WILL THE DEADLINE BE EXTENDED?

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Breaking News: On July 6, 2015 CMS announced the following:

1. For the first 12 months, Medicare will not deny Part B claims solely on an incorrect ICD-10 code if it is “a valid code from the right family;”

2. For program year 2015, CMS will not penalize providers under the Physician Quality Reporting System, Value Based Modifier, or Meaningful Use auditing if an ICD-10 code is “from the correct family of codes;”

3. Advanced payments may be available if there is an implementation challenge preventing timely claims processing; and

4. CMS will create an ICD-10 Ombudsman to triage physician and provider issues.

The deadline for the U.S. transition to ICD-10 is less than 90 days away, questions remain about its implementation.

WILL THE DEADLINE BE EXTENDED?

No. Despite three previous delays (see sidebar, page 2), all evidence suggests that the ICD-10 transition will occur on October 1, 2015. At that time, all entities covered by the Health Insurance Portability and Accountability Act (HIPAA) of 1996 must cease using ICD-9 to document patient diagnoses and inpatient procedures. Only claims using ICD-10 will be accepted.

What’s the Evidence?

An ICD-10 delay could be authorized by either the Obama Administration or Congress, but the Administration opposes an extension and few Members of Congress support an extension. The Obama Administration supports maintaining the October 1, 2015 deadline citing that ICD-9 is outdated and uses terms inconsistent with current medical practices. An upgrade to ICD-10 will increase the information physicians capture leading to better patient care, improve care coordination, advance public health research, support quality-based payment models, and

enhance fraud detection capabilities.i HHS Secretary Burwell expressed support for ICD-10 at an

April 2015 Congressional hearing and stated that CMS and the majority of hospitals and physician practices are prepared for the transition.ii

CONTACTS »

Bruce Hallowell

Managing Director

Navigant Healthcare - Outsourcing & Technology Management

312.583.5826

bruce.hallowell@navigant.com

Dave Hampshire

Managing Director

Navigant Healthcare - Outsourcing & Technology Management

312.583.4159

dave.hampshire@navigant.com

ICD-10 Deadline Approaching:

The 5 Key Questions Organizations

are Asking

The Navigant Center for Healthcare Research and Policy Analysis

Washington, D.C. | July 2015

About Navigant Center for

Healthcare Research and Policy Analysis

Navigant Center for Healthcare Research and Policy Analysis is Navigant Healthcare’s research center that focuses on trends and issues relevant to each of the industry’s major sectors. The Center’s role is to monitor signals from the market, identify innovative solutions and facilitate implementation in this fast-changing environment. The Center, headquartered in Washington, D.C., is led by Paul Keckley, a healthcare industry analyst, policy expert and Managing Director at Navigant.

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ICD-10: THE BASICS »

ICD-10 is the tenth revision of the International Statistical Classification of Disease and Related Health Problems (ICD), a medical classification developed by the World Health Organization to classify diseases and other health problems recorded on health and mortality records. ICD-10 adoption began in 1994 and approximately 70% of the world’s health expenditures (USD $3.5 billion) are allocated using ICD for reimbursement and resource allocation.

US TRANSITION »

The United States has been using versions of ICD-9 since 1979 for both medical diagnoses (ICD-9-CM) and inpatient procedures (ICD-9-PCS). There are 3,824 procedure codes and 14,025 diagnosis codes. ICD-10 offers more granular health status information through 71,924 procedural codes and 68,823 diagnosis codes.

To improve clinical decision making, quality measurement, and disease research, HHS supports transition of all HIPAA-covered entities to ICD-10. Originally in 2008 HHS proposed an October 1, 2011 effective date, but finalized an October 1, 2013 deadline. In September 2012 HHS delayed implementation until October 1, 2014. In April 2014 the Protecting Access to Medicare Act of 2014 prohibited implementation before

Congressional support for an ICD-10 delay is limited and recent postponement efforts have been

ineffective. In the House, 20 representatives support bills banning or delaying ICD-10,iii but the

only action has been inclusion of non-binding report language encouraging the HHS Secretary

to work with medical providers on hardship exemptions.iv In the Senate, Senator Cassidy is

the most outspoken ICD-10 opponent, but he has not gathered the support needed to delay

implementation.v

The primary reasons Congress will not delay the October 1, 2015 deadline:

» Timing – There is a limited window for Congress to pass a bill that gives the industry ample

time to respond. Between July 1st and the ICD deadline the House is in session 26 daysvi

and the Senate 49 days.vii

» Cost – A one-year ICD-10 delay is estimated to cost between $1.2 - $6.9 billion with 80%

born by commercial health plans and provider organizations. The Republican-controlled Congress is not likely to require the private sector to shoulder this financial burden.

» Divided Constituent Groups – Members of Congress get conflicting viewpoints regarding preparedness from constituent groups. Hospitals and health systems express support for the

current deadline,viii but physician organizations express concern.ix

What about a Transition Period?

A transition period during which both ICD-9 and ICD-10 would be allowed is not feasible. It could gain Congressional support, but the Administration warns that Medicare and many commercial

health plans are not capable of processing claims using both classifications.x

HOW MANY ORGANIZATIONS ARE PREPARED?

The degree of ICD-10 preparedness varies by organization and sector:

SECTOR PREPAREDNESS COMMENTS PAYERS

Medicare Prepared CMS reports positive end-to-end testing results for its upgraded claims system.

State Medicaid Agencies

Likely Prepared States self-report they will be ready, but preparation on-going in some.

Commercial Insurers Prepared Industry fully prepared and tested, per national trade group. PROVIDERS

Hospitals and Health Systems

Large Facilities Prepared; Smaller Facilities May Lag

Health systems and larger hospitals typically are complete or in advanced stages, but smaller hospitals may have delayed efforts due to capital or financial constraints.

Physician Practices Few Prepared AMA reports a “lack of industry-wide preparation” and 15-20% are estimated not to have started.

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Payers

Medicare – Prepared

The Centers for Medicare and Medicaid Services (CMS) reports that Medicare, which insured 55 million Americans and paid

$597 billion in medical benefits in 2014,xi has updated its claims

processing systems for ICD-10 codes,xii has conducted months of

acknowledgement testing for all electronic submitters,xiii and will

conduct three rounds of end-to-end testing with Medicare Fee-for-Service providers, clearinghouses, and billing agencies. During the second end-to-end testing round, CMS processed 23,138 claims: 88% accepted; 3% rejected for coding errors, and 9% rejected for other data issues.xiv

State Medicaid Agencies – Likely Prepared

CMS reports that as of October 2014, all states self-reported they will be able to process claims by October 2015. In January 2015, the Government Accountability Office concluded that while CMS is working closely with State Medicaid agencies, “work remains to

complete testing by the transition deadline.”xv

Commercial Insurers – Prepared

The commercial insurance industry is fully prepared for and supports the October 1, 2015 ICD-10 implementation according to America’s Health Insurance Plans (AHIP), the national trade

association representing the health insurance industry.xvi

UnitedHealthcare, Aetna, the Blue Cross and Blue Shield system, and Humana report being prepared to process ICD-10 claims for the last year’s deadline.xvii

Providers

Hospitals and Health Systems – Large Facilities Prepared; Smaller Facilities May Lag

Most large hospitals and health systems are prepared for the ICD-10 transition, but smaller facilities may not be. CMS reported in 2014 that most large providers were ICD-10 ready and a coalition of 22 health systems from 14 states (representing 130 hospitals, 1,475 clinics, 20,000 providers, and 260,000 support

professionals) lobbied Congress to maintain the 2015 deadline.xviii

Smaller and rural facilities, which often have capital and resource constraints, are reported to lag behind in implementation due to the complexity and financial requirements. For example, only 37% of 50 rural hospitals in the southeast report being on track for the

October 2015 deadline.xix

Physician Practices – Few Prepared

ICD-10 preparedness varies by physician practice, but nearly 100 physician organizations led by the American Medical Association attest to a lack of industry-wide preparation and advocate for

a delay.xx A 2015 claims clearinghouse survey of 350 physician

practices found that 21% are on track to meet the 2015 ICD-10 deadline, 64% are in various stages of implementation and 15%

have not started preparing.xxi In the Workgroup for Electronic Data

Interchange (WEDI)’s 10th annual ICD-10 preparedness survey, less than 10% of 260 physician practices were in the final ICD-10 claims testing phase as of February 2015, and less than 20% had not started preparing.

Vendors

Clearinghouses, EHR Providers, Coding Services, and Revenue Cycle Managers – Most Prepared, but Many Not Tested

Despite multi-year delays, not all healthcare vendors are offering ICD-10 compliant capabilities.xxii WEDI reports that only 60% of clinical

and billing software and solutions vendors have ICD-10 solutions in the marketplace with an additional 25% anticipating solutions available prior to October. A Healthcare Billing & Management Association survey found that 18 of 80 (23%) billing companies do not have software to process ICD-10 claims and 46 (57%) have not conducted internal capabilities testing.xxiii

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WHAT LESSONS CAN WE LEARN

FROM THESE? HOW’D THEY DO IT?

ICD-10 implementation is a complex process with nearly every healthcare organization’s financial future and clinical reputation on the line. The transition must be well organized and executed. There is no margin for error. Here are a few lessons learned from early adopters:

1. Start Yesterday – This transition is more than a coding change; it’s a herculean operational redesign requiring clinical and administrative staff to learn new systems, technology upgrades to integrate seamlessly, and all business partners to

speak the same language.xxiv

2. You Don’t Have to Go It Alone – Contractor support can add prior implementation expertise and guide the entire change

management process.xxv

3. Train Everyone, Early and Often – Education is critical. Organizations can have all the systems and processes ready, but will fail without well-trained staff.xxvi

4. Test, Test, and Retest – October 1 is a hard deadline.xxvii Any

error exposes your organization to financial and clinical risk.

5. Be Prepared for Slowdowns – Staff productivity will diminish as health professionals learn to use five times as many

claim codes.xxviii Reimbursement processing time is likely to

increase, as are claims rejections.xxix

6. Have a Back-Up Plan – Hard-stop transitions are notorious for errors. Be prepared with plans B, C, and D. Have flexible support teams on site, increase the number of coders, and

have vendors on speed dial.xxx

SECTOR ESTIMATED AVERAGE ICD-10 COST PER ENTITY

COMMENTS PAYERS

Commercial

Small Plans (<1M members) $14 million

Data based upon AHIP survey of 20 plans covering 139 million lives and only accounts for incremental ICD-10 implementation costs, and excludes claims payments. Medium Plans (1-5M members) $42 million

Large PLans (>5M members) $217 million PROVIDERS

Hospitals $1-5 million CMS estimates that a 100-bed hospital would incur $1 million of ICD-10 charges (e.g. staff training, systems upgrades, and productivity losses), but media coverage indicates expenses can range up to $5 million due to IT upgrades.

Health Systems $20+ million Reports of health system implementation costs vary based upon physician and adnimistrative staff size, need to upgrade medical and billing systems, uncertain productivity disruption, and need for consulting support.

Physician Practices $8,167 - $8 million Estimates vary greatly with the low end represented by <6 physician practices using free ICD-10 training material and modern EHRs. On the other end is a 100-physician practice upgrading its EHR, paying for training, and accounting for productivity and payment disruption.

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Payers

The entire commercial insurance industry spent an estimated $2-3

billion preparing for ICD-10.xxxi Each carrier upgraded software and

IT infrastructure, modernized claims processing algorithms, and conducted staff training resulting in one-time transformation charges: small plans $14 million ($38 per member); medium plans $42 million ($13 per member); large plans $217 million ($11 per member).

Providers

Hospitals – $1-5 million

Anecdotal evidence suggests that independent hospitals will accrue $2-5 million in ICD-10 implementation expenses based upon staff size, reliance on vendors, and sophistication of IT systems.xxxii In 2009, HHS

estimated that the ICD-10 implementation would cost $1 million for a 100-bed community hospital with 4,000 annual discharges and gross revenue of $200 million due to staff and physician training requirements,

systems changes and software upgrades, and productivity losses.xxxiii

Health Systems – $20+ million

Reported costs to prepare a health system for ICD-10 start at $20 millionxxxiv and increase to $50 million for a 14-hospital

system in New York and more than $100 million for a 24-hospital

system in California.xxxv Variables influencing the cost include:

EHR capabilities, size of clinical and administrative staff, extent of contract support, and organizational change management ability.

Physician Practices – $8,167 - $8 million

There are conflicting reports for a physician practice’s ICD-10 implementation costs. At the high end is the American Medical Association, which includes estimated payment disruption and productivity losses.xxxvi

» Small practice (3 providers) $56,639 - $226,105.

» Medium practices (10 providers) $213,364 - $824,735.

» Large practices (100 providers) $2,017,151 - $8,018,364.

A recent survey of 276 physician practices with six or fewer providers found the average actual incurred cost (e.g. IT upgrades, staff and physician training, organizational assessment, and

testing) was $8,167 per practice or $3,430 per provider.xxxvii A

California independent physician association with 3,800 doctors

spent $2.1 million or $5,526 per physician.xxxviii Reasons why the

actual costs are lower than the AMA’s: lower cost education and training materials, new vendor capabilities, greater EHR adoption, and not accounting for payment or productivity impacts.

IF NOT PREPARED, IS IT TOO LATE

TO START?

It’s not too late to start, but organizations should act quickly. The October 1 deadline is fast approaching. For those HIPAA-covered entities not prepared, here’s a simple process flow to jumpstart implementation:

1. Organize

i. Convene an implementation team

ii. Determine implementation contractor support need iii. Formulate an implementation schedule

iv. Develop an implementation budget

v. Communicate ICD-10 transition with organization and business partners

2. Assess

i. Obtain ICD-10 codes

ii. Conduct ICD-10’s organizational impact assessment iii. Evaluate IT system, software, clearinghouses, and billing

services readiness

iv. Engage vendors and partners (e.g. affiliate providers, health plans) to assess transition support

v. Develop project implementation plan

3. Implement

i. Develop and roll-out stakeholder specific education modules

ii. Modify policies and procedures iii. Update forms and templates iv. Upgrade IT systems and software

4. Test

i. Prepare test cases and generate ICD-10 claims ii. Evaluate accuracy of internal test (claims, system, and

processes)

iii. Perform external testing with health plans iv. Develop contingency planning

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The opinions expressed in this article are those of the author and do not necessarily represent the views of Navigant Consulting, Inc. The information contained in this article is a summary and reflects currentimpressions based on industry data and news available at the time of publication. Any predictions and expectations noted herein are inherently uncertain and actual results may differ materially from those contained in this article. Navigant undertakes no obligation to update any of the information contained in the article.

About Navigant Healthcare

Navigant Consulting, Inc. (NYSE:NCI) provides a wide range of services, spanning from consulting and compliance to litigation and investigative support, to help highly-regulated industry organizations

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ENDNOTES:

i http://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2015-Fact-sheets-items/2015-02-25.html ii

http://www.appropriations.senate.gov/hearings-and-testimony/labor-hhs-subcommittee-hearing-fy16-budget-request-department-health-and

iii Representative Poe sponsored a bill (HR 2126) to ban the ICD-10 transition and Representative Black (HR

2247) sponsored a bill instituting an 18 month transition period

iv http://appropriations.house.gov/uploadedfiles/hrpt-114-hr-fy2016-laborhhsed.pdf

v http://www.healthcare-informatics.com/article/washington-debrief-onc-s-funding-maintained-same-level-fy2016 vi http://www.majorityleader.gov/wp-content/uploads/2014/11/114thCongressFirstSession-Monthly.pdf vii http://www.senate.gov/legislative/resources/pdf/2015_calendar.pdf

viii http://coalitionforicd10.org/wp-content/uploads/2015/03/2015-03-03_Multi-Org_ICD-10-EC_WM_SF_FINAL.pdf ix http://assets.fiercemarkets.com/public/healthit/3-4icd10letter.pdf

x http://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2015-Fact-sheets-items/2015-02-25.html xi http://files.kff.org/attachment/report-a-primer-on-medicare-key-facts-about-the-medicare-program-and-the-people-it-covers xii http://www.gao.gov/assets/670/668128.pdf page 35

xiii http://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNMattersArticles/Downloads/

SE1435.pdf and http://www.fiercehealthit.com/story/cms-icd-10-testing-boasts-88-percent-acceptance-rate/2015-06-02

xiv http://www.cms.gov/Medicare/Coding/ICD10/Downloads/2015-April-Testing-Results.pdf xv http://www.gao.gov/assets/670/668128.pdf page 31

xvi http://docs.house.gov/meetings/IF/IF14/20150211/102940/HHRG-114-IF14-Wstate-BocchinoC-20150211.pdf xvii http://www.aafp.org/news/practice-professional-issues/20140313icd10insurers.html

xviii http://coalitionforicd10.org/wp-content/uploads/2015/03/2015-03-03_Multi-Org_ICD-10-EC_WM_SF_FINAL.pdf xix

http://www.benzinga.com/pressreleases/15/06/p5561510/hometown-health-launches-a-100-day-countdown-in-response-to-icd-10-surv

xx http://assets.fiercemarkets.com/public/healthit/3-4icd10letter.pdf

xxi http://info.navicure.com/rs/navicure/images/Navicure-ICD-10-Preparation-Survey-Part3.pdf xxii http://www.icd10watch.com/blog/icd-10-transition-going-hurt-physicians-more-vendors xxiii http://www.modernhealthcare.com/article/20150410/NEWS/304109978 xxiv http://www.icd10watch.com/blog/now-good-time-panic-about-icd-10-deadline

xxv http://www.icd10watch.com/blog/road-icd-10-implementation-now-a-race and

http://www.cms.gov/Outreach-and-Education/Outreach/NPC/Downloads/2013-08-22-ICD10-NPC.pdf

xxvi http://www.icd10watch.com/blog/everyone-should-be-some-level-icd-10-training-now and http://www.

icd10watch.com/blog/five-elements-needed-icd-10-training-plan

xxvii http://www.roadto10.org/faq/

xxviii

http://www.ama-assn.org/ama/pub/news/news/2014/2014-02-12-icd10-cost-estimates-increased-for-most-physicians.page

xxix

http://www.ama-assn.org/ama/pub/news/news/2014/2014-02-12-icd10-cost-estimates-increased-for-most-physicians.page

xxx http://www.himss.org/resourcelibrary/TopicList.aspx?MetaDataID=2977 xxxi http://www.ahip.org/pdfs/SurveyICD-10CostsSept2010.pdf

xxxii http://www.fiercehealthcare.com/story/icd-10-switch-can-cost-hospitals-20m/2011-06-14 xxxiii http://www.gpo.gov/fdsys/pkg/FR-2009-01-16/pdf/E9-743.pdf page 3359

xxxiv http://www.fiercehealthcare.com/story/icd-10-switch-can-cost-hospitals-20m/2011-06-14 xxxv http://www.icd10watch.com/blog/how-much-will-icd-10-implementation-really-cost

xxxvi

http://www.ama-assn.org/ama/pub/news/news/2014/2014-02-12-icd10-cost-estimates-increased-for-most-physicians.page

xxxvii http://www.healthcareitnews.com/news/survey-shows-icd-10-easier-reported and http://journal.ahima.org/

wp-content/uploads/2015/02/Week-2_PAHCOM-Survey-Results.final_POST.pdf

xxxviii http://www.modernhealthcare.com/article/20140405/MAGAZINE/304059985

FOR MORE INFORMATION ABOUT

ICD-10, CONTACT:

Bruce Hallowell

Managing Director

Navigant Healthcare - Outsourcing & Technology Management bruce.hallowell@navigant.com

312.583.5826

Dave Hampshire

Managing Director

Navigant Healthcare - Outsourcing & Technology Management dave.hampshire@navigant.com

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