Updated on: March 16, 2016

Study Can’t Predict How Coding Practices Will Impact Medicare Inpatient Hospital Payments Under ICD-10

Original story posted on: July 11, 2011

Dr. Ronald E. Mills and his colleagues at 3M Health Information Systems in Wallingford, Ct. recently released a report outlining their study titled “Impact of the Transition to ICD-10 on Medicare Inpatient Hospital Payments”

According to this report, “the result of the payment impact analysis shows that the conversion to a native ICD-10 version of MS-DRGs will have a minimal impact on aggregate payments to hospitals and the distribution of payment across hospitals.” (p. E9)



The Diagnosis Related Groups (DRGs) represent a reimbursement methodology based on ICD-9-CM diagnosis and procedure codes. Therefore, any payer that continues to use DRGs to pay inpatient claims for discharges on and after Oct. 1, 2013 must incorporate ICD-10-CM diagnosis codes and ICD-10-PCS codes into their payment systems.

For the most part, payers have two options:

  1. Convert all of the ICD-9-CM codes that currently housed in their payment system to ICD-10 codes (i.e. convert their ICD-9-CM-based payment system into an ICD-10-based payment system); or
  2. Retain their ICD-9-CM-based payment system, and as providers submit claims with ICD-10 codes, map them to their equivalent ICD-9-CM codes (i.e. continue using an ICD-9-CM-based payment system).

Either option will involve the payer mapping from ICD-9-CM and ICD-10. Payers may find it expeditious to use General Equivalence Mappings (GEMs) to perform bi-directional (forward and backward) conversions between ICD-9-CM and ICD-10 codes. The National Center for Health Statistics (NCHS) oversees the Diagnosis GEMs, while CMS oversees the Procedure GEMs. A link to the GEMs is available on the CMS ICD-10 website at http://www.cms.gov/ICD10/01_Overview.asp#TopOfPage.

The Study Methodology

CMS uses the Medicare-Severity Diagnosis Related Groups (MS-DRGs) as its inpatient prospective payment system (IPPS), and CMS already has converted and posted onto their website the MS-DRG Version 27.0 conversion to ICD-10 (this is the fiscal year 2010 version of MS-DRGs, used for discharges occurring from Oct. 1, 2009 to Sept. 30, 2010.

Under contract with CMS, the 3M HIS team used all of the 10 million-plus Medicare inpatient claims from acute-care hospitals with discharge data from Oct. 1, 2008 through Sept. 30, 2009. The research team used the GEMs to convert the ICD-9-CM codes on each of the claims to ICD-10 codes.

Payments based on the MS-DRGs assigned using ICD-9-CM coded data then were compared to the following:

  • Payments based on the MS-DRGs assigned using ICD-10 coded claims data; and
  • Payments based on the MS-DRGs using ICD-10 coded claims data converted back to ICD-9-CM.

The Results

As per the report, “the result of the payment impact analysis shows that the conversion to a native ICD-10 version of MS-DRGs will have a minimal impact on aggregate payments to hospitals and the distribution of payment across hospitals. However, it should be noted that the aggregate payment impact estimate does not reflect changes in hospital coding practices that could occur with the implementation of ICD-10.” (p. E9)

Hospital Coding Practices and Medicare Payment Impact

Although not addressed in the study, veteran coding professionals know that there are a number of areas in which hospital coding practices could impact hospital Medicare inpatient payments under ICD-10.



Physician Documentation


Physician documentation requirements are even more stringent under ICD-10 than they were under ICD-9-CM for many conditions and procedures, and if physicians are not properly trained well in advance of the Oct. 1, 2013 compliance date, both hospital coding and reimbursement will suffer.

For example, in order for asthma to be coded, physicians must document the asthma severity and complications based on the classification that appears in ICD-10-CM – in which the severity must be classified as mild intermediate, mild persistent, moderate or severe, and the complication options are to be classified as none, acute exacerbation or status asthmaticus. Examples of

ICD-10-CM asthma codes include the following:

J45.20 Mild intermittent asthma, uncomplicated;

J45.41 Moderate persistent asthma with (acute) exacerbation; and

J45.52 Severe persistent asthma with status asthmaticus.

This classification of asthma does not exist in ICD-9-CM. If coding specialists can’t complete inpatient charts because the asthma documentation is incomplete, for example, a hospital’s cash flow will be impacted (due to increased unbilled accounts) as a direct result of the ICD-10 transition

Physician Query Compliance

The more detailed documentation requirements under ICD-10 may bring with them an increased number of physician queries (by the coding specialists) seeking clarification and/or additional documentation when there is conflicting, incomplete or ambiguous information in the medical record. If hospitals currently are struggling to obtain timely responses to queries from certain physicians (repeatedly), this problem, if not addressed, only will intensify under ICD-10.

Hospitals that have serious physician query problems should implement corrective action plans well in advance of the Oct. 1, 2013 ICD-10 compliance date or this will be another area in which hospitals are at risk to lose money under ICD-10.

Coding Accuracy

When documentation is created in a timely and complete fashion, a coding specialist’s job is much easier. However, if some coding specialists have not been trained thoroughly or are having difficulty with some ICD-10 conventions and guidelines, hospitals could be at risk financially due to:

Delayed billing of accounts (cases may not be completed in a timely manner if coding specialists are uncomfortable with their code assignments and they request an increased number of chart reviews by their coding supervisors and/or managers); and

Front-end edit violations (inaccurate ICD-10 coding may cause claims to be “flagged” for violating ICD-10-specific coding edits embedded in the hospitals’ internal edits or the edits of the hospitals’ electronic data interchange/EDI vendor).


Coding Productivity

When documentation is timely and complete, and coding specialists are well-trained and confident in their ICD-10 coding abilities, all hospitals still will need to address the reality that it takes more time to code under ICD-10-CM and ICD-10-PCS. This is due to the greater level of detail in ICD-10 codes and due to some of the ICD-10-specific coding guidelines that allow for the reporting of additional conditions and procedures not separately reportable in ICD-9-CM.

For example, in ICD -9-CM, when a laparoscopic cholecystectomy is converted to an open cholecystectomy, only one ICD-9-CM procedure code is assigned – for the open cholecystectomy.

In ICD-10-CM, when a laparoscopic cholecystectomy is converted to an open cholecystectomy, both the diagnostic laparoscopy and the open cholecystectomy are coded.

Why? Per the official 2011 ICD-10-PCS coding guidelines: “During the same operative episode, multiple procedures are coded if: The intended root operation is attempted using one approach, but is converted to a different approach. Example: Laparoscopic cholecystectomy converted to an open cholecystectomy is coded as percutaneous endoscopic inspection and open resection.”

This one guideline, while allowing the capture of an additional procedure code, also increases – even if by one minute – the amount of time it will take to code such a scenario.

In order to ensure that there is no significant coding backlog on and after Oct. 1, 2013 hospitals may need to hire additional coding specialists long before that date, and/or secure and sign contracts now with firms that provide contract coding (make sure, however, that these firms provide written proof of comprehensive ICD-10 training for each and every contract coder they send to your facility).


Providers should not be lulled into a false sense of financial security by the 3M HIS finding that the transition from the ICD-9-CM to the ICD-10 version of MS-DRGs will have a minimal impact on aggregate payments to hospitals. The more relevant finding from the study is that this negligible impact does not reflect potential changes in hospital coding practices. Providers must include in their ICD-10 implementation action plan physician documentation training, physician query process review with corrective action plan (if necessary), comprehensive ICD-10 coding training and a documented plan to handle decreased productivity.




“Impact of the Transition to ICD-10 on Medicare Inpatient Hospital Payments” (https://www.cms.gov/MMRR/Downloads/MMRR001_02_A02.pdf )

Medicare & Medicaid Research Review 2011, Volume 2, Number 2, Centers for Medicare & Medicaid Services, Hyattsville, Md.: doi: 10.5600/mmrr.001.02.a02

(https://www.cms.gov/MMRR/Downloads/MMRR001_02_A02.pdf )

Lolita M. Jones, MSHS, RHIA, CCS

Lolita M. Jones, MSHS, RHIA, CCS has provided Product Consultant services to a warehousing and analytics start-up that developed and marketed decision support software, health outcomes services, and regulatory compliance toolsets. Her goal is to combine her medical coding expertise with data mining-pattern recognition, to help improve data accuracy and compliance in medical coding and reimbursement (i.e., ICD-10-CM, ICD-10-PCS, CPT, HCPCS Level II, modifiers, DRGs, APCs, and eAPGs). Ms. Jones also provides remote and on-site training/consulting in her newly developed Healthcare Data Mining Clinic educational series. She is currently pursuing a Graduate Certificate in Healthcare Data Analytics from a top university. Ms. Jones is based in New York and can be reached at .