The American Recovery and Reinvestment Act (ARRA) provides incentives to modernize health care, including the upgrade to a new medical coding standard, ICD-10. Despite both incentives and mandates, health insurance companies, hospitals, and others want more data on the cost and benefits of the change over. We felt this data provided a good independent view of these issues.
The RAND Corporation was asked to provide research to answer these questions:
- What are the costs and benefits of switching from ICD-9’s diagnostic codes to those of ICD-10-CM?
- What are the costs and benefits of switching from ICD-9’s procedure codes to those of ICD-10-PCS?
The research was conducted by the Science and Technology Policy Institute (operated by RAND from 1992 to November 2003) for the Department of Health and Human Services, under contract ENG-9812731.
Summary
Statistical models led to these conclusions
Cost (March 2004 dollars)
Our best guess is that the cost of conversion will run $425 million to $1.2 Billion in one-time costs plus somewhere between $5 million and $40 million a year in lost productivity.
Benefits
- More-accurate payments for new procedures – between $100 million and $1.2 Billion
- Fewer miscoded, rejected claims – between $200 million and $2.5 Billion
- Reduced “improper” or exaggerated claims (including fraud ) – between $100–$1 Billion
- Better understanding of the value of new procedures – between $100 million to $ Billion.
- Improved disease management –between $200 and $1.5 Billion
Conclusion
It is likely that switching to both ICD-10-CM and ICD-10-PCS has the potential to generate
more benefits than costs.
Methodology
RAND estimated the cost of systems reprogramming by sampling payers, providers, and software vendors; dividing their answers by membership (in the case of payers) or revenue (in the case of providers and software vendors); and extrapolating to the entire population.
Their anecdotal comment was that Most observers believe that ICD-10-CM and ICD-10-PCS are technically superior to their ICD-9-CM counterparts. If nothing else, they represent the state of knowledge of the 1990s rather than of the 1970s. They have also been deemed more logically organized, and they are unquestionably more detailed—by a factor of two in diagnoses (and twenty for injuries) and by a factor of fifty in procedures.
Related Posts
- ICD-10 Implementation Approaches: Penny Wise and Pound Foolish
- Health Care Quality Measures Are Not Part of Physician Incentives
- Accountable Care Organization: New Risk in ACO Model vs. Prospective Payment System
- Medical Loss Ratio Provision of the Affordable Care Act – Less For ICD-10 and Other Reform Issues
- ICD-10 Implementation Contention – Only 55 Hospitals in the U.S. Are at Stage Seven for Electronic Health Records
- ICD-10 Implementation and Medical Management are Co-mingled with Revenue Cycles
- ICD10 – Don’t Delay, Make Sure You Do an Assessment
