October 2003 Bulletin

HIPAA’s compliance deadlines eased

Take advantage of reprieve to become compliant

By Steven E. Fisher, MBA

By now, most AAOS members are somewhat familiar with the Administrative Simplification provisions of the Health Insurance Portability and Accountability Act (HIPAA). “Covered Entities” (CEs) were required to implement the Act’s Privacy rules as of April 14, 2003. The official deadline for compliance with the next two sets of HIPAA regulations, Tranactions and Code Sets (TCS), is Oct. 16, 2003.

The TCS regulations create national standards for the electronic transmission of certain types of health care-related information—including insurance claims, payment and remittance advice, coordination of benefits information, claim status requests and responses, and eligibility inquiries.

Congress’s primary rationale for mandating the establishment of these standards was to encourage covered entities to start exchanging information electronically, which will ultimately save them money by reducing their paperwork and streamlining their day-to-day operations. Obviously, the largest CE is Medicare itself, which has a great interest in reducing costs or at least limiting the amount of cost escalation.

As HIPAA was originally written, doctors who did not transmit or receive health care information electronically were not CEs, and thus were not obligated to adhere to any of the Act’s provisions. Realizing, however, that this would not serve to promote electronic data interchange, Congress amended HIPAA in 2001 by passing the Administrative Simplification Compliance Act (ASCA). ASCA mandated that only those offices employing fewer than ten persons could continue to file their Medicare claims on paper after October 15. The result is that most doctors—including the vast majority of orthopaedists—will become CEs as of that date—even if they aren’t now.

Physicians have found it very difficult to achieve compliance with the new TCS regulations for a variety of reasons. In the first place, the regulations are complex and extremely technical. Furthermore, most doctors are dependent on their software vendors to make the required upgrades. As a result, a high percentage of medical offices, including orthopaedic practices, have not yet even initiated testing with payers, an activity they were supposed to start last April.

Many health care organizations, including AAOS, predicted a train wreck after Oct. 15—with patients being unable to obtain timely access to health care and physicians experiencing serious cash flow disruptions. To prevent this from occurring, AAOS staff worked closely with representatives from 15 other medical specialty societies, as well as the American Medical Association and the American Hospital Association, to convince CMS to take preventative steps.

Initially, CMS was not receptive to this idea. Finally, on Sept. 23, the Agency announced that it would deploy a contingency plan, whereby Medicare intermediaries would accept “legacy claims” (including HCFA/CMS 1500 claims) in addition to TCS-compliant claims for an unspecified period of time after October 15.

Soon after CMS’s announcement, Blue Cross Blue Shield (BC/BS) issued a press release announcing that the Association would be deploying a similar contingency plan for its 42 constituent companies. On that same day, Health Insurance Association of America (HIAA) and American Association of Health Plans (AAHP)—probably acting in concert—announced their own plans. The latter two organizations avoided formally committing their plans to paying legacy claims after Oct. 15. Even so, the atmosphere now seems much more positive than it was before. It is likely that most private insurers will continue payments.

The announcements made by CMS, BC/BS, HIAA and the AAHP should allay AAOS members’ concerns about the previously envisioned major cash flow disruption. However, there is no question that “spot” cash-flow disruptions will occur under some certain circumstances and with some payers, particularly private insurers. Members should recognize this and take action to be certain they have the capability to borrow funds via a line of credit—should this become necessary on a short-term basis.

Equally important, AAOS members should recognize that the “reprieve” is only temporary. At some point in the future, most—if not all—payers are likely to stop accepting legacy claims (either on paper or submitted electronically) and start mandating TCS-compliant claims. Additionally, private payers may not follow Medicare’s example and exempt small practices. As of this writing, the only payer that is mandating electronic submission is not making such an exception.

Finally, CMS’s contingency plan only relates to the format for submitting electronic claims. It does not change who is and who is not obligated to start submitting claims electronically as of Oct. 16. In a “roundtable discussion” held on Sept. 25, 2003—with more than 2,500 people participating—CMS representatives stated they did not anticipate that enforcement of this aspect of the regulations would be retroactive. However, they did imply that if the Agency concludes that an office should be submitting electronically and it does not do so, claims would cease to be paid prospectively until the situation is corrected.

Every orthopaedic practice must chart its own approach toward achieving compliance with the TCS standards. Tasks that must be completed depend on where you are located and who your Medicare intermediary is, the number and terms of your payer contracts, the capabilities of your practice management system, and the decisions your vendor makes. It is in your best interest to use the current reprieve to become compliant with the regulations.
Additional information is available on the AAOS Practice Management Center’s Compliance section. Go to Practice Management (the site is password protected); then select “Compliance” in the Table of Contents and scroll down to TCS. Additional information on other HIPAA regulations is also included in the Compliance section.

Steven E. Fisher, MBA, is the manager of practice management affairs, AAOS department of socioeconomic and state society affairs. He can be reached at (847) 384-4331 or sfisher@aaos.org

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