New HIPAA Standards Offer Payers and Providers Opportunity to Reach Electronic Transaction Goals

Since 2003, many health care entities have been using the ASC X12 Version 4010/4010A1 and NCPDP Version 5.1 electronic transaction standards, in compliance with the Health Insurance Portability and Accountability Act of 1996 (HIPAA). But others – including many payers – either are not using all the standards or have not fully embraced their intent. The result has been a proliferation of multiple proprietary formats and additional costs to support manual processes for electronic billing and reimbursement systems.

However, the federal government has now issued a new iteration of the standards, Version 5010 and Version D.0. Consistent implementation of these revised standards by the industry would help eliminate inefficient methodologies and lead to significant cost savings: between $11.6 billion and $33.8 billion, according to one estimate.¹

In order to realize these gains, payers will need to adopt the standards in a uniform manner and leave their own interpretations at the door, according to Larry Watkins, vice president, Standards and Regulatory Affairs, Ingenix. “Payers need to accept the standards as written in order to encourage more widespread and less-expensive adoption,” he said. “That may sound obvious, but if you implement a standard in a non-standard manner, what you end up with is a mess.”

Current standards are ambiguous

The new 5010 and D.0 standards proposed by the Centers for Medicare & Medicaid Services (CMS) on Aug. 21, 2008, are designed to “promote the efficiencies needed in electronic transactions,” CMS stated. They will replace the current standards, which, while mandated by HIPAA, are “widely recognized as outdated and lacking certain functionality needed by the…industry."²

Problems with Version 4010A1 standards have stemmed from both unique payer interpretations of the requirements and inconsistent provider adoption. “There is so much room for interpretation in the current standards, that providers have to deal with each payer in a different manner,” Watkins explained. “When there is no consistency across payers, then the costs of dealing with each payer go up dramatically.”

According to Kepa Zubeldia, senior vice president of Interoperability Technologies for Ingenix, 4010A1 includes three types of data elements: (1) those that are absolutely required, (2) those that are never used and (3) those that are situationally required. The third type states that if a situation is true, then the data element “should” be present; and if a situation is not true, then the data “should not” be present.

“With different payer interpretations of the situational requirements, we have created a scenario where we have a thousand different dialects within one standard. This defeats the purpose and hamstrings the entire industry,” Zubeldia said.

CMS expects that, in addition to other improvements, “adoption [of Version 5010] would reduce ambiguities.”³ “5010 better defines the situational requirements by stating that if the situation is true, then the data element ‘must’ – not ‘should’ – be present,” Zubeldia clarified.

Full implementation, immediate action is needed for success

Payers that embrace the 5010 standards as written will offer a higher level of value to providers, and will create an incentive for providers to increase their electronic transactions. “Electronic transactions – when they go smoothly – are more efficient than paper,” Watkins noted. “But clearly, with 50 percent of health care payments still issued on paper checks, the way we’ve approached electronic transactions in the past has missed the mark.”

The incentive for payers to fully leverage the new standards is significant, with the average payer spending from 12 percent to 22 percent of premium dollars on administrative expenses, many of which are the result of manual processes.⁴ Zubeldia suggested that with consistent application, payers “will find they have more tools available to them, such as off-the-shelf software, to realize efficiencies and help control costs.”

Further, after the implementation date – currently proposed for April 1, 2010 – Medicare, Medicaid and other health plans will not accept electronic transactions that are not in the new 5010 format. Transmission delays may affect cash flow and relationships with trading partners and patients, and could result in penalties assessed by CMS. Accordingly, “payers can lead the way and realize greater benefits from electronic transactions, but they need to get started immediately,” said Watkins.

Some commenters on the proposed rule, such as the Coalition for Affordable Quality Healthcare’s Committee on Operating Rules for Information Exchange (CAQH CORE), and WEDI (Workgroup for Electronic Data Interchange) have asserted that although they generally support the 5010 proposed rule, its implementation date is too soon. Even if requests to push forward the April 1, 2010, date are granted, Zubeldia advises stakeholders to take the first steps toward implementation as soon as possible.

“The date may change, but the standards definitions won’t,” Zubeldia said. “Wise use of the window of time between now and the eventual implementation date will offer a competitive advantage.”

Watkins advised using the time to assess what changes are needed, as well as the impact of those changes on the organization. “Careful assessment is significant because it’s been so long since the first version of the standards, and there hasn’t been an iterative approach to the change,” he said. “Payers need to determine where the greatest cost impacts will be, and get started on a strategy for implementation.”

Watkins predicted that one-time costs will be associated with the following operations:

• Analysis of business flow changes
• Software procurement or customized development
• Integration of new software
• Staff training
• Collection of new data
• Testing
• Transition processes

Seeking help to navigate the landscape

Ingenix is helping the industry transition to 5010 in several ways. First, Ingenix Consulting can help payers, providers and other stakeholders with 5010 business readiness assessments, program implementation, vendor management, reporting gap changes from 4010 to 5010, documentation, education and training.

In addition to these areas of expertise, Ingenix is an active participant in such industry standards organizations as WEDI, X12 and HL7. This in-depth working knowledge is reflected in a comprehensive suite of electronic data interchange (EDI) solutions and connectivity services, ranging from 5010 pre-production transaction testing and certification via Claredi Classic, to Faciledi 5010 continuous automated production validation routing and reporting systems, to the Ingenix Transaction Exchange national clearinghouse, which can provide a bridge to 5010 ahead of the deadline. To help reduce administrative costs even further, payers can implement direct connections with trading partners using Connectivity Director, and providers can achieve the same capabilities with TransactionManager™.

To support all health care entities – payers, providers, software vendors and clearinghouses – with the implementation of the new standards, the company created a dedicated resource Web site: www.5010prepared.com.

“We have the know-how to smooth out transition issues before they become problems,” Watkins said. “Ingenix sees the 5010 implementation as a second chance for the health care industry to more fully realize the efficiencies and cost savings inherent in electronic transactions.”

¹ “Version 5010 Regulatory Impact Analysis – Supplement,” Gartner Inc., prepared for under a contract to the Centers for Medicare & Medicaid Services in support of the Regulatory Impact Analysis in the proposed rule: 45 CFR Part 162 (September 2008). The benefits are realized from year three to year 10 and vary by segment.
² “HHS Proposes Modifications to HIPAA Standards for Electronic Transactions (CMS-0009-P)” Fact Sheet (Aug. 21, 2008).
³ Id.
⁴ The Value of Healthcare Information Exchange and Interoperability. Center for Information Technology Leadership (2005).

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