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Computerworld - A new federally mandated medical coding system designed to better track diagnoses and treatments is affecting dozens of core applications for healthcare providers and insurance payers, and is requiring a massive overhaul of IT systems that some say will be nearly impossible to complete on time.

Medical providers and insurance payers are required to move from the current ICD-9 coding system to ICD-10 by Oct. 1, 2013. The effort has already been under way since 2008, yet most hospitals have yet to begin the change-over, says the American Hospital Association, an industry group with more than 5,000 member hospitals, health systems and other care organizations.

The move from ICD-9 to ICD-10, which changes out about 15,000 codes for approximately 68,000 new ones, comes at a time when care providers are already under the gun to implement and prove to the federal government the meaningful use of electronic health records (EHR).

ICD-10 was published by the World Health Organization in 1992 as a way to add the tracking of mortality rates to the coding standard. Since that time, additional coding has been added to provide a more comprehensive method for tracking diagnoses and medical treatments.

The Centers for Medicare & Medicaid Services (CMS) is in charge of regulating both "meaningful use" and ICD-10 implementations. So-called meaningful-use standards come in three phases, and hospitals are required to implement Phase 1 this year. A proposed rule governing Phase 2 is targeted for publication in late 2011 or early 2012, the agency says.

In the meantime, ICD-10's deadline looms, and many hospitals and Medicaid providers are well behind what is considered by most to be a multiyear implementation.

"Quite frankly, the holdup is, it's a big undertaking and it took them a while to get under way. Everybody's started, but a large percentage of hospitals are in the heavy analysis stage or they're just starting," said Casey Corcoran, vice president of commercial solutions for healthcare at General Dynamics Information Technology, a vendor offering ICD-10 consulting services.

Earlier this year, the CMS conducted a teleconference to help payers and providers understand their responsibilities in implementing ICD-10.

Christine Armstrong, a principal at Deloitte Consulting, said in a report that ICD-10's complex code and its impact on EHRs, various billing systems, reporting packages, and other decision-making and analytical systems will prompt major upgrades or the replacement of current systems.

The changeover will probably cost larger hospitals between $2 million and $5 million, and large care groups as much as $20 million, said James Swanson, director of client services at Virtusa, an IT services and consulting company.

ICD-10 will also require staff at hospitals and private physician practices to map and load codes, redo system interfaces, redevelop reports and retrain users. system changes will impact nurses, physicians, patient financial services, case management, utilization review and other staff, in addition to coders.

"It is the kind of thing that people have compared to Y2K. It's probably more complex than Y2K. There's a lot more human interaction than Y2K," said Robert Alger, vice president of health plan IT strategy at Kaiser Permanente.

Kaiser is one of the nation's largest healthcare providers, with 8.7 million health plan members, 167,300 employees and 14,600 physicians.

Alger, who is in co-chairman of Kaiser Permanente's ICD-10 implementation team, said the changeover has impacted well over 100 systems internally, including clinical coding, financial, claims processing and customer reporting systems.

Kaiser, which was well ahead of the curve in implementing EHRs, expects to meet the government's deadline for ICD-10 with time to spare. Alger said his company began its implementation two years go and expects to finish it next year.

Jim Whicker, principal technology consultant for Health IT strategy and policy in Kaiser Permanente's IT division, said many smaller hospitals, as well as public and private health plans, are running up against a deadline they will not likely meet.

Whicker said he feels that the CMS must do a better job in providing guidance, education and outreach to the healthcare industry.

For one, Whicker hopes the agency will come out with a testbed for providers so that they can check to see whether upgraded systems are functioning properly. The agency did not immediately respond to requests for comment on ICD-10.

George Arges, senior director of the American Hospital Association's Health Data Management Group, called ICD-10 an "unfunded mandate" whose implementation is taking money from operational budgets.

"It is pretty costly. A lot of other capital programs and initiatives are being deferred so these hospitals can work on the ICD-10 switchover," he said. "It crosses over so many different information systems. It's very broad in its scope."