Some physicians may end up paying nearly three times more for ICD-10 implementation than had been predicted just five years ago, according to a new report from the American Medical Association.

The updated AMA cost study, conducted by Nachimson Advisors, finds dramatic increases when compared to a similar 2008 report, also by Nachimson. That financial hit is now compounded by other federal mandates that weren't yet in existence back then.

With the Oct. 1, 2014 deadline to transition to ICD-10 code sets just months away, and physician practices grappling with a slew of new regulatory requirements related to meaningful use and payment reform, AMA – whose official position calls for ICD-10 repeal – sent a letter to Health and Human Services Secretary Kathleen Sebelius asking her to rethink the ICD-10 mandate.

"By itself, the implementation of ICD-10 is a massive undertaking," wrote James L. Madara, MD, executive vice president and CEO of AMA. "Yet, physicians are being asked to assume this burdensome requirement at the same time that they are being required to adopt new technology, re-engineer workflow, and reform the way they deliver care; all of which are interfering with their ability to care for patients and make investments to improve quality."

Compelling physicians to adopt ICD-10 will be a big burden for practices – compounded by their inability to devote time and resources to other federal mandates that come with significant penalties.

Madara made the case that, "physicians are facing serious financial obstacles from multiple sources," including:

• Incurring costs to comply with meaningful use that exceed available incentives;
• Purchasing EHR software certified for 2014 or software upgrades that allow for use of ICD-10;
• Implementing upgrades to practice management systems for ICD-10
• Incurring penalties from cuts to Medicare Part B reimbursement, "including a 2 percent cut if Medicare ePrescribing is not met (cut taken in 2014), a 1 percent cut if meaningful use is not met (cut taken in 2015), and a 1.5 percent cut under the Physician Quality Reporting System (PQRS) (cut taken in 2015)"; and
• Mitigating a 2 percent cut stemming from sequestration.

In 2008 the predicted cost to implement ICD-10 ranged from $83,290 for a small practice, $285,195 for a medium practice and $2,728,780 for a large practice, according to the first Nachimson Advisors report.

Based on new information, the 2014 study found the following cost ranges for each practice size based on variable factors such as specialty, vendor and software.

[See also: Practices badly lagging on ICD-10]

• Small practice: $56,639-$226,105

• Medium practice: $213,364-$824,735

• Large practice: $2,017,151-$8,018,364

Two-thirds of physician practices are projected to fall into the upper range of current cost estimates, which are much higher than the 2008 estimates, according to AMA. These practices are expected to incur major costs associated with software upgrades to accommodate the transition to ICD-10.

In addition to software upgrades, the total costs include the expense of training, practice assessments, testing, payment disruptions and productivity loss for physicians.

The 2014 estimates include much higher figures due in part to significant post-implementation costs, including the need for testing and the potential risk of payment disruption.

AMA data also shows that vendor readiness for the new code set is significantly lagging. Few practices have therefore been able to conduct appropriate testing or implement workflow changes to ensure the new codes are working as intended.

"The markedly higher implementation costs for ICD-10 place a crushing burden on physicians, straining vital resources needed to invest in new health care delivery models and well-developed technology that promotes care coordination with real value to patients," said AMA President Ardis Dee Hoven, MD, in a press statement.

"Continuing to compel physicians to adopt this new coding structure threatens to disrupt innovations by diverting resources away from areas that are expected to help lower costs and improve the quality of care," she said.

Read the new Nachimson Advisors Study here.

Read AMA's letter to HHS here.