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Backed by New Research, AMA Questions ICD-10 Mandate

February 12, 2014
by Rajiv Leventhal
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Updated study says ICD-10 implementation costs could be triple of what was once expected

Some physician practices may be paying up to three times more for ICD-10 implementation than had been previously estimated, according to updated research from the American Medical Association (AMA).

The AMA study, updated from 2008 and conducted by Nachimson Advisors, previously estimated costs to implement ICD‐10 in six areas for three hypothetical practice sizes. The 2008 findings showed that the ICD‐10 costs ranged from an estimated $83,290 for a small practice up to $2,728,780 for a large practice.

The updated study demonstrates that costs to implement ICD‐10 may be much higher than what was estimated in 2008, especially for physicians who must pay for upgrades to their electronic health records (EHR) and practice management systems. Now, the research predicts that small practice costs will range anywhere from $56,000 to more than $226,000. Medium practices, it estimates, will pay between $213,000 and $824,000 for implementation. And large practices are predicted to run between $2 million and $8 million.

The deadline for the switch to the ICD-10 code-set is Oct. 1, as mandated by the Centers for Medicare & Medicaid Services (CMS). But in a letter sent on Feb. 12 to U.S. Department of Health & Human Services (HHS) Secretary Kathleen Sebelius that cites the study, AMA executive vice president and CEO James Madara, M.D., asks CMS to “strongly reconsider the ICD-10 mandate.”

Regarding the study, Madara says in the letter, “The previous estimate did not account for the costs to upgrade to certified EHR software since Congress had not yet enacted the meaningful use program. Therefore, many physicians are expected to have to spend considerably more to upgrade their software given the new regulatory environment.”

In the letter, Madara writes, “Continuing to force physicians down the ICD-10 path will result in significant financial burdens for physicians. This impact will be compounded by their inability to devote time and resources to meeting other federal mandates that carry hefty financial penalties, which further threaten their financial viability. Physicians are facing serious financial obstacles from multiple sources including:

  • Incurring costs to comply with the EHR meaningful use program, which exceed available incentives
  • Purchasing EHR software certified for 2014 or a software upgrade that allows for use of ICD-10
  • Seeking upgrades from practice management system vendors for ICD-10 software
  • Incurring financial penalties in the form of cuts to Part B reimbursement, including a 2 percent cut if Medicare e-prescribing is not met (cut taken in 2014), a 1 percent cut if meaningful use is not met (cut taken in 2015), and a 1.5 percent cut under the Physician Quality Reporting System (PQRS) (cut taken in 2015)
  • Mitigating a 2 percent cut stemming from sequestration

A survey published last week by the Englewood, Colo.-based Medical Group Management Association (MGMA) found that less than 10 percent of physician practices are ready for the switch to the ICD-10 code-set, and a survey last month from KPMG, the N.Y.-based audit, tax and advisory firm, found that healthcare organizations were largely unprepared for ICD-10 implementation.

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