Implementation of ICD-10 and the Updated Transaction Code Sets is intended to improve patient care quality and data reporting enhance claim processing promote interoperability across all industry stakeholders What is the rationale for adopting ICD-10? ICD-9-CM is the current code sets standard adopted by the Secretary of HHS under HIPAA. ICD-9 is used by all covered entities to report diagnoses and inpatient hospital procedures on health care transactions for which HHS has adopted a standard. Shortcomings of ICD-9 include: ICD-9 is outdated, with only a limited ability to accommodate new procedures and diagnoses; ICD-9 lacks the precision needed for a number of emerging uses such as pay-for-performance and biosurveillance. Biosurveillance is the automated monitoring of information sources that may help in detecting an emerging epidemic, whether naturally occurring or as the result of bioterrorism; ICD-9 limits the precision of diagnosis-related groups (DRGs) as a result of very different procedures being grouped together in one code; ICD-9 lacks specificity and detail, uses terminology inconsistently, cannot capture new technology, and lacks codes for preventive services; and ICD-9 will eventually run out of space, particularly for procedure codes. Adoption of the ICD-10 code sets is expected to: Support value-based purchasing and Medicare’s anti-fraud and abuse activities by accurately defining services and providing specific diagnosis and treatment information; Support comprehensive reporting of quality data; Ensure more accurate payments for new procedures, fewer rejected claims, improved disease management, and harmonization of disease monitoring and reporting worldwide; and Allow the United States to compare its data with international data to track the incidence and spread of disease and treatment outcomes because the United States is one of the few developed countries not using ICD-10. Relationship between the ICD-10 Code Set and Version 5010 Transaction Standards The new version of the standard for electronic health care transactions (Version 5010 of the X12 standard) is essential to the use of ICD-10 codes because the current X12 standard (Version 4010/4010A1), cannot accommodate the use of the greatly expanded ICD-10 code sets. Accordingly, HHS closely coordinated the development of the final rules, and the rules are being announced simultaneously. [Source: The U.S. Department of Health and Human Services]