HIPAA Standards: Dual Code Sets Are Acceptable for Reporting Medical Procedures
Published: 2002-08-09T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Consistently classifying, defining, and distinguishing among the range of medical services provided today--from diagnoses to treatments--is critical for reimbursing providers and analyzing health care utilization, outcomes, and cost. Codes serve this role by assigning each distinct service a unique identifier. Health care providers, such as hospitals and physicians, report medical conditions and the health-related services they have provided to patients on medical records. In August 2000, the Department of Health and Human Services (HHS) adopted two standard code sets for reporting medical procedures: (1) the International Classification of Diseases, 9th Revision, Clinical Modification, Volume 3 (ICD-9-CM Vol. 3); and (2) the Current Procedural Terminology (CPT). Despite HIPAA's goals for administrative simplification, many representatives of the health care industry have expressed concern that the individual limitations of these code sets result in inefficiencies in record keeping and data reporting.
section_title: What GAO Found
paragraphs: GAO found that, given the 18-month time frame allotted to HHS under HIPAA for adopting standard code sets, ICD-9-CM Vol. 3 and CPT were practical options for HIPAA standard code sets despite some limitations. Both code sets meet almost all of the criteria for standard code sets recommended by HHS's HIPAA implementation teams. For example, they improve the efficiency and meet the needs of the health care industry, have low additional costs and administrative burdens associated with their implementation, and are consistent with other HIPAA standards. In addition, each of these codes sets meets a criterion for procedural code sets recommended by the National Committee on Vital and Health Statistics.

section_title: Letter
paragraphs: Medical care involves the provision of a myriad of health-related services,  from the diagnosis of a medical condition to its treatment. A means to  consistently classify, define, and distinguish among these and other health- related services is critical for reimbursing providers and analyzing health  care utilization, outcomes, and cost. Codes serve this role by assigning  each distinct service a unique identifier. Health care providers, such as  hospitals and physicians, report medical conditions and the health-related  services they have provided to patients on medical records, which are in  turn transcribed into corresponding codes by coding professionals. These  codes are then reported on claims forms and submitted to both public and  private payers for payment. In addition to their use in these financial and  administrative transactions, codes facilitate the analysis of data that are  used in monitoring resource utilization and cost; measuring the quality,  safety, and efficacy of care; analyzing outcomes of treatment options; and  identifying fraud and abuse.
Until recently, there was wide variability in requirements for coding  health-related services, such as procedures, diagnoses, medical devices,  supplies, and prescription drugs. For example, coding requirements could  vary from payer to payer, making the filing of claims with multiple payers  administratively burdensome for providers. In addition, this wide  variability in coding made it difficult to electronically transmit  standardized health-related information and compromised the reliability of  health-related data. In enacting the Health Insurance Portability and  Accountability Act of 1996 (HIPAA), the Congress sought to simplify data  reporting and claims processing requirements across all providers and  payers and facilitate the electronic transmission of health-related  information. In so doing, HIPAA required the Secretary of the Department  of Health and Human Services (HHS) to adopt standard code sets for  describing health-related services in connection with financial and  administrative transactions, such as filing claims for payment. In addition,  HIPAA required these standard code sets to be used by members of the  health care industry. In August 2000, HHS adopted the following two code  sets for reporting medical procedures.  1.  For reporting inpatient hospital procedures, HHS selected the  International Classification of Diseases, 9th Revision, Clinical  Modification, Volume 3 (ICD-9-CM Vol. 3). This code set is maintained  publicly by HHS’s Centers for Medicare and Medicaid Services (CMS).  2.  For reporting physician services and other medical services including  outpatient hospital procedures, HHS selected the Current Procedural  Terminology (CPT), which is maintained and copyrighted by the  American Medical Association (AMA).
In addition to the code sets HHS adopted for reporting medical  procedures, HHS adopted code sets to standardize the reporting of  diagnoses and other health-related services, such as medical devices,  supplies and equipment, prescription drugs, and dental services. (The  standard code sets adopted under HIPAA for health-related services are  described in app. I.)
Despite HIPAA’s goals for administrative simplification, many  representatives of the health care industry have expressed concern that  the individual limitations of ICD-9-CM Vol. 3 and CPT result in  inefficiencies in record keeping and data reporting. HHS recognized that  these procedural code sets would need to be revised in the future,  particularly ICD-9-CM Vol. 3, and specifically cited the International  Classification of Diseases, 10th Revision, Procedural Coding System  (referred to here as 10-PCS) as a potential replacement for ICD-9-CM   Vol. 3, once it was ready for implementation. Nevertheless, many  representatives of the health care industry argue that the lack of  comparability between existing code sets contributes to the inefficiencies  providers and payers experience in using two procedural code sets and  impedes the analysis of health-related data. These representatives of the  health care industry have suggested the adoption of a single code set for  reporting inpatient hospital procedures, physician services, and other  medical services such as hospital outpatient procedures. For example,  since 1993 the National Committee on Vital and Health Statistics  (NCVHS)—a public advisory body to HHS in the areas of health data and  administrative simplification—has recommended the adoption of a single  code set for reporting these procedures.5, 6  Given these concerns, you asked that we study issues surrounding  procedural code sets. Specifically, we have examined the benefits and  challenges associated with: (1) the ICD-9-CM Vol. 3 and CPT as standard  code sets under HIPAA, (2) 10-PCS, the new procedural code set which  was designed to replace ICD-9-CM Vol. 3, and (3) potentially replacing dual  procedural code sets with a single set for reporting inpatient hospital  procedures, physician services, and other medical services such as  hospital outpatient procedures.
The NCVHS serves as the statutory public advisory body to HHS in the area of health data  and statistics. The committee is composed of 18 individuals from the private sector, 16 of  whom are appointed by the Secretary of HHS for terms of 4 years each with about 4 new  members being appointed each year, and 2 of whom are selected by congressional  leadership. 42 U.S.C. § 242k(k) (1994).
The NCVHS recommendations explicitly state that a single procedural code set should be  limited to the classification of procedures and should not attempt to incorporate codes for  diagnoses or other health-related services such as medical devices, supplies and  equipment, and prescription drugs. procedural code sets, and other published materials related to procedural  code sets. We also interviewed representatives from: the American  Hospital Association (AHA); the American Health Information  Management Association (AHIMA), an association of health coding  professionals; AMA; CMS; the National Centers for Health Statistics  (NCHS); NCVHS; and 3M Health Information Systems, the contractor hired  by CMS to revise ICD-9-CM Vol. 3. We conducted our work from   August 2001 through July 2002 in accordance with generally accepted  government auditing standards.
subsections: section_title: Background
paragraphs: Health-related information from medical records and claims is used  throughout the health care industry for the analysis of health-related  services and payment. To facilitate the processing and analysis of these  data, alphabetic or numeric codes are assigned to identify individual  heath-related services. Coding professionals, who receive degrees and  certifications in health information management, translate the  unstandardized narrative information reported by providers on medical  records into the appropriate codes. These codes then assist members of  the health care industry in identifying health-related services on medical  claims for payment and analyzing service utilization, outcomes, and cost.
A procedural code set should include codes that accurately define similar  medical procedures and minimize the number of broadly defined codes  that group procedures that are seemingly similar, but in fact  heterogeneous. The challenge in coding medical procedures is finding a  level of specificity that allows codes to accurately represent the procedure  being performed, without being so broad or so specific that the code set  becomes more complex than necessary to administer and that the data  yielded are too broad or specific to be effectively used in processing  claims or conducting research.
In 1993, NCVHS suggested that a procedural code set should be easy to use  and facilitate data analysis. To accomplish these goals, NCVHS  recommended criteria for a procedural code set to HHS and the health  care industry. Specifically, NCVHS recommended that a procedural code  set be designed so that:    all aspects of a medical procedure are described in detail, including the  body system affected (e.g., cardiovascular, respiratory), the approach that  was used in completing the procedure (e.g., open surgery, laparoscopy),  the technology that was used to complete the procedure (e.g.,  laparoscope, endoscope), and the device that was implanted, if any;  the code set allows for the addition of codes to reflect procedures  introduced through new technology;    codes can be collapsed into increasingly larger broad categories of related  procedures to facilitate aggregated data analysis; and    definitions are standardized.
subsections: section_title: Adoption of Standard Code Sets under HIPAA
paragraphs: In 1996, the administrative simplification provisions of HIPAA required the  Secretary of HHS to adopt standard code sets in an 18-month timeframe.  Through these standard code sets, HIPAA’s goals were to (1) simplify  administrative functions for Medicare, Medicaid, and other federal and  private health programs, (2) improve the efficiency and effectiveness of  the health care industry in general, and (3) enable the efficient electronic  transmission of health-related information between members of the health  care industry such as providers and payers. Under HIPAA, the Secretary  had the authority to select existing code sets developed by either private  or public entities as the national standard code sets.
In adopting standard code sets, HIPAA directed HHS to seek insight from  various members of the health care industry. With input from these  industry experts, HHS interdepartmental “HIPAA implementation teams”  defined a set of criteria to consider in selecting HIPAA standard code sets.  In summary, HHS’s HIPAA implementation teams recommended that  standard code sets should:  improve the efficiency and effectiveness of the health care industry;    meet the needs of the health care industry;    be supported by accredited standards-setting organizations or other public  and private organizations that will maintain the standard code sets;    have timely development, testing, implementation, and updating processes    have low development and implementation costs relative to the benefits;    keep data collection and paperwork burdens on members of the health  care industry as low as possible;    be technologically independent of computer programs used in health care    be consistent with other standard code sets under HIPAA;    be precise and unambiguous; and  incorporate flexibility to adapt more easily to changes in the health care  industry, such as incorporating new codes for new health-related services  and information technology.
On May 7, 1998, HHS proposed two standard code sets for reporting  medical procedures under HIPAA: ICD-9-CM Vol. 3 for inpatient hospital  procedures and CPT for all physician services and other medical services,  including outpatient hospital procedures. Members of the health care  industry who commented on this proposed rule generally supported the  adoption of these procedural code sets as standards on the grounds that  they were already in widespread use throughout the health care industry.  The final rule was published August 17, 2000, and these code sets became  the procedural coding standards effective October 16, 2000.13, 14 Recent  legislation extended the deadline for complying with the HIPAA standard  code set requirements to October 16, 2003, for those who submit a plan of  how they will come into compliance by that date.
65 Fed. Reg. 50,312.
In addition to the standard code sets HHS adopted for reporting medical procedures, HHS  adopted additional code sets to standardize the reporting of diagnoses and other health- related services, such as medical devices, supplies and equipment, home health care  services, prescription drugs, and dental services (see app. I).
section_title: ICD-9-CM Vol. 3 and Its Maintenance
paragraphs: ICD-9-CM Vol. 3, the standard code set named for use in reporting  inpatient hospital procedures, is maintained in the public domain by CMS.  CMS revises ICD-9-CM Vol. 3 through the ICD-9-CM Coordination and  Maintenance Committee meetings. Members of the health care industry  attend these biannual public meetings at their discretion and typically  include representatives from the AHA, AHIMA, and AMA, among others.  Discussions at these meetings include proposed coding changes, such as  the addition of codes to reflect new and distinct medical procedures— including those resulting from technological advancements—that may not  be accurately represented by existing codes. CMS makes final decisions on  whether a new medical procedure warrants a new code based on evidence  and recommendations presented by stakeholders at the committee  meetings. According to CMS representatives, it takes 6 to 18 months to  consider new procedural coding requests, designate new codes to  represent the new procedures, and implement the new codes. CMS  implements newly approved inpatient service codes every October 1.
In addition to contributing to CMS’s maintenance of ICD-9-CM Vol. 3, other  organizations such as 3M Health Information Systems, AHA, AHIMA, and  AMA publish and market coding textbooks, handbooks, workbooks, and  software that are used by members of the health care industry. For  example, AHA maintains a free information clearinghouse for members of  the health care industry with questions about coding. It also coordinates  with CMS, NCHS, and AHIMA to write the official guidelines on the use of  ICD-9-CM Vol. 3. According to AHA estimates, the administrative costs  for AHA to provide clearinghouse and guidance activities are about   $1 million per year. AHA also publishes textbooks, handbooks, and  workbooks that are used in coding curriculums and the Coding Clinic for  ICD-9-CM, a quarterly, subscription-based publication that serves as the  primary manual of ICD-9-CM Vol. 3 guidelines. AHA projects that, for 2001,  these publications will incur about $1.7 million in costs and generate  almost $2 million in revenue.
section_title: CPT and Its Maintenance
paragraphs: CPT, the code set used to report physician services and other medical  services including outpatient hospital procedures, is privately maintained.  AMA, which copyrights CPT, maintains the code set through its CPT  Editorial Panel, which is made up predominantly of AMA-appointed  physicians. The panel also includes such members as physicians  nominated by CMS, the Blue Cross Blue Shield Association, AHA, and the  Health Insurance Association of America. In addition, an AHIMA  representative is permitted to attend the CPT Editorial Panel meetings and  participate in discussions of new coding requests as a nonvoting panel  member. The panel makes final decisions on requests for new procedure  codes. Anyone can request a coding change to CPT and anyone who  requests a coding change can present their views at the panel’s quarterly  meetings and stay throughout deliberations and voting, but the panel’s  meetings are closed to the general public. It takes approximately   18 months to consider new coding requests, designate new codes to  represent the new procedures, and implement the new codes. Approved  changes are added to the CPT by AMA and become effective every   January 1.
In October 2001, the AMA released its yearly update of CPT as part of an  effort to not just add new codes, but to also phase-in changes designed to  improve the code set as a whole. The latest version of CPT was designed  to revise code descriptors that had been problematic and had contributed  to code ambiguity. For example, in some cases, AMA either added  parenthetical statements to existing codes to define exactly what methods,  techniques, and approaches were used in performing a procedure or, in  other cases, it developed new codes to better delineate the procedures  performed. In addition, AMA incorporated codes for nonphysician services  such as home health care. Finally, CPT was modified to include a special  category designed to expedite the adoption of codes for technically  innovative procedures that may not have enough clinical evidence  available to otherwise meet the approval standards of the CPT Editorial  Panel. These codes will be used for data tracking purposes only and not  for assigning payment.
AMA reports that CPT’s administrative costs—including those costs  associated with collecting licensing fees, publishing CPT literature,  holding panel meetings, and paying salaries—are about $10.1 million a  year. AMA estimates that its revenue from licensing fees paid by software  companies (between $3 million and $4 million) and CPT publications  totals about $18 million, or about 7 percent of its annual budget. According  to AMA estimates, most of the revenue is generated by the sale of the CPT  codebook; other related revenue sources include textbooks, manuals,  newsletters, and a CPT advice hotline, which is a subscription-based  service staffed by five coding professionals. Under a 1983 agreement  between HHS and AMA, CMS pays no fees for its use of CPT. As part of the  agreement, CMS assists the AMA in maintaining and updating the code set  through its representation on the CPT Editorial Panel.
section_title: ICD-9-CM Vol. 3 and CPT Were Practical Options for Standard Code Sets, Despite Some Limitations
paragraphs: Both ICD-9-CM Vol. 3 and CPT meet almost all of the criteria for standard  code sets recommended by HHS’s HIPAA implementation teams. In  addition, these codes sets each meet a criterion for procedural code sets  recommended by NCVHS. Nevertheless, a consensus exists among most  representatives of the health care industry, including CMS representatives,  that ICD-9-CM Vol. 3 and CPT—to varying extents—do not meet some  criteria for HIPAA standard code sets and procedural code sets, including  adequate levels of detail to facilitate data analysis and a capacity to  incorporate codes in response to new technology. In fact, HHS recognized  that in adopting ICD-9-CM Vol. 3 as a standard code set that it would need  to replace it in the not-too-distant future, given its limitations.
subsections: section_title: Wide Use of ICD-9-CM Vol. 3 and CPT Made Them Practical Options for Standards
paragraphs: Given the 18-month timeframe in which HHS was required to adopt  standard code sets under HIPAA, the widespread use of ICD-9-CM Vol. 3  and CPT made them the most practical options for standards at the time.  In addition, both ICD-9-CM Vol. 3 and CPT meet almost all of the criteria  for HIPAA standard code sets recommended by HHS’s implementation  teams (see table 1). For example, most members of the health care  industry currently use one, if not both, of these procedural code sets to  some extent. The existing health care administrative system for these  procedural code sets—including trained coding professionals,  publications, training manuals, computer software, medical claims forms,  and fee schedules that are already aligned to these code sets—suggests  that the costs of implementing these procedural code sets as standards  across all providers and payers will be much lower than the costs of  implementing less widely used code sets. The maintenance processes for  both ICD-9-CM Vol. 3 and CPT are well established, systematic, and  operational, which should facilitate the implementation of these  procedural code sets as HIPAA standards across all providers and payers.
In addition, ICD-9-CM Vol. 3 and CPT each meet a criterion for procedural  code sets recommended by NCVHS. ICD-9-CM Vol. 3 meets the NCVHS  criterion that a code set should contain codes that can be collapsed into  increasingly broader categories of related procedures to facilitate  aggregated data analysis. For example, all ICD-9-CM Vol. 3 codes  beginning with “36” are classified as “operations on the heart vessels.” This  sequential structure allows many distinct procedures such as open  coronary angioplasty (code 3603), percutaneous angioplasty (code 3606),  and intercoronary thrombosis infusion (code 3604) to be collapsed into  this broad category of similar procedures—“operations on the heart  vessels”—based on the “36” code alone, facilitating aggregated data  analysis. As for CPT, the maintenance process established by the AMA for  updating CPT is considered by many representatives of the health care  industry, including NCVHS, to maintain currency with technological  advancement.
section_title: ICD-9-CM Vol. 3 in Need of Replacement
paragraphs: Despite its widespread use, most representatives of the health care  industry, including CMS representatives, agree that ICD-9-CM Vol. 3,  designed more than 20 years ago, is outdated and, because of its limited  coding capacity, irreparable. In fact, HHS recognized that in naming   ICD-9-CM Vol. 3 as a HIPAA standard, it would need to replace it in the  not-too-distant future, given its limitations. ICD-9-CM Vol. 3 does not meet  2 of the 10 criteria for HIPAA standard code sets and does not meet most  of the procedural code set criteria recommended by NCVHS (see table 2).
First, ICD-9-CM Vol. 3 lacks the specificity needed to accurately identify  many key aspects of medical procedures. Very distinct but related  procedures may all be classified under one code, and variations in  procedures performed or technologies used may not be identified. For  example, in this code set, a single code exists for all multiple vessel  percutaneous angioplasties (code 3605), without specification as to the  number of blood vessels involved, or what type of equipment—balloon-tip  catheter, laser, or stent—was used. If a stent was used, to fully represent  the type of procedure performed, an additional, secondary code, code  3606, “insertion of coronary artery stent,” would also have to be reported.  For payment or research purposes, to know how many vessels were  involved in the procedure, or whether the stent used was self-expanding or  expandable by a balloon, one would have to look to the medical record for  this information, as the code would not capture this level of specificity.  Without codes that accurately distinguish between the procedures  performed, it is difficult to (1) identify trends in utilization and cost that  may provide evidence to support the recalibration of payments, or   (2) collect information on the performance outcomes of both new and  existing procedures and technologies.
Second, many representatives of the health care industry, including CMS  representatives, agree that the four-character structure of ICD-9-CM Vol. 3  lacks the capacity to expand and the flexibility to appropriately  incorporate new codes in response to new procedures and technology.  Code set sections are organized by body systems such as the nervous,  cardiovascular, and respiratory systems and by miscellaneous diagnostic  and therapeutic procedures and services. With only 10 options available  for each character (0 through 9), many of the code set sections for body  systems are “full” and can no longer accommodate additional codes,  requiring new procedures to be assigned their own code outside of their  appropriate body system section. For example, CMS has determined that  six new procedures involving cardiac resynchronization pacemakers,  some of which have defibrillation capabilities, warrant the creation of  their own codes. Generally, these procedures would be assigned codes  within the pacemaker code sequence in the cardiovascular section (code  sequence 3770-3789). However, the code sequence for pacemaker codes is  full and there is only one code available for use in the defibrillator code  section. Therefore, to add new codes for these six new procedures, CMS  assigned these new technologies to the code sequence beginning with “00,”  which is outside of their appropriate section. This solution makes the  code set harder for providers and coding professionals to use and  complicates the retrieval of data for research purposes, as some  pacemaker procedure codes are grouped together and others may be  interspersed with codes for a collection of dissimilar procedures.
section_title: CPT Seen as More Comprehensive, but Sometimes Ambiguous
paragraphs: Although CPT meets almost all of the criteria recommended for standard  code sets under HIPAA (see table 1), it does not meet all of the criteria  recommended for a procedural code set by NCVHS (see table 3). For  example, CPT code 34001 represents an “embolectomy or thrombectomy,  with or without catheter...” Thus, this code is used to represent different  procedures, without identifying the specific procedure that was actually  performed. This lack of specificity is present for many CPT codes as their  definitions use ambiguous language such as “and/or” and “with or  without.” In addition, CPT generally lacks the consistency in its coding  sequence that would enable data to be easily aggregated into broad  categories. For example, in CPT, procedures on blood vessels can begin  with the characters “33,” “34,” or “35,” making it more difficult to aggregate  data for procedures performed on blood vessels. In addition, codes  beginning with the characters “33” can represent such divergent  procedures as those involving the implantation of pacemakers and  procedures on the cardiac valves, which further complicates the  aggregation of like data.
section_title: 10-PCS Considered Improvement over Current Inpatient Code Set Standard, but Some Challenges Remain
paragraphs: Most representatives of the healthcare industry, including CMS  representatives, consider 10-PCS to be an improvement over ICD-9-CM  Vol. 3 for coding inpatient hospital procedures. In particular, 10-PCS meets  almost all of the criteria for HIPAA standard code sets and for procedural  code sets as recommended by NCVHS. However, the design and logic of  10-PCS raise concerns about potential challenges in its implementation,  including coding accuracy and the availability of useful data. In addition,  the existing health care administrative system would need to be changed  significantly to accommodate 10-PCS, imposing additional financial costs  and administrative burdens on members of the health care industry, such  as providers and payers, who are currently undertaking changes to comply  with HIPAA. Although the costs of implementing 10-PCS are anticipated to  be substantial, most representatives of the health care industry, including  CMS representatives, agree that the limitations of ICD-9-CM Vol. 3 warrant  its replacement. However, HHS has not yet reached a decision regarding a  proposal to adopt 10-PCS as a replacement of ICD-9-CM Vol. 3.
subsections: section_title: 10-PCS Addresses Criteria for Standard and Procedural Code Sets Not Met by ICD-9-CM Vol. 3
paragraphs: Most representatives of the health care industry, including CMS  representatives, find 10-PCS’s design and logic to be an improvement over  ICD-9-CM Vol. 3. Its seven-character code allows 34 alphanumeric values  for each character, affording it much greater capacity than the existing  procedural code sets. Within its seven-character structure, 10-PCS is able  to identify key aspects of procedures, including the body system and body  part affected, the technique or approach of the procedure, and the  technology used in completing it (see fig. 1). For example, the first of the  seven characters represents the section that relates to the general type of  procedure (e.g., surgery, obstetrical procedure, laboratory procedure); the  second character is the body system (e.g., respiratory, gastrointestinal);  the third character, the root operation or objective of the procedure (e.g.,  removal, repair); the fourth character, the body part; the fifth character,  the approach or technique used; the sixth character, the device or devices  left in the body after the procedure; and the seventh character, a qualifier  that has a unique meaning for specific procedures, such as identifying the  second site included in a bypass.
Most representatives of the health care industry, including CMS  representatives, consider 10-PCS to be an improvement over ICD-9-CM  Vol. 3 for coding inpatient hospital procedures. In particular, its design and  logic meet almost all of the criteria for HIPAA standard code sets and for  procedural code sets recommended by NCVHS. In addition, 10-PCS  addresses the criteria for HIPAA standard code sets and for procedural  code sets recommended by NCVHS that are not met by ICD-9-CM Vol. 3  (see table 4). According to many representatives of the health care  industry, 10-PCS’s greater coding specificity will distinguish among  distinct procedures that might otherwise be grouped into broadly defined  ICD-9-CM Vol. 3 codes. This precision in coding could facilitate the use of  more specific data to analyze service utilization, outcomes, and cost. For  example, the ICD-9-CM Vol. 3 code 3605 for a multiple vessel angioplasty  can represent many related procedures with no specification as to the  number of blood vessels involved, the technique used in completing the  procedure, or what devices, if any, were implanted in the blood vessels.  Because of the increased flexibility and capacity of 10-PCS, 18 different  procedures currently reflected under this one ICD-9-CM Vol. 3 code are  coded separately under 10-PCS.
In addition, CMS representatives suggest that the design and logic of   10-PCS and its standardization of definitions should allow codes for new  procedures and technologies to be added more expeditiously than under  the current process used to update ICD-9-CM Vol. 3. Unlike 10-PCS, the  numeric characters of ICD-9-CM Vol. 3 codes are not predefined to  represent certain elements of procedures, including the type of procedure  and the body part. According to CMS representatives, the ICD-9-CM  Coordination Committee spends a significant amount of time trying to  determine how a new procedure should be defined and distinguished from  existing procedures and what code should be used to represent that  procedure. 10-PCS’s standardization of characters and definitions using  alphanumeric characters—where each letter and number is predefined to  represent an area of clinical care, a body system, a root operation, and so  on—should facilitate how CMS will assign codes to new procedures.
In addition to addressing the deficiencies of ICD-9-CM Vol. 3, many  representatives of the health care industry, including CMS representatives,  state that the design and logic of 10-PCS will facilitate the aggregation of  data for analysis of utilization and health outcomes, as recommended by  NCVHS. For example, when analyzing 10-PCS codes, one could aggregate  the data broadly or narrowly based on the codes: all codes beginning with  “027” broadly represent surgical procedures where great blood vessels are  expanded; all codes beginning with “0272” represent such surgical  procedures performed on three coronary arteries (i.e., great blood  vessels), specifically.
section_title: 10-PCS Design and Logic May Pose Challenges
paragraphs: Although 10-PCS has many advantages over ICD-9-CM Vol. 3, its design  and logic may pose some challenges. First, experienced coding  professionals contend that 10-PCS may require greater clinical expertise  among coding professionals than the existing code sets. For example, in  pretests, coding professionals found that because of its increased  specificity and level of detail, 10-PCS would require a higher level of  clinical knowledge in anatomy and physiology to translate the procedures  recorded on medical records into the appropriate codes than ICD-9-CM  Vol. 3 and would therefore require substantially more training. Once  familiar with the code set, however, the coding professionals noted overall  gains in efficiency, citing one pretest in particular in which 57 patient  records that were difficult to code using ICD-9-CM Vol. 3 codes were more  readily coded using 10-PCS codes.
Second, AMA representatives contend that the terminology of 10-PCS is a  distinct departure from the current medical terminology used by  physicians and does not parallel the terminology used on medical records.  As a result, these representatives contend that physicians, other  practitioners, and coding professionals will need to learn a vocabulary that  differs from the terminology they now use to document medical  procedures. According to the AMA, the 31 body system characters in   10-PCS do not conform to traditionally named body systems. For example,  upper and lower arteries and veins, a distinction made in 10-PCS, is not a  common anatomical distinction made by health care professionals. In  addition, “amputation” is the standard terminology for removal of an  extremity; 10-PCS terminology uses “detachment” to describe this  procedure. These differences in terminology may result in coding errors,  particularly when the code set is first implemented, as coding  professionals transcribe the terminology used on medical records into   10-PCS codes, which in turn could affect the appropriateness of payment  and the accuracy of information used to analyze data on utilization,  outcomes, and cost.
Finally, there are some cases where 10-PCS’s specificity creates a  significantly greater number of codes, and it is unknown what effects, if  any, this increased volume of codes will have on coding accuracy or the  availability of useful data. For example, code 3691, the ICD-9-CM Vol. 3  code for “coronary vessel aneurysm repair,” can represent any number of  related procedures with no specification as to the means of repair, the  type of arteries, the number of arteries, or the device used. Because of the  specificity of 10-PCS, 180 different procedures currently reflected under  this one ICD-9-CM Vol. 3 code would be coded separately under 10-PCS.  With more codes available for use, there are more opportunities for coding  errors with inaccurate codes used in describing the procedure provided,  particularly if the descriptions of procedures on medical records do not  capture all the dimensions of the procedure needed to complete a code.
section_title: Implementation of 10-PCS Will Involve Financial Costs and Administrative Burdens
paragraphs: 10-PCS may not meet two of the criteria for standard code sets  recommended by HHS’s HIPAA implementation teams: it may not have  low implementation costs and its implementation as a standard code set  may not keep data collection and paperwork burdens on members of the  health care industry as low as possible. 10-PCS is a distinct departure from  the design and logic of ICD-9-CM Vol. 3; thus the existing health care  administrative system—including computer software, coding manuals,  claims and remittance forms, and training for coding professionals and  other health care professionals—would need to be adapted if 10-PCS were  to be implemented. Therefore, the implementation of 10-PCS may impose  other financial costs and administrative burdens on members of the health  care industry, such as providers and payers, who are currently  undertaking changes to implement ICD-9-CM Vol. 3 and CPT as standard  code sets under HIPAA. Although the costs of implementing 10-PCS are  anticipated to be high, and may impose additional administrative burdens  on the health care industry, most representatives of the health care  industry, including CMS representatives, agree that the limitations of   ICD-9-CM Vol. 3 warrant the implementation of its replacement: 10-PCS.
Although the development of 10-PCS is complete, HHS has not reached a  decision regarding a proposal to adopt it as a HIPAA standard code set.  For 10-PCS to replace ICD-9-CM Vol. 3 and be implemented as a HIPAA  standard code set, it must go through a public comment and rulemaking  process. If 10-PCS is adopted as the new code set for reporting inpatient  hospital procedures under HIPAA, CMS will most likely implement it  concurrent with that of the revised diagnosis code set—the International  Classification of Diseases, 10th Revision, Clinical Modification   (ICD-10-CM). Some representatives of the health care industry suggested  concurrent implementation to reduce administrative burdens and the  additional disruption to the coding infrastructure that would result from  nonconcurrent implementation of procedural and diagnosis code sets.
section_title: Merit of Establishing a Single Procedural Code Set Uncertain in Light of Practical Considerations
paragraphs: Although ICD-9-CM Vol. 3 and CPT have been supported by most  representatives of the health care industry as acceptable options for  HIPAA standard code sets given the practical considerations, since 1993  NCVHS and other representatives of the health care industry have argued  that a single procedural code set for reporting inpatient hospital  procedures, physician services, and other medical services including  outpatient hospital procedures would streamline data reporting and  facilitate research across providers and sites of service. Although these  representatives of the health care industry support the adoption of a single  procedural code set in principle, they disagree on which code set should  serve in this capacity. Although no data on implementation costs exist,  most representatives of the health care industry, including CMS  representatives, agree that implementing any new single code set,  regardless of the code set that is adopted, would be costly and time  consuming; CMS estimates that adopting a single code set for procedures  would likely take at least a decade to complete. Nevertheless, there are no  data or studies to demonstrate the potential benefits or costs of adopting a  single procedural code set.
subsections: section_title: Representatives of the Health Care Industry Agree That One Code Set Is Preferable to Two
paragraphs: Since 1993, NCVHS has supported the adoption of a single code set for  reporting inpatient hospital procedures, physician services, and other  medical services, including outpatient hospital procedures. NCVHS  contends that because of variations in design and terminology between  ICD-9-CM Vol. 3 and CPT, the simultaneous operation of the dual code sets  is not conducive to aggregating data needed to perform utilization and  outcome analyses across providers and sites of service. For example, for  payment purposes, hospitals need to use both procedural code sets—an  inpatient hospital procedure receives an ICD-9-CM Vol. 3 code for payment  purposes whereas the same procedure performed in a hospital outpatient  department receives a CPT code. In order for hospitals to analyze the  provision of services across inpatient and outpatient departments, they  must voluntarily code these procedures using both ICD-9-CM Vol. 3 and  CPT so that these data can be aggregated. For the same reason, this dual  code set arrangement complicates the research activities of health care  analysts seeking data on a particular procedure performed across  providers and sites of service. Such analyses are becoming more important  as advancements in medical technology increase the ability of providers to  perform procedures in various sites of service. NCVHS also notes that  efforts to reduce fraud and abuse require more uniformity in coding;  multiple code sets, with entirely different maintenance processes and  rules, add to the complexity of proper billing and the difficulties of  regulators and law enforcement officials in identifying billing violations.
Other representatives of the health care industry support the adoption of a  single procedural code set in principle. For example, AHIMA  representatives support a single procedural code set, suggesting that a  single set would reduce the level of resources—including staff, software,  and updated manual and guideline publications—needed by hospitals to  operate separate inpatient and outpatient procedural code sets. Currently,  the operation of dual procedural code sets requires hospitals to maintain  either separate coding staffs with expertise in each set or a single coding  staff with expertise in both sets. AMA concurs that ideally one procedural  code set could be used by providers in all sites of service, allowing for true  administrative efficiencies and the reduction of burdens faced by  providers that currently use multiple sets.
section_title: Neither 10-PCS nor CPT, as Designed, Would Suffice as a Single Code Set
paragraphs: A single procedural code set has not been developed. Although most  representatives of the health care industry, including CMS representatives,  agree ICD-9-CM Vol. 3 would not suffice as a single procedural code set,  substantial disagreements exist on whether 10-PCS or CPT could serve in  this capacity. AHIMA views 10-PCS as a potential candidate because it  meets the procedural code set criteria recommended by NCVHS, but has  stated that pretesting of this new code set for many outpatient procedures,  including physician services, has been too limited to make conclusive  recommendations. AMA argues that 10-PCS would not suffice as a single  procedural code set. In addition to not reflecting the terminology currently  used by the medical profession, 10-PCS does not include codes for certain  outpatient procedures now represented in CPT, such as those for  “evaluation and management” services—physician office visits,  consultations, and hospital observation services. If 10-PCS were to be  used as a single procedural code set, adaptations to the code set would  have to be made to incorporate these services. CMS has not planned to  test 10-PCS as a candidate for a single procedural code set.
AMA supports a single procedural code set that would be based on CPT,  because it is already widely used by the health care industry and could be  adapted for coding inpatient hospital procedures. However, according to  NCVHS, CPT is not an ideal candidate for a single procedural code set  because its definitions are not always precise and unambiguous and its  codes lack the ability to be easily collapsed into broad categories for  aggregated data analysis. In addition, AHA and AHIMA contend that CPT is  designed to describe physician-based services specifically and does not  adequately capture hospital-based, nonphysician services.
section_title: Implementing a Single Code Set Would Involve Significant Costs and Time
paragraphs: Although no data on implementation costs exist, most representatives of  the health care industry, including CMS representatives, agree that  implementing any single procedural code set, regardless of the code set  that is adopted, would involve significant costs and time. For example,  coding textbooks, handbooks, workbooks, software, and claims forms  would need to be revised or developed. All providers and payers would  need to retrain staff, update computer software, and create or purchase  new manuals and other educational materials. In addition, a single  procedural code set would need to be coordinated with public and private  payment systems for inpatient and outpatient procedures, including  physician services, which would contribute to the costs of implementing  such a code set. Finally, some representatives of the health care industry  note that even if an existing code set such as 10-PCS or CPT were adopted  as a single procedural code set, the process for its adaptation and  implementation would take at least a decade.
section_title: No Empirical Evidence on Benefits or Costs of a Single Code Set
paragraphs: There have been no empirical studies on the adoption of a single  procedural code set to measure the potential benefits identified by NCVHS  and others or to estimate the costs of implementing such a code set.  Recognizing the lack of empirical evidence, NCVHS stated in its  recommendations that it would be necessary to evaluate the costs,  benefits, and impact of a single procedural code set. AHA has stated that  any proposed change should be thoroughly tested to prove that the  procedural code set is both functional and able to be coordinated with  payment systems. In addition, AHIMA recommends that federally funded  research examine the feasibility, efficacy, costs, and benefits of moving to  such a set.
The benefits of a single procedural code set for research may be altered by  developments in processing health-related information. Increasingly, the  health care industry is moving toward electronic medical records and  claims. Companies are working to create search engines that would align  the unstandardized terminology found on electronic medical records with  variations in definitions from existing code sets. For example, the  narratives on a medical record may list “myocardial infarction,” “MI,” or  “heart attack” to represent the same condition. Similarly, ICD-9-CM Vol. 3,  CPT, and 10-PCS have differences in terminology to describe similar  medical procedures. These search engines would allow for searches under  key terms and retrieve the appropriate data regardless of the terminology  or code that is used on electronic medical records and claims, facilitating  the analysis of data across sites of service.
section_title: Concluding Observations
paragraphs: ICD-9-CM Vol. 3 and CPT, although not without limitations, were practical  options for HIPAA code set standards given their widespread use in the  health care industry and the time constraints for their adoption. In  addition, these procedural code sets meet almost all of the criteria  recommended for HIPAA standard code sets—that they improve the  efficiency and meet the needs of the health care industry, are recognized  by the public and private organizations that will maintain the code sets,  have low additional costs and administrative burdens associated with their  implementation, are independent of computer programs, and are  consistent with other HIPAA standard code sets. Nevertheless, many  representatives of the health care industry argue that the adoption of a  single procedural code set could help further improve the efficiency of  data reporting and facilitate data analysis across sites of service. Yet it is  unknown if the benefits of moving to a single procedural code set would  justify the transition costs, or how long it would take for the benefits to  recoup these costs because the theoretical merits of a single procedural  code set have yet to be demonstrated empirically. Considering the  adequacy of ICD-9-CM Vol. 3 and CPT in meeting almost all of the criteria  recommended for HIPAA standard code sets, the practical challenges of  implementing a single procedural code set, and lack of empirical evidence  to either support or disprove the merits of doing so, we believe that dual  code sets for reporting medical procedures are acceptable under HIPAA.  In addition, we concur with those representatives of the health care  industry who contend that more study is needed to examine the possible  benefits of adopting a single code set for medical procedures before its  implementation could be considered.
section_title: Agency Comments
paragraphs: We received written comments from CMS on a draft of this report (see  app. III). We also received written comments from AHA, AHIMA, and AMA  on excerpts of our draft report. In general, CMS concurred with our  analysis. CMS said that this subject is of concern to HHS because the  Secretary is considering how to proceed in the face of the perceived  inadequacies of ICD-9-CM Vol. 3 for the future coding of inpatient hospital  procedures. CMS also said it was important to emphasize that the decision  to adopt ICD-9-CM Vol. 3 as a HIPAA standard code set was made  following an evaluation of its benefits and limitations and that it  represented the best alternative available at the time for inpatient  procedure coding. In addition, while CMS agreed that the costs of  replacing ICD-9-CM Vol. 3 with 10-PCS would be significant, they  emphasized that no estimate is available and that it is difficult to justify  referring to these costs as “high,” as we do in our report. CMS said that the  costs associated with making a change (such as software and training  manuals) should be balanced against the costs to the health care system of  continuing to use an out-of-date code set. We agree with CMS that the  costs associated with replacing ICD-9-CM Vol. 3 should be balanced  against the costs to the health care system of its continued use.  Nevertheless, we feel that the costs associated with replacing it for the  myriad of users within the health care system—updating computer  software, coding manuals, and claims and remittance forms and training  coding professionals and other health care professionals—will ultimately  be “high.” Finally, CMS said the report should clarify that the Secretary has  not made a decision to eliminate ICD-9-CM Vol. 3 and adopt 10-PCS. We  have revised the report accordingly. CMS, AHA, AHIMA, and AMA also  made technical comments that we have incorporated where appropriate.
We are sending copies of this report to CMS, AHA, AHIMA, and AMA, and  will make it available to those who are interested upon request. In  addition, the report is available at no charge on GAO’s Web site at  http://www.gao.gov.
If you or your staff have any questions, please contact me at   (202) 512-7101. Emily J. Rowe, Hannah Fein, Preety Gadhoke, and   Martin T. Gahart made major contributions to this report.
section_title: Appendix I: Code Set Standards for Health- Related Services Adopted under HIPAA
paragraphs: The Health Insurance Portability and Accessibility Act of 1996 (HIPAA)  required the Secretary of the Department of Health and Human Services  (HHS) to adopt standard code sets for describing health-related services in  connection with transactions such as filing claims for payment. In  addition, HIPAA required these standard code sets to be used by all  providers and payers. In response, HHS adopted several code sets to  standardize the reporting of procedures, diagnoses, and other health- related services, such as medical devices, supplies and equipment,  prescription drugs, and dental services (see table 5).
section_title: Appendix II: The Distinct and Independent Code Sets Known as “ICD-9”
paragraphs: Appendix II: The Distinct and Independent  Code Sets Known as “ICD-9”
There are several distinct code sets similarly referred to as “ICD-9” that are  used to code different health-related services (see table 6). The World  Health Organization’s (WHO) International Classification of Diseases,   9th Revision (ICD-9) was used worldwide to code and classify causes of  death from death certificates before WHO adopted the tenth revision. The  International Classification of Diseases, 9th Revision, Clinical Modification  (ICD-9-CM) has three, publicly maintained volumes that have been  adopted as standard code sets for assigning codes to diagnoses and  inpatient hospital procedures under the Health Insurance Portability and  Accountability Act of 1996 (HIPAA). Volumes 1 and 2 of ICD-9-CM are  based on WHO’s ICD-9 mortality code set and have been named the  standard code set under HIPAA to code and classify diagnosis data from  inpatient and outpatient records, physician offices, and most National  Centers for Health Statistics (NCHS) surveys. NCHS is responsible for the  use, interpretation, and periodic revision of the diagnosis code set in  collaboration with WHO. Volume 3 of ICD-9-CM has been named as the  standard code set under HIPAA for coding inpatient hospital procedures.  It is maintained in the public domain by the Centers for Medicare and  Medicaid Services (CMS) and pertains to the provision of hospital  inpatient procedures.
section_title: Appendix III: Comments from the Centers for Medicare and Medicaid Services