Rand Study Details Costs and Benefits of switching from ICD-9 to ICD-10 Medical Coding

The Americal 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."