December 2000 Bulletin

HHS tells electronic transaction formats

Regulations aimed at reducing volume of paperwork in health care system

By Laura Nuechterlein

The Department of Health and Human Services (HHS) has established standard formats for electronic health care transactions, including claims submission, health plan eligibility information, referral certification and authorization, and health claim status information. HHS hopes this move will reduce the volume of paperwork and save the U.S. health care system almost $30 billion over the next decade.

The new standards were published in the Aug. 17, 2000 Federal Register and will become effective in October 2002 for health care providers, health plans and data clearinghouses. Both private sector and government health plans are covered under the rules. The regulations establish standard data content and formats for submitting electronic claims and other transactions.

Currently, private insurers use hundreds of different electronic forms, and the regulations are intended to level the playing field. All health plans will be required to accept these standard formats. Physicians will still be allowed to submit paper forms if they so desire. A separate standard will be published in early 2001 for electronic health claims attachments. Until that standard is adopted, health plans may continue to require claims attachments to be submitted on paper.

These electronic transaction standards are required by the administrative simplification sections of the Health Insurance Portability and Accountability Act (HIPAA) of 1996. HHS is also drafting regulations that deal with other HIPAA requirements, such as developing national identifiers for providers, health plans, and employers; establishing security safeguards for electronic health information; and creating privacy standards for patient medical records.

The regulations establish two sets of standards, one for electronic transactions and one for code sets. The transaction standards apply only to electronic data interchange—when data are transmitted electronically between providers and health plans. Most of the standards chosen are from the Accredited Standards Committee (ASC) of the American National Standards Institute (ANSI), a private sector organization. Specifically, Version 4010 of the ANSI ASC X12N standards were chosen for all transactions except retail pharmacy transactions, which will use the National Council for Prescription Drug Programs Telecommunications Standard Format Version 5.1 or Batch Standard Version 1.0.

The law does not require physicians to purchase computers or submit claims electronically. However, the government hopes that the publication of national standards will encourage more physicians to use electronic transactions, improving efficiency and reducing administrative costs associated with paper claims.

The regulations estimate the average cost of compliance with the new standards at approximately $4,000 (including necessary software upgrades) for a currently automated practice with three or more physicians. Alternately, both physicians and health plans may contract with clearinghouses to convert paper or other nonstandard formats into the new standard transactions. Physicians who use clearinghouses or billing agencies should contact them with any questions regarding compliance with the regulations.

The regulations also establish standard medical data code sets for reporting diagnoses, procedures, drugs and other supplies and equipment. These code set standards are already familiar to physicians and other health care providers. The American Medical Association Current Procedural Terminology (CPT) was named the national standard for reporting physician services; the ninth edition of the International
Clas sification of Diseases (ICD-9-CM) for reporting diseases and injuries; the National Drug Codes (NDC) for reporting drugs and biologics; and the HCFA Common Procedure Coding System (HCPCS) for reporting medical supplies, orthotics and prosthetics, and durable medical equipment.

All HCPCS local codes will be eliminated. CPT two-digit modifiers will also become part of the standards, which the AMA welcomed as a victory for physicians. Many private insurers currently do not recognize modifiers, resulting in inappropriate reimbursement for many procedures.

The HHS has cautioned that the regulations were published under the assumption that the regulations on privacy standards will be in place at the same time the electronic transaction standards take effect, in late 2002. However, if the privacy protections are not yet in place, the agency may consider suspending or delaying implementation of the transaction standard rules.

Laura Nuechterlein is senior policy analyst in the AAOS health policy department.

The pros and cons of in-house electronic medical record systems and Application Service Providers (ASP) are discussed in the Computer Link column "Weigh pros, cons of ASPs, in-house EMRs".


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