Nolan Study Estimates $6 Billion-$14 Billion Price Tag to Implement ICD-10-CM And ICD-10-PCS

DALLAS, TX, Nov. 3, 2003 -- A new study evaluates the costs and implications of replacing the ICD-9-CM diagnostic classification system with ICD-10-CM and ICD-10-PCS for key segments of the health care industry.

The study, conducted by the Robert E. Nolan Company, a leading management consulting firm to the health care industry, concludes that key segments of the health care industry would incur a significant expenditure of between $6 billion to $14 billion during a two- to three-year implementation period.

Migration to ICD-10-CM and ICD-10-PCS, the study finds, would require installing new code sets, re-mapping interfaces and recreating every report used by providers and payers in clinical, financial, reimbursement and quality analysis processes.

"This conversion would require significant system modifications -- affecting virtually every system provider's and payer's use," says Merit Smith, vice president of the Robert E. Nolan Company and one of the study's authors. "Extensive education and outreach would be required, as well as a wide-ranging effort to train coders, physicians, nurses, and other hospital and payer staff."

Implications of Converting to ICD-10

-- Short-term "data fog": The study reports that because of code disconnects between ICD-9-CM and ICD-10-CM and ICD-10-PCS, existing medical knowledge could be degraded significantly for a period of three to five years. While crosswalks have been or are being attempted between the current and proposed code sets, they cannot address all of the comparability issues and thus do not solve the problem of data continuity, the study finds.

-- Likely backlogs and payment delays: During the initial transition period, the time required for providers and their coding experts to code claims properly will increase significantly, according to the study. "This is a clear lesson learned from virtually every country's experience. An error by any payer will affect not only its own transactions but also all others in the subsequent flow of clinical data and funds," says Smith.

"These coding backlogs are likely to result in major payment slowdowns, causing enormous cash flow problems and gaps in data for payers." Other consequences of such a slowdown, according to the study, are increased inquiries from patients and providers, short-term borrowing costs, and potential under- and over-payments to providers.

Benefits of ICD-10-CM and ICD-10-PCS

The study finds that the vast majority of benefits asserted by proponents of converting to ICD-10-CM or ICD-10-PCS cannot be achieved without first implementing a standard clinical vocabulary.

The study also questions how other benefits ascribed to ICD-10-CM and ICD- 10-PCS will be achieved, such as improved trending abilities, reduced medical review of claims, improved fraud and abuse detection, improved ability to negotiate contracts between providers and payers, and patient safety.

To download the complete study, titled "Replacing ICD-9-CM with ICD-10-CM and ICD-10-PCS: Challenges, Estimated Costs and Potential Benefits," visit the Robert E. Nolan Company Web site at http://www.renolan.com .

The Robert E. Nolan Company is a management consulting firm specializing in the health care, insurance and banking industries. For more information, visit http://www.renolan.com .

SOURCE Robert E. Nolan Company

Web Site: http://www.renolan.com