Rushing ICD-10 Implementation Would Likely Cause Improper And Fraudulent Medicare Payments To Soar, New Report Finds

May 15, 2006

WASHINGTON – A new report by D. McCarty Thornton – partner Sonnenschein Nath & Rosenthal, LLP, and former chief counsel to the Inspector General of the Department of Health and Human Services (HHS) – concludes that rushing to implement ICD-10 billing codes by 2009 would “substantially” increase the risks of improper and fraudulent Medicare claims.  Thornton is one of the nation’s foremost authorities on healthcare fraud and abuse and compliance. 

The House is considering health information technology legislation (H.R. 4157) that would require providers and payers to switch from the ICD-9 billing code set to a very different ICD-10-CM/PCS (ICD-10) code set by October 1, 2009.  The Blue Cross and Blue Shield Association (BCBSA) is advocating for the extension of the deadline to 2012 because much has to be done before a switch to ICD-10 can be started (including the consolidation of Medicare fee-for-service administrative contractors) and providers need time to automate their offices and be trained. 

In his report, Thornton explains the 2009 deadline would not give the contractors who administer the Medicare fee-for-service claims processing the time needed to update and test their fraud detection tools and techniques, especially as Medicare is, at the same time, undergoing the largest contracting reform in its history – from 50 contractors down to 15.  HHS reports that improper Medicare payments accounted for $12.1 billion in 2005, nearly one-third of all government-wide improper payments. 

Key findings in Thornton’s report include:

• Medicare contractors have helped to reduce improper payments dramatically.  Over the past ten years, the tools and techniques used by contractors for detecting improper Medicare payments have helped reduce such payments by 8.6 percent, from 13.8 percent in 1996 to 5.2 percent in 2005.  Without sufficient time for updating, these tools and techniques will lose much of their effectiveness when ICD-10 is implemented.
  
  
• Implementing ICD-10 will require a massive, time-consuming overhaul of contractors' systems for fighting fraud.  It has taken more than 20 years to hone the current tools and techniques contractors use to detect improper payments to current levels of effectiveness.  Most of these tools and techniques depend on ICD-9 code logic.
  
  
• Implementing ICD-10 should not begin until Medicare completes contractor reform.  Between 2007 and 2009, Medicare is consolidating more than 50 local contractors into 15 Medicare Administrative Contractors, the most far-reaching change in fee-for-service contracting since Medicare's inception.  Making the "massively complex" transition to ICD-10 at the same time "would be extraordinarily risky" and would likely increase "opportunities and incidences of improper payments and fraud," Thornton concludes in his report.
  
  
• ICD-10 should be pilot-tested before it is implemented nationwide.  Extending the timeframe beyond 2009 would give Medicare and its contractor's time to identify and remediate the inevitable gaps and technical difficulties. 

For more information, or to access this report, please visit: www.bcbs.com.