and 

causes of injury, disease and 

impairment, or other health problems. 

In § 162.1002(c)(3), we proposed to 

adopt ICD–10–PCS (including the 

official guidelines) to replace ICD–9–CM 

Volume 3 (including the official coding 

guidelines) for the following procedures 

or other actions taken for diseases, 

injuries, and impairments on hospital 

inpatients reported by hospitals: 

prevention, diagnosis, treatment, and 

management. 

Comment: Commenters 

overwhelmingly supported our proposal 

to adopt ICD–10–CM and ICD–10–PCS 

as code sets under HIPAA, replacing the 

ICD–9–CM Volumes 1 and 2, and the 

ICD–9–CM Volume 3 code sets, 

respectively, citing the benefits we 

described in the August 22, 2008 

proposed rule. Some commenters 

pointed out that the United States, with 

its continued use of ICD–9–CM, is 

behind the rest of the world which has 

already migrated to ICD–10, and that 

ICD–9–CM’s basic structure is flawed 

and outdated, and cannot accommodate 

new medical technology and 

terminology. Commenters agreed that 

ICD–9–CM Volume 3 is running out of 

space, and that this space limitation 

curtails the ability to capture accurate 

reimbursement and quality data for 

health care documentation. A few 

commenters noted that, as providers 

migrate toward the use of electronic 

health records (EHRs), use of the more 

robust ICD–10–CM and ICD–10–PCS 

codes will be necessary to support 

EHRs’ more detailed information 

requirements. Another commenter 

noted that waiting to move to ICD–10– 

CM and ICD–10–PCS incurs its own 

costs as the underlying data used for 

patient care improvement, institutional 

quality reviews, medical research and 

reimbursement becomes increasingly 

unreliable. 

Response: We are amending 

§ 162.1002 to adopt ICD–10–CM and 

ICD–10–PCS as medical data code sets 

under HIPAA, replacing ICD–9–CM, 

Volumes 1 and 2, and ICD–9–CM 

Volume 3. 

Comment: We also received a number 

of comments stating that we should not 

adopt ICD–10–CM and ICD–10–PCS as 

code sets under HIPAA. Several 

commenters said that the ICD–9–CM 

code set is adequate to meet current 

coding needs, making ICD–10–CM and 

ICD–10–PCS unnecessary. These 

commenters said that current ICD–9– 

CM codes do not have serious 

limitations, and perhaps simply need 

some modifications to alleviate any 

limitations that ICD–9–CM might have. 

A number of commenters said that we 

should not adopt ICD–10–CM and ICD– 

10–PCS because the cost associated with 

the transition from ICD–9–CM to ICD– 

10–CM and ICD–10–PCS would be a 

burden to industry. However, they did 

not offer specific alternative solutions. 

Other commenters offered a number 

of different alternatives, including: 

• Create additional space in ICD–9– 

CM through the annual elimination and 

reassignment of codes that are no longer 

used. 

• Modify the structure of ICD–9–CM 

to provide for the assignment of 

additional codes. 

• Continue to assign new procedures 

to the two, previously unassigned 

overflow chapters of ICD–9–CM, 

chapters 00 and 17, and once those 

chapters are filled, no new codes should 

be created that cannot be assigned to the 

appropriate body system chapter. 

• Adopt the American Medical 

Association’s Physicians’ Current 

Procedural Terminology (CPT) for 

coding inpatient hospital procedures. 

• Wait and adopt the ICD–11 code 

set. Two commenters stated that by the 

time the United States has achieved 

proficiency using ICD–10–CM and ICD– 

10–PCS, the rest of the world will be 

using ICD–11, and our nation’s coding 

reporting system will once again be 

incompatible with that of other 

countries. 

• Decouple the coding of diseases at 

the point of patient care from the 

classification of diseases for secondary 

uses of medical record data by 

developing a U.S. Disease-Entity Coding 

System (USDECS) instead of adopting 

ICD–10–CM. 

One commenter erroneously 

interpreted our proposed adoption of 

ICD–10–PCS as a proposal to replace 

CPT codes in the ambulatory setting. 

Another commenter said we should 

recognize that hospital outpatient 

departments are currently required to 

report using HCPCS and CPT codes, but 

that some hospitals have elected to code 

these hospital outpatient medical 

records using ICD–9–CM procedure 

codes. 

Response: None of the suggested 

alternatives adequately address the 

shortcomings of ICD–9–CM that were 

identified and discussed in the August 

22, 2008 proposed rule. The majority of 

commenters supported our analysis of 

these shortcomings. As we noted in the 

August 22, 2008 proposed rule (73 FR 

49827), we do not believe that extending 

the life of ICD–9–CM by assigning codes 

to unrelated chapters or purging and 

reassigning codes that are no longer 

used is a long-term solution, and it 

would perpetuate confusion for coders 

and data users if hierarchy and code set 

structure were to continue to be set 

aside in the issuance of new codes. 

Gaining space in ICD–9–CM by annually 

purging codes that are not used is 

problematic because, while it creates 

space, this space may not necessarily be 

in the same chapters in which codes are 

needed. As no one asserted that this 

purging process would open up 

sufficient capacity to assign new codes 


sroberts on PROD1PC70 with RULES
3332 Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations 

in the hierarchical sections in which the 

new codes ought to be placed, purging 

and reassigning might only lead to coder 

confusion and further contribute to the 

hierarchical instability of the code set. 

Moreover, such action would destroy 

the ability to perform longitudinal 

research. 

Modifying the existing ICD–9–CM 

code sets by adding more digits and/or 

alpha characters was discussed as a 

possible alternative to adoption of the 

ICD–10–CM and ICD–10–PCS code sets 

at public meetings of the ICD–9–CM 

Coordination and Maintenance 

Committee; however, there appears to 

be little industry support for this 

alternative. The disruption resulting 

from adding a digit and/or alpha 

character to the ICD–9–CM code set, and 

then trying to both refine and modify 

approaches to assigning codes would 

result in nearly the same costs in 

infrastructure and systems changes as a 

transition to ICD–10–PCS, but with no 

significant improvement in the coding 

system. 

In the August 22, 2008 proposed rule 

(73 FR 49804), we explained that we did 

not consider the CPT–4 coding system 

to be a viable alternative to ICD–10–CM 

and ICD–10–PCS code sets because CPT 

does not adequately capture facilitybased, non-physician services, and 

commenters did not offer any new 

information to support that approach. 

In the August 22, 2008 proposed rule, 

we did not propose the replacement of 

CPT with ICD–10–PCS in the 

ambulatory setting. In the August 17, 

2000 final rule (65 FR 50312), we 

adopted the HCPCS and CPT codes as 

the official procedure coding systems 

for outpatient reporting. ICD–9–CM 

procedure codes are not a HIPAA 

standard for coding in these settings, 

and while some hospitals may elect to 

double code their outpatient records 

using both HCPCS and CPT, as well as 

ICD–9–CM procedure codes for internal 

purposes, this is not a requirement. We 

do not encourage this type of double 

coding, and do not believe that this 

voluntary practice impacts the analysis 

of whether or not ICD–10–PCS should 

be adopted. 

We discussed waiting to adopt the 

ICD–11 code set in the August 22, 2008 

proposed rule (73 FR 49805), noting that 

the World Health Organization (WHO) 

has only begun preliminary work on 

ICD–11. There are no firm timeframes 

established for completion of the ICD– 

11 developmental work, testing or 

release for use date. We are aware of 

reports that the WHO’s alpha version of 

ICD–11 may be available for testing in 

2010, with possible approval of ICD–11 

for general worldwide use in 2014. 

However, work cannot begin on 

developing the necessary U.S. clinical 

modification to the ICD–11 diagnosis 

codes or the ICD–11 companion 

procedure codes until ICD–11 is 

officially released. Development and 

testing of a clinical modification to ICD– 

11 to make it usable in the United States 

will take an estimated additional 5 to 6 

years. We estimated that the earliest 

projected date to begin rulemaking for 

implementation of a U.S. clinical 

modification of ICD–11 would be the 

year 2020. 

The suggestion that we wait and 

adopt ICD–11 instead of ICD–10–CM 

and ICD–10–PCS does not consider that 

the alpha-numeric structural format of 

ICD–11 is based on that of ICD–10, 

making a transition directly from ICD– 

9 to ICD–11 more complex and 

potentially more costly. Nor would 

waiting until we could adopt ICD–11 in 

place of the adopted standards address 

the more pressing problem of running 

out of space in ICD–9–CM Volume 3 to 

accommodate new procedure codes. 

Finally, the development of a United 

States Disease-Entity Coding System 

(USDECS), which would involve 

developing a totally new classification 

system not based on any previous 

classification system platforms, would 

require even more time than 

implementing ICD–11, and would also 

hamper efforts to evaluate United States 

data in the context of other countries’ 

experiences. 

Comment: A few commenters stated 

that HHS needs to ensure that the use 

of ICD–10–CM and ICD–10–PCS code 

sets will not conflict with other 

federally recognized standards. 

Response: We assume the commenter 

is referring to Secretarially recognized 

interoperability standards 

recommended by the Healthcare 

Information Technology Standards 

Panel (HITSP), a cooperative 

partnership between the public and 

private sectors formed to harmonize and 

integrate standards that will meet 

clinical and business needs for sharing 

information among organizations and 

systems. In some HITSP interoperability 

specifications, including those for 

Electronic Health Records, Laboratory 

Results Reporting and Biosurveillance, 

HITSP has defined or identified specific 

interoperability standards, including 

use of SNOMED–CT®, to support 

interoperability of systems. As 

discussed in the August 22, 2008 

proposed rule (73 FR 49803), ICD–10– 

CM and ICD–10–PCS are classification 

coding systems while SNOMED–CT® is 

a clinically complex terminology 

standard. As we noted in the August 22, 

2008 proposed rule, we do not believe 

that SNOMED–CT® is a suitable 

standard for reporting medical 

diagnoses and hospital inpatient 

procedures for purposes of 

administrative transactions. The 

numerous codes would be impractical 

to assign manually and are not suited to 

the secondary purposes for which 

classification systems like ICD–10 codes 

are used because of their size and 

considerable granularity, complex 

hierarchies, and lack of reporting rules. 

(See 73 FR 49803–49804). SNOMED– 

CT® is not a substitute for ICD–10 as a 

coding system, but, as further noted in 

the August 22, 2008 proposed rule, the 

benefits of using SNOMED–CT®

increase if such use is linked to a 

classification system such as ICD–10– 

CM and ICD–10–PCS. Mapping would 

be used to link SNOMED–CT® to ICD– 

10 code sets. Plans are underway to 

develop these crosswalks, so a transition 

to ICD–10 code sets will ultimately 

facilitate realizing the benefits of using 

the specified interoperability standards 

including SNOMED–CT®. Moreover, it 

is the promulgation of regulations, and 

not the HITSP process, that dictates 

which standards are ultimately to be 

used for administrative transactions. 

Comment: A number of commenters 

stated that quality performance 

measures currently used for programs 

such as the Physician Quality Reporting 

Initiative (PQRI) are based on ICD–9– 

CM diagnosis codes, and it is unclear 

how the change to ICD–10 would 

impact those programs. 

Response: We anticipate that the use 

of ICD–10–CM, with its greater detail 

and granularity, will greatly enhance 

our capability to measure quality 

outcomes. We acknowledge that quality 

performance outcome measures are 

currently used for high-profile 

initiatives such as the hospital pay-forreporting program. The greater detail 

and granularity of ICD–10–CM and ICD– 

10–PCS will also provide more 

precision for claims-based, value-based 

purchasing initiatives such as the 

hospital-acquired conditions (HAC) 

payment policy. Crosswalks that allow 

the industry to convert ICD–9–CM codes 

into ICD–10–CM and ICD–10–PCS codes 

(and vice versa) are already in existence. 

These crosswalks and others that are 

developed during the implementation 

period will allow the industry to 

convert payment systems, HAC payment 

policies, and quality measures to ICD– 

10. We note that, under this rule, ICD– 

10 codes will not be implemented as a 

HIPAA code set until 2013. Programs 

that offer incentives that are based on 

performance outcome measures that 

may be impacted by the changeover 

from ICD–9–CM to ICD–10–CM will 


sroberts on PROD1PC70 with RULES
Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations 3333 

have sufficient time to plan for a smooth 

transition to ICD–10 coding. Our own 

such preparation will include ICD–10 

updates to the quality measures as part 

of our routine regulatory process. 

B. Compliance Date 

In the August 22, 2008 proposed rule, 

we proposed October 1, 2011 as the 

compliance date for ICD–10–CM and 

ICD–10–PCS code sets for all HIPAA 

covered entities. To illustrate our 

implementation timeline for 

preliminary planning purposes, we also 

published in the proposed rule (73 FR 

49807) a draft implementation timeline 

for both Version 5010 and ICD–10–CM 

and ICD–10–PCS. 

Comment: While an overwhelming 

majority of commenters favored 

adoption of ICD–10–CM and ICD–10– 

PCS, they expressed many different 

positions regarding the compliance date. 

Most commenters disagreed with the 

proposed October 1, 2011 compliance 

date, stating that it did not provide 

adequate time for industry to train 

coders and complete systems 

changeovers and testing. 

In general, commenters expressed 

particular concern about the industry’s 

ability to implement both ICD–10 and 

the concurrently proposed X12 Version 

5010 transactions standards (Version 

5010) in the proposed timeframe. The 

commenters pointed out that this 

timeframe would jeopardize plans’ 

ability to process claims and could 

therefore result in more unpaid or 

improperly paid claims. They also 

pointed out that this compliance date 

would provide less time for adopting 

ICD–10–CM and ICD–10–PCS than the 

actual amount of time it took industry 

to implement other HIPAA standards, 

including the National Provider 

Identifier. One commenter proposed 

incentive payments to HIPAA covered 

entities to help them achieve 

compliance given the short compliance 

timeframe. 

NCVHS’ September 26, 2007 

recommendation on the implementation 

of Version 5010 and ICD–10 was 

frequently cited by commenters as being 

the benchmark against which they 

measured their own recommendations. 

Some commenters stated that we should 

further consider the NCVHS 

recommendation to the Secretary that 

there be a 2-year time gap between the 

finalization of the implementation of 

Version 5010, and compliance with 

ICD–10. A number of commenters 

interpreted the NCVHS 

recommendation as being that of a 3- 

year time gap, and cited that as their 

basis for supporting a 2013 or in some 

instances, a 2014 compliance date for 

ICD–10. 

In fulfillment of part of its HIPAAmandated responsibilities, NCVHS 

submitted recommendations to HHS 

that suggested establishing two different 

levels of compliance for the 

implementation of ICD–10–CM and 

ICD–10–PCS codes sets relative to 

compliance with Version 5010. ‘‘Level 1 

compliance,’’ as interpreted by NCVHS, 

would mean that the HIPAA covered 

entity could demonstrate that it could 

create and receive ICD–10–CM and ICD– 

10–PCS compliant transactions. ‘‘Level 

2 compliance,’’ as interpreted by 

NCVHS, would mean that HIPAA 

covered entities had completed end-toend testing with all of their trading 

partners. NCVHS further recommended 

that no more than one implementation 

of a HIPAA transaction or coding 

standard be in Level 1 at any given time, 

which tacitly suggests that Level 2 

testing for Version 5010 could, in 

NCVHS’ estimation, reasonably take 

place concurrently with initial Level 1 

activities associated with ICD–10 

implementation. 

As commenters noted, the NCVHS 

letter stated that ‘‘it is critical that the 

industry is afforded the opportunity to 

test and verify Version 5010 up to two 

years prior to the adoption of ICD–10.’’ 

The letter’s Recommendation 2.2 further 

states that ‘‘HHS should take under 

consideration testifier feedback 

indicating that for Version 5010, two 

years will be needed to achieve Level 1 

compliance.’’ 

A small number of commenters 

supported the proposed October 1, 2011 

implementation date. They believed that 

the date was achievable, and stressed 

that the benefits of ICD–10 are so 

significant that an aggressive 

implementation timetable was justified 

because it would make additional 

information available that would 

support health care transparency, and 

thereby benefit patients, and that further 

delays in implementation would result 

in increased implementation costs. 

Others simply stated that the time had 

come for the U.S. to catch up with the 

rest of the world in using ICD–10. 

A smaller number of commenters 

supported an implementation date of 

October 1, 2012. They, too, cited the 

benefits of ICD–10, and argued that a 

one-year postponement of the proposed 

October 2011 date would provide 

sufficient time in which the industry 

could achieve compliance with ICD–10– 

CM and ICD–10–PCS. A few 

commenters explicitly noted that a 2012 

implementation date would allow them 

adequate time to budget and plan for the 

changeover. Other commenters stated 

that ICD–10 compliance should come no 

earlier than October 2012; and still 

others recommended an October 2012 

compliance date if such a compliance 

date would allow for a 3-year 

implementation timetable for ICD–10 

following the Version 5010 compliance 

date. 

A number of commenters suggested a 

compliance date of October 2013, citing 

insufficient time in which to install and 

test ICD–10–CM and ICD–10–PCS 

within their claims processing and other 

related IT systems, the need for coder 

and provider education and outreach, 

and the time needed for implementation 

of previous HIPAA standards. These 

commenters stated that an October 2013 

date would afford them with the 

minimum of 2 years after implementing 

Version 5010 that they said they needed 

in order to comply with ICD–10–CM 

and ICD–10–PCS. The compliance date 

must occur on October 1 of any given 

year in order to coincide with the 

effective date of the annual Medicare 

Inpatient Prospective Payment System 

(IPPS). A number of commenters 

supported a 2013 compliance date as 

more realistic than the proposed 2011 

date, and urged that we move quickly to 

publish a final rule to adopt ICD–10–CM 

and ICD–10–PCS. Other commenters 

simply noted that 2013 was a reasonable 

date that would allow more time for 

effective implementation and training 

on the proper use of code sets. 

Commenters noted that this date should 

give HIPAA covered entities sufficient 

time to fully implement Version 5010 

before moving on to ICD–10. A few 

other commenters noted that the 

compliance date for ICD–10 should not 

be any earlier than 2013. 

The majority of commenters, 

including individual providers and 

industry associations, supported a 

compliance date of October 1, 2014 

which they said could be less costly, 

allow more time for education, and 

would better ensure that the desired 

benefits of the ICD–10–CM and ICD–10– 

PCS code sets are achieved. The 

majority of submissions that supported 

a 2014 compliance date were form 

letters submitted by members 

representing the position of one 

industry professional association. 

A few commenters suggested an 

implementation date of October 1, 2015 

or beyond, once again citing their 

perceptions of the high cost of the 

transition to ICD–10–CM and ICD–10– 

PCS, and the need for extensive 

education and training. 

Other commenters did not propose a 

specific compliance date, but rather 

indicated the need for 3 years after the 

Version 5010 compliance date. Other 


sroberts on PROD1PC70 with RULES
3334 Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations 

commenters suggested that 95 percent of 

covered entities be successfully 

converted to Version 5010 prior to the 

start of ICD–10 implementation. 

One commenter stated that the 

adoption of ICD–10–CM should be 

delayed until the Diagnostic and 

Statistical Manual of Mental Disorders, 

Fifth Edition (DSM–V) has been 

released. 

Response: We recognize that the 

compliance date issue is crucial to the 

successful implementation of ICD–10. 

We have assessed the comments 

carefully, balancing the benefits of 

earlier implementation against the 

potential risk of establishing a deadline 

that does not provide adequate time for 

successful implementation and 

thorough testing. We cannot consider a 

compliance date for ICD–10 without 

considering the dependencies between 

implementing Version 5010 and ICD– 

10. We recognize that any delay in 

attaining compliance with Version 5010 

would negatively impact ICD–10 

implementation and compliance. The 

lack of information on cost estimate 

impacts also supports a later ICD–10 

compliance date to allow the industry to 

spread out any unanticipated costs over 

a longer period of time. 

Pursuant to a regulation published in 

this same edition of the Federal 

Register, the Version 5010 compliance 

date has now been established as 

January 2012, to afford the industry an 

additional year, for a total of 3 years to 

achieve compliance with Version 5010. 

From our review of the industry 

testimony presented to NCVHS and 

comments received on our August 22, 

2008 proposed rule, it appears that 24 

months (2 years) is the minimum 

amount of time that the industry needs 

to achieve compliance with ICD–10 

once Version 5010 has moved into 

external (Level 2) testing. 

We believe that the spirit and intent 

of the NCVHS letter recommends that 

the Secretary move the industry forward 

on the adoption and implementation of, 

and compliance with, Version 5010 and 

the ICD–10–CM and ICD–10–PCS code 

sets. At the same time, NCVHS 

recognizes the wide-reaching impacts of 

the transition to ICD–10–CM and ICD– 

10–PCS, and in doing so, implies that 

any implementation plans and 

timetables should be structured as to be 

realistic for the industry as a whole. 

In establishing the ICD–10 

compliance date, we have sought to 

select a date that achieves a balance 

between the industry’s need to 

implement ICD–10 within a feasible 

amount of time, and our need to begin 

reaping the benefits of the use of these 

code sets; stop the hierarchical 

deterioration and other problems 

associated with the continued use of the 

ICD–9–CM code sets; align ourselves 

with the rest of the world’s use of ICD– 

10 to achieve global health care data 

compatibility; plan and budget for the 

transition to ICD–10 appropriately; and 

mitigate the cost of further delays. 

We believe that an October 1, 2013 

ICD–10 compliance date achieves that 

balance, being 2 years later than our 

proposed October 2011 ICD–10 

compliance date and providing a total of 

nearly 5 years from the publication of 

the Version 5010 final rule through final 

compliance with ICD–10. The 32 

months from completion of Level 1 

testing for Version 5010 in January 2011 

(at which point Level 1 ICD–10 

activities can begin) to the October 1, 

2013 compliance date for ICD–10 

should allow the industry ample time to 

effect systems changeovers and testing 

so as to become fully compliant with the 

ICD–10–CM and ICD–10–PCS code sets. 

We note that those requesting 

compliance dates of 2014 and later did 

not suggest methods for mitigating the 

negative effects of delaying compliance, 

including the increased implementation 

costs which may result from the 

increase in the number and size of 

legacy systems that will need to be 

updated; delay in achieving the benefits 

identified in the August 22, 2008 

proposed rule; and the impacts of 

continued degradation of the code sets. 

We further note that many health plans 

supported a 2013 compliance date. 

Since the complexity of ICD–10 

implementation will be much higher for 

health plans (because after health plans 

update systems to utilize ICD–10 codes, 

they will also have to develop claims 

processing edits based on those codes) 

than for individual providers and 

coders, we take the support of health 

plans for a 2013 compliance date as an 

indication of the reasonableness of this 

timeline. 

It is also important to note that, while 

NCVHS recommended that Level 1 

activities for Version 5010 and ICD–10 

should not overlap, it is inevitable that, 

as covered entities embark on 

requirements analysis for Version 5010, 

they will identify ICD–10 issues as a 

natural offshoot of those efforts. Thus, 

even if entities choose not to begin fullscale ICD–10 implementation efforts 

until Version 5010 has reached Level 2 

compliance, they will likely begin that 

phase with a preexisting knowledge 

base about ICD–10, and will also have 

identified lessons learned and best 

practices that will inform those later 

activities. 

We also note that the Diagnostic and 

Statistical Manual of Mental Disorders, 

Fifth Edition (DSM–V) is projected to be 

released in 2012 by the American 

Psychiatric Association (APA). CDC is 

working with APA to ensure that ICD– 

10–CM and DSM–V codes match, and 

that the timing of this projected release 

would conform with the commenter’s 

request that the ICD–10 compliance date 

occur after the release of DSM–V. 

We are adopting the ICD–10–CM and 

ICD–10–PCS as medical data code sets 

under HIPAA, replacing ICD–9–CM 

Volumes 1 and 2, and Volume 3, with 

a compliance date of October 1, 2013, 

and have updated the draft ICD–10/ 

Version 5010 implementation timeline 

which previously appeared in the 

proposed rule (73 FR 49807) to read as 

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 partners and move into production; dual processing mode) for Versions 5010 and 

D.0.

01/11: Begin initial compliance activities (gap analysis, design, development, internal testing). 


sroberts on PROD1PC70 with RULES
Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations 3335 

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 

the October 1 compliance date should 

be changed to better align with the 

health care industry’s regularly 

scheduled annual system changeovers. 

Response: The commenter did not 

reference specific system changeovers, 

suggest an alternative date, or specify 

the regularly scheduled system changes 

to which it refers, so we are unable to 

assess the validity of the comment. We 

received no other comments opposed to 

an October 1 date. The October 1 date 

was selected to ensure that the ICD–10 

compliance date would coincide with 

the effective date of the Medicare IPPS 

update. 

Comment: A number of commenters 

urged that the compliance date for the 

HIPAA health care claims attachment 

standard not coincide with the Level 1 

implementation activities related to 

either Version 5010 or ICD–10. 

Response: We will take this into 

consideration in establishing a 

compliance date in the health care 

claims attachment standard final rule. 

C. Implementation Period 

Comment: A minority of commenters 

disagreed with our proposal to establish 

a single compliance date for ICD–10. 

Some commenters suggested a variety of 

alternatives for phased-in or staggered 

implementation of the ICD–10–CM and 

ICD–10–PCS code sets in order to 

alleviate the impact of implementation. 

A number of these commenters 

suggested that we allow ‘‘dual 

processing’’: in other words, acceptance 

of either ICD–9 or ICD–10 code sets on 

any given claim for a specified period of 

time. They expressed concern about 

having a single date on which all 

covered entities would have to convert 

to ICD–10, and stressed the need for 

testing between trading partners to 

ensure that claims are properly 

processed. They also pointed out that 

covered entities would have to maintain 

dual processes in any case to process 

old claims. 

Other commenters proposed that the 

ICD–10–CM diagnosis and ICD–10–PCS 

procedure codes be implemented at 

different times. A few commenters 

suggested adopting other nations’ 

approaches to implementing ICD–10 

such as those used in Canada and 

Australia, specifically, staggered 

implementation of the new codes either 

by geographic region, by covered entity 

category, and/or allowing for a later 

implementation date for small entities. 

Other commenters pointed out that 

diagnosis and procedure codes affect the 

amount of payment, and that dual 

processing (that is, the possibility that a 

claim for services provided on a given 

date being processed for reimbursement 

at two different rates based on two code 

sets) would add significant complexity. 

Response: Implementation of ICD–10 

will require significant business and 

technical changes for all covered 

entities. 

We acknowledge that ICD–9–CM 

codes will continue to be used only for 

the period of time during which old 

claims (those with dates of service prior 

to October 1, 2013) continue through the 

payment cycle. We do not believe that 

this period during which covered 

entities will be maintaining the ability 

to work in two code systems is what 

commenters meant by ‘‘dual 

processing.’’ Rather, we believe that 

commenters utilized the term ‘‘dual 

processing’’ to mean the provider’s 

ability to use their own discretion in 

deciding whether to submit claims 

using ICD–9 or ICD–10 code sets after 

the October 1, 2013 compliance date. 

Such use of more than one code set for 

coding diagnoses or procedures, 

whether in a medical record or claim, 

would cause significant business 

process duplication. It could result in 

different information being shared about 

a patient because the ICD–10 code set is 

so much more robust than ICD–9, and 

the code for a given diagnosis/procedure 

does not necessarily match one code to 

one code between the code sets. 

While HHS could elect to provide for 

some sort of ‘‘staggered’’ 

implementation dates, we have 

concluded that it would be in the health 

care industry’s best interests if all 

entities were to comply with the ICD– 

10 code set standards at the same time 

to ensure the accuracy and timeliness of 

claims and transaction processing. 

We agree with commenters that 

maintenance of two code sets for a 

significant span of time such that, on 

any specific date of service in that time 

frame one could submit, process and/or 

receive payment on a claim based on 

ICD–9–CM or the ICD–10–CM and ICD– 

10–PCS code sets would raise 

considerable logistical issues and add to 

the complexity of the ICD–10 code set 

implementation. One would need to 

employ/operate duplicate coding staffs 

and systems. For example, we 

understand that Medicare’s systems will 

not allow the use of two different code 

sets for services provided on the same 

date, and we presume that other covered 

entities’ systems were likewise not 

designed with such capacities. Even if 

such coding and processing capabilities 

were available, the biller would have to 

ensure that claims indicated the coding 

system under which they were 

generated, and the recipient would need 

to put measures in place to avoid 

processing on the wrong system. We 

believe that this would impose a very 

significant burden on plans and 

providers/suppliers. The availability 

and use of crosswalks, mappings and 

guidelines should assist entities in 

making the switchover from ICD–9 to 

ICD–10 code sets on October 1, 2013, 

without the need for the concurrent use 

of both code sets in claims processing, 

medical record and related systems with 

respect to claims for services provided 

on the same day. Furthermore, although 

the Act gives the Secretary the authority 

to extend the time for compliance for 

small health plans if the Secretary 

determines that it is appropriate, we 

believe that different compliance dates 

based on the size of a health plan would 

also be problematic, since a provider 

has no way of knowing if a health plan 

qualifies as a small health plan or not. 

As stated in the August 22, 2008 

proposed rule (73 FR 49806), a phasedin implementation of ICD–10 that 

allows for payment systems to accept 

both ICD–9 and ICD–10 codes for 

services rendered on the same day 

would constitute a significant burden on 

the industry. We continue to believe 

that, based on our previous HIPAA 

standards implementation experience 


sroberts on PROD1PC70 with RULES
3336 Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations 

and in consideration of the complexities 

of the U.S. health care system’s multipayer system, allowing both code 

systems to be used and reported at the 

same time (i.e., for services/procedures 

performed on the same day) would 

create confusion in processing and 

interpreting coded data, and claims 

could likely be denied for services, or 

returned as errors if processing errors 

resulted in edits that indicated too many 

or too few digits. It would be more 

costly for the various health care 

payment systems used in the United 

States to accept and process claims with 

both ICD–9 and ICD–10 code sets. 

Providers would have to maintain both 

coding systems, and there would be 

significant system implications in trying 

to determine which coding system was 

being used to report the coded data. 

Adopting diagnosis and procedure 

codes at different times would result in 

similar system problems, namely 

pairing an ICD–9 diagnosis code with an 

ICD–10 procedure code, or vice versa. 

For more examples of problems 

associated with maintaining the two 

coding systems concurrently, please 

refer to the August 22, 2008 proposed 

rule (73 FR 49806). 

Allowing the industry to use ICD–10– 

CM and ICD–10–PCS codes voluntarily 

would also result in confusion. Systems 

would not be able to recognize whether 

the code was an error made in an ICD– 

9 code entry, or actually an ICD–10 

code, again causing rejection errors. 

We continue to believe it is in the 

industry’s best interest, and that 

includes small health plans, to have a 

single compliance date for ICD–10–CM 

and ICD–10–PCS. This will reduce the 

burden on both providers and insurers 

who will be able to edit on a single new 

coding system for claims received for 

encounters and discharges occurring on 

or after October 1, 2013, instead of 

having to maintain two coding systems 

over an extended period of time. 

Providers and insurers would use ICD– 

9–CM edits and payment logic for 

claims relating to encounters and 

discharges occurring prior to the date of 

compliance, and the ICD–10–CM and 

ICD–10–PCS edits and payment logic for 

all claims relating to encounters and 

discharges occurring on or after the 

ICD–10 compliance date. They would 

not have the burden of selectively 

applying either the ICD–9–CM or ICD– 

10–CM edits and logic to claims before 

the compliance date, and as a result, we 

have not established dates for Level 1 

and Level 2 testing compliance for ICD– 

10 implementation. We encourage all 

industry segments to be ready to test 

their systems with ICD–10 as soon as it 

is feasible. We believe that the October 

1, 2013 compliance date will allow 

various payment systems to correctly 

edit the codes and make payments 

based on the payment and coding 

system in effect at that time, and is 

sufficiently far in the future to provide 

all sectors of the industry adequate time 

to implement the code sets. 

As described in section XI.D of the 

August 22, 2008 proposed rule (73 FR 

49827), a number of phase-in 

compliance options for ICD–10–CM and 

ICD–10–PCS were considered and 

rejected because of the nature of the 

U.S. multi-payer system. Phased-in 

ICD–10–CM and ICD–10–PCS 

compliance based on staggered dates set 

by geography over extended periods of 

time would require plans (especially 

national plans), and possibly multi-state 

chain or national providers/suppliers or 

health care entities that were vertically 

integrated, to maintain and operate both 

ICD–9 and ICD–10 coding systems for 

an extended period of time. The time 

frame during which covered entities 

will need to learn and use the new ICD– 

10 codes, while at the same time 

continuing to work with the old ICD–9 

codes, should be minimized because 

during this period there is an increase 

in the chance of errors in payments, and 

such confusion and uncertainty in the 

provider/supplier community could 

result in undesirable delays in 

processing claims that should be 

avoided to the extent possible. We 

believe that maintaining dual systems 

concurrently for an extended period of 

time would impose a very significant 

burden on plans and providers/ 

suppliers. In the August 22, 2008 

proposed rule (73 FR 49827), we also 

referenced the Canadian and Australian 

experience with their geographic 

phased-in ICD–10 implementation 

approach, and the problems they 

reported that were inherent in that 

approach. We have received no new 

information on other countries’ 

experience with the implementation of 

their respective version of ICD–10 that 

would lead us to reverse our initial 

conclusion that a phased-in approach 

based on geographic boundaries is not 

in the best interests of the industry. 

Therefore, in consideration of the many 

problems inherent with these phased-in 

and/or staggered implementation 

alternatives, we are adopting October 1, 

2013 as the compliance date for the 

ICD–10–CM and ICD–10–PCS medical 

data code sets. 

D. Date of Admission Versus Date of 

Discharge Coding 

Comment: We proposed to follow the 

current practice of implementing new 

code set versions effective with the date 

of service, which for purposes of 

inpatient facilities means the medical 

codes in effect at the time of patient 

discharge. For example, if a patient is 

admitted in September and the patient 

is discharged on or after the October 1 

compliance date, the hospital would 

have to assign the codes in effect on 

October 1. Several commenters 

requested that inpatient hospital 

facilities use the version of the codes in 

effect at the date of admission instead of 

the date of discharge because this would 

benefit inpatient facilities that use 

interim billing. They proposed that 

hospitals that did not use interim billing 

could continue to use the date of 

discharge for determining the version of 

ICD code sets to be used for coding. 

Response: It has been a long standing 

practice for inpatient facilities to use the 

version of ICD codes in effect on the 

date of discharge. Most hospitals do not 

code their records for billing purposes 

until the patient is discharged. Much 

information is gathered through the 

process of inpatient treatment. Tests are 

performed, surgeries may be completed, 

and additional diagnoses may be 

assigned. Therefore, the documentation 

is more complete by the time a patient 

is discharged. At this point the hospital 

coder assigns the codes that are in effect 

on the date of discharge. All of our 

national inpatient data is based on this 

practice. We do not agree that changing 

this practice would be of benefit to 

hospitals, and maintain that the 

opposite would be true, and is counter 

to the implementation of a single, 

consistent ICD–10 implementation date. 

Furthermore, using the date of 

admission for some types of claims 

coding, and date of discharge for other 

types of claims coding would also 

greatly disrupt national data and create 

problems in analyzing what has, until 

this point in time, been a consistent 

approach to coding medical records. 

Hospitals engaged in interim billing will 

not see any change from their current 

practices. They will continue to use the 

code set in effect for services occurring 

prior to October 1, 2013 and will use the 

next year’s update (in this case, ICD–10– 

CM and ICD–10–PCS for 2013) for 

services occurring on or after October 1, 

2013. 

Therefore, we will not change the 

current practice followed by inpatient 

facilities of coding based on the date of 

discharge. 

E. Coding Guidelines 

Comment: Several commenters 

expressed the need for ICD–10 coding 

guidelines to be developed and 

maintained. Some commenters 

incorrectly pointed out that guidelines 


sroberts on PROD1PC70 with RULES
Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations 3337 

were not available, while others were 

aware of the ICD–10 guidelines that are 

posted on the CMS and CDC Web sites. 

Commenters expressed concern that the 

ICD–10–CM guidelines on CDC’s Web 

page were created in 2003, and stated 

that they are ‘‘draft’’ guidelines that 

have not been updated. Commenters 

further indicated that this lack of 

finalized coding guidelines will make it 

difficult for software and systems 

vendors to develop ICD–10 products 

and for covered entities to begin training 

staff. Commenters also stated that there 

should be a single, authoritative source 

for ICD–10 coding guidelines to avoid 

variations in the interpretation and use 

of the codes. These commenters 

questioned whether the implementation 

of ICD–10 should be delayed until such 

time as the guidelines can be updated. 

Response: We agree that it is 

important to have an official set of ICD– 

10 coding guidelines, and that they be 

properly maintained. CMS, CDC, AHA 

and AHIMA joined forces some time ago 

under a long-standing memorandum of 

understanding to develop and approve 

the guidelines for ICD–9–CM code set 

coding and reporting. These 

‘‘Cooperating Parties’’ conduct annual 

reviews of these guidelines and develop 

new guidelines as needed, considering 

stakeholder input obtained through 

public meetings of the ICD–9–CM 

Coordination and Maintenance 

Committee, and through input 

submitted from AHA and AHIMA 

members. Only those guidelines 

approved by the Cooperating Parties are 

official and posted to CDC and CMS 

Web sites, and this has proven to be an 

effective approach to guideline 

development and maintenance. The 

Cooperating Parties will finalize a 2009 

version of the Official ICD–10–CM 

coding guidelines, which will be posted 

to CDC’s Web site in January 2009. 

Updated coding guidelines for ICD–10– 

PCS are included in the Reference 

Manual already posted to CMS’ Web site 

at http://www.cms.hhs.gov/ICD10/ 

Downloads/pcs_refman.pdf. Given the 

imminent availability of updated coding 

guidelines, we do not believe that it 

would be appropriate to further delay 

the adoption of the ICD–10 code sets 

pending the issuance of the updated 

guidelines. 

F. ICD–10 Mappings and Crosswalks 

Comment: Many commenters 

emphasized the importance of reliable 

crosswalks between ICD–9–CM and 

ICD–10–CM and ICD–10–PCS. Some 

commenters incorrectly stated that there 

were no crosswalks available between 

ICD–9–CM and ICD–10–CM and ICD– 

10–PCS diagnosis and procedure codes 

and pointed out the importance of such 

crosswalks for implementation. Other 

commenters stated that they would 

require ‘‘additional bi-directional 

mapping developed by a single 

authoritative national source prior to 

implementation,’’ to prevent loss of data 

integrity. Commenters expressed 

concern about possible crosswalk and 

mapping errors, the lack of a crosswalk 

between ICD–10–CM and the ICD–10 

code set for international data 

comparability, and about the ability of 

available crosswalks to serve as a useful 

tool in data conversion. Some 

commenters stated there should be an 

extension of the timeline for ICD–10 

compliance due to the limited 

availability and utility of the existing 

crosswalks. Several commenters 

recommended that HHS inform industry 

stakeholders how often these mappings 

will be updated and how they will be 

maintained. One commenter asked 

whether companies may develop their 

own proprietary mapping systems and if 

this could impact the compliance dates. 

We also received a comment that, if 

ICD–10 is implemented, we should 

provide a crosswalk between the 

Ambulatory Payment Classification 

(APC) groups and the Medicare 

Severity—Diagnosis Related Groups 

(MS–DRGs). 

Response: We agree that crosswalks 

between ICD–9–CM and ICD–10–CM 

and ICD–10–PCS will be critical. 

Section 1174(b)(2)(B)(ii) of the Act states 

that if a code set is modified under this 

subsection, the modified code set shall 

include instructions on how data 

elements of health information that 

were encoded prior to the modification 

may be converted or translated so as to 

preserve the informational value of the 

data elements that existed before the 

modification. Any modification to a 

code set under this subsection shall be 

implemented in a manner that 

minimizes the disruption and cost of 

complying with such modification. 

In anticipation of that possible need 

if/when ICD–10 code sets were to be 

adopted, authoritative, detailed bidirectional (that is, they can be used to 

translate from the old code to the new, 

or from the new to the old) crosswalks, 

or mappings, which we refer to as 

General Equivalency Mappings (GEMs), 

have been developed between ICD–9– 

CM Volumes 1 and 2 and ICD–10–CM 

and the ICD–9–CM Volume 3 and ICD– 

10–PCS. These mappings were 

developed with stakeholder input into 

their creation and maintenance, and 

discussed at public meetings of the ICD– 

9 Coordination and Maintenance 

Committee. 

CDC developed one such bidirectional mapping between ICD–9– 

CM diagnosis codes and ICD–10–CM. 

This mapping, and an accompanying 

guide explaining how to use the 

mapping, are available on CDC’s Web 

page at http://www.cdc.gov/nchs/about/ 

otheract/icd9/icd10cm.htm, as well as 

the CMS Web page at http:// 

www.cms.hhs.gov/ICD10/02_ICD–10- 

PCS.asp. 

CMS developed bi-directional 

mappings between ICD–9–CM Volume 3 

and ICD–10–PCS, along with an 

accompanying guide explaining how to 

use the 2008 mappings, which are 

posted to the CMS Web page at http:// 

www.cms.hhs.gov/ICD10/ 

01m_2009_ICD–10-PCS.asp#TopOfPage. 

CDC’s mapping was highly successful 

as a clinical equivalent was reported to 

be possible in all but 0.6 percent of ICD– 

10–CM codes. In those 0.6 percent of 

ICD–10–CM codes, a new diagnosis 

concept was introduced into ICD–10– 

CM that was not previously found in 

ICD–9–CM. Therefore, in 0.6 percent of 

the ICD–10–CM codes, there were no 

similar codes in ICD–9–CM to which the 

ICD–10–CM code could be mapped, and 

this is clearly indicated in the GEM 

mappings. However, there are general 

equivalence mappings for over 99 

percent of all ICD–10–CM codes and for 

100 percent of the ICD–10–PCS codes. 

The ICD–9–CM Coordination and 

Maintenance Committee reported on the 

use of the GEM mapping in converting 

the MS–DRGs from ICD–9–CM to ICD– 

10–CM codes. A complete report of this 

activity is included in the September 

24–25, 2008 ICD–9–CM Coordination 

and Maintenance Committee meeting 

summary which can be found at 

http://www.cms.hhs.gov/ 

ICD9ProviderDiagnosticCodes/ 

03_meetings.asp#TopOfPage. 

The use of the GEM mappings to 

convert the MS–DRGs from ICD–9–CM 

to ICD–10 codes demonstrates that the 

GEM mappings are extremely accurate 

and useful. The GEM mappings were 

able to convert 95 percent of the ICD– 

9–CM diagnosis codes in the digestive 

part of the MS–DRGs to the appropriate 

ICD–10–CM and ICD–10–PCS codes. For 

these digestive system MS–DRGs, the 

GEM mappings automatically converted 

99 percent of the ICD–9–CM digestive 

system diagnoses codes and 91 percent 

of the ICD–10–PCS procedure codes to 

the appropriate digestive system ICD–10 

codes. Five percent required some 

additional analysis, and we believe that 

future experience will increase that rate 

of conversion. We trust that these will 

be of great assistance to the industry in 

converting payment, quality and other 

types of systems from ICD–9–CM to 


sroberts on PROD1PC70 with RULES
3338 Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations 

ICD–10–CM and ICD–10–PCS and vice 

versa. 

There may be value in annually 

revising these bidirectional mappings to 

allow for conversions between ICD–9– 

CM codes and the ICD–10–CM and ICD– 

10–PCS codes as the ICD–10 code sets 

are updated annually after their 

adoption. The ICD–9–CM Coordination 

and Maintenance Committee is the 

public forum used to discuss updates to 

ICD–9–CM and it will be used to discuss 

updates to the ICD–10 coding system, as 

well as the mapping between the 

systems. As previously discussed, this 

Committee will be re-named the ICD–10 

Coordination and Maintenance 

Committee once ICD–10 is 

implemented. The Committee will 

continue to discuss issues such as 

mappings to the prior coding system, 

ICD–9–CM. The Committee will discuss 

the need to continue updating these 

mappings for a minimum of 3 years after 

the ICD–10–CM and ICD–10–PCS final 

compliance date. Should the industry 

recommend that this period be extended 

by several years, then we would 

anticipate that the mappings will 

continue to be updated through the 

auspices of the Committee, and will 

seek input from industry stakeholders 

through the Committee as to whether 

these mappings are beneficial to 

industry, and whether mappings to 

ICD–9–CM should be updated for an 

additional period of time. 

CMS also has developed a 

reimbursement mapping that can be 

used to update payment systems that 

gives the ICD–10–CM code that best 

matches the previously used ICD–9–CM 

code. This reimbursement mapping will 

allow other payers to more quickly 

determine how they want to classify a 

particular ICD–10 code within their 

payment system. Should payers want to 

consider refinements to their payment 

systems based on the additional detail 

provided by ICD–10, they may do so. 

The complete ICD–10–CM and ICD–10– 

PCS GEMs may also assist in those cases 

where additional information is needed, 

which is not found in the more 

streamlined reimbursement mapping. 

For details of the discussion of the 

reimbursement mappings at the ICD–9– 

CM Coordination and Maintenance 

Committee, please access the CMS Web 

site at http://www.cms.hhs.gov/ 

ICD9ProviderDiagnosticCodes/ 

03_meetings.asp#TopOfPage. 

CMS will post to this same Web site 

the reimbursement mapping file along 

with the 2009 versions of the GEMS and 

the 2009 version of ICD–10–PCS by the 

end of 2009. CDC will be posting the 

2009 version of the ICD–10–CM GEMs 

to their Web site at http://www.cdc.gov/ 

nchs/about/otheract/icd9/icd10cm.htm 

by the end of 2009. 

CMS will use mappings to convert the 

Medicare-Severity Diagnosis Related 

Groups (MS–DRGs) from ICD–9–CM to 

ICD–10–CM and ICD–10–PCS. MS– 

DRGs are used by Medicare to 

determine hospital payments under the 

Inpatient Prospective Payment System 

(IPPS). This conversion was discussed 

at the September 24, 2008 ICD–9–CM 

Coordination and Maintenance 

Committee meeting. This presentation 

can be found at: http:// 

www.cms.hhs.gov/ 

ICD9ProviderDiagnosticCodes/ 

03_meetings.asp#TopOfPage. We expect 

that CMS will have converted all MS– 

DRGs to ICD–10 by October 2009, and 

will share those results with payers and 

providers at a future ICD–9–CM 

Coordinating and Maintenance 

Committee meeting. The adoption of the 

final ICD–10 version of MS–DRGs will 

be subject to rulemaking. We encourage 

anyone who has particular concerns 

about possible errors in the crosswalks 

and/or mappings to share them with 

CMS and CDC through the ICD–9–CM 

Coordination and Maintenance 

Committee so that mappings can be 

updated as we move forward toward 

implementation. 

We disagree that we should develop 

a crosswalk between APCs and MS– 

DRGs when ICD–10 is implemented. We 

do not have a crosswalk between the 

current APCs, which are based on CPT 

codes, and MS–DRGs, which are based 

on ICD–9–CM codes. The IPPS, which 

relies on MS–DRGs, and the hospital 

outpatient prospective payment system 

(OPPS), which relies on APCs, were 

developed to reimburse providers in 

different settings, are maintained 

separately, and undergo separate formal 

rulemaking each year. 

Finally, CDC fully intends to produce 

a crosswalk between ICD–10 and ICD– 

10–CM, addressing the need for 

international data comparability, and 

this crosswalk will be completed and 

made available one year prior to the 

ICD–10 compliance date. CDC already 

uses ICD–10 to report cause of death, 

and it is anticipated that this crosswalk 

will be of great interest to those engaged 

in international data reporting. 

Any additional tools will certainly 

assist in the implementation of ICD–10, 

and both CMS and CDC will continue to 

make improvements and refinements to 

their publicly available mappings and 

post them for others to use. Other 

vendors may develop products to assist 

in analyzing codes or converting data, 

but we do not see any reason why the 

availability of such products, whether 

proprietary or non-proprietary, would 

have any bearing on the determination 

of a final compliance date for ICD–10– 

CM and ICD–10–PCS. 

G. ICD–10 Education and Outreach 

Comment: Many commenters stated 

that the proposed October 2011 ICD–10 

compliance date would not allow for 

proper industry education and outreach 

and that the tight timeline would 

constitute a major burden to the 

industry. Commenters expect that 

certified coders would need detailed 

education in order to identify the proper 

codes for accurate billing. Some 

commenters said regular physician 

office staff would need to become 

certified coders, and current certified 

coders would need to get recertified, 

incurring a costly exam fee. 

Many commenters recommended that 

significant education and outreach for 

ICD–10 would be needed, and they 

suggested a number of strategies, 

including the need for national 

associations to collaborate on education 

efforts; a need for a consistent set of 

messages and/or materials from a 

national authoritative source; 

recognition that different audiences/ 

entities (for example, inpatient hospital 

coders) may need different levels of 

training; that in-person training should 

supplement Internet training and 

printed documents; and that CMS 

should provide funding for ICD–10 

training for State Medicaid program 

staff. 

Response: As stated in the August 22, 

2008 proposed rule (73 FR 49807), with 

the publication of this final rule, we will 

begin to proactively conduct outreach 

and education activities which include, 

but are not limited to, roundtable 

conference calls with industry 

stakeholders, development of FAQs, fact 

sheets, and other supporting education 

and outreach materials for industry 

partner dissemination. We also 

anticipate that there will be extensive 

industry-sponsored educational 

opportunities through various 

stakeholder associations. As part of our 

education and outreach efforts, we will 

work closely with industry stakeholders 

to make subject matter experts available 

to them, and to expeditiously help 

stakeholders disseminate relevant 

information at the national, regional and 

local level that will be useful to them in 

educating their respective members. 

Comment: One commenter expressed 

the belief that implementing ICD–10 

will exacerbate the current shortage of 

clinical coders. Other commenters 

stated that we did not account for the 

impact to formal training programs for 

degree and national certificates that will 

need to be updated or redeveloped. 


sroberts on PROD1PC70 with RULES
Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations 3339 

Response: We have received no 

indication from industry and/or 

technical school representatives that the 

changeover from ICD–9 to ICD–10 codes 

might contribute to the existing shortage 

of clinical coders and, in fact, increased 

marketplace demand for coders as a 

result of the adoption of ICD–10–CM 

and ICD–10–PCS may lead to more 

enrollment in coding curriculums. 

School representatives have indicated 

their readiness to adapt to any needed 

ICD–10 curriculum changes and 

anticipate that they will be able to 

produce ‘‘ICD–10 ready’’ clinical coders 

upon graduation from their respective 

institutions. We anticipate that 

educational venues offering coding 

courses are already familiar with 

making annual updates to curriculums 

to reflect yearly code set revisions. The 

final compliance date of October 1, 2013 

should afford educational institutions 

ample time to change their curriculums, 

seek out appropriate educational 

materials and related resources, and 

graduate ICD–10 competent coders. 

Some hospitals may require coders to 

have a certification from a national 

professional association. While 

desirable, this does not appear to be a 

requirement for coders working in 

physician offices or other ambulatory 

settings. We understand that many 

certified coders must meet annual 

continuing educational requirements or 

authorities to maintain their 

certifications. As we have no coding 

certification requirements or authorities, 

we recommend that those concerned 

with future certification standards 

contact the applicable professional 

organizations. 

We agree with commenters that it is 

important that consistent and accurate 

ICD–10–CM and ICD–10–PCS materials 

are developed to assist with national 

training and education. We also agree 

that it is important that educational 

training be a collaborative effort among 

all interested stakeholders. We will 

continue to collaborate with other 

stakeholder organizations on outreach 

and education on the transition from 

ICD–9 to ICD–10, taking into 

consideration the contextual and timing 

needs of different industry segments, 

including hospitals, providers, coders, 

etc., in a way that will ensure all 

affected entities have the resources 

needed to properly code. 

Both AHA and AHIMA will take lead 

roles in developing additional, more 

detailed technical training materials for 

coders. AHA also plans to continue 

their training support activities by 

updating their education materials to 

ICD–10 and will change the name of 

their publication to Coding Clinic for 

ICD–10. AHA has announced that it will 

begin to include ICD–10 information in 

its Coding Clinic in advance of the 

actual ICD–10–CM and ICD–10–PCS 

implementation date. 

CMS has been working collaboratively 

with the Cooperating Parties to develop 

additional ICD–10 educational materials 

which will be posted at: http:// 

www.cms.hhs.gov/ICD10/05_

Educational_Resources.asp#TopOfPage. 

H. Testing 

Comment: A minority of commenters 

stated that ICD–10–CM and ICD–10– 

PCS need more testing prior to 

implementation. Some commenters 

recommended pilot testing, with one of 

those commenters stating that pilot 

testing should take place before the 

issuance of a final rule, on the 

assumption that information gained 

through pilot testing could be used to 

inform the development of a final rule. 

A few commenters stated that more 

internal and external training would be 

needed beyond that which we described 

in the August 22, 2008 proposed rule. 

Another commenter said that additional 

time—between six months to a year— 

should be added to the final Version 

5010 compliance date to allow for 

testing. 

Response: Any pilot testing of ICD– 

10–CM and ICD–10–PCS would 

demonstrate its integration into business 

processes and/or systems, and not the 

appropriateness of its adoption as a 

HIPAA standard through the notice and 

comment rulemaking process. 

Furthermore, were pilot testing to 

demonstrate a need for additional codes, 

etc., these changes could be handled 

through the code set maintenance 

process, without the need for further 

rulemaking to accomplish such changes. 

Therefore, we see no reason to pilot test 

ICD–10–CM and ICD–10–PCS before 

issuing a final rule. 

In the development of the August 22, 

2008 proposed rule (73 FR 49807) draft 

timetable, we accounted for testing with 

both internal and external partners as 

part of the generally accepted industry 

implementation process for the 

implementation of these medical data 

code sets as adopted HIPAA standards. 

This follows similar implementation 

plans undertaken for previously 

adopted and implemented HIPAA 

standards. Such testing is a way to 

determine whether, once systems 

changeovers are in place, transactions 

using the ICD–10–CM and ICD–10–PCS 

code sets would be successfully and 

accurately processed within a HIPAA 

covered entity’s own systems, as well as 

whether that entity can successfully 

transmit such information from its own 

system to a trading partner. We 

welcome the opportunity to work with 

industry on any voluntary testing of the 

workflows, productivity, and other 

practical considerations of the 

changeover from ICD–9–CM to ICD–10– 

CM in the ambulatory setting that could 

result in the development of ‘‘lessons 

learned’’ that might be disseminated to 

assist this industry segment with a 

smooth transition to ICD–10. 

With regard to testing the utility of the 

ICD–10–CM and ICD–10–PCS code sets 

themselves, we refer to the results of the 

AHA–AHIMA ICD–10–CM field testing 

reported to NCVHS on September 23, 

2003, involving 6,177 medical records 

coded by credentialed coding 

professionals. A copy of this report can 

be found at http://www.ncvhs.hhs.gov/ 

030923ag.htm. 

We believe that there has been 

successful, independent field testing of 

the utility and functionality of ICD–10– 

CM and ICD–10–PCS, and that no 

additional testing of this nature is 

necessary. 

I. ICD–10 Code Set Development and 

Utility 

Comment: Several commenters stated 

that countries such as Canada and 

Australia have not developed such 

extensive clinical modifications to 

medical code sets compared to those 

used in the U.S. because their versions 

of the ICD–10 code sets are not used in 

ambulatory settings. Commenters 

recommended that a process be 

undertaken to streamline and/or 

significantly reduce the number of ICD– 

10 codes to make adoption easier. 

Response: Unlike the United States, 

other countries do not use ICD–10 codes 

for reimbursement purposes. The level 

of detail in the United States’ clinical 

modification version of the ICD–10 code 

set has resulted in an increased number 

of codes, and is commensurate with the 

complexities of our multi-payer health 

care system. The United States’ clinical 

modifications have been derived in part 

with the input of clinical specialty 

groups that have requested this level of 

specificity. If the United States is 

moving toward an electronic healthcare 

system and increasingly using codes for 

quality purposes, there is a need to 

capture more precise information, not 

less. ICD–10–CM and ICD–10–PCS will 

greatly support these efforts. 

The Canadian health care system and 

the United States health care system are 

very different. Canada does not have the 

same data needs as the United States. 

The Canadian version of ICD–10, called 

ICD–10–CA, has been implemented in 

hospitals, hospital-based ambulatory 

care centers, day surgery centers and 


sroberts on PROD1PC70 with RULES
3340 Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations 

high-cost clinics (for example, dialysis 

and cancer clinics). National ambulatory 

care reporting has not been fully 

implemented in Canada, but some 

provinces have already expanded the 

use of ICD–10–CA beyond hospitalbased ambulatory care. ICD–9–CM was 

never implemented in physician offices 

in Canada because each province had its 

own billing system, but the provinces 

now fully intend to do so, and are 

moving in that direction. 

Each country uses its respective 

version of ICD–10 for its own purpose, 

but common threads from other 

countries’ ICD–10 implementation 

experiences, such as systems 

changeovers, business process issues 

and the timing of their conversions to 

ICD–10, can help inform our ICD–10 

implementation experience in the 

United States. An increased number of 

codes does not necessarily result in 

increased complexity in using the 

coding system. Though training would 

be required in order to make full use of 

the increased number and granularity of 

the codes, greater specificity can mean 

the correct code is easier to determine 

because there is less ambiguity. Not all 

HIPAA covered entities will use all of 

the ICD–10–CM and ICD–10–PCS codes. 

Similar to the way a dictionary is 

utilized, ICD–10–CM and ICD–10–PCS 

make available a full spectrum of codes, 

and entities will selectively use only 

those codes that are germane to their 

specific clinical area of practice or 

healthcare operations. 

We are also aware that, in many 

instances in the ICD–10–CM code set, 

the 7th character is repetitive in nature. 

Taking this into account, the remainder 

of the core codes amount to far fewer 

new codes to learn. Therefore, we do 

not believe that reducing the number of 

ICD–10–CM and ICD–10–PCS codes to 

make adoption easier is warranted, nor 

do we believe that the code sets’ size is 

a justification for not implementing 

ICD–10–CM and ICD–10–PCS in a 

timely manner. 

Comment: Some commenters stated 

that the ability to demonstrate laterality 

already exists through modifiers 

available for use with ICD–9–CM that 

allow the capture of duplicate claims. 

Response: In the August 22, 2008 

proposed rule (73 FR 49801), we 

defined laterality as the ability to 

specify which organ or part of the body 

is involved when the location could be 

on the right, left or bilateral. The 

advantage of ICD–10–CM over ICD–9– 

CM code sets is that ICD–10–CM 

accounts for laterality in the code set 

coding itself. ICD–9–CM only allows for 

laterality indicators through means of an 

extra modifier. These modifiers can only 

be used on outpatient claims to further 

describe the HCPCS codes, which are 

used for reporting physician and 

ambulatory procedures. HCPCS codes 

will continue to be used for reporting 

physician and ambulatory procedures. 

Current claim forms and systems do not 

allow for modifiers on the diagnosis 

codes in any setting or for procedures in 

the inpatient setting. This problem is 

corrected with both the ICD–10–CM and 

ICD–10–PCS codes. This improved 

ability to convey laterality can reduce 

duplicate payments and/or claims, and 

better inform research on conditions 

that may affect only one area of the 

body; for example, a stroke. 

We believe that the laterality inherent 

in ICD–10–CM provides another reason 

to adopt ICD–10–CM and ICD–10–PCS 

code sets as HIPAA standards. 

Comment: Several commenters stated 

that there is a discrepancy between the 

number of ICD–10–CM diagnosis codes 

stated in the August 22, 2008 proposed 

rule, and other previous citations. A 

commenter asked if the ICD–9–CM 

13,000 diagnosis codes and 3,000 

procedure codes referred to in the 

August 22, 2008 proposed rule are those 

that are currently in use or include 

potential space for use in the future. 

Response: The June 2003 version of 

ICD–10–CM contained 120,000 codes. 

That figure was used in both CMS and 

other industry presentations because 

that was the number of codes in ICD– 

10–CM at that time. A draft of the ICD– 

10–CM code set was posted to CDC’s 

Web site and CDC solicited comments 

on how to update and/or revise the 

coding system. Based on those 

submitted comments, CDC made 

revisions to ICD–10–CM that led to a 

reduction in the total number of ICD– 

10–CM codes for use in the clinical 

modification developed for use in the 

United States. A similar, annual process 

has been undertaken for ICD–10–PCS, 

resulting in changes to the number of 

ICD–10–PCS codes as well. 

The ICD–9–CM 13,000 diagnosis 

codes and 3,000 procedure codes 

referenced in the August 22, 2008 

proposed rule (73 FR 49802), represent 

those codes that are currently in use. 

These codes are updated each year by 

the ICD–9 Coordination and 

Maintenance Committee and, therefore, 

the number of codes changes annually. 

For FY 2009, there are 14,025 ICD–9– 

CM diagnosis codes and 3,824 ICD–9– 

CM procedure codes in use. 

Comment: Commenters stated that the 

annual ICD–9–CM code set updates 

should cease one year prior to the 

implementation of ICD–10. Also, they 

stated that such a ‘‘freeze’’ on code set 

updates would allow for instructional 

and/or coding software programs to be 

designed and purchased early, without 

concern that an upgrade would take 

place just immediately before the 

compliance date, necessitating 

additional updates and/or purchases. 

Response: The ICD–9–CM 

Coordination and Maintenance 

Committee has jurisdiction over any 

action impacting the code sets. 

Therefore, the issue of consideration of 

a moratorium on updates to the ICD–9– 

CM, ICD–10–CM and ICD–10–PCS code 

sets in anticipation of adoption of ICD– 

10–CM and ICD–10–PCS will be 

addressed through the Committee at a 

future public meeting. 

Comment: One commenter noted that, 

while ICD–10–CM will incorporate 

needed specificity and clinical 

information as compared to the ICD–9– 

CM code set, the ICD–10–CM diagnosis 

code set in general does not include 

‘‘function diagnosis,’’ the performance 

deficit for which an occupational 

therapy intervention is provided. The 

commenter strongly urged CMS to 

include in the ICD–10–CM code set a 

method of coding the functional 

impairments of patients requiring 

rehabilitation services, add specific 

functional diagnoses to ICD–10–CM 

codes, or adopt the use of the 

International Classification of 

Functioning, Disability and Health 

(ICF). 

Another commenter stated that ICD– 

10–CM codes do not address the need 

to stratify the level of severity of 

traumatic brain injuries. 

Response: We agree with the 

commenter that ICD–10–CM, like ICD– 

9–CM, does not include concepts that 

relate to difficulties with activities of 

daily living, functional impairments, 

and disability. Those concepts are found 

in the ICF, published by the World 

Health Organization. The wide scale 

incorporation of ICF concepts, with 

structural and definitional differences, 

into ICD–10–CM would be 

inappropriate. The WHO acknowledged 

this when developing ICF as a separate 

and distinct classification within the 

WHO Family of International 

Classifications. While we agree that ICF 

has great ability to more accurately and 

completely describe functioning and 

disability concepts, its adoption as a 

HIPAA code set is beyond the scope of 

this final rule. 

The issue of coding of traumatic brain 

injury was discussed at the 

September 24–25, 2008 meeting of the 

ICD–9–CM Coordination and 

Maintenance Committee. It was stated at 

that time that the Committee would 

address any changes to be made to ICD– 

9–CM for traumatic brain injuries, and 


sroberts on PROD1PC70 with RULES
Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations 3341 

those changes would also be 

incorporated into ICD–10–CM as 

necessary. 

V. Provisions of the Final Regulations 

For the most part, this final rule 

incorporates the provisions of the 

August 22, 2008 proposed rule. Those 

provisions of this final rule that differ 

from the August 22, 2008 proposed rule 

are discussed as follows. 

In § 162.1002(b), we have revised the 

year ‘‘2011’’ to read ‘‘2013’’ in this 

regulation. 

In § 162.1002(c), we have revised the 

year ‘‘2011’’ to read ‘‘2013’’ in this 

regulation. 

In § 162.1002(c)(3), we have removed 

the term ‘‘Classification’’ and replaced it 

with ‘‘Coding’’ in this regulation. 

VI. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 30- 

day notice in the Federal Register and 

solicit public comment before a 

collection of information requirement is 

submitted to the Office of Management 

and Budget (OMB) for review and 

approval. In order to fairly evaluate 

whether an information collection 

should be approved by OMB, section 

3506(c)(2)(A) of the Paperwork 

Reduction Act of 1995 requires that we 

solicit comment on the following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

Section 162.1002 of 45 CFR explains 

the implementation and continued use 

of the International Classification of 

Diseases, Tenth Revision, Clinical 

Modification (ICD–10–CM) for diagnosis 

coding, and the International 

Classification of Diseases, Tenth 

Revision, Procedure Coding System 

(ICD–10–PCS) for inpatient hospital 

procedure coding for the period on and 

after October 1, 2013. The burden 

associated with the implementation and 

continued use of ICD–10–CM and ICD– 

10–PCS is the time and effort required 

to update information systems for use 

with updated HIPAA transaction and 

code set standards. Specifically, the 

entities must comply with the ASC X12 

Technical Reports Type 3, Version 

005010 (Version 5010) standards, which 

accommodate the use of the ICD–10–CM 

and ICD–10–PCS code set. The burden 

associated with meeting the ICD–10–CM 

and ICD–10–PCS code set standards is 

not discussed in this final rule; 

however, the burden associated with 

these standards is accounted for in the 

Version 5010 final rule, CMS–0009–F, 

published elsewhere in this Federal 

Register. The inclusion of other 

standards referenced in the Version 

5010 final rule, namely the National 

Council of Prescription Drug Programs 

(NCPDP) Telecommunications Standard 

Version D.0, and the NCPDP Batch 

Standard Medicaid Subrogation 

Implementation Guide, Version 3, 

Release 0, has no impact on that 

analysis’ ability to address the PRA 

burden of ICD–10–CM and ICD–10–PCS. 

The burden associated with meeting 

the Version 4010 standards is contained 

in the following affected sections: 

§ 162.1102, § 162.1202, § 162.1301, 

§ 162.1302, § 162.1401, § 162.1402, 

§ 162.1501, § 162.1502, § 162.1602, 

§ 162.1702, and § 162.1802. The affected 

sections are currently approved under 

OCN 0938–0866 with an expiration date 

of July 31, 2011; however, the Version 

5010 final rule provides for the revision 

of the requirements contained in the 

aforementioned affected sections to 

update the adopted HIPAA transaction 

standard to Version 5010. As OCN 

0938–0866 was issued for the current 

version of this HIPAA standard, we 

have submitted to OMB a revised 

version of information collection 

request (OCN 0938–0866) for its review 

and approval of the information 

collection requirements associated with 

the implementation of the Version 5010 

standards, and ultimately, the 

implementation of ICD–10–CM and 

ICD–10–PCS. Included as part of the 

revised Information Collection 

Requirement (ICR) are detailed 

instructions on the implementation of 

ICD–10–CM and ICD–10–PCS. These 

information collection requirements are 

not effective until approved by OMB. 

VII. Regulatory Impact Analysis (RIA) 

Statement of Need 

The objective of this regulatory 

impact analysis (RIA) is to summarize 

the costs and benefits of moving from 

ICD–9–CM to ICD–10–CM and ICD–10– 

PCS code sets in the context of the 

current health care environment. 

The following are the three key issues 

that we believe necessitate the need to 

update from ICD–9–CM to ICD–10–CM 

and ICD–10–PCS: 

• ICD–9–CM is out of date and 

running out of space for new codes. 

• ICD–10 is the international standard 

to report and monitor diseases and 

mortality, making it important for the 

U.S. to adopt ICD–10 classifications for 

reporting and surveillance. 

• ICD codes are core elements of 

many HIT systems, making the 

conversion to ICD–10 necessary to fully 

realize benefits of HIT adoption. 

For a more detailed discussion of the 

limitations of ICD–9–CM, please refer to 

section III.B in the preamble of the 

August 22, 2008 proposed rule (73 FR 

49799). As noted in the August 22, 2008 

proposed rule, no other viable 

alternatives to adopting ICD–10 were 

identified. The costs and benefits for 

moving from ICD–9–CM to ICD–10–CM 

and ICD–10–PCS were assessed within 

the requirements of the Executive 

Orders and Acts cited in the regulatory 

impact analysis. 

A. Overall Impact 

We examined the impacts of this final 

rule as required by Executive Order 

12866 on Regulatory Planning and 

Review (September 30, 1993, as further 

amended), the Regulatory Flexibility 

Act (RFA) (September 19, 1980, Pub. L. 

96–354) (as amended by the Small 

Business Regulatory Enforcement 

Fairness Act of 1996, Pub. L. 104–121), 

section 1102(b) of the Social Security 

Act, sections 202 and 205 of the 

Unfunded Mandates Reform Act of 1995 

(Pub. L. 104–4), Executive Order 13132 

on Federalism (August 4, 1999), and the 

Congressional Review Act (5 U.S.C. 

804(2)). 

Executive Order 12866 (as amended 

by Executive Order 13258 and Executive 

Order 13422, which modifies the list of 

criteria used for regulatory review) 

directs 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). A regulatory impact analysis 

(RIA) must be prepared for major rules 

with economically significant effects 

($100 million or more in any 1 year). We 

consider this to be a major rule, as it 

will have an impact of over $100 

million on the economy. Accordingly, 

we have prepared an RIA. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

also requires that agencies assess the 

anticipated costs and benefits before 

issuing any rule that includes a Federal 

mandate that could result in 

expenditures of $100 million in 1995 

dollars (updated annually for inflation) 

in any 1 year by State, local, or tribal 

governments, in the aggregate, or by the 

private sector. That threshold level is 

currently approximately $130 million. 


sroberts on PROD1PC70 with RULES
3342 Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations 

Based on our analysis, we anticipate 

that the private sector would incur costs 

exceeding $130 million per year 

beginning 3 years after the publication 

of the final rule, and ending 3 years after 

implementation. Our analysis indicates 

that the States’ share of ICD–10 

implementation costs would not exceed 

$130 million over a 1-year period. In 

addition, local or tribal governments 

will not experience costs exceeding 

$130 million over a 1-year period. We 

base our assessment on the fact that we 

received no comments from local 

governments indicating cost impacts 

exceeding $130 million over a 1-year 

period in response to the August 22, 

2008 proposed rule, and the Indian 

Health Service (IHS) estimate of costs to 

tribal governments totaling $12.3 

million as detailed in Table 1 of this 

final rule. 

In addition, under section 205 of the 

UMRA (2 U.S.C. 1535), having 

considered three alternatives that are 

referenced in the preamble of this final 

rule, HHS has concluded that the 

provisions in this final rule are the most 

cost-effective alternative for 

implementing HHS’s statutory objective 

of administrative simplification. 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule (and subsequent final 

rule), that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 

Executive Order 13132 requires the 

opportunity for meaningful and timely 

input by State and local officials in the 

development of rules that have 

Federalism implications. HHS consulted 

with appropriate local, State and 

Federal agencies, including tribal 

authorities and Native American groups, 

as well as private organizations. These 

private organizations included, among 

others, WEDI, NUCB, NUCC, and the 

ADA in accordance with section 

1178(c)(3) of the Act. 

In order to validate the fiscal and 

operational impact of this rule on State 

Medicaid agencies, current data on costs 

for States to implement a new code set 

would be necessary. We reference in the 

preamble of this final rule industry 

studies that were conducted by both 

Nolan and RAND that provide some 

insight into this information for States. 

HHS has examined the effects of 

provisions in this final rule as well as 

the opportunities for input by the States. 

The Federalism implications of this 

final rule are consistent with the 

provisions of the Administrative 

Simplification subtitle of HIPAA by 

which HHS is required by the Congress 

to promulgate standards for the 

interchange of certain health care 

information through electronic means. 

Under section 1178(a)(1) of the Act, 

these standards generally preempt 

contrary State law. 

The States were invited to submit 

comment on this section and all 

sections of the August 22, 2008 

proposed rule. 

The objective of this regulatory 

impact analysis is to summarize the 

costs and benefits of moving from ICD– 

9–CM to ICD–10–CM and ICD–10–PCS 

code sets in the context of the current 

health care environment. 

We received numerous comments on 

our analysis of the costs and benefits of 

transitioning from ICD–9 to ICD–10. In 

the August 22, 2008 proposed rule (73 

FR 49830), we solicited additional data 

that would help us determine more 

accurately the impact of ICD–10 

implementation on the various 

categories of entities affected by the 

proposed rule. We solicited, but did not 

receive, comments regarding certain 

assumptions upon which we based our 

impact analysis in the August 22, 2008 

proposed rule, including the inflation 

factor we applied to our assumed costs, 

and the growth factor we applied to our 

assumed benefits. We also did not 

receive comments regarding the number 

of, or specific impacts to, third party 

administrators or design firms that may 

need to update their systems or business 

processes to accommodate the ICD–10 

code set. In those cases where we did 

not alter our assumptions from those 

made in the August 22, 2008 proposed 

rule, the relevant tables are referenced 

but not reprinted in this final rule. 

Detailed summary tables are provided 

herein with all of the costs and benefits 

recalculated to reflect changes that were 

made in response to comments. 

Although many commenters stated 

that we overstated the benefits of 

transitioning from ICD–9 to ICD–10, 

they provided no data or information to 

substantiate their assertions or to refute 

our benefits analysis; therefore, this RIA 

continues to rely on the benefit 

assumptions outlined in the proposed 

rule’s RIA. 

Many commenters stated that we 

underestimated the costs of 

transitioning from ICD–9 to ICD–10. 

In some instances, commenters 

included the cost of transition to 

Version 5010 in their discussion of the 

costs for transitioning to ICD–10. In 

those instances, we were unable to 

separate Version 5010 implementation 

costs from ICD–10 implementation 

costs. In other instances, they provided 

Version 5010 implementation costs, but 

not ICD–10 implementation costs. 

Regardless, in the majority of cases, 

commenters did not provide data or 

information to substantiate their cost 

estimates or to refute our cost estimates 

and regulatory impact analysis. Where 

new information was provided that 

allowed us to improve our cost 

estimates, we have outlined our 

rationale for the changes in the 

following narrative and summary tables. 

1. Use of the Rand Report 

Comment: A few commenters stated 

that the RAND report should not have 

been used as the basis for the impact 

analysis in the August 22, 2008 

proposed rule because they asserted that 

the RAND report underestimates ICD– 

10’s systems impacts and the laborintensive nature of implementation 

activities. One commenter suggested 

that the Nolan report, and not the RAND 

report, was the more accurate study, and 

suggested that it should have been used 

as the primary source of data for the 

August 22, 2008 proposed rule’s impact 

analysis. 

Response: The 2004 RAND and Nolan 

reports are considered by the industry to 

be the benchmark studies for the 

transition from ICD–9–CM to ICD–10, 

and both have been cited by other 

reports as the basis for their ICD–10 cost 

assumptions. In the proposed rule (74 

FR 49811), we detailed the differences 

between RAND and Nolan’s data 

sources, assumptions and cost estimates 

on a wide variety of elements, including 

training, productivity, system changes, 

contract renegotiations and benefits. 

Each report considers some factors that 

the other does not, uses different data 

gathered from a variety of sources at 

different times, and cites some data that 

are not substantiated. The HHS intraagency workgroup analyzed both reports 

prior to developing its own assumptions 

and conclusions, which served as the 

basis for the proposed rule’s analysis. 

2. Estimated Costs—General 

Comment: Many commenters 

expressed their general perceptions 

regarding the costs of implementing 

ICD–10–CM and ICD–10–PCS. Some 

commenters stated that they thought it 

was simply too expensive for industry 

to implement ICD–10–CM and ICD–10– 

PCS in the current economic climate. 

Several commenters suggested that more 

analysis of the costs is needed, and 

recommended a variety of mechanisms, 

including a provider office/hospital 

panel. Others expressed the need to 

monitor and publicly report on the 

costs, benefits, and industry readiness 

through an independent party such as 

NCVHS. 


sroberts on PROD1PC70 with RULES
Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations 3343 

Response: The estimates we 

developed for the August 22, 2008 

proposed rule were based upon 

extensive analysis of publicly available 

data by an HHS intra-agency workgroup 

representing many areas of expertise. 

While the provisions and analysis 

offered in the August 22, 2008 proposed 

rule represented the best available 

information, we solicited input on our 

assumptions, and anticipated that 

commenters would provide any 

additional available data that was 

available that would enable us to refine 

our estimates of the impacts associated 

with the implementation of ICD–10–CM 

and ICD–10–PCS. While we did receive 

input regarding specific assumptions, 

most commenters did not substantiate 

their assertions that we underestimated 

costs and overstated benefits with data 

that we could use to produce more 

accurate estimates. In the cases where 

commenters provided updated, 

substantiated data, we have discussed 

the new information and revised our 

estimates accordingly. 

We agree with commenters that 

NCVHS is an appropriate public body 

through which to solicit and share 

industry information on costs and 

implementation of, and compliance 

with, electronic transactions and code 

sets. We trust that it will continue to be 

a valuable resource to HHS and the 

industry as these code sets and other 

HIPAA standards are implemented. 

3. Training—Number of Coders 

Comment: A number of commenters 

disagreed with our estimate of the 

number of inpatient, full-time coders. In 

the August 22, 2008 proposed rule, we 

estimated that there are 50,000 full-time, 

inpatient coders based on AHIMA 

membership, and 179,230 part time 

coders, based on NAIC data as shown on 

Table 7 of the August 22, 2008 proposed 

rule (73 FR 49815). We assumed that 

full-time coders likely work in the 

hospital setting, and therefore would 

require training on both ICD–10–CM 

and ICD–10–PCS. We further assumed 

that part time coders likely work in the 

ambulatory setting, and therefore would 

require training only on ICD–10–CM. 

Commenters representing two national 

coder associations disagreed with the 

estimate that there are only 50,000 fulltime inpatient coders in the United 

States. Five members of a national coder 

association commented that it is likely 

that the total number of coders 

nationwide is approximately 150,000, of 

which 100,000 are certified coders. 

However, they did not substantiate their 

assertion, nor distinguish between the 

number of full-time inpatient and parttime outpatient coders in this 150,000 

figure. The other national coder 

association stated that they did not have 

a more accurate estimate of the number 

of full-time inpatient hospital coders, 

but simply wanted to note that, in their 

opinion, the basis of the number of fulltime, inpatient coders used for our 

estimates in the proposed rule was 

flawed. This commenter stated that our 

assumption that part-time coders work 

in ambulatory settings, and that fulltime coders work in hospitals was 

inaccurate because there are many fulltime coders who practice in outpatient 

settings. They also recognized that 

estimating the number of coders in the 

U.S. is very difficult, and that current 

statistics for occupational classifications 

may not permit a fully accurate estimate 

of the number of coders, or the settings 

in which they work. Several 

commenters stated that there are other 

clinical specialty organizations that 

certify their members as coders and that 

those coders should also be included in 

our estimates. 

A few commenters suggested that all 

coders would need additional 

physiology and anatomy training in 

order to use the ICD–10 code sets. 

Response: In the proposed rule (73 FR 

49815), we discussed our estimate of the 

number of full-time, inpatient coders. 

The Nolan study estimated 

approximately 142,170 coders, but did 

not differentiate between hospital 

coders (inpatient) and coders working in 

ambulatory settings, and also did not 

provide the source for these data. 

Assuming that full-time, inpatient 

coders were employed primarily by 

hospitals and that these individuals 

would be represented by AHIMA’s 

50,000 membership, we used that 

number in calculating the number of 

full-time, inpatient coders who would 

require training on both ICD–10–CM 

and ICD–10–PCS. 

In the August 22, 2008 proposed rule 

(73 FR 49815), we also estimated, based 

on NAIC codes from the 2005 Statistics 

of U.S. Businesses, that there are 

approximately 179,267 part-time coders. 

This was based on our assumption that, 

for every 20 employees in an 

ambulatory setting, there would be one 

part-time coder. We calculated the 

estimated number of part-time coders in 

outpatient ambulatory practices with 20 

to 499 employees. This total of part-time 

coders, 179,267, plus the 

aforementioned 50,000 full-time, 

inpatient coders, accounted for a total 

estimated coder universe of 229,267 

coders who would require ICD–10–CM 

and/or ICD–10–PCS training. 

We also do not believe that coders 

will need additional training in anatomy 

and physiology in order to use ICD–10 

codes. Most, if not all, coders already 

possess basic knowledge of anatomy 

and physiology either through formal 

training or through on-the-job 

experience. 

We understand that many hospitals 

require their coders to be certified 

through an examination program and 

annual continuing medical coding 

education offered by their professional 

associations and other educational 

entities. If we were to assume, as some 

national coder association members 

commented, that there are an estimated 

100,000 certified coders, that they all 

are employed by hospitals, and that 

there are 5,700 hospitals in the United 

States, we would conclude that there are 

approximately 26 certified coders per 

hospital. We cannot confirm that all 

hospitals require their coders to be 

certified, and believe that the average of 

26 certified coders per hospital is likely 

too high and would skew our analysis 

of these estimated costs. 

We acknowledge that while there may 

be more than 50,000 inpatient coders, 

the 150,000 total coder estimate offered 

by some coder association commenters 

does not distinguish between how many 

of those may be inpatient coders versus 

outpatient coders. We also do not know 

how many other clinical specialty 

certified coders may exist. We do agree 

with both the commenters’ and the 

RAND report’s contention that, because 

inpatient coders must also learn ICD– 

10–PCS in addition to ICD–10–CM, we 

need to account for their increased 

training costs and productivity losses, 

and therefore, we must attempt to assign 

a value to the number of inpatient 

coders if we are to establish valid cost 

estimates. 

Therefore, we will retain our estimate 

of 229,267 coders in total from the 

proposed rule. However, we will 

increase our estimate of hospital coders 

from 50,000 to 60,000 coders. This shift 

decreases the number of outpatient 

coders as shown in the proposed rule by 

10,000, to 169,267, but still accounts for 

a total number of 229,267 coders. The 

basis for these revised assumptions is 

derived from our research of the U.S. 

Bureau of Labor Statistics (BLS) data. 

The BLS data show that, in the category 

‘‘Medical Records and Health 

Information Technicians’’, which 

includes many coders, 60,000 of the 

individuals accounted for in this 

category are employed by hospitals. We 

acknowledge concerns that current 

statistics for occupational classifications 

may be inaccurate, but absent other 

substantiated data, we must rely on the 

information that is currently available 

and use our best judgment in arriving at 

a conclusion based on that data. 


sroberts on PROD1PC70 with RULES
3344 Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations 

We note that our estimate of 229,267 

coders in total is higher than the 

estimates from the Nolan report and 

commenters. We considered reducing 

our estimate accordingly, but decided to 

retain the higher number to assure we 

have adequately addressed this cost. 

4. Number of Coder Training Hours/ 

Costs 

Comment: In the August 22, 2008 

proposed rule (FR 73 49815), we had 

estimated that, based on RAND data, 

approximately 50,000 inpatient coders 

who would need to learn both ICD–10– 

CM and ICD–10–PCS would require 

about 40 hours of training. We also 

estimated that ambulatory coders who 

would need to learn only ICD–10–CM 

would need only about 8 hours of 

training. We calculated the cost of ICD– 

10 code set training for inpatient coders 

at $2,750 per coder, assuming $550 in 

training costs and $2,200 in lost 

productivity, for a total of $137.51 

million. For the proposed rule’s 179,000 

coders in the ambulatory setting, we 

estimated a cost of $110 in training costs 

and $440 each for lost work time, for a 

total of $98.5 million. 

Many commenters offered widely 

varying estimates as to the amount of 

time required, and associated costs, for 

coding training. A few commenters 

stated that the training time for coders 

outlined in the proposed rule appeared 

to be reasonable. Another commenter 

stated that we overstated training costs, 

and that ‘‘train the trainer’’ programs 

could be effectively used to train coding 

leaders who would then disseminate 

information to other colleagues, 

replacing the costs already being 

incurred by hospitals to keep up with 

changes in ICD–9–CM. 

One commenter stated that an 

experienced coder would need as little 

as 5 hours of ICD–10 training. The 

majority of commenters estimated that it 

would take more than 40 hours of 

training, and more likely between 40 to 

60 hours for coders to train in ICD–10. 

Still another commenter estimated that 

it would take between 60 to 80 hours of 

ICD–10 training for a coder in an 

ambulatory setting. Another commenter 

stated that coders must attend anywhere 

from 10 to 30 hours of training annually 

to earn continuing education credits to 

maintain their professional credentials, 

and that this time and expense would 

offset any ICD–10 training time and 

expense projections. 

Commenters stated that coder training 

costs ranged from $150 per coder to over 

$96,000 to train a health plan’s coding 

staff. One commenter stated that our 

estimated training cost of $31 per hour 

per coder was too low, and can vary 

greatly depending on geographic region. 

One commenter stated that we did not 

account for coder training-related travel. 

Another commenter stated that our 

estimate of $550 per coder for a week of 

training is low by industry standards, 

but that the return on investment 

justifies any training expense. 

Response: Commenters’ estimates of 

the amount of time needed for coder 

training, based on whether they worked 

full-time in inpatient settings or parttime in ambulatory settings, varied 

greatly. Estimates for coder training 

involve five distinct areas of 

consideration: The training 

methodology; the clinical specialty; the 

number of inpatient and outpatient 

coders; the number of hours for coder 

training; and the cost per hour of 

training. 

ICD–10 code set training will likely be 

offered by both commercial entities and/ 

or industry associations or other 

interested stakeholders, and training can 

take many forms—self-directed internet 

or intranet, webinars, video conferences, 

correspondence courses, seminars, 

technical school and community college 

courses, seminars, etc. The longer and 

more detailed the training and the 

setting (for example, in person versus 

on-line training), the greater the impact 

on the cost of training. However, more 

‘‘convenient’’ training, such as that 

offered on-line or through webinar, may 

also charge attendees a premium price 

for training based on the convenience of 

on-line or webinar programs. As one 

commenter noted, the use of a ‘‘train the 

trainer’’ approach to training would 

greatly reduce training costs for a larger 

organization that employs a number of 

coders and/or personnel who perform 

coding functions and require ICD–10 

code set training. Also, training may or 

may not require travel and as such, 

there is no way to estimate travel 

expenses as a result of attending 

training for ICD–10 coding. 

We recognize that perhaps as many as 

100,000 coders may be certified, and 

already spend from 10 to 30 hours a 

year attending training for which they 

receive continuing education credits to 

maintain their certifications. These costs 

would likely already be accounted for as 

part of that ongoing educational process, 

but again, we have no way of knowing 

if these certified coders work in 

inpatient and/or outpatient settings. 

Absent such data, an attempt on our 

part to assign numbers of certified 

coders to one setting versus another 

would likely be inaccurate. 

We have carefully considered the 

comments received, and we generally 

believe that some adjustments to our 

estimates for the number of hours and 

costs of ICD–10 training for coders may 

be necessary. 

Based on industry feedback regarding 

the need for more time than the 40 

hours of training we estimated for 

inpatient coders to learn both ICD–10– 

CM and IC–10–PCS, we will increase 

our estimate of the number of hours of 

training that inpatient coders will need 

to learn ICD–10–CM and ICD–10–PCS 

from 40 hours to 50 hours, well within 

the commenters’ suggested range of as 

little as 5 hours of training, to a 

maximum of 80 hours. As discussed 

above, we have estimated that there are 

60,000 inpatient coders who would 

require these 50 hours of training. To 

account for geographic variations in 

costs, we will increase our training costs 

only, by 15 percent, to a cost of 

$3,218.75 per coder, including $2,500 

for lost productivity (based on the 

increased number of training hours) and 

$718.75 in training costs, for a total of 

$212.06 million, annualized at 3 percent 

and 7 percent, as reflected in Table 4. 

Based on similar feedback from the 

industry expressing concern about the 

complexity of ICD–10–CM due to its 

size and structural changes, and coder 

unfamiliarity, we also will increase from 

8 to 10 hours the time that outpatient 

coders will need for ICD–10–CM 

training, and calculate that 169,267 

outpatient coders will require 10 hours 

of ICD–10–CM training at a cost per 

coder of $644 ($500 in lost productivity 

due to the increase in hours, and 

$143.75 in training, the latter of which 

includes a 15 percent increase in 

estimated training costs from the August 

22, 2008 proposed rule), or a total of 

$119.69 million, annualized at 3 percent 

and 7 percent, as shown in Table 4. 

We considered reducing the estimates 

in recognition of the fact that almost 

half of the total number of coders are 

likely to receive some ICD–10 training 

as part of their continuing education 

requirements for maintaining 

certification. However, we elected to 

retain the higher number to ensure that 

we have adequately addressed this cost. 

5. Physician Training 

Comment: In the August 22, 2008 

proposed rule, we estimated, based on 

RAND’s assumption, that ten percent of 

all physicians, or about 150,000, would 

seek ICD–10 code set training. We made 

the assumption that this training would 

take up to 4 hours, instead of RAND’s 

estimate of 8 hours, at a cost per hour 

of $137. Many commenters stated that 

we underestimated the number of 

physicians that would need training on 

the ICD–10 code sets, and the amount of 

time that training would take. Some 

professional associations stated that all 


sroberts on PROD1PC70 with RULES
Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations 3345 

physicians will need ICD–10 code set 

training. A few commenters, citing an 

industry-sponsored report on ICD–10 

costs for physician practices, estimated 

12 hours of ICD–10 code set training 

would be required for physicians. 

In contrast, another national 

professional coder association 

referenced their own study, showing 

that almost half of the respondents 

reported that none of the physicians in 

their offices performed coding, and of 

those physicians who did, they 

performed coding on only a small 

portion of the ICD–9–CM code set. 

Other commenters confirmed that many 

physicians do not code themselves, but 

rather rely on billers or other staff, or 

use superbills for coding. However, 

several commenters stated that, at a 

minimum, all physicians will need to be 

aware of the basic guidelines and 

construct of the ICD–10 code set, or 

‘‘awareness training’’, provided through 

existing physician continuing education 

and hospital-sponsored in-service 

training. 

Response: In the August 22, 2008 

proposed rule (73 FR 49809), we 

discussed the differences between the 

RAND and Nolan report assumptions 

relative to ICD–10 code set training for 

physicians. We also discussed our 

rationale for our decision to base our 

estimates on 4 hours versus RAND’s 8 

hours for physician ICD–10 training, 

because we assumed that the majority of 

physicians used superbills and would 

not require 8 hours of training. 

There appears to be a wide variance 

of opinions across all industry segments 

as to how many physicians would need 

and/or want ICD–10 code set training, 

and the length of that training. As 

discussed in the coder training section 

of this impact analysis, we believe that 

there are many factors that may 

influence this estimate, including 

geographic region; clinical specialty; 

size of practice; and available resources 

(superbills, electronic medical records, 

etc.) 

We agree that physicians will want 

training on ICD–10 code sets, but it is 

clear from commenters that the RAND 

estimate of only 10 percent of 

physicians wanting ICD–10 code set 

training may be too low. In an effort to 

better estimate the costs of ICD–10 

training for physicians, while 

acknowledging commenters who stated 

that not all physicians will need 

training due to use of superbills, staff 

and other coding mechanisms, we will 

accept the Nolan study estimate of 

754,000 physicians seeking a midpoint 

of 8 hours of ICD–10 training, at a cost 

of $157.55 per hour (reflecting a 15 

percent increase over the per hour cost 

estimate of $137.00 per hour used in the 

August 22, 2008 proposed rule), or 

$1,043.14 million, annualized at 3 

percent and 7 percent as shown in Table 

4. We also will assume that the 

remainder of physicians will either not 

seek ICD–10 code set training, or will 

need less intensive ‘‘awareness 

training’’ which we anticipate will be 

available through continuing medical 

education opportunities of which they 

likely would have availed themselves 

absent the transition from ICD–9 to ICD– 

10. 

6. Training for Auxiliary Staff 

Comment: In the August 22, 2008 

proposed rule (73 FR 49816), we 

estimated that, based on RAND data, 

there were some 250,000 code users. We 

assume that, of these 250,000, only 

150,000 work directly with codes and 

would require 8 hours of training for an 

total training cost of approximately $250 

($31.25 per hour × 8 hours). Some 

commenters mentioned that we did not 

account for other staff that may need 

training other than coders and 

physicians. Commenters stated that 

many health care settings, especially 

small physician practices, do not 

employ professional coders, but rather 

office staff who, along with other duties, 

provide the coding needed for claim 

submission and reimbursement 

purposes. 

Commenters cited billing/ 

administrative staff; clinicians and nonphysicians; clinical support staff, 

analytical and IT professionals; coding 

specialists; labs; and ancillary staff as 

those additional staff who will require 

training on the new codes. One 

commenter estimated that for a health 

plan/payer, staff training could amount 

to $96,156, not counting the cost of 

reference materials or training costs 

from outside sources. 

One commenter mentioned that code 

users can also include those who use 

the codes for medical decisions and that 

they will need extensive training on the 

new codes. Another commenter stated 

that the category of ‘‘code users’’ 

represents individuals with a wide 

variety of roles and responsibilities, so 

the level of training needed would 

depend on how and to what extent the 

individual health professional use 

coded data and potentially how the 

training is delivered. One commenter 

disagreed with the number of code users 

that we outline in the proposed rule, 

estimating that there are only 20,000 

code users, but did not substantiate the 

source of their information. 

Response: In the August 22, 2008 

proposed rule (73 FR 49815), we used 

RAND data to define code users as 

people outside of health care facilities— 

researchers, epidemiologists, 

consultants, auditors, claims 

adjudicator, etc. Users could also 

include people within health care 

facilities in areas such as senior 

management, clinicians, quality 

improvement, utilization management, 

accounting, business office, clinical 

departments, data analysis, performance 

improvement, corporate compliance, 

data quality, etc. Additionally AHIMA 

defines a user of coded data as anyone 

who needs to have some level of 

understanding of the coding system, 

because they review coded data, rely on 

reports that contain coded data, etc., but 

are not people who actually assign 

codes. These could include the 

additional staff that will require training 

as cited above. 

In the August 22, 2008 proposed rule 

(73 FR 49816), we estimated that there 

are approximately 250,000 code users, 

most likely employed by payers but 

that, based on RAND data, only about 60 

percent, or 150,000, would require ICD– 

10 code set training for the purpose of 

actually assigning and/or interpreting 

codes. We believe that, given all the 

categories of coders, both professional 

and non-professional, physicians, other 

clinicians, auxiliary staff and the code 

users definitions as shown above, we 

have adequately accounted for a broad 

universe of potential code users and we 

maintain our original assumption of the 

number and costs of training for code 

users. 

As stated in the August 22, 2008 

proposed rule (73 FR 49814), we based 

our estimates on 2004 dollars because 

we used RAND study figures based on 

2004 dollars. For purposes of this 

analysis, we are updating the value to 

2007 dollars to be consistent with the 

updates to our benefits analysis by 

applying the increases in the Consumer 

Price Index (CPI–U) from 2004 to 2007. 

For the costs estimates, we divide the 

CPI–U annual index for 2007 (the most 

recent data available) by 2004’s index to 

determine the adjustment factor in 

which to apply to each cost estimate. 

This adjustment factor equals 

approximately 1.098. Since the cost 

estimates for implementing ICD–10 are 

not tied to medical services, we feel that 

the CPI–U is reasonable to use for 

adjusting these 2004 costs for inflation. 

We are adjusting our estimate for code 

user training costs that were based on 

RAND data from the estimate shown in 

the August 22, 2008 proposed rule 

update to 2007 dollars for a revised total 

of $41.18 million over 4 years, 

annualized at 3 percent and 7 percent, 

as shown in Table 4. 


sroberts on PROD1PC70 with RULES
3346 Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations 

7. Productivity Losses 

Comment: In the August 22, 2008 

proposed rule (73 FR 49814), we 

acknowledged that, while RAND did not 

consider the cost of cash flow 

interruptions as a result of the adoption 

of ICD–10–CM and ICD–10–PCS, we 

agreed with the Nolan study that the 

implementation of the new code sets 

may cause serious cash flow problems 

for providers, and assumed that payers 

would develop temporary payment 

policies to mitigate this risk. 

Many commenters agreed that, with 

the introduction of ICD–10, for a period 

of time, we may see an increase in 

returned or rejected claims which may 

cause physician practices and/or 

hospitals to spend more time fixing 

billing problems. Many commenters 

mentioned that ICD–10 will cause an 

increase of improperly paid claims and 

denied and/or rejected claims, which 

will require additional audit work and 

investigation to find and fix problems. 

One commenter stated we 

underestimated the projected claim 

rejection rate in the August 22, 2008 

proposed rule, and that they 

experienced a higher (20 to 30 percent) 

rejection rate when implementing the 

NPI. Commenters disagreed with our 

statement in the August 22, 2008 

proposed rule (73 FR 49814) that it was 

the plans’ practice to advance periodic 

interim payments (PIPs) to providers 

who might be affected by a claims 

processing slowdown. A few 

commenters, citing an industrysponsored report on ICD–10 costs, 

stated that significant changes in 

reimbursement patterns according to 

severity of diagnosis (which are 

determined based on ICD–10–CM codes) 

will disrupt provider cash flows, and 

estimated the cost of cash flow 

disruption per physician practice to be 

between $19,500 and $650,000. 

Commenters stated that CMS should 

monitor and publish claim rejection 

rates, issue clear and flexible Medicare 

advance payment guidelines and 

mitigation strategies if provider cash 

flow is adversely affected, and consider 

interim Medicare payments to hospitals 

if payments are disrupted. 

Response: In the August 22, 2008 

proposed rule (FR 73 49817), we 

accounted for the fact that the 

implementation of the new code sets is 

expected to produce a temporary 

increase in coding errors on the part of 

physicians, resulting in rejected and/or 

returned claims. We used Medicare 

returned claims data for FYs 2004 

through 2006, and identified a spike 

pattern in Medicare returned claims 3 to 

6 months following introduction of 

annual ICD–9 code updates. We noted 

that we anticipated that the percent of 

returned claims following the ICD–10 

implementation could be more than 

double the previous years’ increase, and 

that returned claims may peak at around 

6–10 percent of pre-implementation 

levels. We estimated a cost range from 

between $274 million to $1,100 million. 

We believe that our assumptions, based 

on three years’ worth of Medicare 

returned claims data, more closely 

reflects returned claims experience, and 

therefore is more accurate than reliance 

on NPI experience, which was likely 

caused by plans’ inability to link 

incoming NPIs with legacy identifiers. 

We also reject the notion that 

significant changes in reimbursement 

patterns based on severity of diagnosis 

will disrupt provider cash flows. We do 

not anticipate that there will be any 

immediate changes to reimbursements 

with the initial implementation of ICD– 

10–CM. Data drives changes in 

reimbursements, and this data likely 

will not be available for quite some time 

after the implementation of ICD–10–CM, 

and thus reimbursement changes will be 

accomplished on an incremental basis. 

States have prompt payment laws that 

require that penalties be assessed 

against health plans who do not issue 

payments for properly submitted claims 

in a timely manner, and Medicare is 

also subject to similar requirements. 

Therefore, it is in the best interests of all 

plans to pay promptly to avoid these 

penalties. Moreover, the October 2013 

compliance date for ICD–10 provides 

ample time for plans to prepare and test 

their payment systems to allow for an 

orderly transition. 

As stated in the proposed rule (73 FR 

49817), the implementation of the new 

code sets is expected to produce a 

temporary increase of physician coding 

errors. We received many concurrences 

with this assumption but no additional 

or substantiated data to counter our 

quantitative analysis at this time. 

Therefore, we maintain our estimate 

based on our original costs, as stated in 

the August 22, 2008 proposed rule. 

Comment: One commenter disagreed 

with our analysis of coding productivity 

in the August 22, 2008 proposed rule 

(73 FR 49817) because they stated that 

the use of preprinted forms or touchscreens does not constitute coding. One 

commenter also took issue with our 

estimate that productivity losses during 

the first six months of ICD–10–CM 

implementation will be reversed, stating 

instead that it will be a long-term 

productivity loss. One commenter 

mentioned that the August 2008 

proposed rule suggests an outpatient 

productivity rate of 3,525 claims per 

hour and that this is 100 times greater 

than what is customary in some 

specialties and more than 10 times what 

is performed in the most highly 

automated computer assisted coding 

operation. 

Other commenters disagreed with our 

assumption that the average time to 

code an outpatient claim could take 

one-hundredth of the time for a hospital 

inpatient claim. Commenters stated that 

physician offices would suffer 

productivity losses because ICD–10–CM 

training would take physicians away 

from patient care, looking up new codes 

will take more time, it will take longer 

to process notes and billings, and 

practice workflows in general will be 

disrupted. 

Response: In the August 22, 2008 

proposed rule (73 FR 49816), we 

acknowledged that coders’ productivity 

will be directly affected because of the 

need to learn new codes and definitions, 

and undoubtedly some claims will 

require resubmission to payers as both 

providers and payers adjust to the new 

codes. For outpatient productivity 

losses, we assume the average time to 

code an outpatient claim could take 

one-hundredth of the time for a hospital 

inpatient claim, taking into account the 

wide variety of outpatient settings and 

coding forms. Although commenters 

disagreed with this assumption, they 

did not substantiate their comments 

with data that contradicted our 

assumptions or analysis. 

As stated in the August 22, 2008 

proposed rule (73 FR 49816), many 

physicians use, and will continue to use 

super-bills, which reduces the coding 

time. We disagree with the commenter 

who stated that the use of superbills or 

touch screens does not constitute 

coding. Coding is the assignment of a 

code to a specific clinical condition or 

procedure; the mechanisms used to do 

this, whether electronic or manual, may 

differ, but codes are still assigned. We 

considered the variety of settings in 

which coding is done and noted that 

most only focus on one or two medical 

conditions (which would likely be 

clearly identified for the coders by the 

physician) in our analysis in the August 

22, 2008 proposed rule. 

We are adjusting our cost estimate for 

outpatient productivity losses from the 

estimate shown in the August 22, 2008 

proposed rule to account to update to 

2007 dollars, for a revised total of $9.40 

million in 2014, the year after ICD–10 

implementation, and this annualized 

cost at 3 percent and 7 percent is 

reflected in Table 4. 

Comment: A few commenters 

questioned our estimate of an additional 

1.7 minutes to code an inpatient claim 


sroberts on PROD1PC70 with RULES
Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations 3347 

in the first month of ICD–10–CM and 

ICD–10–PCS compliance, and the 

associated productivity losses. None of 

the commenters stated whether they 

deemed that estimate to be too high or 

too low. 

Response: In the August 22, 2008 

proposed rule (73 FR 49816), we 

estimated an additional 1.7 minutes to 

code an inpatient claim that includes an 

inpatient procedure in the first month of 

ICD–10–CM and ICD–10–PCS 

compliance. This estimate was based 

upon analysis reported in the RAND 

report. According to RAND, ICD–10– 

PCS was tested by two clinical dataabstracting centers. One center found 

that ICD–10–PCS which is used in 

inpatient settings, generated more codes 

and that each record, on average, took 

longer to code than did ICD–9–CM (3.6 

minutes versus 1.9 minutes, or a 

difference of 1.7 minutes). We applied 

this 1.7 minute loss to 1.8 million 

inpatient claims requiring procedures 

coding per month (20,000,000 claims 

per year divided by 12 months) at $50 

per hour, or $1.41 per claim, resulting 

in a productivity loss of $2.7 million in 

the first month. After accounting for a 

monthly increase in productivity of 

$450,000, and subtracting this from each 

month’s lost productivity, we arrived at 

a total inpatient productivity loss of 

$8.90 million in 2014, the year after 

ICD–10 implementation. 

None of the commenters indicated 

whether this estimate was too low or too 

high. Therefore, we maintain our 

assumptions and our productivity loss 

estimates as outlined in the proposed 

rule. We are adjusting our estimate for 

inpatient productivity losses from that 

shown in the August 22, 2008 proposed 

rule to update to 2007 dollars, for a 

revised estimate of $9.77 million in 

inpatient coder productivity losses, and 

annualized at 3 percent and 7 percent, 

as shown in Table 4. 

Comment: Some commenters stated 

that the August 22, 2008 proposed rule 

did not adequately account for the cost 

of updates to the CMS–1500 claim form 

and superbills. One commenter noted 

that, while 50 percent of all physician 

practices use superbills, the conversion 

to the larger ICD–10–CM code set will 

make superbills cumbersome and 

impractical. A few commenters stated 

that the $55 superbill revision cost cited 

in the proposed rule was too low. 

Another commenter stated that it took 

more than 2 hours to convert a sample 

family practice superbill from ICD–9 to 

ICD–10, resulting in an unusable 9-page 

document. Another commenter stated 

that superbill conversion could take up 

to 6 hours, with an additional 4–6 hours 

for physician review, costs of $500 to 

$1,000 for editing and new batch 

printing, and additional costs for 

disposal of outdated superbills. A few 

commenters, citing an industrysponsored report on ICD–10 costs, 

estimated the expense for revising 

superbills to be from between $2,985 for 

a small physician practice, to $99,500 

for a large practice. 

Response: Commenters erroneously 

interpreted our reference to superbill 

costs in the August 22, 2008 proposed 

rule (73 FR 49817). In that proposed 

rule, we estimated that the total cost of 

lost productivity (time) for a coder to 

convert a practice’s superbill would be 

only about 2 hours’ time or 

approximately $55, not the entire cost of 

reprinting a supply of superbills. The 

2003 field study conducted by the 

American Health Information 

Management Association (AHIMA) and 

the American Hospital Association 

(AHA) demonstrated that a superbill can 

be converted to ICD–10–CM in a few 

hours, and that they are no larger than 

existing superbills. Superbills generally 

do not list all of the specific codes 

relevant to a particular condition but if 

this was the case, the existing ICD–9– 

CM superbills would also be pages long. 

The reprinting of superbills is an 

annual expense incurred by providers. 

For example, one form manufacturer 

might charge a provider anywhere from 

$100 for 2,500 1-part, white bond 

superbills, to $600 for 10,000, 3-part 

carbonless superbills. We also know 

that one major medical center incurred 

an annual cost of approximately $93,000 

for their reprinting of superbills. 

However, because ICD–9–CM code sets 

are updated annually, providers and 

hospitals would likely still incur 

revision and reprinting, as well as 

disposal costs for unusable superbills as 

an annual cost of doing business 

whether or not there was a changeover 

from the ICD–9–CM code sets to the 

ICD–10–CM and ICD–10–PCS code sets. 

With respect to the CMS–1500 claim 

form, the National Uniform Claim 

Committee (NUCC) which maintains 

this claim form, already expanded the 

field for reporting diagnosis codes to 

accommodate the ICD–10 format in their 

August 2005 revision of the claim form. 

It is therefore ready for ICD–10 use with 

no additional cost. 

Therefore, because we maintain that 

there will not be any substantive 

additional costs for reprinting of 

superbills, and none for the CMS–1500 

claim forms resulting from the transition 

to ICD–10, we will not make any 

revisions to our impact analysis based 

on superbill and/or 1500 claim form 

costs. However, we are adjusting our 

cost estimate to update to 2007 dollars, 

for a revised cost of $12.08 million in 

2014, the year after ICD–10 

implementation, annualized at 3 percent 

and 7 percent as shown in Table 4. 

Comment: The industry’s perceived 

need for increased medical 

documentation was not addressed in the 

proposed rule because we did not 

consider it to be a relevant cost. We 

received several comments that the use 

of ICD–10–CM and ICD–10–PCS would 

cause physicians to order unnecessary 

medical tests to provide more precise 

diagnoses or require more 

documentation to the medical record, 

wasting medical resources, and greatly 

increasing provider costs. Commenters 

stated that one must use the most 

precise ICD–10 code every time to 

achieve the full benefits of ICD–10. 

Another commenter stated that local 

claims determination adjudication rules 

require claims coded with 

‘‘unspecified’’ codes to be rejected. 

Response: We agree that ICD–10–CM 

and ICD–10–PCS offer significantly 

greater detail and specificity reflecting 

the nature of a patient’s medical 

condition. We also agree that there are 

substantial benefits to be derived from 

the greater detail of ICD–10–CM when a 

coder selects the most accurate code 

based on the available documentation. 

This is true whether one is using ICD– 

9–CM codes or ICD–10–CM codes. If 

one cannot assign a precise code, it is 

because the medical record 

documentation is not available or 

because a clear diagnosis has not been 

made and in that case, a more general, 

non-specific code would be selected. 

Such codes are available in both ICD– 

9 and ICD–10. However, we disagree 

that physicians will be pressured to 

perform unnecessary medical tests or 

include additional medical 

documentation because they are using 

ICD–10–CM and ICD–10–PCS code sets. 

Physicians adhere to standards of care 

which, according to the AMA, ‘‘is a duty 

determined by a given set of 

circumstances that present in a 

particular patient, with a specific 

condition, at a definite time and place.’’ 

These standards of care include full 

documentation which, according to the 

American Academy of Family 

Physicians (AAFP), ‘‘includes fully 

describing the patient’s medical history, 

physical findings, (the physician’s) 

diagnosis, the treatment plan and care 

rendered.’’ Physicians select codes that 

reflect the information that they have 

available to them through patient 

history, physical findings and clinically 

appropriate testing, which they have 

documented in the patient’s medical 

record based on the aforementioned 

standards of care. Patient care and 


sroberts on PROD1PC70 with RULES
3348 Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations 

treatment are not pre-determined by 

diagnostic coding; in fact, diagnostic 

coding is determined from best practice 

patient care. A poorly documented 

medical record can be problematic for a 

number of reasons, but such deficient 

medical records are an issue of and by 

themselves, and not contingent upon 

whether the code assigned is an ICD–9– 

CM or an ICD–10–CM code. 

Improved medical documentation is 

not predicated on the change from ICD– 

9–CM to ICD–10–CM. Rather, improved 

medical documentation is being driven 

by initiatives such as quality 

measurement reporting, value-based 

purchasing and patient safety. 

We view any potential improvements 

in medical record documentation as a 

positive outcome of the move to ICD– 

10–CM and ICD–10–PCS. With better 

and more accurate data, patient care can 

only be improved. 

For some services, such as a particular 

drug or surgical procedure, there may be 

a National Coverage Decision (NCD) or 

a Local Coverage Decision (LCD) that 

requires the reporting of a list of specific 

diagnosis codes. These coverage 

decisions sometimes include 

unspecified codes but oftentimes they 

do not. In a handful of cases, the 

coverage decision will list several 

specific diagnosis codes needed in order 

to make payments, and physicians are 

aware of the services or surgeries to 

which they apply. Under MS–DRGs, 

sometimes a lower payment results from 

reporting an unspecified code. An 

unspecified code will still result in a 

payment, but it might be a lower 

payment. The number of such cases will 

not necessarily increase as a result of 

the adoption of ICD–10. 

8. System Changes—Provider/Vendor 

Comment: Commenters stated they 

would incur costs to implement ICD– 

10–CM, including updating and/or 

replacing software and hardware. 

Commenters disagreed with our 

assumption in the proposed rule that 

vendors might provide their clients with 

updated ICD–10-compatible software at 

little to no charge. One commenter 

stated that some vendors charge 

upwards of $10,000 for similar software 

updates. 

Response: In the August 22, 2008 

proposed rule (73 FR 49818), we 

assumed that large provider groups, 

chain providers and institutions, such 

as large hospitals, are most likely to 

require changes to their billing systems, 

patient record systems, reporting 

systems and associated system 

interfaces. We also noted that the new 

codes may also require the redesign of 

standard and special reports. 

Additionally, small providers, who rely 

on superbills, as well as their homegrown systems for capturing patient 

information and claims submission, 

may only need to update their systems 

to accommodate the length of the new 

code fields. Costs of updating provider 

systems will depend on the degree of 

system integration; the need for outside 

technical assistance; and the number of 

systems and system interfaces that must 

be updated. Physician practices (and all 

providers) should begin looking at their 

use of ICD–9–CM and use the transition 

to ICD–10 as an opportunity to consider 

changes that will improve their 

processes and workflows. 

Although commenters do not agree 

that vendor-supplied software will be 

provided to providers free-of-charge, we 

maintain that, for small providers that 

are PC-based or have client-server 

systems, the provider may not bear any 

immediate costs for the software 

upgrades. Practice management systems 

will need to be revised to accommodate 

ICD–10 codes, but this change will take 

place as a part of the migration to the 

Version 5010 standards, and these costs 

have been accounted for in that impact 

analysis. 

Although we recognize that providers’ 

systems will require updating, we did 

not receive substantial information or 

data during the August 22, 2008 

proposed rule’s public comment period 

that would lead us to revise our cost 

analysis in this area. We are adjusting 

our cost estimate as shown in the 

August 22, 2008 proposed rule to 

update to 2007 dollars, for a revised cost 

of $150.64 million over 4 years, 

annualized at 3 percent and 7 percent as 

shown in Table 4. 

Comment: In the August 22, 2008 

proposed rule (73 FR 49805), we cited 

a November 2002 joint letter to NCVHS 

from the AHA, Federation of American 

Hospitals (FAH) and AdvaMed 

supporting the implementation of ICD– 

10–CM and ICD–10–PCS as national 

standards. We also noted in the 

proposed rule (73 FR 49818) that large 

institutions such as hospitals will need 

to transition their systems to both ICD– 

10–CM and ICD–10–PCS, at a cost 

ranging from $55 million to $220 

million. One commenter stated that few 

hospitals were aware of the impending 

transition to ICD–10, and have not 

developed the multi-disciplinary teams 

necessary for a successful transition. 

Other hospital commenters noted that 

they use a combination of purchased 

software and in-house applications, and 

both will require modifications for ICD– 

10 code sets for functions such as code 

assignment, medical records abstraction, 

claims submission, and other financial 

functions, at a heavy financial burden to 

them. However, they did not contest our 

systems cost estimates. One commenter 

noted that this large transition will 

require at minimum two hospital budget 

cycles in order to properly plan and 

allocate resources. 

Response: Hospital commenters did 

not submit any new data that 

substantiated their assertions and would 

predispose us to revising our large 

provider group cost projections, so we 

will continue to rely on our estimate as 

outlined in the August 22, 2008 

proposed rule. Given the change of the 

ICD–10 compliance date to October 

2013, we anticipate that hospitals will 

have ample budget cycle time during 

which to plan for their systems 

implementation of ICD–10–CM and 

ICD–10–PCS. Moreover, the conversion 

of billing systems to accommodate ICD– 

10 codes will take place as part of the 

migration to the Version 5010 standards, 

and these billing system conversion 

costs have been accounted for in that 

impact analysis. 

Comment: We stated in the August 22, 

2008 proposed rule (73 FR 49818) that, 

while many providers who use vendorsupplied software may be able to defer 

the costs of software upgrades, the 

vendor industry may have to bear, at 

least initially, the costs of such 

upgrades. Using RAND’s analysis, based 

on interviews conducted with industry 

experts, we estimated cost of system 

changes for software vendors of 

transitioning to ICD–10 to include the 

wide range of information and billing 

systems and the configurations of 

provider systems. Commenters stated 

we underestimated or did not account 

for all vendor software and systems 

revision costs. These include patient 

accounting, practice management and 

billing systems; encoders and grouper 

software; contract management and 

reimbursement modeling programs; 

quality measurement systems; software 

components of emergency departments, 

and ambulatory and physician office 

systems that must be revised to 

accommodate the use of the ICD–10 

code sets. Commenters also stated that 

systems used to model or calculate 

acuity, staffing needs, patient risk and 

patient care; decision support systems 

and content; presentation of clinical 

content for support of plans of care; and 

selection criteria within electronic 

medical records would be impacted by 

the use of ICD–10 code sets. 

Commenters stated that specifications 

for data file extracts, reporting programs 

and external interfaces, analytic 

software that performs business analysis 

or that provides decision support 

analytics for financial and clinical 


sroberts on PROD1PC70 with RULES
Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations 3349 

management; and business rules guided 

by patient condition or procedure 

would also need to be revised for ICD– 

10 use. Commenters estimated an 

average of 24 months for product 

development, and that vendor product 

release cycles, typically between 18 to 

36 months, do not usually match 

regulatory compliance dates and the 

transition to ICD–10 may negatively 

impact these cycles. 

Response: While some commenters 

provided additional examples of vendor 

systems that will need to be updated for 

the transition to ICD–10, they did not 

provide us with any costs associated 

with those systems. We are unable to 

determine at this point if those 

additional systems can be applied to all 

vendors since vendors deal with many 

types and sizes of providers and 

provider organizations. 

We agree with commenters that there 

will be impacts to vendor systems, and 

that it may be difficult to initially 

account for all system changes because 

of the varying needs of individual 

providers. 

We again point out that a portion of 

these costs will take place as part of the 

migration to the Version 5010 standards 

and these system costs have been 

accounted for in that impact analysis. 

However, based on the comments we 

received which stated that the proposed 

rule did not account for all of the 

vendor systems that will need to be 

updated to accommodate the new code 

set, we have increased our estimate of 

software vendor systems by 20 percent. 

Subsequently, we have increased our 

software vendor system costs from the 

previous $96.05 million to $115.29 

million over a 4-year period, annualized 

at 3 percent and 7 percent as shown in 

Table 4. 

9. System Changes—Plans 

Comment: In the August 22, 2008 

proposed rule (73 FR 49818), we 

acknowledged that revisions to payer 

systems may be one of the largest ICD– 

10 cost categories, at approximately 

$164.64 million, with a range of $110 

million to a $274 million cost, based on 

data from the RAND report. We also 

acknowledged that not all payer system 

changes may have been identified in our 

impact analysis. Commenters stated that 

payer business process impacts 

resulting from implementation of ICD– 

10–CM and ICD–10–PCS would include, 

among others, impacts to medical 

policy; benefit design and coding; 

vendor management; data reporting; 

disease and case management; trend 

analysis and quality assurance. 

Commenters noted that edits will need 

to be updated to accommodate ICD–10’s 

impact on auto-adjudication systems. 

One commenter cited a 2000 industry 

white paper that stated for each 100 

hours spent on programming, payers 

must spend an addition 30–35 hours 

preparing specifications, conducting 

analysis and design sessions, 

performing testing and conducting other 

implementation-related activities. 

Another commercial payer estimated 

8,000 programming hours for their 

transition from ICD–9 to ICD–10, not 

including specification changes or 

testing, while another plan estimated 

that it would cost between $3.00 and 

$5.80 per plan member to cover the cost 

of ICD–10 implementation. One 

commenter stated that integrating the 

expanded ICD–10 code sets into their 

business systems would be difficult, 

while another stated that detailed 

information on how reimbursement 

programs will be affected should be 

made available to payers at least one 

year before ICD–10–CM and ICD–10– 

PCS implementation so that payers can 

plan for training, financial analysis and 

modeling. 

Response: Commenters did not 

provide substantiated data that would 

allow us to update our payer system 

cost estimates at this time. 

We agree with commenters that there 

will be an impact to payer systems, and 

that it may be difficult to initially 

pinpoint all of the system changes 

because of the pervasive use of ICD–9 

codes within payer systems. As part of 

our internal analysis of CMS payment 

systems that currently use ICD–9 code 

set data and would likely use ICD–10 

code set data, we conducted interviews 

with all CMS components and 

identified no less than 20 systems across 

30 business processes/areas that 

potentially would be impacted. As an 

example of the internal investigative 

process CMS undertook as part of our 

ongoing ICD–10 planning and analysis, 

CMS has shared this information with 

the industry through its summary report 

at http://www.cms.hhs.gov/ 

TransactionCodeSetsStands/ 

Downloads/AHIMASummary.pdf. We 

expect that once payers initiate similar 

ICD–10 planning and analysis activities, 

they will identify both known and 

heretofore unknown impacts to their 

payer systems, and can better evaluate 

them in terms of minimal, medium, and 

high impacts relative to cost and risk. 

As discussed in the August 22, 2008 

proposed rule (73 FR 49800), there are 

multiple ways for entities to integrate 

the ICD–10 code sets into their business 

settings. As the codes are incorporated 

into systems and processes, some 

providers, plans, and vendors may 

decide to populate the new codes 

throughout their entire system all at 

once, or translate the codes on a flow 

basis as they are used. Integration of the 

codes in many cases will be determined 

by the extent to which the available 

granularity is needed in transactions. 

For purposes of this analysis, we 

acknowledge that the estimated payer 

systems costs may exceed those 

identified in the August 22, 2008 

proposed rule. Recognizing that these 

payer system costs may be difficult to 

ascertain, and considering the 

comments submitted that expressed 

concern regarding underestimation of 

payer system costs, we have increased 

our estimate of payer systems costs by 

20 percent based on comments which 

stated that the August 22, 2008 

proposed rule did not account for all of 

the systems that will need to be updated 

to accommodate the new code set. We 

believe that a 20 percent increase in our 

estimate of payer system costs will 

recognize these potential unaccounted 

system costs and better estimate ICD–10 

implementation costs. Therefore, we 

have increased our payer system costs 

from the previous $164.64 million to 

$197.64 million over 4 years, 

annualized at 3 percent and 7 percent as 

shown in Table 4. 

As information becomes available 

from industry, we anticipate that it will 

be shared through advisory bodies such 

as NCVHS, and other industry 

communication vehicles such as 

association Web sites, newsletters, open 

door forums, conferences, etc. As 

information on the impact of ICD–10 

transition to CMS programs becomes 

available, CMS plans to share 

information through official CMS 

communication vehicles as appropriate, 

for purposes of informing the industry’s 

ICD–10 implementation planning. 

10. System Changes—Government 

Comment: In the August 22, 2008 

proposed rule (73 FR 49819), we 

discussed potential costs to State 

Medicaid programs associated with the 

transition from ICD–9 to ICD–10. We 

noted the limitations of our analysis, 

and we estimated that it would cost 

approximately $102 million or about $2 

million per State to transition their 

systems to ICD–10–CM and ICD–10– 

PCS. The majority of comments focused 

on costs of ICD–10–CM and ICD–10– 

PCS implementation to State Medicaid 

programs. A number of commenters 

stated that the August 22, 2008 

proposed rule did not fully account for 

the impact of ICD–10–CM and ICD–10– 

PCS on State Medicaid programs. In 

light of those additional unaccounted 

for costs, some State Medicaid agencies 

stated that they would not be ready to 


sroberts on PROD1PC70 with RULES
3350 Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations 

accept the new ICD–10 code sets by the 

proposed October 2011 compliance 

date, resulting in rejected claims, claims 

paid inappropriately, and an increase in 

adjustments and re-billing. Of the 

comments received regarding the ICD– 

10–CM and ICD–10–PCS conversion 

costs for State Medicaid agencies, none 

were able to offer any data to support 

their assertions that these conversion 

costs were underestimated in the 

August 22, 2008 proposed rule. Another 

commenter stated that Medicaid paper 

claim forms will need to be reprinted for 

ICD–10 codes. Four States stated that 

the transition to ICD–10 will increase 

their Medicaid Management Information 

Systems (MMIS) replacement costs, and 

that these updates could be jeopardized 

if their system transition from ICD–9 to 

ICD–10 is made too quickly. They noted 

that changes to MMIS, as well as legacy 

systems, may force them to initially run 

dual systems. One State Medicaid 

agency recommended a provision that 

would waive implementation of the 

ICD–10 code sets in any legacy system 

scheduled for replacement. 

One commenter stated the August 22, 

2008 proposed rule did not account for 

system conversions and training 

required for public programs outside of 

Medicaid, including the use of ICD–10 

in public health reporting and 

surveillance systems. The commenter 

stated that implementation of ICD–10 

would result in legacy system migration 

costs, and changes to longitudinal 

analysis for downstream data users, 

including State employee health plans, 

some social service programs, State 

health care, and university research and 

training programs. While the commenter 

noted these impacts, they did not 

provide any data that would cause us to 

further revise our analysis at this time. 

Tribal government representatives 

expressed concern about their costs 

associated with the implementation of 

ICD–10–CM and ICD–10–PCS, asking 

that the ICD–10 compliance date be 

moved forward to October 2013 to allow 

them time to achieve compliance. 

A few commenters stated that we did 

not consult with local governments on 

the impacts that might result from the 

transition from ICD–9–CM to ICD–10– 

CM as required by Executive Order 

13132. 

Response: We agree with commenters 

that ICD–10 Medicaid cost estimates 

were understated because they were 

based on a very limited State survey. We 

anticipated that State Medicaid agencies 

would respond with more accurate and 

complete data, but they were unable to 

do so, with some citing current State 

budget uncertainties. 

The ICD–10 compliance date of 

October 1, 2013 addresses State 

Medicaid agencies’ concerns about not 

being able to be ready to accept claims 

with the new ICD–10 code set by the 

proposed October 1, 2011 date. State 

Medicaid agencies can approach the 

transition from ICD–9–CM to ICD–10– 

CM and ICD–10–PCS either through 

installation of a new MMIS system (of 

which 18 States are currently in various 

stages of procurement) that would 

already accommodate the ICD–10–CM 

and ICD–10–PCS codes; or through 

remediation of their current systems. 

Either way, States are reimbursed by the 

Federal government for 90 percent of 

the cost of ICD–10–CM and ICD–10–PCS 

modification to the State’s Medicaid 

system design, development, 

installation or enhancement, leaving 10 

percent as the state’s share of the 

expense. 

This updated information, and 

discussions with Medicaid subject 

matter experts regarding our experience 

with similar Medicaid implementations 

with the States (Y2K and NPI, for 

example) leads us to revise our 

estimates of the States’ Medicaid 

program cost of ICD–10 implementation 

from $102 million, to a range of between 

$200 million to $400 million. Taking the 

midpoint of that range, or $300,000,000, 

we estimate that the average ICD–10 

cost per State Medicaid program, at 

their 10 percent cost share, to be 

$588,235, for a State Medicaid program 

cost of $30 million. We estimate the 

remaining 90 percent cost share to the 

Federal Medicaid program as an average 

of $5.294 million per State, or a Federal 

Medicaid share of $270 million. 

Therefore, based on this new 

information, we have increased by $270 

million the Federal government’s share 

of the Medicaid system cost estimates, 

and revised the State’s 10 percent cost 

share to $30 million, with costs 

annualized at 3 percent and 7 percent, 

respectively, as shown in Table 1. 

At some Tribal programs, Medicare 

and Medicaid collections represent half 

of the operating budget of the facility 

and any delay or decrease in collections 

as a result of the transition from ICD– 

9–CM to ICD–10–CM will have an 

impact on Tribal programs’ ability to 

provide services. The Indian Health 

Service (IHS) has jurisdiction over 

Tribal health care programs and 

provides the Tribes with necessary 

system upgrades to their Resource and 

Patient Management Systems (RPMS). 

IHS will need to invest in systems 

changes for all 60 RPMS software 

packages, integrate ICD–10–CM and 

ICD–10–PCS codes into their reports, 

train staff on new codes, and test data 

transmissions with payers. IHS was one 

of the first Federal agencies to recognize 

the impact of ICD–10 on their support 

of Tribal health services, and has taken 

these expenses into consideration in 

their estimate of their ICD–10 costs, of 

which the latest data were included in 

the proposed rule at 73 FR 49819. 

HHS actively participated in NCVHS’ 

public and open process for soliciting 

input on ICD–10. In the August 22, 2008 

proposed rule (73 FR 49799), we 

discussed the number of NCVHS 

hearings on ICD–10, and the wide array 

of testifiers and comment submitters, 

including public health representatives. 

The Public Health Data Standards 

Consortium (PHDSC), which includes 

local and county health departments 

among their members, as well as the 

National Association of City and County 

Health Officials (NACCHO) were invited 

to testify. Their issues were addressed 

by the National Association of Health 

Data Organizations (a not-for-profit 

organization that addresses the 

collection, analysis, dissemination, 

public availability, and use of health 

data) which testified strongly in favor of 

moving to ICD–10 code set. The PHDSC 

and the U.S. Joint Public Health 

Informatics Task Force, which includes 

NACCHO, both submitted positive 

comments on our proposed rule, calling 

for implementation of ICD–10 by no 

later than October 2012. NCVHS 

considered all of this input, and made 

recommendations to adopt ICD–10–CM 

and ICD–10–PCS to the Secretary. These 

recommendations were all taken into 

consideration by HHS as it developed 

this rule. 

TABLE 1—GOVERNMENT COSTS $ MILLION

Change 

Government 

agency 

Cost annualized 

3%, 7% 

3.00% 7.00% 

Systems/Software Modifications and Updates: 


sroberts on PROD1PC70 with RULES
Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations 3351 

TABLE 1—GOVERNMENT COSTS $ MILLION—Continued 

Change 

Government 

agency 

Cost annualized 

3%, 7% 

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 

we should consider suspending 

Medicare Administrative Contractor 

(MAC) and RAC auditing for at least 12 

months following the ICD–10 

compliance date. One commenter stated 

that during the transition from ICD–9 to 

ICD–10, provider coding errors should 

not be used as a basis for prosecution 

under the False Claims Act. Another 

commenter noted that CMS should not 

unfairly penalize providers if the agency 

adopts a prospective budget neutrality 

adjustment (BNA). 

Response: These comments relate 

specifically to ICD–10–CM and ICD–10– 

PCS implementation issues that will 

impact the Medicare program. We will 

take these comments under 

consideration, and inform the industry 

and other interested stakeholders 

through normal CMS communication 

channels of any decisions made relative 

to these issues as we plan for the 

transition from ICD–9–CM to ICD–10– 

CM and ICD–10–PCS. 

11. Impact on Clinical Laboratories 

Comment: A few commenters stated 

that neither the proposed rule nor the 

RAND and Nolan ICD–10 reports 

addressed the impacts of ICD–10 

adoption on clinical laboratories. 

Commenters stated that clinical 

laboratories submit a large volume of 

small claims and rely on providers to 

submit correct codes but that obtaining 

missing codes, following up on and/or 

correcting invalid codes submitted by 

providers is a large administrative 

burden. Commenters stated that, by 

using ICD–10 codes, providers will be 

more likely to submit incorrect codes or 

will fail to submit them at all. 

Commenters also mentioned that 

pathologists will have to be trained in 

how they document the diagnoses they 

submit in their pathology reports, which 

would require an increase in medical 

documentation. 

One commenter stated that, although 

they perceived an impact of the 

adoption of ICD–10 on clinical 

laboratories, the 60-day public comment 

period was not enough time for them to 

gather substantive data on that impact. 

One commenter suggested that 

clinical labs be exempt from the 

requirement to adopt ICD–10–CM or at 

least not be required to utilize the 

highest degree of specificity in diagnosis 

coding when submitting claims. 

According to some commenters, 

clinical laboratory systems that will be 

impacted include: Order entry; 

laboratory billing, reporting, and data 

warehousing; and programs, screens, 

reports, requisitions, forms (printed and 

electronic), interfaces, contracts and 

policy manuals. Additionally, 

commenters stated that use of ICD–10– 

CM will require more highly qualified 

and more expensive specialists to 

translate physicians’ narratives into the 

appropriate ICD–10–CM coding. 

Commenters also stated that clinical 

labs will be responsible for educating 

providers as to the proper submission of 

diagnosis codes as well as conducting 

business rule development, 

programming, testing and 

implementation for hundreds of internal 

software programs, remapping hundreds 

of external interfaces as well as 

conducting end-to-end testing with 

trading partners. 

An industry-sponsored report on ICD– 

10–CM and ICD–10–PCS costs 

acknowledged that ICD–10 would have 

an impact on clinical laboratories, but 

provided no substantiated data in 

support of that statement. The report 

does mention that one large national 

laboratory has estimated its up-front 

cost of implementing ICD–10–CM to be 

about $40 million, including IT and 

education costs. However it does not 

provide how that cost was derived, and 

we are unable to assess the basis for this 

estimate or the extent to which it may 

include costs already included in our 

assumptions. 

Response: We addressed the impact of 

the adoption of ICD–10–CM on clinical 

laboratories in two areas, part-time 

coders and laboratories as small entities, 

and used the public information 

available to us at the time of the 

development of the August 22, 2008 

proposed rule as a basis for our 

assumptions and our cost/benefit 

analysis. In the August 22, 2008 

proposed rule (73 FR 49815), we 

acknowledged in Table 7 (‘‘Ambulatory 

Entities Assumed To Employ Part-Time 

Coders Based on the 2005 Statistics of 

U.S. Businesses’’) that 6,080 coders 

were likely employed by medical and 

diagnostic laboratories (designated as 

North American Industry Classification 

System or NAICS code 6215), and 

included them in our estimate of the 

costs of coder training. We assumed that 

these 6,080 coders would have training 

costs per coder of $550, for an estimated 

cost of $3.344 million. 


sroberts on PROD1PC70 with RULES
3352 Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations 

In the August 22, 2008 proposed rule 

(73 FR 49828), we also noted that 

approximately 92 percent of medical 

laboratories are assumed to be small 

entities, with annual receipts below $9 

million, and considered them in our 

analysis of the impact on small entities. 

In Table 9 (‘‘Estimated Impact of ICD– 

10 Transition Cost on Inpatient and 

Outpatient Providers and Suppliers, 

Adjusted for Inflation’’), we had 

included NAICS code 6215, which was 

erroneously labeled ‘‘Medical 

Diagnostic and Imaging Services’’ but is 

actually ‘‘Medical and Diagnostic 

Laboratories’’, for which we allocated a 

portion of provider systems costs based 

on a percent of laboratory revenues. In 

the August 22, 2008 proposed rule, we 

estimated this cost to be $5 million, for 

a combined cost of $8.344 million 

($3.344 million based upon 6,080 

laboratory coders in Table 7 in the 

August 22, 2008 proposed rule at $550 

per coder + $5 million from Table 9 in 

the August 22, 2008 proposed rule). The 

August 22, 2008 proposed rule’s Table 

9 data for medical and diagnostic 

laboratories is updated in this final rule 

from $5 million to $13.14 million to 

account for the increase in costs, and is 

reflected in Table 2 and our Table 6 cost 

summary (which includes annualized 

costs at 3 percent and 7 percent), both 

of which appear in this final rule. This 

accounts for provider follow-up 

productivity losses as described by the 

commenters. Although commenters 

provided a great deal of qualitative 

information as to the impact of the ICD– 

10–CM transition on the clinical 

laboratory industry, and again, we 

acknowledge that it will be impacted, 

we did not receive any quantitative data 

from commenters to support a revision 

of our analysis of the quantitative 

impact of the adoption of ICD–10–CM 

on clinical laboratories. 

Clinical laboratories cannot be 

exempted from the requirement to adopt 

ICD–10–CM. All HIPAA covered entities 

need to be ICD–10–ready at the same 

time to not disrupt claims payment and 

processing. Since clinical laboratories 

utilize ICD codes for reimbursement and 

submit claims to various payers, it is 

imperative that they implement ICD–10 

at the same time as the rest of the health 

care industry. As to one commenter’s 

suggestion that laboratories not use the 

highest degree of specificity in diagnosis 

coding when submitting claims, the use 

of the ICD–10 codes do not drive the 

clinical care, as previously discussed in 

this RIA. Laboratories should continue 

to code based on the information at 

hand, or supplied by the provider or 

based on the clinical test being 

conducted. 

As we previously indicated in our 

discussion on medical documentation 

in this final rule, we also disagree with 

commenters who stated that 

pathologists would need additional 

training to provide correct diagnosis as 

a result of using ICD–10 codes. While 

laboratories will be responsible for 

working with providers to ensure proper 

programming and testing, these are 

activities that they would undertake on 

an ongoing basis with any new provider 

clients. The implementation of ICD–10 

in hundreds of internal software 

programs, and the remapping hundreds 

of external interfaces as well as end-toend testing with trading partners are 

similar processes that all HIPAA 

covered entities will be undertaking as 

they implement ICD–10, and are part of 

the generally accepted ICD–10 system 

implementation process. Other than the 

cost estimates for coder training and 

productivity losses, absent other 

quantitative data from clinical 

laboratories on costs, we cannot at this 

time project any more specific cost 

estimate relative to clinical laboratories’ 

transition from ICD–9–CM to ICD–10– 

CM and ICD–10–PCS. 

12. Impact on Pharmacies 

Comment: Some commenters stated 

that the ICD–10 proposed rule did not 

account for the impact that the 

transition to ICD–10–CM and ICD–10– 

PCS would have on the pharmacy 

industry. One commenter stated that the 

adoption of the National Council of 

Prescription Drug Plans’ 

Telecommunications Standard Version 

D.0, and increased adoption of eprescribing, will cause an increase in 

diagnosis code use required by payers. 

A few commenters stated that 

between 40 and 50 percent of 

prescription claim volume is associated 

with prescription refills. Some 

commenters recommended that there be 

a one year staggered transition period 

for pharmacies to implement ICD–10– 

CM so that authorized prescription 

medication refill orders can complete 

the reorder cycle uninterrupted. A 

commenter stated that for refills, 

pharmacies will not be able to use an 

ICD–9 to ICD–10 crosswalk because of 

the lack of one-to-one relationships but 

will have to contact physicians to obtain 

the ICD–10–CM code the prescriber has 

assigned to the patient. Another 

commenter stated that all prescription 

refills written prior to the compliance 

date for ICD–10–CM should be 

exempted from having to use the ICD– 

10–CM codes. Commenters also stated 

that ICD–9–CM codes are used by 

pharmacy benefit managers (PBMs) for 

disease management reporting, and for 

client reporting, benchmarking, and 

patient stratification. Commenters stated 

that ICD–10–CM would impact the 

pharmacy industry for training, systems 

and business process revisions, manual 

review of systems, outreach to 

providers, consumer education, cost of 

manual provider contact, and other 

considerations. Conversely, two other 

commenters stated that ICD–9 codes are 

not heavily used in pharmacies, and 

that impact would be minimal. None of 

the commenters were able to provide 

substantiated data to support their 

qualitative impact claims. 

Response: NCVHS held multiple 

hearings and solicited comments from 

all industry segments regarding the 

potential impacts of ICD–10–CM on 

their respective business processes and 

systems. During the ongoing NCVHS 

process, representatives of the pharmacy 

industry did not indicate that the 

transition from ICD–9–CM to ICD–10– 

CM codes would be problematic and, 

therefore, we did not identify 

pharmacies as an impacted industry 

segment in the August 22, 2008 

proposed rule’s regulatory impact 

analysis. We now understand that ICD– 

9–CM codes are currently used in 

pharmacy settings when the patient’s 

drug benefit plan may require a 

diagnosis code for purposes of prior 

authorization. However, the pharmacist 

does not assign this diagnosis code; it 

must be obtained by the pharmacist 

from the prescriber, just as it would if 

ICD–9–CM codes were still in use. The 

adoption of NCPDP 

Telecommunications Standard Version 

D.0 was overwhelmingly favored by the 

pharmacy industry for its ability to 

better support Medicare Part D 

requirements. We do not anticipate that 

the use of NCPDP Telecommunication 

Standard Version D.0 or the ICD–10–CM 

code sets in pharmacy settings will 

cause an increase in the requirement to 

use codes to report supplies/services in 

e-prescribing transactions and that, in 

fact, the use of such standards will 

enhance retail pharmacy transactions 

through their greater specificity, 

reducing pharmacy call-backs to 

physicians, and improving the 

efficiency of pharmacy claims 

submissions and accurate payments. As 

with other coding situations, ICD–9–CM 

codes will continue to be used up to and 

until the October 1, 2013 compliance 

date, at which time ICD–10–CM and 

ICD–10–PCS code sets will be required. 

With regard to ongoing prescription 

refills that are written prior to, and 

refilled after the October 1, 2013 

compliance date, we anticipate that 


sroberts on PROD1PC70 with RULES
Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations 3353 

pharmacies will be able to use the 

reimbursement mappings posted to the 

CMS Web site to translate ICD–9–CM 

codes into ICD–10–CM. These mappings 

provide a one-to-one match of the 

closest ICD–9–CM to ICD–10–CM and 

ICD–10–PCS codes for reimbursement 

purposes. We also anticipate that, given 

the new compliance date of October 

2013, this will afford the pharmacy 

industry ample additional time to 

identify and fix any outstanding refill 

issues. 

Although commenters provided 

qualitative information as to the impact 

of the ICD–10 transition on the 

pharmacy industry, we did not receive 

any data that would allow us to offer 

any refined estimates of quantitative 

impacts to the pharmacy industry. 

13. Contract Renegotiation 

Comment: A number of commenters 

stated that the cost of contract 

renegotiations was not addressed in the 

proposed rule, and that once contracts 

are opened to accommodate the ICD–10 

transition, many providers will want to 

review their negotiated rates based on 

revised fee schedules. Other 

commenters stated that it is more cost 

effective for payers and providers to 

renegotiate contracts in conjunction 

with their renewal dates, whereas offcycle negotiations demand additional 

resources, analysis and time, which 

would be required under the transition 

to ICD–10. 

A commenter mentioned that for an 

entire network of hospital contracts, 25 

to 30 percent may be up for renewal in 

any given year. Another commenter 

stated many high-volume providers 

have multi-year agreements with 

negotiations taking months, and 

reimbursement terms can be the most 

time-consuming part of the process. 

Other commenters mentioned that 

extensive pricing analysis will be 

required prior to entering contract 

renegotiations. One commenter stated it 

will be difficult to price contracts 

because unknown provider billing 

patterns will create financial 

uncertainty for providers and payers. 

Other commenters mentioned that the 

new coding system will cause 

differences in the classification of 

provider services and the reporting of 

utilization patterns. Provider contracts 

will require modification to account for 

subsequent reimbursement changes to 

achieve budget neutrality. 

Response: In the August 22, 2008 

proposed rule (73 FR 49814), we 

discussed the different approaches 

taken by RAND and Nolan with regard 

to the cost of contract renegotiations. 

RAND stated that periodic contract 

renegotiations are the norm in the 

health care payer industry, with 1-year 

and 3-year contract cycles being quite 

common. RAND assumed that the 

conversion to ICD–10–CM and ICD–10– 

PCS would introduce more issues to 

negotiation, but would be far less likely 

to spur negotiations when there 

otherwise would have been none. 

Nolan assumed that, because ICD–10– 

CM and ICD–10–PCS represents changes 

in the underlying diagnostic and 

procedural coding, many if not all 

contracts based on code definitions and 

their associated reimbursement rates 

will require development, negotiation, 

review and ultimately agreement. Nolan 

assumed this will be a costly and timeconsuming process shared by payers 

and providers alike. The number of 

contracts Nolan used for their analysis— 

5 to 20 per entity—is much smaller than 

the millions of contracts the industry 

has estimated because Nolan assumed 

that many contracts for physicians and 

provider groups would be standardized 

and would be negotiated by contracting 

staff rather than by physicians 

themselves. Nolan did not provide any 

separate estimates for the costs of 

contract renegotiation to health plans, 

assuming that these costs would be 

included in the health plans’ overall 

costs of ICD–10–CM and ICD–10–PCS 

implementation. 

As discussed in the August 22, 2008 

proposed rule (73 FR 49814), we did not 

account for the costs of contract renegotiations because we shared RAND’s 

assumption that providers and payers 

must regularly renegotiate contracts in 

response to new policies. Contracts are 

renegotiated to revise the terms of the 

contract, usually in response to changes 

in policy that affect rates of 

reimbursement, and as we have already 

noted, we do not anticipate that the 

ICD–10–CM and ICD–10–PCS data that 

would constitute the basis for changes 

in reimbursement will be available until 

some time after the initial 

implementation of ICD–10–CM. 

Therefore, we believe that any cost of 

renegotiating contracts will be spread 

out over time, be undertaken at the time 

of the regularly scheduled contract 

renewal, and should be accounted for as 

a cost of doing business. 

14. Impact on Electronic Medical 

Records 

Comment: In the August 22, 2008 

proposed rule (73 FR 49829), we 

discussed the impact of ICD–10 on 

electronic medical record (EMR) 

systems. Many commenters stated that 

the EMRs systems will be too costly to 

reprogram for ICD–10 code sets, but 

offered no examples of what those costs 

might be. However, one commenter 

estimated that only 4 percent of 

physicians have an extensive, fully 

functioning EMR system, and only 13 

percent have a basic EMR system. 

Commenters stated the complexity of 

system changeovers will delay EMR 

adoption, put stress on practice 

operations and increase costs. One 

industry group stated that, unlike other 

systems, not all ICD–10 hardware and 

software changes for EMRs will be 

accommodated by the Version 5010 

upgrade of vendor applications. 

Response: We agree that there will be 

costs associated with reprogramming 

electronic medical record systems to 

accommodate the use of ICD–10. 

However, as both commenters and the 

proposed rule noted, the rate of 

adoption of EMRs among providers is 

currently very low, and the transition to 

ICD–10–CM and ICD–10–PCS would 

affect only those providers who now 

employ EMRs. As those providers have 

already made their initial investment in 

their EMR system and are enjoying the 

benefits associated with its use, we 

expect that they will make the necessary 

upgrades to allow continued use of their 

system. For those providers who 

anticipate purchasing EMR systems, 

they should verify with their vendors 

that the systems they are considering 

can accommodate ICD–10–CM and ICD– 

10–PCS codes. We also anticipate that 

providers who need to migrate their 

EMR systems to ICD–10 will work 

closely with their vendors to ensure 

successful transitions. We also agree 

that, for clinical and administrative 

functions within EMR systems that are 

not integrated into other systems that 

use Version 5010, separate hardware 

and/or software costs may be incurred. 

However, absent data from vendors and 

providers, we cannot at this time project 

any specific cost estimates relative to 

ICD–10 transition and EMRs. 

15. General Benefits 

Comment: Overall, most commenters 

agreed with the benefit categories 

outlined in the August 22, 2008 

proposed rule (73 FR 49821). Some 

commenters stated that, although these 

benefits will eventually be seen from the 

ICD–10 transition, their size was 

overestimated by the August 22, 2008 

proposed rule. However, no 

substantiated data was provided by 

these commenters that would provide 

quantifiable information to counter our 

assumptions or convince us to change 

our analysis at this time. 

While many commenters agreed with 

the benefits outlined in the proposed 

rule, they also suggested other benefits 

that could be realized through the 


sroberts on PROD1PC70 with RULES
3354 Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations 

transition to ICD–10. Commenters stated 

that these other benefits included 

improvement in medical knowledge and 

technology; the ability to substantiate 

the medical necessity of diagnostic and 

therapeutic services; the ability to 

demonstrate the efficacy of using 

technology for particular clinical 

conditions; and the ability to identify 

complications and adverse effects 

through the use of technology. Another 

commenter specifically mentioned that 

ICD–10–CM also permits the 

identification of individual fetuses in 

multiple gestation pregnancies which 

will make it possible for the first time 

to link a coded condition to a specific 

fetus. 

One commenter stated that while the 

discussion of the benefit of ‘‘more 

accurate payments for new procedures’’ 

in the proposed rule seems to focus on 

Medicare payments, the benefit would 

apply to other payers and health plans 

as well. 

Conversely, some commenters 

questioned the benefits of ICD–10. A 

few commenters questioned whether 

covered entities would really achieve 

more accurate payments, fewer rejected 

claims and fewer improper claims. 

Some commenters expressed doubt as to 

whether physician practices specifically 

would achieve many of the stated ICD– 

10 benefits. Others noted that 

conversion to ICD–10 would make 

almost 30 years of longitudinal U.S. 

morbidity data derived from ICD–9 

virtually useless and it would be 

difficult to draw conclusions about 

trends in ICD–9 or ICD–10 translated 

data when aggregate comparisons 

assume that all hospitals are coding 

consistently. It was also noted that 

information or benchmarks were not 

available from previous HIPAA 

implementations that could validate or 

disprove the projected benefit 

assumptions. 

Some commenters stated that many of 

the projected benefits refer to 

improvements in the procedure code 

classification system (ICD–10–PCS) and 

are not directly tied to ICD–10–CM 

adoption. 

Response: As outlined in the August 

22, 2008 proposed rule, we were 

conservative in our estimate of benefits. 

In many instances, we claimed only a 

small percentage of our calculated full 

benefit, and in a number of areas where 

we did not have quantifiable benefit 

data, we declined to claim any benefit 

whatsoever. We agree with commenters 

who stated that we did not account for 

all the benefits that could potentially be 

realized through the use of ICD–10–CM 

and ICD–10–PCS. If benefits were 

overestimated, as some commenters 

asserted, those assertions did not 

indicate how or to what degree we may 

have overestimated benefits, nor did 

they provide information that we could 

use to revise our benefits estimates. 

In the proposed rule, for the benefit 

growth factor pre-implementation, we 

use the growth in national health care 

expenditures for years 2005–2007, with 

year 2007 having an estimated growth 

rate of 1.212. For the growth projections 

for years 2012 and beyond, we use the 

compounded growth in the U.S. 

population which is projected to grow at 

0.008 per year. 

In this final analysis we use the same 

approach, but rather than 2004 as the 

base year for the analysis, we now use 

expenditures from 2007 as the base year 

of the analysis. We then apply the 1.212 

growth rate adjustment to the 100 

percent benefit value for each respective 

benefit listed in Table 5, and use the 

resulting number to pro-rate the phasein amounts based upon the identified 

phase-in percentage assigned for the 

first year in which the benefits first 

appear. Going forward from the year in 

which the regulation is implemented, 

we applied the population growth factor 

compounded by the number of years 

from the implementation year of the 

regulation (2014). We now estimate 

benefits at $4,539.63 million over 15 

years, and annualized at 3 percent and 

7 percent, as reflected in Table 7, 

compared with $3,950.74 million over 

15 years in the August 22, 2008 

proposed rule. Since the benefits 

estimates are now based in 2007 dollars, 

we updated the cost numbers to 2007 

dollar for comparability. 

16. Education and Outreach 

Comment: Commenters stated that 

while there should be a set of basic ICD– 

10–CM and ICD–10–PCS training 

materials with consistent messages, 

education should be designed for 

different learning levels and audiences. 

Other commenters suggested the 

development of a detailed provider 

education and outreach plan with 

emphasis on small physician practices 

and software vendors; increasing the 

number of Medicare customer service 

representatives and creating a separate 

toll free hotline for ICD–10 questions; 

hosting regularly scheduled regional 

calls with rural providers, independent 

clinical laboratories, key stakeholders, 

physicians, and State and regional 

medical societies; designating a central 

point person to guide ICD–10–CM and 

ICD–10–PCS implementation and 

ensure consistency of materials; and 

development of a public access Web site 

for ICD–10 interpretation and guidance. 

Commenters also stated that academic 

medical centers and teaching hospitals 

will be impacted by ICD–10–CM and 

ICD–10–PCS and should be targeted for 

more intense educational outreach. 

Commenters recommended that CMS 

should fund ICD–10 education and 

outreach programs, and pursue both 

paid and earned ICD–10 educational 

advertising. 

Response: In the August 22, 2008 

proposed rule (73 FR 49807), we 

detailed our intention to provide ICD– 

10 education and outreach to a wide 

variety of health care entities, including 

Medicare contractors; Fiscal 

Intermediaries, Carriers, and Medicare 

Administrative Contractors; hospitals; 

physicians; other providers; and other 

stakeholders. We stated that we will 

develop and make publicly available a 

host of tools, including extensive 

‘‘Frequently Asked Questions’’ 

documents which will be updated as 

new questions and/or information arise; 

fact sheets; and other supporting 

education and outreach materials for 

partner dissemination. Other potential 

impacted groups will be targeted, and 

activities will be developed, based on 

this stakeholder input. We acknowledge 

that different health care professionals 

and entities will have different 

information needs, and we are 

beginning to address this need through 

educational materials posted to http:// 

www.cms.hhs.gov/MedLearn and http:// 

www.cms.hhs.gov/ICD10/ Web sites. All 

materials go through extensive reviews 

from a number of subject matter experts 

prior to dissemination to the public to 

assure accuracy and consistency. Our 

free, ongoing series of roundtable and 

open door forum discussions tailored to 

specific audiences such as ESRD 

providers, rural providers, hospitals, 

etc. also address a full spectrum of 

stakeholder segments and concerns, 

including ICD–10, on a regularly 

scheduled basis. 

Many stakeholders, through the 

August 22, 2008 proposed rule’s public 

comment process, expressed their 

willingness to assist in disseminating 

information to their respective 

constituencies, and we will take 

advantage of those offers of assistance, 

working closely with industry in this 

regard. 

17. Impacts on Training Programs 

Comment: A commenter stated that 

the August 22, 2008 proposed rule did 

not address possible coder shortages 

and the need to re-certify coders. The 

commenter noted that implementing 

ICD–10 will exacerbate the current 

shortage of clinical coders, and did not 

account for the impact on formal 


sroberts on PROD1PC70 with RULES
Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations 3355 

training programs for degree and 

national certificates that will need to be 

updated or redeveloped. Some 

commenters stated regular physician 

office staff would need to become 

certified coders, and current coders will 

need to recertify, incurring a costly 

exam fee. Commenters noted that ICD– 

10–CM and ICD–10–PCS are too 

technical to teach in a short amount of 

time. Other commenters stated that the 

October 2011 proposed compliance date 

did not allow enough time for 

publishers to update and revise medical 

coding and billing program texts and 

curriculum; and allow institutions to 

purchase, install and test the new IT 

systems needed to train medical coders. 

Response: We have received no 

indication from industry, and have no 

reason to believe, that the changeover 

from ICD–9–CM to ICD–10–CM and 

ICD–10–PCS codes might contribute to 

the existing shortage of clinical coders. 

In fact, increased marketplace demand 

for coders as a result of adoption of 

ICD–10–CM and ICD–10–PCS may lead 

to more enrollment in coding 

curriculums and, in turn, the graduation 

of more and better qualified coders. 

Industry trade and technical school 

representatives have indicated their 

readiness to adapt to any needed 

curriculum changes as a result of the 

adoption of ICD–10, and anticipate that 

they will be able to produce ‘‘ICD–10 

ready’’ clinical coders upon graduation 

from their respective institutions. As 

ICD–9–CM codes are currently updated 

annually, we anticipate that educational 

venues offering courses in coding would 

be familiar with making changes in 

curriculum to reflect these revisions. 

The final compliance date of October 1, 

2013 should afford educational 

institutions sufficient time to change 

their instructional coding curriculums, 

and seek out and obtain appropriate 

educational materials and related 

resources. 

Some hospitals may require their 

coders to be certified by certifying 

bodies such as the various national 

professional associations, and while 

desirable in the ambulatory setting, this 

does not appear to be a requirement for 

coders working in physician offices or 

other ambulatory settings. Coders must 

maintain annual continuing educational 

requirements to maintain their 

certifications. As CMS has no coding 

certification requirements, we refer 

those concerned with future 

certification standards to contact their 

applicable professional organizations. 

18. Impact on Other HIT Initiatives 

Comment: In the August 22, 2008 

proposed rule (73 FR 49805–49806), we 

detailed known health information 

technology (HIT) initiatives and their 

relation to ICD–10 adoption and timing. 

Commenters stated that there are too 

many other HIT initiatives that they are 

being asked to embrace, creating too 

much competition for scant resources 

and time, but did not offer any 

substantiated data concerning potential 

costs associated with these other 

initiatives. Commenters noted that the 

Medicare Improvements for Patients and 

Providers Act (MIPPA) legislation 

creates e-prescribing incentives at the 

same time as the proposed October 2011 

ICD–10 implementation date. A few 

health plans stated that there are 

multiple statewide requirements that 

also place demands on their available 

resources that would otherwise be 

diverted to ICD–10 implementation, but 

did not indicate costs associated with 

these requirements. Some commenters 

asked that the final rule for claims 

attachments be delayed until after the 

compliance date for ICD–10–CM and 

ICD–10–PCS. 

Response: Of the 11 initiatives listed 

in the August 22, 2008 proposed rule, 7 

of them had compliance deadlines 

which have already passed. These 

included HITSP interoperability 

specifications for use cases; the NPI 

compliance date; publication of CCHIT 

criteria for inpatient electronic health 

record products; publication of CCHIT 

criteria for certifying health information 

technology networks and systems; the 

NPI compliance date for small health 

plans; and a second set of e-prescribing 

final standards under Medicare Part D 

and adoption of the NPI for electronic 

prescribing transactions. Of the 

remaining 4 initiatives, 2 relate to 

compliance dates associated with the 

adoption of Version 5010, NCPDP 

Telecommunications Standard D.0, and 

NCPDP Medicaid Subrogation Standard 

3.0, both of which are now projected for 

January 2012 (the Medicaid Subrogation 

Standard for small health plans only is 

projected for January 2013). The two 

remaining initiatives, the compliance 

date in the proposed rule for a new 

HIPAA standard for the healthcare 

claims attachment standard, and the 

proposed compliance date for the claims 

attachment transaction for small health 

plans, were scheduled for 2011 and 

2012, respectively. We acknowledged in 

the August 22, 2008 proposed rule that 

implementing ICD–10 codes sets will 

require significant effort on the part of 

covered entities and their vendors, and 

took other HIT initiatives into 

consideration in establishing our 

proposed ICD–10 compliance date to 

sequence compliance in a manner that 

would allow covered entities to 

concentrate their efforts on ICD–10 

implementation during the relevant 

period. For more information on ICD– 

10’s relation to and impact on other HIT 

initiatives, see the discussion in the 

August 22, 2008 proposed rule (73 FR 

49805). 

We believe that with the new ICD–10 

compliance date of October 1, 2013, 

there will be ample time—an additional 

two years from the proposed October 1, 

2011 compliance date, and a year from 

the MIPPA 2012 e-prescribing 

deadline—for providers to prepare for 

the changeover from ICD–9 to ICD–10. 

We have stated publicly, and reiterate 

once again, that we will not consider 

implementing a new HIPAA standard 

for claims attachment transactions until 

after the compliance date for ICD–10. 

With regard to commenters’ assertions 

that there are multiple State 

requirements that will compete with 

implementation of ICD–10, we believe 

that these requirements are not new, but 

constitute updates to existing State 

requirements that would need to be 

accomplished whether or not ICD–10 

was implemented, and for which 

entities affected by these requirements 

are already prepared. The later 

compliance date of October 1, 2013 

should allow ample time for HIPAAcovered entities to implement ICD–10 

while meeting any applicable State 

requirements, and should allow for 

planning of future health information 

technology initiatives to assure there is 

no overlap of HIPAA standards 

implementations. 

19. Impact on Other Entities 

Comment: Commenters noted that 

other non-HIPAA covered entities 

would be impacted by the change from 

ICD–9 to ICD–10. They cited worker’s 

compensation programs, which would 

need to update their systems that 

support EDI transactions, as well as the 

Version 5010 of the 837 transaction 

standard for institutional claims and/or 

encounters. Commenters noted that life 

insurers will have to enter new 

diagnosis codes/conditions into their 

underwriting decisions. Commenters 

stated that all reports sent from third 

party administrators to employer 

sponsors of group health plans will 

need to be translated into ICD–10 for 

longitudinal analysis to track financial 

and health care quality performance. A 

commenter stated that the OASIS data 

set for home health care, the inpatient 

rehabilitation patient assessment 

instrument (IRF–PAI) and the post-acute 

care payment reform demonstration 

project plan will all need to account for 

the cost of transitioning to ICD–10 code 


sroberts on PROD1PC70 with RULES
3356 Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations 

sets within their respective instruments. 

Commenters also stated that durable 

medical equipment (DME) providers 

would be impacted because they are 

required to submit diagnosis codes 

when billing DME supplies and 

Medicare Part B covered services. 

Response: In the August 22, 2008 

proposed rule (73 FR 49805), we 

addressed the adoption of ICD–10–CM 

and ICD–10–PCS as medical data code 

sets under HIPAA and, therefore, did 

not specifically address the potential 

impacts of ICD–10 adoption on nonHIPAA entities. 

Neither RAND nor Nolan addresses 

impacts of ICD–10 on non-HIPAA 

entities. On page 2 of the October 2003 

Nolan study on ICD–10 implementation 

(http://www.renolan.com/healthcare/ 

icd10study_1003.pdf), it notes that the 

study ‘‘excludes many providers such as 

nursing homes, clinical labs and durable 

medical equipment vendors. Similarly, 

a large number of payer organizations 

have been excluded such as third party 

administrators, clearinghouses, and 

many small and medium insurers. 

These providers and payer entities were 

excluded because they were unable to 

develop initial cost estimates needed in 

the study.’’ We believe that, as with 

Nolan’s observations in their 2003 

report, this is still the case. We heard 

from a handful of commenters who 

stated that the adoption of ICD–10 will 

have a ripple effect on life insurers, 

worker’s compensation programs, third 

party administrators and similar 

entities, but they did not offer any 

quantitative data that could be used to 

refine the impact analysis calculation of 

their costs associated with the adoption 

of ICD–10. According to our analysis of 

2005 data from the National Academy of 

Social Insurance’s report on benefits, 

coverage and costs of worker’s 

compensation programs, more than 

$26.2 billion in medical benefits were 

paid out in 2005, at an employer cost of 

$88.8 billion, but the administrative 

costs associated with worker’s 

compensation programs are not 

available from this source. 

From a benefits perspective, we do 

know that Chapter 20 of ICD–10, 

‘‘External Causes of Morbidity (V01– 

Y98),’’ provides for the classification of 

environmental events and external 

circumstances as the cause of injury, 

and other adverse effects. These codes 

are more precise and describe a wider 

range of causes of injuries, which 

should be quite helpful to worker’s 

compensation programs in determining 

the exact cause of an injury. 

With regard to OASIS, IRF–PAI and 

the post-acute care payment reform 

demonstration project, the business 

process and systems impacts of ICD–9– 

CM, and subsequently ICD–10–CM and 

ICD–10–PCS, on these and similar 

instruments have already been 

identified. The costs associated with the 

implementation of ICD–10 relative to 

these instruments will be accounted for 

through CMS’s ongoing ICD–1CM and 

ICD–10–PCS internal planning and 

analysis activities and will be shared 

with the industry once these costs have 

been projected. 

We acknowledge that many 

uncertainties exist regarding the 

transition to ICD–10–CM and ICD–10– 

PCS, and that the costs and benefits 

associated with the transition as 

outlined in this final rule may not fully 

capture all of the impacts to the 

industry. In order to account for this 

uncertainty, we included low, high and 

primary estimates of the costs and 

benefits of transitioning to ICD–10–CM 

and ICD–10–PCS. These estimates may 

also include some uncertainty in that 

the costs and benefits may be higher or 

lower than even our low and high 

estimates. 

Some examples of uncertainty include 

the acknowledgment that our estimates 

for physician training may not 

accurately reflect the number of 

physicians who may require or request 

training on ICD–10–CM and ICD–10– 

PCS, because we received conflicting 

estimates from stakeholders during the 

ICD–10–CM and ICD–10–PCS proposed 

rule comment period. Additionally, 

some industry studies have determined 

that productivity losses will be timelimited, while others have opined that 

productivity losses may be continuous. 

We also recognize that the ICD–10– 

CM and ICD–10–PCS proposed rule did 

not account for all of the systems that 

may be impacted by the ICD–10–CM 

and ICD–10–PCS transition. Due to the 

complexity of the U.S. health care 

system, it is very difficult to determine 

the number and all the types of systems 

that will need to be updated for ICD– 

10–CM and ICD–10–PCS use. However, 

we anticipate that, upon publication of 

this final rule, the industry will begin its 

requirements gathering, development 

and planning activities for the ICD–10– 

CM and ICD–10–PCS transition. We also 

acknowledge that the ICD–10–CM and 

ICD–10–PCS benefits estimates may 

include some uncertainty. We did not 

receive many comments on the benefits 

estimates that were provided in the 

August 22, 2008 proposed rule. 

However, we fully anticipate that once 

the ICD–10–CM and ICD–10–PCS code 

sets are implemented, and the industry 

becomes more familiar and comfortable 

with their use, benefits may be easier to 

measure. 

B. Regulatory Flexibility Analysis 

1. Final Regulatory Flexibility Analysis 

Section 604 of the Regulatory 

Flexibility Act (RFA) requires agencies 

to analyze options for regulatory relief 

of small entities if a final rule has a 

significant impact on a substantial 

number of small entities. For purposes 

of the RFA, small entities include small 

businesses, nonprofit organizations, and 

small governmental jurisdictions. Most 

hospitals and most other providers and 

suppliers are small entities, either by 

being nonprofit status or by qualifying 

as small businesses under the Small 

Business Administration’s (SBA’s) size 

standards (having revenues of $7.0 

million to $34.5 million in any 1 year). 

For details, see the SBA’s Web site at 

http://sba.gov/idc/groups/public/ 

documents/sba_homepage/ 

serv_sstd_tablepdf.pdf (refer to Sector 

62). 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 604 of the 

RFA. For purposes of section 1102(b) of 

the Act, we define a small rural hospital 

as a hospital that is located outside of 

a metropolitan statistical area and has 

fewer than 100 beds. 

As stated in the August 22, 2008 

proposed rule (73 FR 49828), we 

determined that about 200 nonprofit 

health care organizations that offer 213 

health plans are considered small 

entities under the RFA because of their 

non-profit status, and that 97 percent of 

all physicians’ practices and clinics also 

qualify as small entities under the RFA. 

In the August 22, 2008 proposed rule 

(73 FR 49819), we showed the 

distribution of the transition costs to the 

ICD–10 codes for providers, suppliers, 

payers and software and system design 

firms. For calculating the impact on 

small entities, entities were grouped by 

the North American Industry 

Classification System (NAICS) and were 

presented at the firm level. The NAICS 

figures were adjusted based on the 

medical inflation factor we applied to 

all costs. Data were collected primarily 

by inpatient and outpatient categories. 

To allocate the transition costs, we used 

an available base which served as a 

proxy to the sub-groupings of inpatient 

and outpatient providers and suppliers. 

For the task of allocating the transition 

costs, we used the revenue-receipts 

reported in the Services Annual Survey 

and the National Health Expenditure 

Accounts, published by the U.S. Census 

Bureau. We grouped providers and 


sroberts on PROD1PC70 with RULES
Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations 3357 

suppliers by inpatient and outpatient 

groups reflecting the level at which the 

data was available. In Column 3, we 

presented the revenue-receipts for each 

type of provider-supplier, insurance 

carrier-third party administrator, and 

computer design firm expected to bear 

transition costs. Column 4 showed the 

percent of the two groups’ revenuereceipts each provider-supplier type 

comprised of the group’s total. In 

Column 5, we applied the percentages 

to the total ICD–10 transition costs for 

each provider-supplier type. 

ICD–10–CM and ICD–10–PCS 

transition costs per entity are calculated 

based on overall costs. As discussed in 

this final rule, we have revised our 

August 22, 2008 proposed rule estimates 

for ICD–10–CM and ICD–10–PCS 

training, productivity loss, and systems 

changes based on industry comments 

received during the proposed rule’s 

comment period. We also have revised 

the data shown in the August 22, 2008 

proposed rule’s Table 9 (73 FR 49820) 

to account for inflation. We applied our 

revised costs to the number of firms and 

total revenue/receipts for each providersupplier type depicted in Table 2 below 

in order to more accurately reflect the 

increase in the distribution of costs 

across industry segments. 

Table 2 ICD–10–CM and ICD–10–PCS 

costs for these provider-supplier types 

now reflect a cost of $1,878.68 million, 

versus $1,087.70 million in the 

August 22, 2008 proposed rule’s Table 

9 (73 FR 49420). We also have now 

correctly designated NAICS Code 6512 

as ‘‘Medical and Diagnostic 

Laboratories’’ to reflect inclusion of 

laboratory data in our regulatory impact 

analysis. 

TABLE 2—ESTIMATED IMPACT OF ICD–10 TRANSITION COST ON INPATIENT AND OUTPATIENT PROVIDERS AND SUPPLIERS

[Adjusted for Inflation] 

NAICS Provider/supplier type Firms 

Revenue/ 

receipts 

($ millions) 

Percent of 

revenue 

receipts 

ICD–10 

costs 

($ millions) 

Percent 

ICD-10 

costs of 

revenue 

receipts 

622 ................... Hospitals (General Medical and Surgical, Psychiatric and Drug and Alcohol Treatment, Other 

Specialty).

4,409 653,033 81.45 254.14 0.03 

623 ................... Nursing Facilities (Nursing care facilities, Residential mental retardation, mental health and substance abuse facilities, Residential mental retardation facilities, Residential mental health and 

substance abuse facilities, Community care facilities for the elderly, Continuing care retirement 

communities).

22,867 148,716 18.55 57.88 0.03 

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, 

Outpatient Mental Health and Drug Abuse Centers, Other Outpatient Health Centers, HMO 

Medical Centers, Kidney Dialysis Centers, Freestanding Ambulatory Surgical and Emergency 

Centers, All Other Outpatient Care Centers).

13,624 73,966 13.80 26.09 0.03 

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 

Other).

5,872 24,593 4.58 8.67 0.03 

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 Administrators 4.4,578 723,412 100 197.60 0.01 

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 Bureau 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 subtotaled by ambulatory provider plus DME suppliers (NAICS 62111–6219) and inpatient providers (NAICS 622, 623) and the percent of the subtotaled 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 upgrading their information systems. 


sroberts on PROD1PC70 with RULES
3358 Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations 

Practices of doctors of osteopathy, 

podiatry, chiropractors, mental health 

independent practitioners with annual 

revenues of less than $6.5 million are 

considered to be small entities. We 

estimated that 92 percent of medical 

laboratories, 100 percent of dental 

laboratories and 90 percent of durable 

medical equipment suppliers are also 

small entities under the RFA. 

We also accounted for the impact of 

ICD–10 adoption on small insurance 

carriers, third party administrators and 

system design and related service firms. 

We first determined the number of 

entities that meet the SBA size standard. 

For insurance carriers and third party 

administrators, the SBA size standard is 

annual receipts of $6.5 million. For 

system design and related services 

firms, the SBA size standard is annual 

receipts of $23 million. 

The Statistics of U.S. Businesses data 

(http://www.census.gov/econ/ 

www.index.html) used in the August 22, 

2008 proposed rule at 73 FR 49820 

shows 97,556 system design and related 

services firms (NAICS code 5415), 

providing software services, data 

processors, computer facilities 

management services, computer system 

design services, custom programming 

services as well as other computerrelated services. Table 3 below outlines 

the impact of ICD–10–CM and ICD–10– 

PCS on payers and computer design and 

related services. We have updated these 

data to reflect our cost revisions and 

include them in our calculations of our 

cost summary which appears in Table 6 

of this final rule. We believe that our 

analysis supports the conclusion that 

implementation of ICD–10–CM and 

ICD–10–PCS will not impose a 

significant economic burden on payers 

and computer design and related 

services firms. 

TABLE 3—IMPACT ON PAYERS AND COMPUTER DESIGN AND RELATED SERVICES

NAICS Payers and system design and related services Firms Small 

entities 

Revenue/ 

receipt 

($ millions) 

Small entity 

receipts 

(in millions 

$) 

% Small 

entity 

receipts 

of total 

receipts 

Total ICD– 

10 costs (in 

millions $) 

Annual 

small entity 

share of 

ICD–10 

costs 

(in 

millions $) 

% Small 

entity implementation cost/ 

revenuereceipts 

524114, 

524292 

Health Insurance Carriers and Third Party Administrators ....... 4,578 3,449 723,412 18,309 2.53 197.60 1.2 0.01 

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 

either non-profit or meet the SBA’s size 

requirements for ‘‘small entities’’ for 

purpose of regulatory impact analyses, 

we generally consider all health care 

providers and suppliers to be small 

entities. Table 9 in the August 22, 2008 

proposed rule and the associated 

discussion (73 FR 49820) showed that 

the transition to ICD–10–CM and ICD– 

10–PCS will not have a significant 

impact on a substantial number of small 

health care entities. 

To come to this conclusion, as stated 

in the August 22, 2008 proposed rule, 

we estimated that small insurance 

carriers and third party administrators 

would have an ICD–10 implementation 

cost of $4 million, or approximately $1 

million per year, for the four years that 

they would incur implementation costs. 

A similar exercise for system design 

and related computer services firms 

yielded a cost of $51.5 million over 4 

years, or $12.9 million per year. We 

stated that it is possible that we could 

be including more firms than will 

actually be implementing the codes. 

In the August 22, 2008 proposed rule, 

to test our analysis, we assumed that 

burden would equal 3 percent of small 

entity revenue. This is based on HHS’ 

May 2003 guidance on proper 

consideration of small entities in rule 

making (http://www.hhs.gov/execsec/ 

smallbus.pdf.pdf) that states that if a 

rule imposes a burden equal to or 

greater than 3 percent of a firm’s 

revenues, it is significant. We assumed 

small business market share would 

remain constant at 53 percent of the 

overall business market for their NAIC 

classification, and that the $12.9 million 

costs described above would be equally 

distributed among the small entities. In 

describing our calculation we stated that 

we took 3 percent of the total cost and 

computed the number of small entities 

for which the cost of implementing the 

ICD–10–CM and ICD–10–PCS codes 

would be a significant burden. This 

description of the calculation was in 

error. What we did was to calculate the 

revenue amount, of which the small 

entity share of the ICD–10–CM and ICD– 

10–PCS implementation costs would 

equal 3 percent. That is, we divided 

$12.9 million by 3 percent to yield $430 

million. Then, dividing the number of 

small entities into the total small entity 

share of revenues yields an average 

revenue amount per small entity of 

$1.104 million. Finally, dividing the 

$430 million by the average revenue per 

small entity of $1.104 million yields the 

number of small entities of 389. This 

number represented the maximum 

number of small entities, if only that 

many participated in the ICD–10–CM 

and ICD–10–PCS implementation, for 

which the costs would be a significant 

burden. 

Based on our revised estimate of costs 

for ICD–10 implementation, computer 

systems design and related services’ cost 

share has been increased from $12.9 

million to $15.4 million, the revenue 

level for which the costs would equal 3 

percent is increased to $513 million. 

Again, dividing the average small entity 

revenue amount of $1.104 million into 

the $513 million yields the number of 

small entities (465) for which the ICD– 

10–CM and ICD–10–PCS 

implementation would become a 

significant burden if only that number 

of entities took part. 

From this analysis we now estimate 

that if 465 or fewer small firms provide 

computer systems design and related 

services, the burden of ICD–10–CM and 

ICD–10–PCS implementation on them 

could be significant. 

We also developed a scenario for a 

typical community hospital with 100 

beds, 4,000 annual discharges and gross 

revenues of $200 million (see 73 FR 

49830 for the details on how we 

calculated this implementation cost). 

We assumed that the hospital would 

experience a productivity loss in the 

first 6 months after implementation 

(based on the AHA/AHIMA 2003 ICD– 

10 field study and other countries’ ICD– 

10 implementation experiences), 

totaling $1,233. We applied a similar 

methodology to determine outpatient 

productivity losses, using RAND’s 

estimate that it would take 1⁄100 of the 

time it takes to code an inpatient claim 

to code an outpatient claim because 

outpatient claims do not require the use 

of the ICD–10–PCS code set. We applied 

0.17 extra minutes per claim, at a labor 

charge of $50 an hour, and a cost per 

claim of $0.014. For the first month, the 

productivity loss for inpatient coding is 

$15.28, with a total 6-month 

productivity loss of $53. For systems 

changes and software upgrades, based 

on comments that claimed our system 

implementation costs were too low, we 

increased the costs to implement the 


sroberts on PROD1PC70 with RULES
Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations 3359 

required changes from $300,000 to 

$1,000,000. For the sake of presenting a 

‘‘worse case’’ scenario, we assume all 

implementation costs will be incurred 

or expensed within a 1-year period. This 

contrasts with our assumption as 

outlined in this final rule’s RIA where 

we expect the costs to be incurred over 

a 4-year period. Along with training and 

productivity losses, the cost for a typical 

community hospital to implement the 

ICD–10 code sets will be $1,003,986. To 

determine the percent of the hospital’s 

revenue diverted to funding its ICD–10 

conversion, we divided the hospital’s 

revenues of $200 million by the cost to 

convert their systems to use the ICD–10 

code sets to obtain a result of 0.50 

percent. 

As previously discussed in this final 

rule, we considered alternatives for 

small entities to adopting the ICD–10– 

CM and ICD–10–PCS code sets. These 

included assigning new ICD–9–CM 

diagnosis and procedure codes where 

needed using the remaining unassigned 

codes and ignoring the hierarchy of the 

ICD–9–CM code set; using CPT–4 for 

coding hospital inpatient procedures; 

and skipping ICD–10 and waiting until 

ICD–11 is ready for use in the United 

States and adopting ICD–11 at that time. 

We also considered phasing in the 

implementation of the new codes by 

geographic region or by large versus 

small entities. Another option was for 

small entities to maintain dual coding 

systems for a period of time; or to delay 

implementation for small entities. All of 

these options were reviewed and 

rejected for the reasons discussed in the 

August 22, 2008 proposed rule at 73 FR 

49826. 

2. Response to Comments on Small 

Entities 

Comment: For purposes of our 

analysis pursuant to the RFA, nonprofit 

organizations are generally considered 

small entities; however, individuals and 

states are not included in the definition 

of a small entity. Because most medical 

providers are either nonprofit or meet 

the SBA’s size standard for small 

businesses for purposes of regulatory 

analysis, we treat all medical providers 

as small entities. 

Many commenters representing small 

physician practices and healthcarerelated associations stated that the cost 

of implementing ICD–10-CM as early as 

October 2011, shortly after the NPI 

implementation, might bankrupt small 

physician practices. Some commenters 

disputed our cost estimates for small 

entities as being too low, but none 

offered quantitative data on the impact 

of ICD–10 on their small practices. 

Commenters generally made vague 

references to anticipated costs due to 

delayed reimbursements, lost 

productivity and costs of training, and 

outlays for software and hardware, and 

asked that the compliance date be 

pushed back. Some commenters stated 

that they will have difficulty integrating 

ICD–10 codes into their systems and 

business functions. 

One commenter stated that the 

number of ICD–10 codes makes printing 

the code set in book form prohibitive, 

and that because of this, small providers 

will be forced to purchase electronic 

systems and software. Some 

commenters from small practices stated 

that they do not have electronic systems 

to support ICD–10, and cannot afford to 

hire additional staff or re-train existing 

staff in ICD–10 coding. A few small 

practices stated that they will need 

additional time in which to become 

compliant with the new code sets, while 

others disagreed, and stated that 

allowing small practices to continue to 

use ICD–9 while other industry 

segments use ICD–10 code sets would 

cause serious claims processing and 

reimbursement problems. 

Response: As detailed in the August 

22, 2008 proposed rule (73 FR 49808), 

the Regulatory Flexibility Act (RFA) 

requires agencies to analyze options for 

the regulatory relief of small entities. As 

previously explained, our analysis 

presumed that all medical providers 

were small entities. While we did not 

estimate that the cost of ICD–10 

implementation per small physician 

practice would be substantial, we did 

acknowledge that, given the large 

number of affected entities, the 

aggregate total cost to the industry as a 

whole could be substantial. 

Of those commenters identifying 

themselves as small practices, all but 

one did not dispute the need to move 

to ICD–10, but stated the timing of our 

proposed October 2011 compliance date 

was problematic because small practices 

do not have the financial and/or other 

resources (staff, technology, etc.) to 

quickly make the move from ICD–9–CM 

to ICD–10–CM. As the compliance date 

has been moved to October 2013, we 

anticipate that this will afford small 

practices the time they need to spread 

any costs associated with the 

implementation of ICD–10 in their 

practices over a longer period of time. 

As discussed previously in this final 

rule, there are multiple ways for small 

entities to integrate the ICD–10 code sets 

into their business settings, either 

populating the new codes throughout 

their entire system all at once, or 

integrating the codes on a flow basis as 

they are used. 

Additionally, any small practices may 

continue to submit paper claims, using 

preprinted forms that include all of the 

appropriate codes required for use in 

such practices. In most instances, 

practitioners in small practices may 

assign the diagnosis themselves and 

may include the ICD–10 code on the 

paper billing form. The use of the ICD– 

10 code sets is not predicated on the use 

of electronic hardware and software. 

The ICD–10 code set has already been 

produced in a book version of ICD–10– 

CM that measures only 2 inches in 

depth; the book version of ICD–10–PCS 

measures 1 inch in depth. Vendors have 

indicated that they are in the process of 

developing both paper-based and 

software products for purchase once 

ICD–10 is implemented. For those small 

practices that have already migrated to 

electronic systems and wish to purchase 

software, a CD of the ICD–10 code set 

will be made available through the U.S. 

Government Printing Office (GPO). The 

ICD–9–CM CD, also sold through the 

GPO, has been priced at less than $30 

for many years, and we expect an ICD– 

10–CM CD, when available, to be 

comparably priced. We do not believe 

this purchase price to be burdensome to 

small providers. 

Also, as previously noted in this final 

rule, the ICD–10–PCS code set is 

available at no charge on the CMS Web 

site at http://www.cms.hhs.gov/ICD10/ 

02_ICD-10-PCS.asp#TopOfPage. The 

ICD–10–CM code set is also available 

free of charge on the NCHS Web site at 

http://www.cdc.gov/nchs/about/ 

otheract/icd9/icd10cm.htm. Both of 

these Web sites also feature the 

previously referenced tools such as 

crosswalks and guidelines for 

downloading at no charge. 

As previously discussed in this 

impact analysis, we believe that there 

will be a plethora of training 

opportunities through the Internet, inservices, hospital-based training, 

association educational programs, 

medical and medical specialty 

associations, etc., and that the 

marketplace will make the appropriate 

ICD–10 training available to small 

providers in the most efficient manner 

possible, recognizing that solo 

practitioners and their staffs cannot 

afford extensive amounts of time away 

from their offices to partake in training. 

Finally, as previously discussed in 

this final rule, we agree with 

commenters who stated a phased-in 

approach to ICD–10 implementation to 

allow more time for small entities to 

transition to ICD–10 is not feasible 

because the use of dual coding systems 

would result in burdensome costs to 

industry, confusion as to which code set 


sroberts on PROD1PC70 with RULES
3360 Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations 

was being used in claims submission, 

and which payers are capable of 

accepting the new codes. The result 

would be massive claims processing 

delays and lagging reimbursements to 

providers. 

3. Conclusion 

We did not receive any data or 

information to substantiate arguments 

that our impact analysis of the potential 

effects of ICD–10 implementation on 

small entities was flawed. We, therefore, 

maintain our small entity ICD–10 

impact assumptions based on the 

Regulatory Flexibility Analysis section 

of the proposed rule at 73 FR 49827. 

Based on the foregoing analysis, the 

Secretary certifies that this final rule 

will not have a significant economic 

impact on a substantial number of small 

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 


sroberts on PROD1PC70 with RULES
Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations 3361 

BILLING CODE 4120–01–C 

TABLE 7—ANNUAL ESTIMATED BENEFITS OVER 15 YEARS FOR ICD–10 (IN $ MILLIONS) DISCOUNTED 3%, 7% 

Year 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 

Present 

value 

(3%) 

Present 

value 

(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] 

Category Primary estimate 

(millions) 

Low 

estimate 

(millions) 

High 

estimate 

(millions) 

Source 

citation 

(RIA, 

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 

management.

.................... .................... RIA 

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 

Administrative practice and 

procedures, Electronic transactions, 

Health facilities, Health Insurance, 

Hospitals, Incorporation by reference, 

Medicaid, Medicare, Reporting and 

recordkeeping requirements. 

■ For the reasons set forth in this 

preamble, the Department of Health and 

Human Services amends 45 CFR part 

162 as follows: 


sroberts on PROD1PC70 with RULESER16JA09.004</GPH>
3362 Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations 

PART 162—ADMINISTRATIVE 

REQUIREMENTS 

■ 1. The authority citation for part 162 

is amended 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 Stat. 2021–2031, and sec. 105 of Pub. L. 

110–233, 122 Stat. 881–922, and sec. 264 of 

Pub. L. 104–191, 110 Stat. 2033–2034 (42 

U.S.C. 1320d–2(note)). 

■ 2. Section 162.1002 is amended by 

revising paragraph (b) introductory text 

and adding paragraph (c) to read as 

follows. 

§ 162.1002 Medical data code sets. 

* * * * * 

(b) For the period on and after 

October 16, 2003 through September 30, 

2013: 

* * * * * 

(c) For the period on and after October 

1, 2013: 

(1) The code sets specified in 

paragraphs (a)(4), (a)(5), (b)(2), and (b)(3) 

of this section. 

(2) International Classification of 

Diseases, 10th Revision, Clinical 

Modification (ICD–10–CM) (including 

The Official ICD–10–CM Guidelines for 

Coding and Reporting), as maintained 

and distributed by HHS, for the 

following conditions: 

(i) Diseases. 

(ii) Injuries. 

(iii) Impairments. 

(iv) Other health problems and their 

manifestations. 

(v) Causes of injury, disease, 

impairment, or other health problems. 

(3) International Classification of 

Diseases, 10th Revision, Procedure 

Coding System (ICD–10–PCS) 

(including The Official ICD–10–PCS 

Guidelines for Coding and Reporting), 

as maintained and distributed by HHS, 

for the following procedures or other 

actions taken for diseases, injuries, and 

impairments on hospital inpatients 

reported by hospitals: 

(i) Prevention. 

(ii) Diagnosis. 

(iii) Treatment. 

(iv) Management. 

(Catalog of Federal Domestic Assistance 

Program No. 93.778, Medical Assistance 

Program) (Catalog of Federal Domestic 

Assistance Program No. 93.773, Medicare— 

Hospital Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 

Dated: December 11, 2008. 

Michael O. Leavitt, 

Secretary. 

[FR Doc. E9–743 Filed 1–15–09; 8:45 am] 

BILLING CODE 4120–01–P 


sroberts on PROD1PC70 with RULES