Cautious optimism about Medicare’s ability to handle claims once the new ICD-10 code sets take effect emerged in the wake of limited, invitation-only end-to-end testing by the Centers for Medicare & Medicaid Services (CMS).

Held January 26 through February 3, the testing involved 661 entities and about 1,400 National Provider Identifiers (NPIs) submitting nearly 1,500 claims either directly to CMS or through clearinghouses and Medicare Administrative Contractors (MACs.)1  

“Overall, participants in the January 26 to February 3 testing were able to successfully submit ICD-10 claims and have them processed through our billing systems,” CMS said in a prepared statement.2  

19% Error Rate

End-to-end testing simulates real-world claims submission to determine if payers can accurately recognize, adjudicate and pay an ICD-10-coded claim. Of the 14,929 claims submitted during the recent test period, 81% were accepted, CMS reported.

Causes of disallowed claims were, according to CMS:3

  • 3% were rejected for invalid submission of ICD-9 diagnosis or procedure code.
  • 3% were rejected for invalid submission of ICD-10 diagnosis or procedure code.
  • 13% were rejected for non-ICD-10 related errors, including issues setting up the test claims (e.g., incorrect NPIs, health insurance claim numbers, submitter IDs, dates of service outside the range for valid testing, invalid HCPCS codes, and invalid place of service).

Cindy Slocum, project manager, ICD-10 implementation for McKesson Business Performance Services (McKesson), said the company submitted claims to four MACs during the testing period. The claims were for a variety of specialties, including radiology, pathology, E&M services, and emergency medicine.

Overall, the majority of McKesson claims were successfully processed, with an error rate well below the 19% error rate experienced across the entire end-to-end simulation. Slocum attributed the lower McKesson error rate to the company’s decision in late 2013 to begin transitioning McKesson coders to the ICD-10 codes via an early adoption program.

A valid sample?

Although the Medicare testing results were positive, Slocum cautioned that only a small number of claims were processed.

“When the testing is so limited in scope, it is difficult to say with any degree of certainty that the systems are going to be able to process the millions of ICD-10 claims that are going to be coming in starting next fall,” she said. “I think everyone would feel better if the testing could be significantly expanded.”

CMS plans two more end-to-end testing sessions before the implementation deadline:

  • April 27 through May 1, for volunteers that have already been selected;
  • July 20 through July 24, for volunteers applying after March 13.

Avoiding a repeat of 5010

Given that the majority of claim rejections in the recent test stemmed from protocol and process issues, Slocum said she was concerned about a possible repeat of the 2012 transition to the Version 5010 standard for electronic transactions.

The standard, which was mandated by the Health Insurance Portability and Accountability Act (HIPAA), was designed to improve the security of medical claims. However, Slocum said many payers, including a number of MACs, were not technically ready to accept the standard on the Jan. 1, 2012 deadline.

As a result, physician payments were delayed and some organizations experienced acute cash flow problems. “It was a nightmare for the industry, and no one wants to see a repeat of that with ICD-10,” Slocum said.

Commercial carriers prepare   

While the recent CMS tests focused on Medicare claims, commercial payers also have been engaged in end-to-end testing, Slocum stated. Although some are further along than others, Slocum said that “for the most part, everybody knows what they need to do and are setting up systems to complete end-to-end testing.”

She said McKesson is monitoring 125 commercial payers to track their ICD-10 readiness levels.

“It’s important that practices identify who their major carriers are and communicate with them about their ICD-10 implementation plans,” she added.

Data feeds to smooth transition

As part of their preparation work, Slocum said it is imperative that practices also assess the readiness of their clinical partners to provide outbound data feeds for demographic and charge information. If hospitals aren’t ready or are slow in establishing the necessary system interfaces, physician practices could take a significant financial hit.

Of particular importance are hospital IT conversions underway or planned for the second half of 2015. Without ample lead time, she said, it will be difficult for any billing entity to complete the necessary interfaces and ensure uninterrupted data feeds.

To head off these problems, Slocum advised practices that bill in-house as well as those that outsource to reach out to their facilities to learn more about the facility’s ICD-10 plans. In the case of McKesson clients, groups should also work to facilitate direct communication between the hospital and the McKesson client manager.

1End-to-End Testing Fact Sheet, Centers for Medicare & Medicaid Services, February 2015,


About the author

McKesson Business Performance Services offers services and consulting to help hospitals, health systems, and physician practices improve business performance, boost margins and transition successfully to value-based care.