Can HIPAA survive transactions?
By Edward F. Shay
On February 20, HHS published final amendments to the transactions and code sets regulations. The amendments are believed to be essential to conducting electronic transactions by October 16 and were significantly delayed. That delay may cause a huge bulge in the pipeline of events that must occur between their final adoption and October 16.
For example, software vendors must make another round of upgrades and changes. Those who have tested their software for compliance already may have to re-test. Those who have not tested yet will need to determine that what they are testing will include the changes adopted by the final amendments. Some observers of the entire transactions side of HIPAA believe that the quantum of change and level of detail that must be mastered by October 16 has created a perfect storm of events that will inundate the financial and administrative side of the health care industry during the last quarter of 2003. If ever the devil was in the details, it is in the timing and nature of the changes in the final amendments to the transactions regulations.
Changes
The final amendments addressed two proposed rules published earlier. The first rule, referred to in the preamble by a rule-tracking designation as CMS-0003-P, dealt with four changes relating to the use of retail drug claims and drug codes, as follows:
1. Adopting a more recent version of the transactions for retail pharmacy claims, eligibility etc., known as the National Council for Prescription Drug
Programs (NCPDP) Batch Standard Batch Implementation Guide Version 1.1
2. Replacing an ASC X12N series of standards for other retail pharmacy transactions with the NCPDP Batch Standard Batch Implementation Guide Version 1.1 and the NCPDP Telecommunication Guide Version 5.1
3. Replacing the NCPDP Batch Standard Batch Implementation Guide and the NCPDP Telecommunication Guide with the ASC X12N 835 claims payment remittance advice format for retail pharmacy
4. Repealing the directive that the National Drug Codes be used for reporting drugs and biologicals on all nonretail pharmacy transactions
Implementation guides
In a companion rule, styled CMS-005-P, HHS adopted a wide array of changes to the implementation guides for the standard transaction other than in the retail pharmacy sector. These changes were adopted by ASC X12N and published in October 2002 as addenda to the then-effective implementation guides. HHS summarized the proposed changes as follows:
1. Twenty percent of the changes involve changing the usage of data elements from required to situational—meaning the elements must be used when certain circumstances apply, but not always
2. Twenty percent of the changes involved removing unneeded data elements
3. Twenty percent of the changes involved allowing certain information to be reported via external codes (e.g., ZIP codes) rather than via data elements that need to go through the Designated Standard Maintenance Organization and rulemaking process to adopt updates
4. Forty percent of the changes involved adding functionality in terms of data elements, code sets and loops that would enable users to better perform business functions with the transmitted data
Based upon the comments received on CMS-005-P, HHS adopted the proposed rule largely unchanged in the final rule.
The changes that were made, while highly technical in nature, were all deemed essential to implementation of the final transactions standards. The following examples from the comments illustrate how small and detailed changes can have significant impact on the smooth implementation of the transactions:
1. The addenda would have required the use of Healthcare Common Procedure Coding system (HCPCS) codes for all outpatient services, even where no such code exists. There are no HCPCS codes, for example, for pharmacy drugs, medical supplies, or observation. Claims involving these items and services would be rejected for the lack of a HCPCS code unless the requirement is modified.
2. The addenda proposed reporting on an institutional claim by taxonomy codes of the specialty of a health care provider that provided medical services. Hospitals argued that they would have to report many providers who participate in care, and that massive changes would be required in existing systems to track and report this information.
3. A recommended change in the addenda that required reporting anesthesia services only in minutes and prohibited reporting in units of service was rejected when anesthesiologists argued successfully that many health plans pay only on the basis of units of service.
Sensing the impending chaos and significant lack of preparedness on the transactions side of the industry, HHS addressed the varying compliance dates for covered entities that did not file for extensions under the Administrative Simplification Compliance Act, those that did request extensions and those small health plans that did not need them anyway.
For some, but not all of these entities, the rules would have required that they conduct transactions on and after October 16, 2002, in accordance with the then-in-effect standards and implementation guides that the HHS secretary was amending to adopt essential changes to make them workable.
Acknowledging the confusion surrounding the dates and the role that HHS’ own delays had played in slowing progress toward implementation, Secretary Tommy Thompson stated:
“We intend to take into account the numerous obstacles to compliance that exist and will work with covered entities to bring them into compliance during this interim period, through, among other things, corrective action plans.”
While the secretary’s flexibility on enforcement is admirable during the transaction year, the harder problems begin on October 16, 2003.
Many observers do not believe that the industry is ready to begin compliant transactions that satisfy the detail and demands of the recently amended implementation guides. In the past, HHS has stated that if a plan conducts a noncompliant transaction with a submitting provider, that both covered entities will be out of compliance. Many observers believe that rejected claims and other transactions will not be processed electronically, but will instead be dropped to paper, and then printed and processed manually. If this scenario materializes, the paradoxical effect of HIPAA transactions will not be efficiency, but a huge step backward to paper claims.
Editor’s note: Edward F. Shay is a partner in the national health law practice at the Philadelphia-based law firm of Post & Schell, PC. The firm’s national practice provides complex litigation, contract, medical staff, fraud and abuse, managed care, health information management, regulatory/patient care, corporate, and research-related services to a broad spectrum of institutional providers and payers. Shay may be reached at .