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These are some interesting excerpts from the 8-17-2000 HIPAA regulations that directly EDI implementations:
Download Full Text [Federal Register: August 17, 2000 (Volume 65, Number 160)] [Rules and Regulations] [Page 50311-50372] [[Page 50311]] I. Background A. Electronic Data Interchange Electronic data interchange (EDI) is the electronic transfer of information, such as electronic media health claims, in a standard format between trading partners. EDI allows entities within the health care system to exchange medical, billing, and other information and to process transactions in a manner which is fast and cost effective. With EDI there is a substantial reduction in handling and processing time compared to paper, and the risk of lost paper documents is eliminated. EDI can eliminate the inefficiencies of handling paper documents, which will significantly reduce administrative burden, lower operating costs, and improve overall data quality. The health care industry recognizes the benefits of EDI and many entities in that industry have developed proprietary EDI formats. Currently, there are about 400 formats for electronic health claims being used in the United States. The lack of standardization makes it difficult and expensive to develop and maintain software. Moreover, the lack of standardization minimizes the ability of health care providers and health plans to achieve efficiency and savings. [[Page 50315]] Certain technologies present a special case for the use of standard transactions. We proposed that telephone voice response, ``faxback'', and Hyper Text Markup Language (HTML) interactions would not be required to follow the standard. We have since reevaluated this position in light of the many comments on this position and on developments in the EDI industry which continue to expand the options in this area. We have decided that, instead of creating an exception for these transmissions, we will recognize that there are certain transmission modes in which use of the format portion of the standard is inappropriate. However, the transaction must conform to the data content portion of the standard. The ``direct data entry'' process, using dumb terminals or computer browser screens, where the data is directly keyed by a health care provider into a health plan's computer, would not have to use the format portion of the standard, but the data content must conform. If the data is directly entered into a system that is outside of the health plan's system, to be transmitted later to the health plan, the transaction must be sent using the full standard (format and content). We have included this clarification in Sec. 162.923 (Requirements for Covered Entities). [[Page 50318]] Employers/Sponsors Not Impacted b. Comment: Several commenters recommended that employers/sponsors who perform EDI should be required to use the standards because they play a critical role in the overall administration of health care. These entities are the major users of the enrollment and disenrollment in a health plan transactions, and are often major payers of health premiums. Response: The administrative simplification provisions of HIPAA do not require noncovered entities to use the standards, but noncovered entities are encouraged to do so in order to achieve the benefits available from such use. For example, employers and sponsors play a key role in the administrative functions of health care, e.g. the enrollment and disenrollment of individuals in health plans. But because the legislation does not specifically require employers / sponsors to use the transaction standards, we are not extending the requirement to them in the regulation. Health plans are, however, free to negotiate trading partner agreements with employers and sponsors that require the use of standard transactions. [[Page 50323]] 1. Comment: One commenter suggested that the X12N (the ASC X12 subcommittee chartered to develop electronic standards specific to the insurance industry) implementation specifications under HIPAA must be flexible to permit businesses to customize their EDI process. It was stated the implementation specifications do not allow flexibility between trading partners. Response: We disagree. Allowing flexibility would result in non- standard implementation of the transactions. The X12N implementation specifications under HIPAA, adopted in this final rule, are all version 4010. If businesses customize implementations of 4010, the health care industry would have hundreds of different implementations of the same transaction. Comments and Responses on the Transaction Standard for Eligibility for a Health Plan[[Page 50340]] Eligibility Response - 270/271 ix. Comment: We received one comment that suggested we clarify that the eligibility response sent by a health plan is not the equivalent of a prior authorization of services, and does not guarantee coverage of a rendered service. Response: We believe that the purpose and scope of the ASC X12N 270/271 is clearly defined in the ASC X12N 270/271 Health Care Eligibility Benefit Inquiry and Response implementation specification. An eligibility response sent by a health plan is not the equivalent of a prior authorization of services and does not guarantee coverage of a rendered service. Furthermore, the function of prior authorization of services is explicitly defined in the ASC X12N 278, Health Care Services Review--Request for Review and Response implementation specification, which is the recommended standard for this transaction. x. Comment: One commenter suggested that we clarify the requirements to clearly state that while health plans must implement the ASC X12N 270/271 Eligibility Request/Response, they are not required to respond to all requests sent in the ASC X12N 270. Response: We do not agree. A health plan may not reject a standard transaction because it contains information the health plan does not want. This principle applies to the data elements of all transactions in this rule. Health plans must accept a complete ASC X12N 270 and must respond with all applicable responses that are included in the ASC X12N 271. If health plans can arbitrarily respond or not respond to a standard transaction, then the cost saving effect of using the standards will be blunted by a requirement to negotiate aspects of every transaction with every trading partner. xi. Comment: One commenter said that the ASC X12N 270 transaction requires an ASC X12N 271 response to every record, a one-to-one correspondence. The commenter recommended that the one-to-one response be negotiable between the parties that have a contract to exchange information. Response: A one-to-one correspondence to every record is not required. The ASC X12N 270/271 transaction sets were built so that trading partners could use them in real time or batch mode. We agree that negotiation must occur between trading partners (including clearinghouses/switches) regarding the processing limits (i.e., file size, transmission speeds). g. Transaction Standard for Health Plan Premium Payments. In subpart Q, we proposed the ASC X12N 820--Payment Order/Remittance Advice, Version 4010, Washington Publishing Company, (004010X061) as the standard for health plan premium payments.
Comments and Responses on the Transaction Standard for Health Plan Premium Paymentsiv. Comment: Several commenters said that health plans must be free to accept premium payment data in non-standard formats if that option is chosen by a sponsor. In the preamble to the proposed rule, we stated that health plans must ``accept only the standard specified in Sec. 142.1704.'' (63 FR 25295). Commenters suggested that we not include the word ``only'' in the final rule under the health plan requirements. One commenter suggested that we add language in the rule to state: ``However, health plans may require trading partners to use the standard transaction to conduct business.'' Response: We recognize that entities such as sponsors perform EDI with health plans. The proposed rule stated that health plans are required to use only the standard specified in Sec. 142.1702 for electronic health plan premium payments. Sponsors, one of the primary trading partners with whom the health plans exchange health plan premium payment transactions, were proposed to be excluded. Our reference to the requirements for health plans to accept ``only'' the standard specified was intended to preclude health plans from using data in formats other than standard when conducting transactions that are standard transactions. It was not intended to impose requirements on sponsors. Thus, sponsors remain free to send health plan premium payments in nonstandard format if they choose, and health plans are free to accept the data. We expect that sponsors may voluntarily accommodate a health plan's request to use the ASC X12N 820 by directly submitting the transaction in standard format, or by using a health care clearinghouse to translate non-standard data into the standard format. vi. Comment: Several commenters, including the Department of the Treasury, said that the ASC X12N 820 should not be named as a payment order format for use by Treasury-disbursed Federal agencies since they use Federal implementation conventions and Treasury payment formats that may not be compatible with this standard. All Federal payment formats disbursed by these agencies must go through a commercial financial institution prior to delivery of the payment to the recipient. It was stated a distinction needs to be made in regard to the function of the [[Page 50341]] X12N 820. It is used as a ``payment order'' and a ``remittance advice'' delivery. Response: The ASC X12N 820 is an appropriate format for use by all covered entities and is designed to provide the information needed to process a payment of health insurance premiums from an employer or other sponsor of health insurance to a health plan. If a Federal agency is a covered entity and conducts a transaction adopted under this part with another covered entity electronically, the transaction must be conducted as a standard transaction. If the other entity is not a covered entity, of course, the standard transaction need not be used unless the Federal agency is a health plan and the other entity requests the standard transaction. This standard is quite flexible with respect to transfers of funds. The implementation specification for the ASC X12N 820 contains two parts, a mechanism for the transfer of dollars and one for the transfer of information about the payment. It allows these two parts to be transmitted separately. Consistent with the implementation guide, actual payment may be sent in a number of different, equally acceptable ways, including check and several varieties of electronic funds transfer, as long as the detailed information describing the payment is transmitted to the health plan using the ASC X12N 820 directly or indirectly (through a health care clearinghouse or financial institution). When the transfer of funds is part of paying a health care premium the ACH transaction may continue to be used as a valid part of an ASC X12N 820 transaction where the other part of the transaction is sent to the health plan. Although these standard transactions allow transmission of one or both parts through a financial institution, they do not require both parts to be sent to the financial institution, and the financial institution is not required by this regulation to accept or forward such transactions. The Department of the Treasury has confirmed that this standard does not conflict with their requirements for disbursements. vii. Comment: One commenter asked whether a sponsor must use the 4010 version of the ASC X12N 820. Response: Section 1172 of the Act identifies the entities required to comply with the HIPAA standards. Sponsors are not included in this provision. If sponsors choose to use the ASC X12N 820, we strongly encourage that they use the version of the standard named in this rule. h. Transaction Standard for Referral Certification and Authorization. In subpart R, redesignated as subpart M, we proposed the ASC X12N 278--Health Care Services Review--Request for Review and Response, Version 4010, Washington Publishing Company, (004010X094) as the standard for referral certifications and authorizations. Comments and Responses on the Transaction Standard for Referral Certification and AuthorizationThe majority of commenters expressed support for the selected standard. Certification and Authorization i. Of those comments we referred to ASC X12N, the work groups determined that 146 comments identified areas where the implementation specification could be improved, and the appropriate changes were made. ii. Thirteen comments identified business needs that ASC X12N judged could already be met within the current standard implementation specification. Detailed information on how the current implementation specifications can be used to meet these business needs has been provided by ASC X12N at the Internet site in Sec. 162.920. iii. Three comments alleged technical or editorial errors in the standard implementation specification. A technical review of these issues was conducted by work groups within ASC X12N. The work groups determined that the 3 comments identified areas where the implementation specifications were in fact correct and that no changes were needed. Changes to the implementation specification were not required. iv. There were another 76 comments which identified business needs that ASC X12N judged could not be met directly within the current standard implementation specification. The implementation specifications could not be changed prior to the issuance of the final regulation because the X12 standards development process for modifying standards could not be completed in time. However, a review of the issues by the ASC X12N work groups has identified a means of meeting the business needs within the existing implementation specification as an interim measure. Organizations and individuals who submitted such comments are encouraged to work with the DSMOs to submit a request to modify the national standard. v. Comment: Several commenters requested that we need to make clear that if a state health agency does not authorize referrals it is not required to use the standard. Response: If a state health agency does not conduct referral certification and authorization, then the health plan is not required to support this transaction based solely on the fact that the transaction is one named as a HIPAA transaction. However, we note that most commercially available software packages are designed to support a suite of transactions. We anticipate that vendors will offer suites for all HIPAA transactions, which may encourage health plans to support this specific transaction. vi. Comment: Several commenters recommended that we include the Inquiry and Response and Notification implementations of the ASC X12N 278. Response: The Request for Review and Response is the only implementation proposed under HIPAA for referral certification and authorization. We are not accommodating this request, because at the time of the development of the proposed rule, the standards development process for the ASC X12N Inquiry and Response and Notification implementation specifications was incomplete and not supported by an accredited standard setting organization. The implementation of the HIPAA standards will be a great undertaking and at this time we are limiting the transactions to those identified in the proposed rule. Entities who use Inquiry and Response and Notification implementations may do so using any available format, including the ASC X12N 278 implementations until such time as we may adopt a standard for Inquiry and Response and Notification through regulation. After the implementation specification for these functions is complete and approved by an accredited standard setting organization, we encourage a request to test a proposed revision to the standard be submitted to the Secretary (see Sec. 162.940). [[Page 50345]] Comments and Responses on the Proposed Impact Analysis--Generala. Comment: Several commenters questioned the validity of the projected cost of implementing electronic data interchange standards (EDI) because it was based largely on data compiled in 1992 by WEDI. The WEDI report projected implementation costs ranging between $5.3 billion and $17.3 billion with annual savings projected to be between $8.9 billion and $20.5 billion. It was stated the WEDI report projected the costs as being much higher. One reason the projected cost was inflated by WEDI is because the HIPAA compliance process will be spread out over a longer period of time than is provided for in the statute. The HIPAA standards will require additional data elements, will replace local coding schemes with national ones, and will affect many business process associated with health plans and health care providers. Therefore, the modifications to existing systems will be extensive and time consuming, with a high degree of uncertainty regarding the projected benefits. The estimates in this section need to be recalculated taking into account more current figures and trends. Response: The cost estimates used in the proposal cost analysis were based largely on data compiled in 1992 but updated to reflect 1998 costs. The report developed by WEDI projects implementation costs ranging from between $5.3 billion and $17.3 billion with annual savings projected to be between $8.9 billion and $20.5 billion. The Department has obtained more current data and information on costs and market trends, and these data are used in the final cost analysis. It is an accurate statement that the HIPAA standards would create new data elements and would remove local coding schemes in favor of national ones. However, some of the factors that would cause health care providers or health plans to incur a substantial financial burden have been spread out over a longer period of time than was suggested by the commenters. The removal of local coding schemes, for example, will not occur immediately, but will occur over a two year time period following the publication of this final rule. A longer time frame will spread out the implementation costs and therefore will not pose as great a burden as previously expected. With regard to Medicaid specifically, some of the unusual service type codes (i.e. taxi services) will also not have to be removed. b. Comment: Several commenters stated that we greatly underestimated the implementation costs. They claimed that the costs associated with translator devices were not included, and upgrades to EDI systems could continue annually and could involve multiple standards which would not be classified as short-term costs. Furthermore, it was stated that all methods of complying with the HIPAA requirements will have costs associated with them that will not be limited to the first three years of implementation. There will be ongoing costs for training and support that will surpass the estimates given by the impact analysis. In addition, third-party administrators opting for in-house programming have already spent large sums of money to prepare for administrative simplification before compliance is mandated. Some commenters fear that health care clearinghouses will potentially charge high yearly fees and high transaction fees due to an increase in demand. They believe high fees will not be eliminated after the three year time frame has ended and the costs could be passed on to health care providers, health plans and purchasers. Finally, while the proposed rule proposed the elimination of data entry clerks and mailing costs, it did not account for software engineers that will be needed to redesign or reprogram a system. The personnel costs associated with these individuals could be 4-6 times as high as a data entry clerk. Response: These comments raise several important issues. The first one deals specifically with the cost of a translator. The cost of translators, in fact, were included in estimating upgrade costs. In addition, some of these EDI standards would have occurred without the passage of HIPAA due to the demands of the health care industry. Many of the other costs mentioned, such as costs for training and support, would have also occurred whether or not standards were mandated, so we do not believe them relevant to the impact of this rule. The financial data given in the Impact Analysis was based on the most reasonable estimates available and took into account the implementation costs, including software engineering, that will be incurred during the first three years. This justifies the categorization of expenditures associated with the HIPAA standards as one-time or short-term. All of the costs associated with a system upgrade have been included in the implementation time-frame noted in the Proposed Rule. Finally, redesigning or reprogramming work that will be done in accordance with this regulation has been included in the implementation costs. While it is an aggregate amount, it provides the most realistic estimate based on available data. Health care clearinghouse charges can be expected to decrease due to market forces. [[Page 50347]] g. Comment: One commenter stated that the impact analysis did not specifically mention who would provide the translator software that would be integrated into an existing system. If small physician practices are using older ``legacy'' type systems, they may not be able to create an interface with a translator that would accept the standard data. A complete system overhaul would be extremely costly to these specific health care provider groups. Response: The Impact Analysis did not specifically mention who would provide the translator software that would be integrated into an existing system because we expect such software to be readily available on the open market. However, it did include estimates from the WEDI reports which were updated to reflect the current costs for small practices to convert their systems in order to use the standard formats. These estimates indicate an overall cost savings for physician practices. The most efficient way for small physician practices to circumvent high implementation costs may be to use a health care clearinghouse. If health care providers cannot create an interface with a translator, they have the option to use a health care clearinghouse. This would avoid the need to overhaul older type systems in order to accommodate the HIPAA standards. Furthermore, the costs for vendors and health care clearinghouses should be reduced due to the use of national EDI standards as well as the NPI. The overall homogeneity of these EDI formats should significantly reduce the high costs associated with the processing of different electronic claims formats. In turn, this would allow vendors and health care clearinghouses to provide services at lower costs, which should enable savings to be passed on to health care providers. In this regard, we also anticipate that market competition should tend to keep costs down. [[Page 50347]] 3. Benefits of Increased EDI for Health Care TransactionsComment: One commenter stated that the impact analysis should factor in the cost of dismantling existing electronic interchange systems. It was also stated that health care providers may move from electronic to paper submission if they feel that the costs and burdens associated with the new standards are too great. Response: There is no need to dismantle entire systems. Rather, provisions need to be made to accommodate the new standards. We believe that the benefits health care providers are currently realizing through EDI will continue and will increase with the adoption of these standards. Unlike current practices which compel health care providers to use multiple formats when sending and receiving, health care providers will only need to use one format for each HIPAA standard when they send and receive. If health care providers are unwilling to upgrade their EDI system, they have the option of using a health care clearinghouse, or reverting to paper claim submission. 4. The Role of Standards in Increasing the Efficiency of EDIComment: One commenter stated that there are many factors affecting a health care provider's decision as to when to convert to EDI. Thus, the idea that a health care provider may decide to delay conversion to EDI until it is ``cost-effective'' is made moot by other forces [[Page 50348]] affecting a health care provider's decision making process. Response: Health care providers must use the standards if they wish to do business electronically. While other factors will impact their decision to do business electronically, we believe that the HIPAA standards will produce cost savings and efficiencies in EDI which should help convince health care providers of the benefits of EDI.
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