President Barack Obama on Tuesday signed a bill that prevents a 24% Medicare payment cut to doctors and postpones the transition to the International Classification of Diseases, 10th Revision (ICD-10) set of diagnostic codes for a year or longer.

Medical associations preferred another bill that would have repealed the sustainable growth rate (SGR) law that mandated the payment reduction. But some of them viewed the inclusion of the ICD-10 delay in the legislation that Congress passed as a victory for physicians.

Associations representing hospitals and health information technology (IT) professionals, however, believe that postponing the implementation of ICD-10 from October 1, 2014, until October 1, 2015, or later will be very costly and counterproductive for organizations that have long been preparing for this transition.

The American Health Information Management Association estimated that a one-year delay would cost the healthcare industry up to $6.6 billion. And a consultant told Healthcare IT News that the postponement will cost his hospital clients anywhere from $500,000 to $3 million each, depending on their size.

The financial effects of the delay on physician practices are likely to be more positive. While some physician groups have invested significant amounts in preparing for ICD-10, a recent survey by the Medical Group Management Association (MGMA) found that less than 10% of its members had made substantial progress on that front.

"Some practices have spent a considerable amount of money getting staff trained and doing other things to get ready for ICD-10," said Robert Tennant, senior policy advisor to MGMA, in an interview with Medscape Medical News. "It's not good for them to have wasted that money. But the majority of practices we surveyed said ICD-10 was going to be very expensive and was going to cost money they didn't have. So there was a lot of support for revisiting the issue of ICD-10 and the compliance date."

While the ICD-10 provision was not the main focus of the bill that averted the Medicare payment cut for one year, it's what has grabbed the attention of the healthcare industry.

According to Tennant, the ICD-10 delay "is an opportunity for CMS [the Centers for Medicare & Medicaid Services] to revisit the issue, because clearly the glide path they'd created over the past few years wasn't working."

MGMA would like CMS and industry representatives to work out a different approach to implementing ICD-10, Tennant said. That might include not only full end-to-end testing of ICD-10 by CMS, but also the possibility that different industry sectors could make the transition to the code set at different times, he added.

Many industry groups, including MGMA, have also pushed recently for flexibility in the meaningful use stage 2 deadline, arguing that many physicians wouldn't have upgraded software in time to attest to meaningful use this year. CMS expanded its hardship exceptions in an effort to address these complaints, but medical societies view CMS' new regulation as inadequate.

Time to Focus on Meaningful Use?

Could the postponement of the ICD-10 deadline encourage physicians who have been primarily focused on that transition to put more effort into meaningful use?

Tennant thinks it's possible, but only if the doctors have already received their 2014-certified electronic health record (EHR) upgrades. Jordan Battani, managing director of CSC Global Institute for Emerging Health Practices, told Medscape Medical News that, with ICD-10 shunted to the side, "it should free up resources to work on other projects and initiatives" such as meaningful use stage 2. But that depends on whether practices were already moving on ICD-10, she added.

"The bigger issue is that we're in a time of so much transformation in healthcare, and there are so many mission-critical projects, that smaller organizations are really struggling to keep up," Battani noted.

Justin Barnes, vice president of industry and government affairs for Greenway Health, a leading EHR vendor, also believes that some physicians might shift their focus to meaningful use. Nevertheless, he stressed, it would be a mistake for practices to ignore ICD-10 — and not only because it may be implemented next year. The infrastructure for accountable care organizations and value-based reimbursement requires ICD-10, which will be used in quality reporting and analytics, he told Medscape Medical News.

"We can't create a more efficient and sustainable system without ICD-10, because ICD-10 is the underpinning to the future of value-based medicine," Barnes declared.

Battani agreed, pointing out that "ICD-10 is linked to enhanced reporting and oversight for the new payment schemes." Value-based reimbursement, she said, depends on quality and outcome measures that could be improved with details from ICD-10 coding.

So in the view of these experts, the ICD-10 delay represents a setback for the industry as a whole, not just for hospitals. Nevertheless, Barnes offered a glimmer of hope. The SGR replacement bill, which would base a large slice of Medicare payments to physicians on their performance, is not dead, he said. The bill's architect, Sen. Ron Wyden (D-OR), and a bipartisan group of other senators and representatives plan to bring that bill back to Congress in the next couple of months, he noted.