The Department of Health and Human Services (HHS) has released a long-awaited proposed regulation that would replace the ICD-9-CM code sets now used to report health care diagnoses and procedures with greatly expanded ICD-10 code sets, effective Oct. 1, 2011. In a separate proposed regulation, HHS has proposed adopting the updated X12 standard, Version 5010, and the National Council for Prescription Drug Programs standard, Version D.0, for electronic transactions, such as health care claims. Version 5010 is essential to use of the ICD-10 codes.In 2000, under authority provided by the Health Insurance Portability and Accountability Act of 1996 (HIPAA), the ICD-9-CM code sets were adopted for use in the administrative transactions by both the public and private sectors to report diagnoses and inpatient hospital procedures. Covered entities required to use the ICD-9-CM code sets include health plans, health care clearinghouses, and health care providers who transmit any electronic health information in connection with a transaction for which a standard has been adopted by HHS.Developed almost 30 years ago, ICD-9 is now widely viewed as outdated because of its limited ability to accommodate new procedures and diagnoses. ICD-9 contains only 17,000 codes and is expected to start running out of available codes next year. By contrast, the ICD-10 code sets contain more than 155,000 codes and accommodate a host of new diagnoses and procedures. The additional codes will help to enable the implementation of electronic health records because they will provide more detail in the electronic transactions. This granularity will also help to improve efficiencies by helping to identify specific health conditions such as Methicillin-Resistant Staphylococcus aureus (MRSA) and other conditions.The ICD-10 code sets proposed rule would concurrently adopt the International Classification of Diseases, Tenth Revision, Clinical Modification (ICD-10-CM) for diagnosis coding, and the International Classification of Diseases, Tenth Revision, Procedure Coding System (ICD-10-PCS) for inpatient hospital procedure coding. The new codes would replace the International Classification of Diseases, Ninth Revision, Clinical Modification (ICD-9-CM) Volumes 1 and 2, and the International Classification of Diseases, Ninth Revision, Clinical Modification (CM) Volume 3 for diagnosis and procedure codes, respectively.Updated versions of current HIPAA electronic transaction standards require the use of the ICD-10 code sets for claims, remittance advice, eligibility inquiries, referral authorization, and other widely used transactions. The currently adopted standard, Version 4010/4010A1 of The Accredited Standards Committee (ASC) X12 group, cannot accommodate the much larger ICD-10 code sets.Under the updated transaction standards proposed rule, compliance with Version 5010 (health care transactions) and Version D.0 (pharmacy claims) would be required by April 1, 2010. In that rule, a standard for the Medicaid pharmacy subrogation transaction is also proposed. Medicaid pharmacy subrogation is the process by which state Medicaid agencies recoup funds for payments they have made for pharmacy services for Medicaid recipients, in cases where another third party payer has primary financial responsibility. Compliance would be required two years after the effective date of the final rule, except for small health plans, which would have an additional year.HHS has released two fact sheets on the proposed regulations, dated August 21, 2008.