The World Health Organization is the public health arm of the United Nations. Since 1948, WHO has been responsible for updating the International Classification of Diseases (ICD), a worldwide system for collecting, processing, classifying and processing statistics about diseases. The most recent version of the ICD is ICD-10, or tenth edition, which WHO published in 1999.

The U.S. Center for National Health Statistics adapts the ICD to create the ICD-CM, which is used by U.S.-based healthcare providers to code every type of medical diagnoses. The Center for National Health Statistics is part of the Centers for Disease Control & Prevention, under the auspices of the U.S. Department of Health & Human Services.

In October, 2008, the Department of Health & Human Services proposed that the federal government adopt ICD-10 by October 1, 2013. Most other industrialized countries had adopted ICD-10 years earlier. Still, doctors and hospitals in the U.S. lobbied for further delay and succeeded in pushing back the effective date to October 1, 2015. The change to ICD-10 affects all healthcare providers who treat Medicare and Medicaid patients, and those covered by the Health Insurance Portability and Accountability Act of 1996 (HIPAA).

The key difference between ICD-9 and ICD-10 is the level of specificity healthcare providers must use to describe signs, symptoms and diseases. ICD-9 used approximately 13,000 codes. ICD-10 uses approximately 68,000 codes. ICD-10 also reflects advances in medicine and medical technology and is flexible enough to add new codes when necessary.

ICD-CM codes are an important part of the reimbursement process for Medicare and Medicaid. By law, these two federal health insurance programs only pay for medical procedures and equipment that are medically necessary. ICD-10-CM codes provide the details for showing medical necessity.

There are other codes used in the Medicare and Medicaid reimbursement process. The Center for Medicare and Medicaid (CMS) developed the Healthcare Common Procedure Coding System (HCPCS) to account for procedures performed, equipment used, and the type and amount of drugs injected or delivered to patient.

There are several levels of HCPCS codes. Level 1 is identical to the Current Procedural Terminology (CPT) codes. CPT codes are divided into six categories: evaluation & management, anesthesiology, surgery, radiology, pathology/lab, and medicine. Level 2 HCPCS codes go beyond the CPT and are used for non-physician services, like ambulances, wheelchairs and walkers.

Let’s look at an example. With doctor’s visits, HCPCS codes differentiate between a quick follow-up appointment that may last five minutes and an extensive examination that may last close to 45 minutes. And there are HCPCS codes for three types of office visits in between the quick follow-up and the in-depth exam. There is a similar scale of increasing time and complexity with codes for medical procedures, diagnostic tests, nursing home care and home health care.

Not surprisingly, Medicare pays higher rates for longer, more complex medical services. So while Medicare providers are required to use the appropriate HCPCS codes, there’s a significant financial incentive to characterize visits and procedures as more complicated than they are, a fraudulent practice known as “upcoding.” In a study released in 2012, the non-profit Center for Public Integrity estimated that Medicare paid $11 billion more than it should have between 2001 and 2010 as a result of upcoding and other coding abuses. CPI reviewed a representative five percent sample of Medicare claims submitted by more than 400,000 healthcare providers.

In theory, the significantly expanded ICD-10-CM codes could undercut efforts at upcoding, because healthcare providers now must be much more specific with their diagnoses. The more detail provided on signs, symptoms and diseases, the more difficult it should be to justify longer office visits where only a shorter one was medically necessary.

But Medicare and Medicaid reimbursements don’t work in that sort of straightforward way. Healthcare providers file millions and millions of claims with Medicare and Medicaid each year. Only a very small percentage of those claims are reviewed for accuracy before payment is made. Program administrators rely, to some extent, on software designed to root out patterns of fraud. Those software programs now need to be re-tooled to account for the 55,000 new diagnosis codes in ICD-10-CM. Then it takes time for the software programs to identify patterns with the new ICD-10-CM codes that may flag a fraud.

If you work in the healthcare industry, the issue of upcoding after the switch from ICD-9-CM to ICD-10-CM will be important to watch. If you have any questions about these or other issues related to healthcare fraud, do not hesitate to contact us.