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Where Are Those HIPAA Savings?

August 26, 2008
by Reece Hirsch
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Back when the "administrative simplification" portion of HIPAA was still a gleam in the eye of a legislator, the primary intent was to standardize certain critical electronic health care transactions and code sets to help the health care industry achieve efficiencies and reduce costs associated with a myriad of transaction formats. The HIPAA privacy and security regulations were somewhat of an afterthought, in recognition of the fact that increased use of electronic health care transactions means increased risk to data.

Which brings us to HHS's August 22 notice of proposed rulemaking, which would require a switch from ICD-9 code sets to International Classification of Diseases, 10th Revision, Clinical Modification in HIPAA standard transactions. The estimated cost to the U.S. health care industry is estimated in the billions of dollars.

Don't get me wrong, I do believe that the HIPAA Privacy and Security Rules have helped raise the bar for protection of medical information. In addition, the move to ICD-10 appears to be necessary; the ICD-9 code sets were developed nearly 30 years ago and can no longer be adequately expanded to address advances in diagnoses and procedures. However, I do question whether the industry is ever going to realize the efficiencies and cost savings that HIPAA was intended to achieve when it was first enacted.



Reece, Can you (or one of the HCI editors) provide a pointer to a recommended primer on the ICD-10 Story?

I've read two recent Gartner pieces (both 2008) by Wes Rishel, as well as a half dozen other articles. I also did the obligatory Google searches, and, of course, Wikipedia on ICD. I'm struggling to find an authoritative account that elaborates:

- why the conversion from ICD-9 to 10 is taking much longer in the US than planned and than elsewhere

- what will happen to the procedure codes, i.e. CPT5 vs ICD-10-PCS, and why

- by the time the US starts a year long or multi-year, phased conversion (Gartner's guess at the probable model), ICD-11 will be beyond initial draft, and ICD-11 will be designed for the semantic web: "WHO has announced that it will apply Web 2.0 principles for the first time to revise the ICD" (from Wikipedia); does that argue for something obvious, like waiting further and doing ICD-10 and ICD-11 together?

- and to your point on economics and savings for moving to ICD-10, where's that analysis (from OMB or whoever)? Are we saying that increasing the number of codes by ten-fold will drive down the coordination-of-care costs? The only thing that appears to be clear is that the 'accuracy' of appropriately chosen codes in ICD-10 will be better than ICD-9. Do accuracy improvements lead to savings, and if so, how?

Thanks for opening the topic for discussion!


Thanks for an excellent series of questions. Here are a few good resources on the conversion to ICD-10:

AHIMA has a resource page on ICD-10 that has a lot of useful material, available at http://www.ahima.org/icd10/prepare.asp.

In addition, CMS has issued a brief fact sheet on the ICD-10 proposed rule, available at http://www.cms.hhs.gov/apps/media/press.

Finally, the information on HHS's cost-benefit analysis with respect to ICD-10 is presented in the commentary to the rule itself, which may be found at 73 Federal Register 49796 (August 22, 2008), in the section labeled "Regulatory Impact Analysis." Whether you agree with the government's assessment is another story ....

In response to your last point, more accurate coding may or may not lead to savings, but it certainly is likely to lead to improved quality of care. Perhaps the conversion to ICD-10 is really more about quality than savings.

just came across this short article that may give some insight - second one from the top:


Thanks Reece. Labor day weekend reading!

For those of you new to the Federal Register reference here, it's at http://www.access.gpo.gov/su_docs/fedreg/a080822c.html

It says the projected benefits of ICD-10 are drawn from RAND:

-more accurate payments for new procedures
-fewer rejected claims
-better understanding of new procedures
-improved disease mgmt
-better understanding of health conditions and outcomes (no $ estimate)
-harmonization with international monitoring and reporting (no $ estimate)

A summary of these is provided in a table on page 49825 and totals to $ 3.9 Billion.

As Reece suggests, there are a lot of stated assumptions that are optimistic. For example, the assumption that claims rejection rates will fall precipitously with ICD-10.

Regarding my question, 'why is the conversion taking much longer in the USA,' I have received a response in conversation that it's a direct result of the US's commercially-based healthcare system, and probably not much else.