[Federal Register Volume 77, Number 74 (Tuesday, April 17, 2012)]
[Proposed Rules]
[Pages 22949-23005]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-8718]
[[Page 22949]]
Vol. 77
Tuesday,
No. 74
April 17, 2012
Part III
Department of Health and Human Services
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45 CFR Part 162
Administrative Simplification: Adoption of a Standard for a Unique
Health Plan Identifier; Addition to the National Provider Identifier
Requirements; and a Change to the Compliance Date for ICD-10-CM and
ICD-10-PCS Medical Data Code Sets; Proposed Rule
Federal Register / Vol. 77 , No. 74 / Tuesday, April 17, 2012 /
Proposed Rules
[[Page 22950]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Office of the Secretary
45 CFR Part 162
[CMS-0040-P]
RIN 0938-AQ13
Administrative Simplification: Adoption of a Standard for a
Unique Health Plan Identifier; Addition to the National Provider
Identifier Requirements; and a Change to the Compliance Date for ICD-
10-CM and ICD-10-PCS Medical Data Code Sets
AGENCY: Office of the Secretary, HHS.
ACTION: Proposed rule.
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SUMMARY: This proposed rule would implement section 1104 of the Patient
Protection and Affordable Care Act (hereinafter referred to as the
Affordable Care Act) by establishing new requirements for
administrative transactions that would improve the utility of the
existing Health Insurance Portability and Accountability Act of 1996
(HIPAA) transactions and reduce administrative burden and costs. It
proposes the adoption of the standard for a national unique health plan
identifier (HPID) and requirements or provisions for the implementation
of the HPID. This rule also proposes the adoption of a data element
that will serve as an other entity identifier (OEID), an identifier for
entities that are not health plans, health care providers, or
``individuals,'' that need to be identified in standard transactions.
This proposed rule would also specify the circumstances under which an
organization covered health care provider must require certain
noncovered individual health care providers who are prescribers to
obtain and disclose an NPI. Finally, this rule proposes to change the
compliance date for the International Classification of Diseases, 10th
Revision, Clinical Modification (ICD-10-CM) for diagnosis coding,
including the Official ICD-10-CM Guidelines for Coding and Reporting,
and the International Classification of Diseases, 10th Revision,
Procedure Coding System (ICD-10-PCS) for inpatient hospital procedure
coding, including the Official ICD-10-PCS Guidelines for Coding and
Reporting, from October 1, 2013 to October 1, 2014.
DATES: Comment Date: To be assured consideration, comments must be
received at one of the addresses provided, no later than 5 p.m. on May
17, 2012.
ADDRESSES: In commenting, please refer to file code CMS-0040-P. Because
of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four ways (please choose only one
of the ways listed):
1. Electronically. You may submit electronic comments on this
regulation to http://www.regulations.gov. Follow the ``Submit a
comment'' instructions.
2. By regular mail. You may mail written comments to the following
address ONLY:
Centers for Medicare & Medicaid Services, Department of Health and
Human Services, Attention: CMS-0040-P, P.O. Box 8013, Baltimore, MD
21244-8013.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments to
the following address ONLY:
Centers for Medicare & Medicaid Services, Department of Health and
Human Services, Attention: CMS-0040-P, Mail Stop C4-26-05, 7500
Security Boulevard, Baltimore, MD 21244-1850.
4. By hand or courier. Alternatively, you may deliver (by hand or
courier) your written comments ONLY to the following addresses prior to
the close of the comment period:
a. For delivery in Washington, DC--
Centers for Medicare & Medicaid Services, Department of Health and
Human Services, Room 445-G, Hubert H. Humphrey Building, 200
Independence Avenue SW., Washington, DC 20201.
(Because access to the interior of the Hubert H. Humphrey Building
is not readily available to persons without Federal government
identification, commenters are encouraged to leave their comments in
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing
by stamping in and retaining an extra copy of the comments being
filed.)
b. For delivery in Baltimore, MD--
Centers for Medicare & Medicaid Services, Department of Health and
Human Services, 7500 Security Boulevard, Baltimore, MD 21244-1850.
If you intend to deliver your comments to the Baltimore address,
call telephone number (410) 786-1066 in advance to schedule your
arrival with one of our staff members.
Comments erroneously mailed to the addresses indicated as
appropriate for hand or courier delivery may be delayed and received
after the comment period.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT: Kari Gaare (410) 786-8612, Matthew
Albright (410) 786-2546, and Denise Buenning (410) 786-6711.
SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following Web
site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to
view public comments.
Comments received timely will also be available for public
inspection as they are received, generally beginning approximately 3
weeks after publication of a document, at the headquarters of the
Centers for Medicare & Medicaid Services, 7500 Security Boulevard,
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30
a.m. to 4 p.m. To schedule an appointment to view public comments, call
1-800-743-3951.
I. Executive Summary and Background
A. Executive Summary
1. Purpose of the Regulatory Action
a. Need for the Regulatory Action
This rule proposes the adoption of a standard unique health plan
identifier (HPID) and the adoption of a data element that will serve as
an other entity identifier (OEID). This rule also proposes an addition
to the National Provider Identifier (NPI) requirements. Finally, this
rule proposes to change the compliance date for the ICD-10-CM and ICD-
10-PCS medical data code sets (hereinafter ``code sets'') from October
1, 2013 to October 1, 2014.
(1) HPID
Currently, health plans and other entities that perform health plan
functions, such as third party administrators and clearinghouses, are
identified in Health Insurance Portability and Affordability Act of
1996 (HIPAA) standard transactions with multiple identifiers that
differ in length and format. Covered health care providers are
frustrated by various problems associated with the lack of a
[[Page 22951]]
standard identifier, such as: improper routing of transactions;
rejected transactions due to insurance identification errors;
difficulty in determining patient eligibility; and challenges resulting
from errors in identifying the correct health plan during claims
processing.
The adoption of the HPID and the OEID will increase standardization
within HIPAA standard transactions and provide a platform for other
regulatory and industry initiatives. Their adoption will allow for a
higher level of automation for health care provider offices,
particularly for provider processing of billing and insurance related
tasks, eligibility responses from the health plans, and remittance
advice that describes health care claim payments.
(2) NPI
In January 2004, the U.S. Department of Health and Human Services
(HHS) published a final rule establishing the standard for a unique
health identifier for health care providers for use in the health care
system and adopting the National Provider Identifier (NPI) as that
standard. The rule also established the implementation specifications
for obtaining and using the standard unique health identifier for
health care providers. Since that time, pharmacies have encountered
situations where they need to include the NPI of a prescribing health
care provider in a pharmacy claim, but where the prescribing health
care provider has been a noncovered health care provider who did not
have an NPI because he or she was not required to obtain one. This
situation has become particularly problematic in the Medicare Part D
program. The proposed addition to the NPI requirements seeks to address
this issue.
(3) ICD-10-CM and ICD-10-PCS Code Sets.
On January 16, 2009, HHS published a final rule (74 FR 3328) in
which the Secretary of HHS (the Secretary) adopted the ICD-10-CM and
ICD-10-PCS (ICD-10) code sets as the HIPAA standards to replace the
previously adopted International Classification of Diseases, 9th
Revision, Clinical Modification, Volumes 1 and 2, including the
Official ICD-9-CM Guidelines for Coding and Reporting (ICD-9-CM Volumes
1 and 2) and the International Classification of Diseases, 9th
Revision, Clinical Modification, Volume 3, including the Official ICD-
9-CM Guidelines for Coding and Reporting (ICD-9-CM Volume 3) for
diagnosis and procedure codes, respectively. The compliance date set by
the final rule was October 1, 2013.
Since that time, some provider groups have expressed strong concern
about their ability to meet the October 1, 2013 compliance date and the
serious claims payment issues that might then ensue. Some providers'
concerns about being able to meet the ICD-10 compliance date are based,
in part, on difficulties they have had meeting HHS' compliance deadline
for the adopted Associated Standard Committee's (ASC) X12 Version 5010
standards (Version 5010) for electronic health care transactions.
Compliance with Version 5010 and ICD-10 by all covered entities is
essential to a smooth transition to the updated medical data code sets,
as the failure of any one industry segment to achieve compliance would
negatively impact all other industry segments and result in returned
claims and provider payment delays. We believe the change in the
compliance date for ICD-10, as proposed in this rule, would give
providers and other covered entities more time to prepare and fully
test their systems to ensure a smooth and coordinated transition by all
industry segments.
b. Legal Authority for the Regulatory Action
(1) HPID
This proposed rule implements section 1104(c) of the Affordable
Care Act and section 1173(b)(1) of the Social Security Act (the Act)
which require the adoption of a standard unique health plan identifier
(HPID).
(2) NPI
This proposed rule would impose an additional requirement on
covered organization health care providers under the authority of
sections 1173(b)(1) and 1175(b) of the Act. It would also accommodate
the needs of certain types of health care providers in the use of the
covered transactions, as required by section 1173(a)(3) of the Act.
(3) ICD-10-CM and ICD-10-PCS
This proposed rule would set a new compliance date for the ICD-10
code sets, in accordance with section 1175(b)(2) of the Act, under
which the Secretary determines the date by which covered entities must
comply with modified standards and implementation specifications.
2. Summary of the Major Provisions
a. HPID
This rule proposes the adoption of the HPID as the standard for the
unique identifier for health plans and definitions for ``Controlling
Health Plan'' and ``Subhealth Plan.'' The proposed definitions of these
two terms seek to differentiate between health plan entities that would
be required to obtain an HPID, and those that would be eligible, but
not required, to obtain an HPID. This rule also proposes to require all
covered entities to use an HPID whenever a covered entity identifies a
health plan in a covered transaction. Because health plans today have
many different business structures and arrangements that affect how
health plans are identified in standard transactions, these two
proposed definitions also seek to enable health plans to obtain HPIDs
to reflect differing business arrangements so they can be identified
appropriately in standard transactions.
This rule also proposes the adoption of a data element that would
serve as an other entity identifier (OEID). The OEID would serve as an
identifier for entities that are not health plans, health care
providers, or ``individuals'' (as defined in 45 CFR 160.103), but that
need to be identified in standard transactions (including, for example,
third party administrators, transaction vendors, clearinghouses, and
other payers). Under this proposed rule, these other entities would not
be required to obtain an OEID, but they could obtain and use one if
they needed to be identified in covered transactions. Because other
entities are identified in standard transactions in a similar manner as
health plans, we believe that establishing a data element to serve as
an identifier for these entities will increase efficiency by
encouraging the use of a uniform identifier.
The most significant benefit of the HPID and the OEID is that they
will increase standardization within HIPAA standard transactions by
establishing uniform identifiers.
b. NPI
This rule proposes that an organization covered health care
provider require certain noncovered individual health care providers
who are prescribers to: (1) Obtain NPIs and; (2) to the extent the
prescribers write prescriptions while acting within the scope of the
prescribers' relationship with the organization, disclose them to any
entity that needs the NPIs to identify the prescribers in standard
transactions. This addition to the NPI requirements would address the
issue that pharmacies are encountering when the NPI of a prescribing
health care provider needs to be included on a pharmacy claim, but the
prescribing
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health care provider does not have, or has not disclosed an NPI.
c. ICD-10-CM and ICD-10-PCS
This rule proposes that the compliance date for ICD-10-CM and ICD-
10-PCS be changed from October 1, 2013 to October 1, 2014. We believe
this change will give covered entities the additional time needed to
synchronize system and business process preparation and changeover to
the updated medical data code sets.
3. Costs and Benefits
a. HPID
The HPID is expected to yield the most benefit for providers, while
health plans will bear most of the costs. Costs to all commercial and
government health plans together (Medicare, Medicaid programs, IHS,
VHA) are estimated to be $650 million to $1.3 billion. However,
commercial and government health plans are expected to make up those
costs in savings. Further, it is our understanding that the industry
will not find that the HPID is overly burdensome. Many entities have
indicated that they have delayed regular system updates and
maintenance, as well as the issuance or adoption of new health plan
identification cards, to accommodate the adoption of the HPID.
Health care providers can expect savings from two indirect
consequences of HPID implementation: (1) The cost avoidance of
decreased administrative time spent by providers interacting with
health plans; and (2) a material cost savings through automation of
processes for every transaction that moves from manual to electronic
implementation. HPID's anticipated 10-year return on investment for the
entire health care industry is expected to be between $1 to $4.6
billion. (This estimate includes savings resulting from the
foundational effect of the HPID rather than a precise budgetary
prediction.)
b. NPI
The addition to the requirements for the NPI would have little
impact on health care providers and on the health industry at large
because few health care providers do not already have an NPI. In
addition, covered organization health care providers may comply by
various means. For example, a covered organization could use a simple
verbal directive to prescribers whom they employ or contract with to
meet the requirements. Alternately, a covered organization could update
employment or contracting agreements with the prescribers. For these
reasons, we believe the additional NPI requirements do not impose
spending costs on State government or the private sector in any 1-year
of $136 million or more.
c. Change of Compliance Date of ICD-10
According to a recent survey conducted by CMS, up to one quarter of
health care providers believe they will not be ready for the October 1,
2013 compliance date.\1\ While the survey found no significant
differences among practice settings regarding the likelihood of
achieving compliance before the deadline, based on recent industry
feedback we believe that larger health care health plans and providers
generally are more prepared than smaller entities. The uncertainty
about provider readiness is confirmed in another recent readiness
survey in which nearly 50 percent of the 2,140 provider respondents did
not know when they would complete their impact assessment of the ICD-10
transition.\2\
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\1\ ``Version 5010 and ICD-10 Readiness Assessment: Conducted
among health Care providers, payers and Vendors for the Centers for
Medicare & Medicaid Services (CMS), December 2011 (OMB Approval No:
09938-1149). The assessment surveyed 404 providers, 101 payers, and
90 vendors, which represents 0.1% of all physician practices, 3% of
hospitals, and 5% of health plans.
\2\ An impact assessment for ICD-10 is performed by a covered
entity to determine business areas, policies, processes and systems,
and trading partners that will be affected by the transition to ICD-
10. An impact assessment is a tool to aid in planning for
implementation. ``Survey: ICD-10 Brief Progress,'' February 2012,
conducted by the Workgroup for Electronic Data Interchange (WEDI).
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By delaying the compliance date of ICD-10 from October 1, 2013 to
October 1, 2014, we would be allowing more time for covered entities to
prepare for the transition to ICD-10 and to conduct thorough testing.
By allowing more time to prepare, covered entities may be able to avoid
costly obstacles that would otherwise emerge while in production.
Savings would come from the avoidance of costs that would occur as
a consequence of significant numbers of providers being unprepared for
the transition to ICD-10. In the Regulatory Impact Analysis (RIA) of
this proposed rule, we estimate that there would be a cost avoidance of
approximately $3.6 to nearly $8 billion in this regard. This range of
estimates reflects the avoidance of two costly consequences that may
occur should the compliance date remain October 1, 2013: (1) Both
health care providers and health plans may have to process health care
claims manually in order for claims to be paid; and (2) small health
care providers may have to take out loans or apply for lines of credit
in order to continue to provide health care in the face of delayed
payments.
In terms of costs, commercial health plans, medium and large
hospitals, and large physician practices are far along in their ICD-10
implementation planning, and therefore have devoted funds, resources,
and staff to the effort. According to our estimates, a 1-year delay of
the ICD-10 compliance date would add 10 to 30 percent to the total cost
that these entities have already spent or budgeted for the transition--
an additional cost to commercial entities of approximately $1 to $6.4
billion. Medicare and State Medicaid Agencies have also reported
estimates of costs of a change in the compliance date in recent
informal polls. Accordingly, the calculations in the RIA in this
proposed rule demonstrate that a 1-year delay in the compliance date of
ICD-10 would cost the entire health care industry approximately $1
billion to $6.5 billion.
We assume that the costs and cost avoidance calculated in the RIA
will be incurred roughly over a 6- to 12-month period, from October 1,
2013 to October 1, 2014. For simplicity sake, however, both the costs
and the cost avoidance that result from a change in the compliance date
of ICD-10 are calculated over the calendar year, 2014.
We solicit comments on our assumptions and conclusions as described
in the RIA.
B. Introduction
The following discussion presents a partial statutory and
regulatory history related only to the statutory provisions and
regulations that are relevant for purposes of this proposed rule. For
additional statutory background and regulatory history, see the
proposed rule entitled ``Health Insurance Reform; Modifications to the
Health Insurance Portability and Accountability Act (HIPAA) Electronic
Transaction Standards,'' published in the Federal Register on August
22, 2008 (73 FR 49742); ``HIPAA Administrative Simplification:
Modification to Medical Data Code Set Standards To Adopt ICD-10-CM and
ICD-10-PCS: Proposed Rule,'' published in the Federal Register on
August 22, 2008 (73 FR 49796) (hereinafter referred to as the ICD-10
proposed rule); and ``HIPAA Administrative Simplification: Modification
to Medical Data Code Set Standards To Adopt ICD-10-CM and ICD-10-PCS,''
published in the Federal Register on January 16, 2009 (74 FR 3328)
(hereinafter referred to as the ICD-10 final rule).
The Congress addressed the need for a consistent framework for
electronic health care transactions and other administrative
simplification issues through the Health Insurance Portability
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and Accountability Act of 1996 (HIPAA), (Pub. L. 104-191), enacted on
August 21, 1996. HIPAA amended the Act by adding Part C-Administrative
Simplification--to Title XI of the Act requiring the Secretary to adopt
standards for certain electronic transactions to enable health
information to be exchanged more efficiently and to achieve greater
uniformity in the transmission of health information exchange.
In the August 17, 2000 Federal Register (65 FR 50312), we published
a final rule entitled ``Health Insurance Reform: Standards for
Electronic Transactions'' (hereinafter referred to as the Transactions
and Code Sets final rule). That rule implemented some of the HIPAA
Administrative Simplification requirements by adopting standards
developed by standard development organizations (SDOs) for certain
electronic health care transactions and medical code sets to be used in
those transactions. We adopted the Accredited Standards Committee (ASC)
X12 standards Version 4010/4010A1 and the National Council for
Prescription Drug Programs (NCPDP) Telecommunication standard Version
5.1, which is specified at 45 CFR part 162, subparts K through R. All
health plans, health care clearinghouses, and health care providers
that transmit health information in electronic form in connection with
a covered transaction (referred to as covered entities) are required to
comply with these adopted standards.
In the January 16, 2009 Federal Register (74 FR 3296), we published
a final rule entitled, ``Health Insurance Reform; Modifications to the
Health Insurance Portability and Accountability Act (HIPAA) Electronic
Transaction Standards'' (the Modifications final rule), that, among
other things, adopted updated versions of the standards for the
electronic health care transactions for which the Department originally
adopted standards in the Transactions and Code Sets final rule. These
updated standards for electronic health care transactions included ASC
X12 Version 5010 and NCPDP Telecommunication Standard Implementation
Guide, Version D. Release 0 (Version D.0), and equivalent Batch
Standard Implementation Guide, Version 1, Release 2 (Version 1.2). In
the Modifications final rule, the Department also adopted the Medicaid
pharmacy subrogation transaction, a new standard--the Batch Standard
Medicaid Subrogation Implementation Guide, Version 3, Release 0).
Covered entities are required to conduct as standard transactions all
electronic transactions for which the Secretary has adopted a standard.
From March 17, 2009 through December 31, 2011, covered entities were
required to comply either with the ASC X12 Version 4010/4010A1 and
NCPDP Telecommunications standard Version 5.1 standards or the updated
Version 5010 and NCPDP D.0 standards. Effective January 1, 2012,
covered entities were required to comply with Version 5010 and NCPDP
D.0, and (except for small health plans) the Version 3.0 standard for
Medicaid pharmacy subrogation transactions. Small health plans must
comply with Version 3.0 on or after January 1, 2013.
Also on January 16, 2009, we published a final rule entitled
``HIPAA Administrative Simplification: Modification to Medical Data
Code Set Standards to Adopt ICD-10-CM and ICD-10-PCS'' (74 FR 3328). In
the ICD-10 final rule, we adopted the International Classification of
Diseases, 10th Revision, Clinical Modification (ICD-10-CM), including
the Official ICD-10-CM Guidelines for Coding and Reporting, as
maintained and distributed by HHS, for the following conditions: (1)
diseases; (2) injuries; (3) impairments; (4) other health problems and
their manifestations; and (5) causes of injury, disease, impairment, or
other health problems. We also adopted the International Classification
of Diseases, 10th Revision, Procedure Coding System (ICD-10-PCS),
including the Official ICD-10-PCS Guidelines for Coding and Reporting,
as maintained and distributed by HHS, for the following procedures or
other actions taken for diseases, injuries, and impairments of hospital
inpatients reported by hospitals: (1) prevention; (2) diagnosis; (3)
treatment; and (4) management.
Table 1 summarizes the full set of transaction standards adopted in
the Transactions and Code Sets final rule and as modified in the
Modifications final rule. The table uses abbreviations of the standards
and the names by which the transactions are commonly referred, while
the official nomenclature and titles of the standards and transactions
related to the provisions of this proposed rule are provided later in
this preamble.
TABLE 1--Transactions Standards Adopted Under HIPAA
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Standard Transaction
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ASC X12 837 D.......................... Health care claims--Dental.
ASC X12 837 P.......................... Health care claims--
Professional.
ASC X12 837 I.......................... Health care claims--
Institutional.
NCPDP D.0 and Version 1.2.............. Health care claims--Retail
pharmacy drug.
ASC X12 837 P and NCPDP D.0 and Version Health care claims--Retail
1.2. pharmacy supplies and
professional services.
NCPDP D.0 and Version 1.2.............. Coordination of Benefits--
Retail pharmacy drug.
ASC X12 837 D.......................... Coordination of Benefits--
Dental.
ASC X12 837 P.......................... Coordination of Benefits--
Professional.
ASC X12 837 I.......................... Coordination of Benefits--
Institutional.
ASC X12 270/271........................ Eligibility for a health plan
(request and response)--
Dental, professional, and
institutional.
NCPDP D.0.............................. Eligibility for a health plan
(request and response)--Retail
pharmacy drugs.
ASC X12 276/277........................ Health care claim status
(request and response).
ASC X12 834............................ Enrollment and disenrollment in
a health plan.
ASC X12 835............................ Health care payment and
remittance advice.
ASC X12 820............................ Health plan premium payment.
ASC X12 278............................ Referral certification and
authorization (request and
response).
NCPDP D.0 and Version 1.2.............. Referral certification and
authorization (request and
response)--Retail pharmacy
drugs.
NCPDP D.0 and Version 1.2.............. Retail pharmacy drug claims
(telecommunication and batch
standards).
NCPDP 3.0.............................. Medicaid pharmacy subrogation
(batch standard).
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In the July 8, 2011 Federal Register (76 FR 40458), we published an
interim final rule with comment period, ``Administrative
Simplification: Adoption of Operating Rules for Eligibility for a
Health Plan and Health Care Claim Status Transactions'' (Eligibility
and Claim Status Operating Rules IFC). That rule adopted operating
rules for two HIPAA covered transactions: (1) Eligibility for a health
plan; and (2) health care claim status. The Eligibility and Claim
Status Operating Rules IFC also defined the term, ``operating rules,''
revised the definition for ``standard transaction,'' revised specific
related regulatory provisions, and described the relationship between
operating rules and standards.
[[Page 22954]]
In general, the transaction standards adopted under HIPAA enable
electronic data interchange (EDI) using a common interchange structure,
thus minimizing the industry's need to rely on multiple formats. The
standards significantly decrease administrative burden on covered
entities by creating greater uniformity in data exchange, and reducing
the amount of paper forms needed for transmitting data, which remains
an obstacle to achieving greater health care industry administrative
simplification.
Section 1172(a) of the Act states that ``[a]ny standard adopted
under [Part C--Administrative Simplification--of Title XI of the Social
Security Act, as amended by section 262 of HIPAA] shall apply, in whole
or in part, to the following persons: (1) A health plan; (2) A health
care clearinghouse; and (3) A health care provider who transmits any
health information in electronic form in connection with a [HIPAA
transaction].''
Section 1173(b) of the Act directs the Secretary to adopt standards
providing for a standard unique health identifier for each individual,
employer, health plan, and health care provider for use in the health
care system. In the May 31, 2002 Federal Register (67 FR 38009), we
published a final rule entitled, ``Health Insurance Reform: Standard
Unique Employer Identifier,'' which adopted the standard for a unique
employer identifier in HIPAA electronic health care transactions. In
the January 23, 2004 Federal Register (69 FR 3434), we published a
final rule entitled, ``HIPAA Administrative Simplification: Standard
Unique Health Identifier for Health Care Providers'' (the 2004 NPI
final rule), in which the Secretary adopted the National Provider
Identifier (NPI) as the standard unique health care provider identifier
and the requirements for obtaining and using the NPI. Health care
providers that transmit any health information in electronic form in
connection with a transaction for which the Secretary has adopted a
standard (known as ``covered health care providers''), are required to
obtain NPIs and use them according to the NPI regulations at 45 CFR
part 162, subpart D. Specifically, under the requirements for health
care providers at 45 CFR 162.410, a covered health care provider must
obtain an NPI for itself and some of its subparts, use the NPI in
standard transactions it conducts, and disclose its NPI to any entities
that need it for standard transactions. The Secretary has not adopted a
standard patient identifier.
Under section 1172(c)(2)(B) of the Act, if no standard setting
organization has developed, adopted, or modified any standard relating
to a standard that the Secretary is authorized or required to adopt
under the Administrative Simplification provisions of HIPAA, then the
Secretary may adopt a standard, relying upon recommendations of the
NCVHS. In such a case, the Secretary shall publish in the Federal
Register any recommendation of the NCVHS regarding the adoption of a
standard under the HIPAA Administrative Simplification provisions.
Further, the Secretary must consult with the National Uniform Billing
Committee (NUBC), the National Uniform Claim Committee (NUCC), the
Workgroup for Electronic Data Interchange (WEDI), and the American
Dental Association (ADA), other appropriate private organizations, and
appropriate Federal and State agencies regarding such standard
adoption.
In this proposed rule, we address the adoption of a unique health
plan identifier, the adoption of a data element that would serve as an
identifier for other entities, an addition to the NPI requirements, and
a change to the compliance date for the ICD-10-CM and ICD-10-PCS code
sets.
C. The Unique Health Plan Identifier (HPID) and the Affordable Care Act
Section 1104(c)(1) of the Affordable Care Act, enacted on March 23,
2010, directs the Secretary to promulgate a final rule establishing a
unique health plan identifier that is based on the input of a Federal
advisory committee, the National Committee on Vital and Health
Statistics (NCVHS). Section 1104 of the Affordable Care Act authorizes
the Secretary to promulgate the rule on an interim final basis and
indicates that such rule shall be effective not later than October 1,
2012.
Health plans are currently identified for different purposes using
different identifiers that have different sources, formats, and
meaning. A health plan may have multiple identifiers, each assigned by
a different organization for a different purpose. The following
discussion focuses on the types of identifiers that currently may be
used to identify health plans in standard transactions. State
regulators, for instance, use the National Association of Insurance
Commissioners' (NAIC) Company code to identify health plans when a
health plan is licensed to sell or offer health insurance in a
particular State. The U.S. Department of Labor (DOL) and the Internal
Revenue Service (IRS) use the 9-digit Employer Identification Number
(EIN) and a 1-digit alphabetic or a 3-digit plan number to identify
health plans. Employers, sole proprietorships, corporations,
partnerships, non-profit associations, trusts, estates of decedents,
government agencies, certain individuals, and other business entities,
use EINs to identify health plans for a host of purposes and
transactions. The IRS uses the EIN to identify taxpayers that are
required to file various business tax returns. Health care
clearinghouses assign proprietary identifiers to health plans for use
in standard transactions. Multiple clearinghouses may identify the same
health plan using different proprietary identifiers in different
covered transactions. Health plans may use other existing identifiers,
such as a tax identification number (TIN) or an EIN, to identify
themselves in the standard transactions, to more easily integrate into
existing proprietary systems, or for use on health insurance cards that
they issue to health plan enrollees.
Not only are health plans identified using a variety of
identifiers, but these identifiers have different formats. For
instance, some identifiers are alphanumeric while other identifiers are
only numeric. Identifiers also differ in length; for example, NAIC
codes are typically five digits while an EIN is nine digits.
The current versions of the adopted standards (ASC X12N and NCPDP)
allow health plans to use these and other identifiers in standard
transactions. Therefore, for the covered transactions there is no
requirement for consistency in the use of identifiers for health plans.
Health care providers, health plans, and healthcare clearinghouses may
use EINs, TINs, NAIC numbers, healthcare clearinghouse, or health plan
assigned proprietary numbers to identify health plans in standard
transactions. Industry stakeholders, especially health care providers,
have indicated that the lack of a standard unique health plan
identifier has resulted in increased costs and inefficiencies in the
health care system. Health care providers are frustrated by problems
with: the routing of transactions; rejected transactions due to
insurance identification errors; difficulty determining patient
eligibility; and challenges resolving errors identifying the health
plan during claims processing.
The Affordable Care Act specifically calls for the establishment of
a unique identifier for health plans. There are however, other entities
that are not health plans but that perform certain health plan
functions and are currently identified in the standard transactions in
the same fields using the same types of identifiers as health plans.
For
[[Page 22955]]
example, health care clearinghouses, third party administrators (TPAs),
and repricers often contract with insurance companies, self-funded
employer health care plans, and provider- or hospital-run health plans
to perform claims administration, premium collection, enrollment, and
other administrative functions. In some cases, TPAs or other entities
are identified in the same fields as health plans in the transactions,
depending on the contractual relationships. As explained later in this
proposed rule, we propose to adopt a data element--an other entity
identifier--to serve as an identifier for these other entities.
D. The National Committee on Vital and Health Statistics (NCVHS)
In section 1104 of the Affordable Care Act, the Secretary is
directed to conduct its rulemaking to establish a unique health plan
identifier based on input of the NCVHS. Congress created the NCVHS to
serve as an advisory body to the Secretary on health data, statistics,
and national health information policy. The NCVHS has been assigned a
significant role in the Secretary's adoption of all standards, code
sets, and operating rules under HIPAA, including the unique health plan
identifier. In section 1104(c)(1) of the Affordable Care Act, Congress
reiterated that the NCVHS would retain its role in providing input on
the establishment of the health plan identifier.
The NCVHS Subcommittee on Standards fulfilled these duties by
conducting public hearings on the health plan identifier on July 19
through 21, 2010. Industry stakeholders, including representatives from
health plans, health care provider organizations, health care
clearinghouses, pharmacy industry representatives, standards
developers, professional associations, representatives of Federal and
State public programs, the Workgroup on Electronic Data Interchange
(WEDI), the National Uniform Billing Committee (NUBC), the National
Uniform Claim Committee (NUCC), and individuals with health plan
identifier proposals provided in-person and written testimony.
Stakeholder testimony at the hearings focused on the use and need for
an HPID to: facilitate the appropriate routing of transactions; reduce
the cost of managing financial and administrative information; improve
the accuracy and timeliness of claims payment; and reduce
dissatisfaction among health care providers and patients/members by
improving communications with health plans and their intermediaries.
Stakeholders provided suggestions on the types of entities that need to
be identified in standard transactions, those that should be eligible
to obtain an HPID, and the level of enumeration for each plan (for
example the legal entity, product, benefit package etc). We discuss the
specifics of key issues in more detail later in this proposed rule.
1. Eligibility for an HPID
There was substantial testimony on the types of entities that
should obtain an identifier and a request that HHS clearly indicate the
organizations that would be required to obtain and use an identifier in
standard transactions. Testifiers also offered extensive input on the
need to provide an identifier for entities that do not meet the
definition of health plan under HIPAA, but have a need to be identified
in standard transactions. The majority of those testifying recommended
that these entities, such as TPAs and health care clearinghouses, be
eligible to obtain an identifier for use in the standard transactions.
2. HPID Enumeration Level
Stakeholders offered extensive input on the appropriate level of
health plan enumeration. Testifier suggestions ranged from requiring
health plans to enumerate at the highest level (that is the parent
company), to enumerating every health plan benefit package (for example
``HMO Gold''). Some testifiers proposed that there be two types of
health plan identifiers, and they used the term ``plan'' to mean both
the health plan products and health plan organizations--Type 1 and Type
2 identifiers, respectively. As reflected in written testimony
submitted to the NCVHS, they proposed that the Type 1 identifier
identify patient-specific health plan products, for instance, a
particular health insurance product, or an employee health benefit plan
or other product defining the patient's coverage. The Type 2 identifier
would identify organizations that perform health plan functions, such
as entities issuing long-term care policies, plan organizations paying
for the cost of medical care for specified populations, or entities
responsible for funding high risk pools offering coverage to eligible
individuals. Some testifiers also suggested that the Type 2 identifier
also identify entities other than health plans that perform certain
administrative or contracting functions on behalf of health plans, such
as TPAs or health care clearinghouses. In addition, some of these
testifiers recommended the creation of a fee schedule identifier so
health care providers could download the appropriate fee schedule, just
as the entity that is administering the claims transaction must do to
price the claim.
Other testifiers opined that enumeration should occur at a health
plan organization level and should support the ability to obtain and
utilize a more granular enumeration scheme if there is a business need
for further differentiation to appropriately route transactions. This
proposal was based on the premise that the purpose of the HPID is to
identify entities that meet the regulatory definition of health plan
and are conducting the covered transactions. The HPID will be used to
identify a health plan that sends or receives the covered transactions.
These testifiers cautioned that requiring fee schedule, reimbursement
information, or product level information in the HPID would create a
level of complexity that would greatly increase the number of
identifiers needed, resulting in significant health plan maintenance
requirements, increased cost, and inefficiencies. These testifiers
recommended that associating product information with particular
identifiers should not be a goal of the HPID, although it could be
addressed in future versions of the standards, implementation guides,
or operating rules.
3. Timing
Stakeholders at the NCVHS hearings also stressed the importance of
a smooth transition from current plan identifiers to the HPID during
the enumeration process, given its potential impact on the industry.
For example, they noted that health plan and health care provider
information systems will need to be reprogrammed to accommodate the
HPID, including the possible expansion of data fields and the creation
of crosswalks between existing proprietary identifiers and the HPID.
Health care clearinghouses and health IT vendors will need to update
their systems to accommodate the new identifiers, and may also need to
create identifier crosswalks to match current health plan identifiers
to the HPID and vice versa. Health plans will need to conduct an
analysis of their organizations and structure to determine, if they
have subsidiaries, which of their entities qualify as health plans and
need to be enumerated. The HPID may also impact information systems
that involve Health Level 7 (HL7) standard protocols. Testimony from
the HL7 SDO noted that it is likely that the HPID may require changes
to existing scheduling, registration, pre-admission, admission, and
other information systems and their screens,
[[Page 22956]]
work flows, and data elements collected, stored, displayed, and
processed by those applications. In addition, testifiers pointed out
other regulatory requirements with similar, converging compliance
dates, such as: January 1, 2012 for complying with Version 5010,
Version D.0 and Version 3.0; October 1, 2013 for complying with the
ICD-10-CM and ICD-10-PCS medical code sets requirements; January 1,
2013 for implementing the first set of operating rules for two of the
standard transactions; and other changes under the Affordable Care Act
all require limited industry resources.
Finally, there was testimony related to the use of health plan
identifiers in the retail pharmacy transactions, and we address this
topic later in this proposed rule. (For transcripts and testimony of
the July 19 and 20, 2010 NCVHS Subcommittee on Standards hearings, go
to http://www.ncvhs.hhs.gov.)
E. The NCVHS Recommendation to the Secretary on HPID
On September 30, 2010, following the July 2010 NCVHS Subcommittee
on Standards hearing, the NCVHS sent a letter to the Secretary with its
recommendations for the adoption of a standard for a health plan
identifier. The nine NCVHS observations addressed the following topics:
(1) The definitions and types of entities eligible for enumeration with
an HPID; (2) the level of entity enumeration; (3) the format and
content of the HPID; (4) the directory database to support the HPID
enumeration system and process; (5) the implementation of the HPID in
retail pharmacy; (6) the implementation process and timing; (7)
applicable testing of the HPID enumeration process; (8) the use of the
HPID on health plan identification cards, and (9) the improvement in
the use of standards and operating rules. The specific recommendations
are as follows:
``HHS should:
1.1 clarify the definition of health plan as specified in
the HIPAA regulations (45 CFR 160.103) for purposes of HPID eligibility
and enumeration, including that property and casualty insurers and
workers' compensation plans could be eligible for such enumeration even
though they are not covered entities.
1.2 work with stakeholders to reach consensus on names and
definitions for intermediary entities. Consider making these
intermediary entities eligible to obtain an HPID where there is a clear
use case for them to be enumerated.
1.3 request stakeholder input through groups such as
Workgroup on Electronic Data Interchange (WEDI), America's Health
Insurance Plans (AHIP), National Association of Insurance Commissioners
(NAIC), and the Designated Standards Maintenance Organizations (DSMO)
Committee for definitions of products to be used in plan enumeration by
October 31, 2010 (or other date as deemed feasible by CMS).
1.4 collaborate across Federal agencies and departments to
develop or identify consensus definitions affecting the identification
of health plans, including Indian Health Service (IHS), Department of
Veterans Affairs (VA), Department of Defense (DoD), and the Federal
Employee Health Benefit Program (FEHBP).
1.5 coordinate, to the maximum extent feasible, the
development and implementation of the HPID with other plan related
requirements in the Affordable Care Act, including, for example, the
consumer health insurance web portal, the health insurance exchanges
and the regulatory requirements for health plans.
2.1 initially enumerate all health plan legal entities as
defined in the HIPAA legislation and further clarified in regulations
at 45 CFR 160.103.
2.2 determine at what level, including product (benefit
package) level or other categorization, a health plan should also be
enumerated, using input from stakeholders, and identify these in
regulation.
3.1 adopt an HPID that follows the ISO Standard 7812, with
Luhn check-digit as the tenth digit.
3.2 adopt an HPID that contains no embedded intelligence.
4.1 establish an HPID enumeration system and process
supported by a robust online directory database.
4.2 direct CMS to work with stakeholders including other
Federal agencies to identify the minimum necessary data elements for
the directory database. Consideration should be given to including the
Employer Identification Number (EIN), Taxpayer Identification Number
(TIN), National Association of Insurance Commissioners (NAIC)
identifier, Source of Payment Typology, and other identifiers that may
assist in supporting the need to appropriately identify health plans in
administrative transactions and in the updating, development and/or
effective use of standards and operating rules. The database should be
sufficiently flexible to enable additional information to be added
initially at the discretion of the entity, and potentially in the
future, as a requirement by HHS.
4.3 require the entity enumerated to maintain all
information according to a published schedule of updates or more often
as appropriate, to maintain accuracy. If there are no changes at the
time of a scheduled update, the date information was validated should
signify that the entity has reviewed and is confirming the data as
being current.
4.4 make available appropriate information from the HPID
directory database to support the efficient and accurate exchange of
information.
4.5 consider, for the future, requiring that the HPID
system enable electronic transactions with the directory database for
users or their systems to obtain information and route transactions
more efficiently and effectively.
5.1 not require the HPID to be used in place of the
existing RxBIN/PCN identifier in retail pharmacy business and
transactions.
5.2 require the use of HPID on the HIPAA-named standard
transactions for retail pharmacy, where appropriately defined by
industry through the ASC X12 and NCPDP processes.
6.1 consider that the effective date of October 1, 2012 be
interpreted as the date to begin registering for an HPID. As such,
subsequent phases should include time for enumeration and testing
before a final implementation date when the HPID must be used in
compliant transactions. This will ensure sufficient time for
publication of the regulation and development of the enumeration system
and process. Phases should include:
October 1, 2012--March 31, 2013: Enumeration
April 1, 2013--September 30, 2013: Testing
October 1, 2013: Implementation
6.2 describe in regulation the potential purposes and uses
of the HPID, including its uses in standard transactions, potential
uses for health information exchange, and others. While purposes should
not be restricted, the initial focus should be on enumerating entities
for use in the financial and administrative transactions required under
HIPAA.
6.3 accommodate bulk enumeration of HPID as applicable.
7.1 provide sufficient time and guidance for testing the
HPID in transactions prior to use.
7.2 allow for a period during which dual use of legacy
health plan identifiers and the new HPID is permitted in the
transactions as appropriate.
8.1 encourage the use of the HPID in health plan
identification cards.
9.1 strongly encourage the industry to collaborate to
enhance operating rules for the financial and
[[Page 22957]]
administrative transactions to support the use of the HPID.''
For the complete text of the NCVHS' observations and
recommendations, go to http://www.ncvhs.hhs.gov/100930lt1.pdf.
We agree in principle with the spirit and intent of the NCVHS'
recommendation to the Secretary for a health plan identifier standard
as relayed in the September 30, 2010 letter. In this proposed rule, we
propose to adopt a health plan identifier based in large part upon the
NCVHS' recommendations, with some minor departures. In section II. of
this proposed rule, we itemize our proposals and, where necessary,
explain the differences between the HHS proposal and the NCVHS'
recommendations.
F. Definition of Health Plan
The regulatory definition of health plan at 45 CFR 160.103 was
initially adopted in the Transactions and Code Sets final rule. The
basis for the additions to, and clarifications of, the statutory
definition of health plan is further discussed in the preamble to the
December 28, 2000 final rule (65 FR 82478 and 82576) entitled
``Standards for Privacy of Individually Identifiable Health
Information'' (hereinafter referred to as the Privacy Rule). The term
``health plan'' is defined at 45 CFR 160.103.
This definition of ``health plan'' references group health plans,
health insurance issuers, and health maintenance organizations that are
also defined in 45 CFR 160.103. These definitions are included here:
Group health plan (also see definition of health plan in this
section) means an employee welfare benefit plan (as defined in section
3(1) of the Employee Retirement Income and Security Act of 1974
(ERISA), 29 U.S.C. 1002(1)), including insured and self-insured plans,
to the extent that the plan provides medical care (as defined in
section 2791(a)(2) of the Public Health Service Act (PHS Act), 42
U.S.C. 300gg-91(a)(2)), including items and services paid for as
medical care, to employees or their dependents directly or through
insurance, reimbursement, or otherwise, that:
(1) Has 50 or more participants (as defined in section 3(7) of
ERISA, 29 U.S.C. 1002(7)); or
(2) Is administered by an entity other than the employer that
established and maintains the plan.
Health insurance issuer (as defined in section 2791(b)(2) of the
PHS Act, 42 U.S.C. 300gg-91(b)(2) and used in the definition of health
plan in this section) means an insurance company, insurance service, or
insurance organization (including an HMO) that is licensed to engage in
the business of insurance in a State and is subject to State law that
regulates insurance. Such term does not include a group health plan.
Health maintenance organization (HMO) (as defined in section
2791(b)(3) of the PHS Act, 42 U.S.C. 300gg-91(b)(3) and used in the
definition of health plan in this section) means a Federally qualified
HMO, an organization recognized as an HMO under State law, or a similar
organization regulated for solvency under State law in the same manner
and to the same extent as such an HMO.
II. Provisions of the Proposed Rule To Adopt a Standard for a Unique
Health Plan Identifier (HPID)
This rule proposes an HPID as the standard for the unique
identifier for health plans. We are also proposing instructions and
guidance concerning how health plans may obtain an HPID. We further
propose requirements that covered entities will have to meet to use the
unique health plan identifier in standard transactions. This proposed
rule would add provisions specific to the HPID in a new subpart
(subpart E) to 45 CFR part 162.
A. The Health Plan Identifier
1. Definition of ``Controlling Health Plan'' and ``Subhealth Plan''
Health plans today have many different business structures and
arrangements that affect how health plans are identified in standard
transactions. There is often a ``parent'' corporation that meets the
definition of health plan, which may be controlled by entities, such as
holding companies, that do not meet the definition of health plan. This
``parent'' health plan may own and operate several other entities and
organizations, which may also meet the definition of a health plan.
While these individual health plans that are owned by the same
``parent'' corporation may have their own EIN or NAIC number, they may
all use a single identifier in covered transactions because of data
processing arrangements. In these situations, some health plans may not
need to be identified separately in covered transactions, and may not
need their own health plan identifier. To differentiate between health
plan entities that would be required to obtain an HPID, and those that
would be eligible, but not required, to obtain an HPID, we are
proposing definitions for controlling health plan (CHP) and subhealth
plan (SHP) in proposed 45 CFR 162.103 as follows.
a. Controlling Health Plan (CHP)
We would define a CHP as a health plan (as defined at 45 CFR
160.103) that--(1) controls its own business activities, actions, or
policies; or is controlled by an entity that is not a health plan (2)
and if it has a subhealth plan(s) (SHPs) (see definition of SHP in
subpart b), exercises sufficient control over the subhealth plan(s) to
direct its/their business activities, actions, or policies.
The following factors would need to be considered when determining
if an entity is a CHP:
Does the entity itself meet the definition of health plan
at 45 CFR 160.103?
Does either the entity itself or a non health plan
organization control the business activities, actions, or policies of
the entity?
If the answer to both questions is ``yes,'' then the entity meets
the definition of CHP. We propose that an entity that meets the
definition of CHP would be required to obtain a health plan identifier.
b. Subhealth Plan (SHP)
A SHP would mean a health plan (as defined in 45 CFR 160.103) whose
business activities, actions, or policies are directed by a CHP. The
following considerations may be helpful in determining whether an
entity is a SHP:
Does the entity meet the definition of health plan at
Sec. 160.103?
Does a CHP direct the activities, actions, or policies of
the health plan entity?
If the answer to both questions is ``yes,'' then the entity meets
the definition of SHP. We propose that a SHP would not be required to
obtain an HPID, but may choose to obtain an HPID, or its CHP may obtain
an HPID on its behalf.
2. Proposed Use of the HPID
In proposed 45 CFR 162.510, we propose HPID usage requirements for
all covered entities. We propose to require all covered entities to use
an HPID wherever a covered entity identifies a health plan in a covered
transaction. Covered entities would obtain the HPIDs of health plans
from the health plans themselves or from the Enumeration System, which
we describe later in this proposed rule. If a covered entity uses a
business associate to conduct standard transactions on its behalf, the
covered entity must require that its business associate use an HPID in
each field where the business
[[Page 22958]]
associate identifies a health plan in all covered transactions.
The HPID may also be used for any other lawful purpose that
requires the identification of health plans.
Some examples of permitted uses include the following:
Health plans may use HPIDs in their internal files to
facilitate processing of health care transactions.
A health plan may use an HPID on a health insurance card.
The HPID may be used as a cross-reference in health care
fraud and abuse files and other program integrity files.
Health care clearinghouses may use HPIDs in their internal
files to create and process standard and non-standard transactions, and
in communications with health plans and health care providers.
HPIDs may be used in patient medical records to help
specify patients' health care benefit package(s).
HPIDs may be used to identify health plans in electronic
health records (EHRs).
HPIDs may be used to identify health plans in Health
Information Exchanges (HIEs).
HPIDs may be used to identify health plans in Federal and
State health insurance exchanges.
HPIDs may be used to identify health plans for public
health data reporting purposes.
3. Proposed Health Plan Identifier Requirements for Health Plans
In 45 CFR 162.512, we propose HPID implementation specifications
for health plans. We propose to require all CHPs, as defined in 45 CFR
162.103, to obtain HPIDs from the Enumeration System in accordance with
the enumeration process, which is described later in this proposed
rule. In addition, CHPs could obtain HPIDs from the Enumeration System
on behalf of their SHPs, as defined in 45 CFR 162.103, or direct their
SHPs to obtain HPIDs directly from the Enumeration System. Any SHP
would be eligible to obtain an HPID regardless of whether or not its
CHP directs it to obtain an HPID. A CHP could only obtain one HPID for
itself.
We propose to require each health plan to disclose its HPID to any
entity, upon request, that needs the HPID to identify that health plan
in a standard transaction. We propose to require each health plan to
ensure that its own data in the Enumeration System is correct and that
each health plan submits changes (updates, corrections, etc.) to its
own data to the Enumeration System within 30 days of the date the
change took place. A SHP would ultimately be responsible for submitting
updates for its own data in the Enumeration System regardless of
whether it obtained its HPID independently or the CHP obtained the HPID
on its behalf. We are requesting comments on whether a SHP should be
responsible for submitting updates to its own data if a CHP obtained
the HPID on its behalf.
This proposed rule provides a discussion on how CHPs and SHPs will
obtain an HPID from the Enumeration System. Health plans would be able
to begin to apply for an HPID on or after the effective date of the
final rule, which we expect to be October 1, 2012, and must use it in
standard transactions by the compliance date of the final rule.
a. Requirements and Options for Obtaining and Using a Health Plan
Identifier
While a CHP would be required to obtain a health plan identifier,
there would be different options available for the enumeration of SHPs
based on a CHP's organizational structure and business needs. The CHP
may analyze its organizational structure to determine if and which of
its SHPs need a HPID based on whether the SHP needs to be identified in
covered transactions. The CHP may obtain HPIDs on behalf of its SHP, or
it may direct the SHPs to obtain the HPIDs. While a CHP could only
obtain 1 HPID for itself, a CHP could use the HPID of its SHPs for any
lawful purpose, including in the transactions.
Self-insured group health plans are included in the definition of
health plan in Sec. 160.103. Because of this, self-insured group
health plans will need to obtain a health plan identifier if they meet
the definition of a CHP. We specifically mention self-insured group
health plans as there was industry discussion about whether these
health plans should be required to obtain HPIDs because they do not
always need to be identified in the standard transactions. As
discussed, the primary purpose of the HPID is for use in the standard
transactions. Many self-insured group health plans contract with third
party administrators or other entities to perform health plan functions
on their behalf and those entities, not the self-insured group health
plans, may be identified in the standard transactions. Some in the
industry thus suggested not requiring self-insured group health plans
to obtain HPIDs as they may not need to be identified in the standard
transactions, while others recommended requiring these plans to obtain
HPIDs as they may be the financially responsible party. Given that
self-insured group health plans are included in the definition of
health plan and there is a potential need to be identified in the
standard transactions, we propose that they be required to obtain a
HPID if they meet the definition of a CHP. We are soliciting comment on
this issue.
A SHP would be able to obtain an HPID even if its CHP does not
obtain one on its behalf or does not direct the SHP to obtain an HPID.
We encourage CHPs and SHPs to coordinate their HPID applications to
prevent duplicative and unnecessary numbers. See Table 2 for a
comparison of requirements for obtaining an HPID.
Table 2--Proposed Enumeration Requirements and Options for CHPs and SHPs
------------------------------------------------------------------------
Enumeration
Entity requirements Enumeration options
------------------------------------------------------------------------
CHPs........................ Must obtain an HPID May obtain an
for itself. HPID(s) for its
SHP(s).
May direct its
SHP(s) to obtain an
HPID(s).
SHPs........................ Not required to May obtain an HPID
obtain an HPID. at the direction of
its CHP.
May obtain an HPID
on its own
initiative.
------------------------------------------------------------------------
Using Illustration A and B, we provide examples of enumeration
options to demonstrate the ways a CHP could choose to enumerate itself
and its SHPs, if applicable. For these options, we are assuming that
CHP ``Z'' and the SHPs Z-1, Z-2, Z-3, and Z-4 each meets the definition
of health plan at 45 CFR 160.103.
[[Page 22959]]
[GRAPHIC] [TIFF OMITTED] TP17AP12.020
(1) Illustration A. Enumeration Option 1: CHP and Each SHP Obtain HPIDs
CHP ``Z'' meets the definition of a health plan and controls its
own business activities, actions, and policies. Therefore CHP ``Z''
would be required to obtain an HPID. CHP ``Z'' would then analyze its
organizational structure and business needs to determine if and which
of its SHPs need an HPID for use in standard transactions. CHP ``Z''
may determine that SHPs Z-1, Z-2, Z-3, and Z-4 each need their own HPID
for use in the standard transactions as CHP ``Z'' and each of its SHPs
may have separate data processing centers or arrangements. Thus, CHP
``Z'' would obtain an HPID, and each of the SHPs, from Z-1 to Z-4 would
obtain their own HPIDs. SHPs could obtain HPIDs in one of two ways as
described in the following scenarios:
Scenario 1--CHP ``Z'' obtains all the HPIDs. It obtains
one HPID for itself and it obtains an HPID on behalf of each SHP. In
total there are five HPIDs.
Scenario 2--CHP ``Z'' directs its SHPs to obtain HPIDs:
CHP ``Z'' obtains its own HPID and each of the SHPs would obtain their
own HPIDs individually. Ultimately, the result would be the same as
scenario 1: The CHP and each of the four SHPs would have their own
HPIDs and there would be a total of five HPIDs.
Other possible scenarios would involve CHP ``Z'' obtaining fewer
than all five HPIDs, or directing fewer than all four SHPs to obtain an
HPID. Each of the SHPs may also decide on its own to obtain an HPID
without direction from the CHP to do so.
(2) Illustration A. Enumeration Option 2: CHP Obtains HPID. SHPs Do Not
Obtain HPIDs
As in the first example, CHP ``Z'' would be required to obtain an
HPID, as it meets the definition of health plan and controls its own
business activities, actions, and policies.
CHP ``Z'' may determine that none of its SHPs needs to be
identified in standard transactions, and therefore none of the SHPs
needs its own HPID. Instead, CHP ``Z'' may direct SHPs Z-1, Z-2, Z-3,
and Z-4 to use the CHPs' HPID in the standard transactions.
(3) Illustration A. Enumeration Option 3: CHP obtains HPID. Some, But
Not All SHPs Obtain HPIDs
Again, CHP ``Z'' would be required to obtain an HPID, as it meets
the definition of health plan and controls its own business activities,
actions, and policies.
CHP ``Z'' may then examine its organizational structure to
determine which of its SHPs need an HPID for use in a standard
transaction. CHP ``Z'' may determine that SHPs Z-3 and Z-4 must be
uniquely identified in the covered transaction because, for example,
they do not share the same data processing centers as CHP ``Z'' and
would each want to use their own HPID. SHPs Z-3 and Z-4 would use their
own HPIDs in standard transactions. SHPs Z-3 and Z-4 could obtain their
HPIDs in one of the following ways:
CHP ``Z'' could direct SHPs Z-3 and Z-4 to obtain their
own HPIDs.
CHP ``Z'' could obtain HPIDs on behalf of SHPs Z-3 and Z-
4. CHP ``Z'' may determine that based on its organizational structure
SHPs Z-1 and Z-2 do not need separate HPIDs for use in standard
transactions as they may share data processing systems with CHP Z, SHP
Z-3, or SHP Z-4. CHP ``Z'' may direct SHP Z-1 and Z-2 to use CHP
``Z'''s HPID, SHP Z-3's HPID, or SHP Z-4's HPID in the transactions.
CHP ``Z'' may make this determination based on the relevant data
processing systems.
[[Page 22960]]
[GRAPHIC] [TIFF OMITTED] TP17AP12.021
(4) Illustration B. Enumeration Option 1: CHP and Each SHP Obtain HPIDs
Illustration B provides an example of a health plan being
controlled by Company A, which is a holding company. Holding companies
are examples of entities that control the business, activities,
actions, or policies of other legal entities such as health plans, but
typically do not meet the definition of a health plan as defined in 45
CFR 160.103. Assuming Company A does not meet the definition of a
``health plan'' under the relevant definition in 45 CFR 160.103, it
would not be eligible to obtain an HPID.
CHP ``Z'' meets the definition of health plan as found in 45 CFR
160.103, is controlled by an entity that is not a health plan, and
exercises sufficient control over the subhealth plans to direct their
business activities, actions, or policies. Therefore, it meets the
definition of ``controlling health plan'' as proposed in 45 CFR
162.103, and would be required to obtain an HPID for itself.
A similar analysis as discussed in Illustration A would need to be
done to determine how subhealth plans Z-1, Z-2, Z-3, and Z-4 would be
enumerated. CHP ``Z'' must examine its organizational structure to
determine which of its SHPs need an HPID for use in standard
transactions, and the same enumeration options for subhealth plans that
existed for Illustration A would exist in this example.
b. Examples of Use of HPID in Standard Transactions
Within each transaction, a health plan may need to be identified in
fields that do not specifically require the use of a health plan
identifier. A health plan could need to be identified, for instance, in
data fields that indicate the payer of the claim or the intended
recipient of the transaction, or the information source for a
particular request. To illustrate how the HPID could be used in
standard transactions, we will look at a specific segment from one
transaction standard. This example illustrates how covered entities
would be required to identify a health plan in a standard transaction.
This example is not meant to state who or what must be identified in
the fields in the transaction, change what entities can be identified
in specific loops or segments in the transaction standards, or affect
the use of identifiers for non-health plans. It is important to note
that the implementation of the HPID would not prohibit or affect the
identification of other entities in these loops or segments if entities
other than health plans need to be identified in those loops or
segments.
For this example, we will look at a specific segment from one
transaction standard--the ASC X12 Version 5010 health care eligibility
benefit inquiry and response (also known as the 271). In this example,
the segment is the NM1-Information Source Name in the 2100A loop--
Information Source. The standard provides the following definition of
information source: ``The information source is the entity that has the
answer to the questions being asked in a 270 Eligibility or Benefit
request transaction. The information source is typically the insurer or
payer. In a managed care environment, the information source could
possibly be a primary care physician or gateway health care provider.
Regardless of the information source's actual role in the healthcare
system, they are the entity who maintains the information regarding the
patient's coverage.'' The information source is identified in loop
2100A. The NM1 segment, information source name, provides specific
details about the information source through data elements. The NM1
segment is comprised of nine reference descriptors. These reference
descriptors provide information about a specific data element. For
instance, NM101--Entity ID Code--is the code identifying the
organizational entity, a physical location, property or an individual.
For NM101, there are specific codes that can be used to describe the
information source. Table 3 represents the NM1 segment. The chart is
meant to demonstrate how the identification of a health plan in the NM1
segment will change after use of the HPID is mandated. For this
example, the information source is the health plan.
In Table 3, Column I, the reference descriptor provides the data
element being described in the NM1 segment. Table 3, Column II provides
the name of the reference descriptor in Table 3, Column I and describes
what is being conveyed in that data element. Table 3, Column III lists
the codes that the standard permits to be used to describe
[[Page 22961]]
the information source. Table 3, Column IV provides the definition of
the corresponding code in Table 3, Column III. Table 3, Column V shows
what could have been used to identify a health plan prior to the HPID
implementation. Table 3, Column VI shows what will be used to identify
a health plan after implementation of the HPID.
Table 3--Example 1, Eligibility Response Transction, Loop 2100A, Segment NM1--Information Source Name (Version
5010)
----------------------------------------------------------------------------------------------------------------
I II III IV V VI
----------------------------------------------------------------------------------------------------------------
Content of the
field before Content of the
Reference description Name Code Definition HPID compliance field after HPID
date compliance date
----------------------------------------------------------------------------------------------------------------
NM101......................... Entity identifier 2B Third-Party If a health plan If a health plan
Code. Administrator. is to be is to be
identified as identified as
the information the information
source, then source, then
Entity Code Entity Code
Qualifier Qualifier
``PR'' will be ``PR'' will be
used. used.
36 Employer........
GP Gateway Provider
P5 Plan Sponsor....
PR Payer...........
NM108......................... Identification 24 Employer's If a health plan If a health plan
Code Qualifier. Identification is to be is to be
Number (EIN). identified as identified as
the information the information
source, source, only
Identification Identification
Code Qualifier Code Qualifier
24, 46, FI, NI, XV can be used.
or PI can be
used.
46 Electronic
Transmitter
Identification
Number (ETIN).
FI Federal
Taxpayer's
Identification
Number.
NI National
Association of
Insurance
Commissioner's
(NAIC)
Identification.
PI Payer
Identification.
XV Centers for
Medicare &
Medicaid
Services Plan
ID.
XX Centers for
Medicare &
Medicaid
Services
Provider
Identifier.
NM109......................... Identification Depending on the HPID only (if a
Code. Identification health plan is
Code Qualifier, to be
this could be identified as
the EIN, ETIN, the information
Tax Id, the source).
NAIC, or any
Proprietary Id.
----------------------------------------------------------------------------------------------------------------
Currently, if the health plan is the information source and needs
to be identified in the transactions, it may be identified using a
number of different identifiers as shown in Table 3, Column V. If this
proposal is finalized and the HPID is adopted, and if a health plan is
identified as the information source, it must be identified using an
HPID as shown in Table 3, Column VI.
As discussed earlier in this proposed rule, stakeholders at the
NCVHS hearings expressed different viewpoints on the appropriate level
of health plan enumeration. Some industry stakeholders encouraged
health plan enumeration at a very high level (for example, at the level
of the health plan's legal entity), while other stakeholders supported
enumeration at the benefit package level. We analyzed and considered
these viewpoints when we developed the HPID policy proposed herein.
We began by exploring the purpose of the HPID. While we considered
multiple uses for the HPID, we determined that the primary purpose of
the HPID is for use in standard transactions in order to identify
health plans in the appropriate loops and segments and to provide a
consistent standard identifier so a health plan no longer uses multiple
identifiers in the HIPAA covered transactions. Therefore, we analyzed
the transaction standards to determine the existing segments and loops
where a health plan may need to be identified, what identifiers are
currently used in those loops and segments to identify health plans,
and what information that loop or segment is providing when a health
plan is being identified. We also carefully considered the information
that industry stakeholders reported was missing in covered transactions
and suggested could be provided using a health plan identifier. We
determined that much of the information testifiers wanted to obtain
through the health plan identifier might already be available in other
parts of the transaction standards and associated operating rules.
The CAQH CORE 154 eligibility content and operating rule, to be
used with the ASC X12 Version 5010 Standard for Electronic Data
Interchange Technical Report Type 3--Health Care Eligibility Benefit
Inquiry and Response
[[Page 22962]]
(270/271) (hereinafter referred to as the Version 5010 270/271
eligibility inquiry/response standard), was adopted through an interim
final rule with comment period published in the July 8, 2011 Federal
Register (76 FR 40458), with a compliance date of January 1, 2013.
These operating rules require that more information be provided in the
Version 5010 270/271 eligibility inquiry/response standard, including
information about a patient's health plan name, coinsurance, copayment,
and deductibles including in-network and out-of-network, as well as
remaining deductible amounts. The loops, segments, and codes within the
transaction standards are already available vehicles for providing this
information today. Future versions of standards, as well as the
adoption of operating rules to supplement the standards, can address
many of the other issues raised by stakeholders and can continue to
address issues or problems in the transactions as they arise.
Therefore, we do not believe that the HPID needs to provide the level
of detail that some testifiers suggested.
In addition, requiring health plans to enumerate to a more granular
level may prove burdensome to the industry as benefit package
information and offerings change frequently and would require constant
updates by health plans. Health care providers may also need to update
their software and systems frequently to ensure the accuracy of
information. This could result in increased time spent by health plan
and health care provider staff to ensure appropriate information is
being used for eligibility determination and claim payments.
We developed the proposed HPID policy after considering stakeholder
testimony, analyzing transaction standards' loops and segments where
the health plan identifier will be used, and taking into account newer
versions of the standards and the adoption of operating rules to
complement the standards.
4. HPID Standard Format
a. Introduction
Per the NCVHS recommendations, which were based on stakeholder
testimony from a wide range of potential HPID users, we propose to
adopt an HPID that is a 10-digit, all-numeric identifier with a Luhn
check-digit as the tenth digit. (See Sec. 162.510). The Luhn check-
digit is an algorithm used most often on credit cards as a check sum to
validate that the card number issued is correct. See http://www.merriampark.com/anatomycc.htm for more information. We seek public
and stakeholder comments on the feasibility and utility of this format
for the HPID.
b. The International Organization for Standardization (ISO) Standard
The International Organization for Standardization (ISO) is the
world's largest developer and publisher of international standards.
National standards institutes from 160 nations comprise the ISO. The
ISO has published more than 16,500 standards for numerous industries
such as agriculture, electrical engineering, and other information
technology industries. For more information on the ISO, refer to the
Web site at http://www.iso.org. Based on stakeholder testimony, the
NCVHS recommendations, and our review, we propose that the ISO 7812
standard format, ISO/IEC 7812-1:2006 and ISO/IEC 7812-2:2007, which
consists of a 10-digit, all-numeric identifier with a Luhn check-digit
as the tenth digit, be adopted as the standard for the HPID. This
standard incorporates the same format that is used for the enumeration
of health care providers via the National Provider Identifier (NPI),
adopted in the NPI final rule, published in the January 23, 2004
Federal Register (69 FR 3434). Like the proposed standard for the HPID,
the standard for the NPI is a 10-position all numeric identifier with a
numeric check digit to assist in identifying erroneous or invalid NPIs.
The HPID format would essentially be an intelligence-free identifier as
the start digit of the number would provide the only piece of
intelligence, signaling that the identifier had been provided to a
health plan and not to an ``other entity'' or a health care provider.
The OEID will have a different start digit than the HPID. The number of
digits of the HPID would not exceed the number permitted for
identifiers in the relevant data fields of the standard transactions.
If additional capacity for HPIDs were needed in the future, the
relevant data fields would permit additional numeric digits to be added
at that time. Also, an all-numeric identifier: is more quickly and
accurately keyed in data-entry applications; is more easily used in
telephone keypad applications; does not require translation before
application of the check digit algorithm and thus uses the full ability
of the check digit algorithm to detect keying errors; will require less
change for systems that currently use a numeric identifier; and is
compatible with ISO identification card standards for a card issuer
identifier, while Alphanumeric identifiers do not possess these
important characteristics.
B. Adoption of the Other Entity Identifier (OEID)
In addition to proposing the adoption of an identifier for health
plans, we are also proposing to adopt a data element in the form of an
optional identifier for other entities for use in standard
transactions, consistent with the recommendations of the NCVHS. Section
1104(c) of the Affordable Care Act provides in relevant part that the
Secretary ``shall promulgate a final rule to establish a unique health
plan identifier (as described in section 1173(b) of the Act (42 U.S.C.
1320d-2(b))) based on the input of the National Committee on Vital and
Health Statistics.'' Section 1173(a)(1)(A) of the Act states in
relevant part that ``[t]he Secretary shall adopt standards for
transactions, and data elements for such transactions, to enable health
information to be exchanged electronically, that are appropriate for--
(A) the financial and administrative transactions described in
paragraph (2)* * *, '' which contains a list of the transactions for
which the Secretary has to adopt a standard.
The OEID would serve as an identifier for entities that are not
health plans, health care providers, or ``individuals'',\3\ yet they
need to be identified in standard transactions. Under this proposed
rule, these other entities would not be required to obtain an OEID, but
they could obtain and use one if they needed to be identified in
covered transactions. If they obtained an OEID, these entities would be
expected to use it and disclose it upon request to entities that need
to identify such entities for covered transactions.
---------------------------------------------------------------------------
\3\ Individual is defined at 45 CFR 160.103 as ``the person who
is the subject of protected health information.''
---------------------------------------------------------------------------
We are proposing to make obtaining and using the OEID voluntary.
Stakeholders expressed a strong interest in being able to obtain an
identifier, and the NCVHS agreed and recommended that such an
identifier would be beneficial to the industry. We believe that
voluntary obtaining and using is appropriate at this time, although we
recognize that the OEID may be more beneficial if obtaining and using
an OEID were required. We could do this, for example, by requiring
health plans that have business relationships with other entities that
perform certain functions on their behalf to direct in a contract or
other arrangement these other entities to obtain and use an OEID.
Alternatively, covered entities could on
[[Page 22963]]
their own initiative require their trading partners or business
associates obtain OEIDs as part of their own agreed upon business
arrangements. This rule does not propose to preclude such a business
practice. We are interested in industry opinions about our proposal to
make obtaining and using the OEID voluntary, and we also welcome
comments about whether and how it should be made mandatory.
1. The Other Entity Identifier (OEID)
As discussed in section I. of this proposed rule, health plans
often use the services of other entities to conduct certain financial
and administrative transactions on their behalf. Rental networks,
benefit managers, third party administrators, health care
clearinghouses, repricers, and other third parties often perform
functions similar to, or on behalf of, health plans. In many cases,
these other entities are currently being identified in standard
transactions in the same fields and using the same type of identifiers
used by health plans. For example, when a covered health care provider
conducts a transaction to determine eligibility for a health plan
(referred to as an ``eligibility for a health plan transaction''), the
health care provider may send an electronic request to obtain
information about a patient's eligibility for health care services to
an entity referred to as an ``information source.'' This ``information
source'' provides information back to the health care provider about a
specific patient's health care coverage that a particular health plan
provides. The ``information source'' for the patient's eligibility
information may be a health plan or one of these other entities that
perform financial and administrative services on behalf of that health
plan. Currently, in the transaction standard for the eligibility for a
health plan transaction, health plans, and the other covered entities
may use the same type of identifiers, such as a Payer Identifier
(PAYERID) or an EIN, to identify themselves as the ``information
source.''
In its September 30, 2010 letter to the Secretary, the NCVHS
explained the integral role other entities play in health care
administrative and financial electronic transactions. The NCVHS
acknowledged that while these other entities may not meet the
definition of ``health plan'' under HIPAA, they nevertheless need to be
identified in the transactions to ensure successful, efficient
communication. The reality is that these entities often need to be
identified in the same fields in which a health plan would need to be
identified because they perform very similar functions. These other
entities are using many of the same identifiers health plans currently
use in covered transactions. In addition, the NCVHS recommended that
HHS consider allowing these entities to obtain HPIDs as they may be the
actual recipients of eligibility queries or claims on behalf of the
health insurance issuer or the entity ultimately responsible for
payment. The NCVHS stressed the importance of enabling these entities
to be enumerated, and recommended that HHS consider making these
entities eligible to obtain an HPID where there is a clear use case for
them to be enumerated. Based on the testimony NCVHS heard, information
we have received, and for the reasons stated previously, we believe
that a clear use case does exist for these other entities to be
enumerated. Moreover, we anticipate that with the recent advances in
health information exchange and the development of health information
networks, the need to identify these other entities in financial and
administrative electronic transactions will only increase.
Offering the OEID as an adopted data element to identify other
entities that need to be identified in covered transactions should
reduce costs and improve efficiency for covered entities. Because other
entities are identified in the transaction standards in a similar
manner as health plans, we believe that establishing a data element to
serve as an identifier for these entities will increase efficiency by
encouraging the use of a uniform identifier and promote compliant use
of the HPID for health plans. Like the standard for HPID we are
proposing to adopt, the OEID that we are proposing would follow ISO
standard 7812, and be a 10-digit, all-numeric identifier with a Luhn
check-digit as the tenth digit. Consequently, entities that have
implemented the HPID and are seeking to implement the OEID would not
need to significantly modify their information technology systems to
accommodate the use of the OEID.
Therefore, we are proposing to establish the OEID for use in
standard transactions to identify entities that are not eligible to
obtain an HPID or NPI and are not individuals (as defined at 45 CFR
160.103). The OEID would be used to identify these other entities where
these other entities need to be identified in the standard
transactions, and for any other lawful purpose. These entities would be
eligible, but not required, to obtain an OEID for themselves. An OEID
would be obtained by the other entity from the Enumeration System
identified in 45 CFR 162.508 as discussed in this proposed rule.
Changes to its required data elements would need to be communicated to
the Enumeration System within 30-days of the change. We solicit
industry and stakeholder comments on our proposed enumeration of other
entities and adoption of the OEID for use in the standard transactions.
C. Assignment of the HPID and OEID
1. The Enumeration System
We propose that in 45 CFR 162.508, the Enumeration System would
assign unique HPIDs and OEIDs to eligible health plans and eligible
other entities, respectively. The Enumeration System would be a
comprehensive system for uniquely identifying and enumerating all
eligible health plans and other entities. It would collect and maintain
certain identifying and administrative information about CHPs, SHPs,
and other entities. The Enumeration System would also disseminate
information through a publicly available searchable database or through
downloadable files. Entities may also obtain a CHP's or SHP's HPID or
an entity's OEID by requesting the HPID from the health plan or the
OEID from the other entity.
HPIDs and OEIDs would only be assigned by the Enumeration System
through an online application process. A health plan or other entity,
when applying online for an HPID or OEID, would be required to provide
certain identifying and administrative information. We anticipate this
information will be used to verify the identity and eligibility of
health plans and other entities during the application process. We
anticipate further that a help desk will be available to assist health
plans and other entities with the online application process as
necessary and to notify health plans or other entities about problems
associated with their online applications.
The Enumeration System would also be able to deactivate or
reactivate an HPID or OEID based on receipt of sufficient information.
Examples of situations justifying deactivation of an HPID may include
the fraudulent use of the HPID by the health plan itself or an other
entity, the change of ownership of a health plan, or the restructuring
of a health plan's data processing systems such that the SHP determines
that its HPID would no longer be needed. Deactivation of an OEID may
also occur in similar situations, for example the fraudulent use of an
OEID by itself or an other entity, the change of ownership of the other
entity, or if the other entity no longer exists.
[[Page 22964]]
Reactivation of an HPID or OEID could occur, for instance, if there
were a change of ownership of a health plan or other entity, or for
health plans if there were a restructuring of a health plan's data
processing systems and the SHP determines that it again needs its HPID.
We solicit stakeholder comments on our proposals regarding the
enumeration system and process.
D. Other Considerations
1. Pharmacy Transactions
During the July 2010 NCVHS hearings on the health plan identifier,
industry stakeholders also expressed views on the use of the HPID in
retail pharmacy transactions. Currently, the pharmacy industry utilizes
two unique identifiers in retail pharmacy transactions, the Bank
Identification Number/Issue Identification Number (BIN/IIN) and the
Processor Control Number (PCN). These identifiers are programmed into
the pharmacy's software and identify the route for processing the
transaction from the pharmacy to the entity responsible for
administering the claim, which could be the health plan or the pharmacy
benefit manager. A pharmacy benefit manager is a third party
administrator for prescription drug programs and is responsible for
processing and paying claims on behalf of the health plan or drug plan
sponsor.
The BIN/IIN is a 6-digit number, requested by the pharmacies from
either the American National Standards Institute (ANSI) or the National
Council for Prescription Drug Programs (NCPDP), for use by retail
pharmacies to route prescription drug claims to the entity responsible
for processing the transaction, usually the pharmacy benefit manager.
The PCN is an identifier of up to 10 characters that is assigned by
pharmacy benefit claim processors if there is a need to further define
benefits and routing. For instance, the Medicare Part D prescription
drug benefit plan Coordination of Benefits (COB) contractor has unique
requirements for processing Medicare Part D claims. To accommodate
those requirements, many administrators or processors have created PCNs
to further differentiate the Medicare Part D prescription drug plan
benefit COB business from their other (commercial or Medicaid) COB
business. Both the BIN/IIN and PCN are embedded into pharmacies'
software programs, and identify the entity for processing claims. The
identifiers are tied to the entity that will be processing the
transaction, or where the transaction is to be sent. These identifiers
are included in information from pharmacy benefit managers and/or
health plans that are distributed to pharmacies to provide details on
who will be processing the transaction, where to route the transaction
and what rules are expected to be applied during transaction
processing. The use of the BIN/IIN and PCN allow pharmacy claims to be
adjudicated and responded to by the pharmacy benefit manager or health
plan within seconds. According to the NCPDP, the use of these two
identifiers has been very effective in ensuring efficient, timely
prescription claim processing. Both pharmacy and non-pharmacy
stakeholders testified at the July 2010 NCVHS Subcommittee on Standards
hearings that the HPID, BIN/IIN and PCN identifiers convey different
information and serve different purposes. The BIN/IIN and PCN
identifiers cannot provide the information needed about the health
plan, nor can the information in the HPID provide the information
inherent in the BIN/IIN and PCN identifiers.
A representative of the retail pharmacy industry testified that if
the health plan identifier were required to replace the BIN/IIN and/or
PCN, such a change would be extremely costly to the retail pharmacy
industry. For example, combination medical and/or prescription drug
plan identification cards would need to be re-issued with the HPID,
with no direct patient or pharmacy benefit. The NCPDP also noted that
an HPID-only requirement would require a substantive change to the
NCPDP D.0. In Version D.0, the Plan ID field is either not used or its
use is optional, meaning its use was not intentionally defined in the
standard. However, the use of the BIN and PCN fields is mandatory.
In its September 30, 2010 recommendation letter to the Secretary,
the NCVHS observed that based on the testimony presented at the July
2010 hearings, retail pharmacy transactions utilize the BIN/IIN and/or
PCN identifier to facilitate their transaction processing and that
changing to an other identifier would significantly affect existing
data flows in the retail pharmacy industry that currently work
effectively. As such, the pharmacy industry requested an exemption from
the requirement to use only HPID in retail pharmacy transactions
because of the current success with the BIN/IIN and PCN identifiers for
routing purposes. The NCVHS recommended that use of the HPID in place
of the existing BIN/IIN and PCN identifier in retail pharmacy business
transactions not be required, but that the HPID be required on the
HIPAA-named standard transactions for retail pharmacy. We are not
proposing any changes to the NCPDP Version D.0 standard, and we do not
believe that the HPID should be required in place of the existing BIN/
IIN and PCN identifier in retail pharmacy transactions.
2. Definition of Covered Health Care Provider
We are proposing to move the definition of ``covered health care
provider'' from 45 CFR 162.402 to 45 CFR 162.103 because the term
``covered health care provider'' has a broader application beyond just
Subpart D.
E. Effective and Compliance Dates for the HPID
In section 1104(c)(1) of the Affordable Care Act, Congress
specified that ``the Secretary shall establish a standard for a unique
health plan identifier based on the input of the National Committee on
Vital and Health Statistics.'' Congress further provided that the rule
shall be ``effective'' not later than October 1, 2012. Therefore, we
are planning for the effective date of this rule to be October 1, 2012.
The effective date would mark the beginning of the implementation
period for the HPID, which we expect would be the first day health
plans may apply to obtain an HPID and the first day an entity may apply
to obtain an OEID from the Enumeration System. We propose that the
compliance date for all covered entities, except small health plans, to
use the HPID in standard transactions be 2 years after the effective
date of the final rule which, if the effective date is October 1, 2012
as we are planning, would be October 1, 2014. The compliance date for
small health plans would be October 1, 2015. Small health plans would
not be prohibited from complying earlier and using the HPID in their
transactions at any time before October 1, 2015.
The Congress uses the terms ``effective'' and ``adoption'' in the
Affordable Care Act as applied to both the rules that the Secretary
must promulgate to adopt the various standards as well as to the
standards themselves. In these provisions of the Affordable Care Act,
Congress consistently uses the term ``effective date'' to mean the time
when the relevant provision--either the rule or an adopted standard--
must go into effect.
In line with our previous interpretations, we have interpreted the
``effective date'' of this rule to mean the date the Secretary adopts
the HPID as the Unique Health Plan Identifier. In the NPI final rule,
for instance, the effective date of the rule was the date the Secretary
adopted a standard unique
[[Page 22965]]
health identifier for health care providers, and the compliance date
marked the time by which an entity had to obtain and use an NPI in the
standard transactions. We consequently interpret this section of the
Act as specifying October 1, 2012 as the effective date of the final
rule, when the policies take effect and the implementation period for
the HPID begins.
Understanding that Congress intended the effective date for the
HPID final rule to be October 1, 2012, we note that this date marks the
first day that a health plan will be able to apply to obtain an HPID.
The 2-year implementation period for this new standard sets the date by
which health plans (excluding small health plans) must obtain and
covered entities (excluding small health plans) must use an HPID in the
standard transactions as October 1, 2014. The compliance date for small
health plans would be October 1, 2015.
We are soliciting comment on the effective and compliance dates for
the HPID.
III. Proposed Addition to the National Provider Identifier Requirements
A. Background
As discussed in section I of this proposed rule, the final rule
adopting the NPI as the standard unique health identifier for health
care providers was published on January 23, 2004 (69 FR 3434) (``2004
NPI final rule''). While the 2004 NPI final rule requires covered
health care providers to obtain NPIs for themselves and certain
subparts and use them in standard transactions, it does not require a
health care provider who is not a covered entity to obtain an NPI. Even
if a noncovered health care provider chooses to obtain an NPI, the
provider is not required to comply with certain NPI requirements, which
means the provider does not have to disclose its NPI to entities who
may need it for standard transactions. When a noncovered health care
provider does not obtain an NPI or does not disclose it, certain
problems arise for entities that need to identify that noncovered
health care provider in standard transactions. We are proposing an
addition to the requirements for the NPI regulations to address such
problems.
The 2004 NPI final rule (69 FR 3445) recognized that,
``[s]ituations exist in which a standard transaction must identify a
health care provider that is not a covered entity. * * * A noncovered
health care provider may or may not have applied for and received an
NPI. In the latter case, * * * an NPI would not be available for use in
the standard transaction. We encourage every health care provider to
apply for an NPI, and encourage all health care providers to disclose
their NPIs to any entity that needs that health care provider's NPI for
use in a standard transaction. Obtaining NPIs and disclosing them to
entities so they can be used by those entities in standard transactions
will greatly enhance the efficiency of health care transactions
throughout the health care industry. * * * The absence of NPIs when
required in * * * claims by the implementation specifications may delay
preparation or processing of those claims, or both. Therefore, we
strongly encourage health care providers that need to be identified in
standard transactions to obtain NPIs and make them available to
entities that need to use them in those transactions.''
The 2004 NPI final rule (69 FR 3445) provided the following example
of a situation where a health care provider is not a covered entity but
its NPI is needed for a standard transaction: ``A pharmacy claim that
is a standard transaction must include the identifier (which, as of the
compliance date, would be the NPI) of the prescriber. Therefore, the
pharmacy needs to know the NPI of the prescriber in order to submit the
pharmacy claim. The prescriber may be a physician or other practitioner
who does not conduct standard transactions. The prescriber is
encouraged to obtain an NPI so it can be furnished to the pharmacy for
the pharmacy to use on the standard pharmacy claim.''
Within just a few months after implementation of the 2004 NPI final
rule, this issue had been raised so frequently to HHS that, on
September 23, 2008, it published a Frequently Asked Question to address
questions about pharmacy claims rejected by payers for lack of an
individual prescriber NPI (Answer ID 9419) (https://
questions.cms.hhs.gov/app/answers/detail/a--id/9419/~/does-the-
national-provider-identifier-(npi)-final-rule-require-individual).
Due to recurring issues, we believe this scenario described in the
2004 NPI final rule needs to be addressed. Pharmacies are encountering
situations where the NPI of a prescribing health care provider needs to
be included in the pharmacy claim, but the prescribing health care
provider does not have an NPI or has not disclosed it. This situation
has become particularly problematic in the Medicare Part D program, as
we explain more fully later in this proposed rule.
By way of background, every prescriber has at least one identifier
that may be submitted on a pharmacy claim. These identifiers include
the NPI, Drug Enforcement Administration (DEA) number, uniform provider
identification number (UPIN), or State license number. The Medicare
Part D program is an optional prescription drug benefit for all
Medicare beneficiaries. Medicare Part D contracts with private
companies, called plan sponsors, to administer the benefit through Part
D drug plans. In the Medicare Part D program, plan sponsors must submit
a prescription drug event (PDE) record to Medicare Part D every time a
beneficiary's prescription is filled under the program. Plan sponsors
use information from the claim generated by the pharmacy to complete
the PDE record, which contains summary information. These PDE records,
which currently must contain a prescriber identifier are necessary to
support accurate payments to plan sponsors by Medicare Part D.
The use of multiple and invalid prescriber identifiers in the
Medicare Part D program has been identified as a concern. In a June
2010 report titled, ``Invalid Prescriber Identifiers on Medicare Part D
Drug Claims'' (``June 2010 report''), the HHS Office of the Inspector
General (OIG) reported the findings of its review of prescriber
identifiers on 2007 Part D PDE records. The OIG reported finding 18.4
million PDE records that contained 527,749 invalid identifiers,
including invalid NPIs, DEA registration numbers, and UPINs. Payments
by Part D drug plans and enrollees for prescriptions associated with
these PDE records totaled $1.2 billion. Prescriber identifiers are
valuable Part D program safeguards. These identifiers are the only data
on Part D drug claims to represent that licensed practitioners have
written prescriptions for Medicare enrollees. Although invalid
prescriber identifiers are not an automatic indication of erroneous or
fraudulent prescriptions or pharmacy claims, the lack of valid
prescriber identifiers on Part D drug claims hampers Medicare's program
integrity efforts.
To address these concerns raised by the June 2010 report, in the
``Medicare Program; Changes to the Medicare Advantage and the Medicare
Prescription Drug Benefit Programs for Contract Year 2013 and Other
Changes'' final rule (which was filed for public inspection onApril 2,
2012 (hereinafter referred to as April 2012 final rule). CMS requires
Part D sponsors to include an active and valid prescriber National
Provider Identifier (NPI) on prescription drug event records (PDEs)
that they submit to CMS, which will assist the Federal government in
fighting possible fraudulent activity in the Part D
[[Page 22966]]
program, because prescribers will be consistently and uniformly
identified. This policy will not interfere with beneficiary access to
needed medications because Part D sponsors must validate the NPI at
point of sale, and if this is not possible, permit the prescription to
be dispensed and obtain the valid NPI afterwards.''
Pharmacies that contract with Part D sponsors may be involved in
obtaining a prescriber's NPI depending on the agreement between the
pharmacies and Part D sponsors. Because Part D sponsors and pharmacies
generally have no regulatory leverage or other recourse over
prescribers who fail or refuse to disclose NPIs, they must resort to
using provider information databases to determine if a prescriber has
an NPI or contact the prescriber, if known. If a Part D sponsor or
network pharmacy is unable to obtain a prescriber NPI for use on the
claim and PDE, the reimbursement from Medicare Part D to the sponsor
(or alternatively, from the sponsor to the pharmacy depending on the
agreement between the parties), could be negatively affected. We seek
to address both current and future problems described previously that
are presented by prescribers who do not have NPIs or do not disclose
them, by proposing an additional requirement for the NPI regulations.
B. Provisions for a Proposed Requirement To Obtain and Use NPIs
We are proposing an additional requirement for organization covered
health care providers that have as a member, employ, or contract with,
an individual health care provider who is not a covered entity and is a
prescriber. Organization health care providers are health care
providers that are not individuals. Our proposal would require an
organization to require such a prescriber to: (1) obtain an NPI; and
(2) to the extent the prescriber writes a prescription while acting
within the scope of the prescriber's relationship with the
organization, disclose the NPI upon request to any entity that needs it
to identify the prescriber in a standard transaction.
Organization covered health care providers would be required to
implement the requirement within 180 days after the effective date of
the final rule, which would be reflected in 45 CFR 162.404(a)(2) with
regulation text stating that an organization covered health care
provider must comply with the implementation specifications in 45 CFR
162.410(b). We expect the final rule to be effective on October 1,
2012, in which case covered organization health care providers would
have to meet the requirement by April 7, 2013.
The requirement would be reflected in the regulation text in 45 CFR
162.410(b) by adding the following new language. ``An organization
covered health care provider that has as a member, employs, or
contracts with an individual health care provider who is not a covered
entity and is a prescriber, must require such health care provider to:
(1) obtain an NPI from the National Plan and Provider Enumeration
System (NPPES) and (2) to the extent the prescriber writes a
prescription while acting within the scope of the prescriber's
relationship with the organization, disclose the NPI upon request to
any entity that needs it to identify the prescriber in a standard
transaction.''
This proposed requirement represents a narrow exception to the
position we took in the 2004 NPI final rule. The 2004 NPI final rule
(69 FR 3440), we stated ``[w]e do not consider individuals who are
health care providers * * * and who are members or employees of an
organization health care provider to be ``subparts'' of those
organization health care providers, as described earlier in this
section. Individuals who are health care providers are legal entities
in their own right. The eligibility for an ``Entity type code 1'' NPI
of an individual who is a health care provider and a member or an
employee of an organization health care provider is not dependent on a
decision by the organization health care provider as to whether or not
an NPI should be obtained for, or by, that individual. The eligibility
for an ``Entity type code 1'' NPI of a health care provider who is an
individual is separate and apart from that individual's membership or
employment by an organization health care provider.''
By virtue of this proposed rule, we are still not considering
noncovered health care providers that are prescribers to be subparts of
organization health care providers, nor are we proposing that they are
not legal entities in their own right. Rather, our proposal would close
a gap in the NPI rule by virtue of the relationships that covered
organization health care providers have with noncovered individual
health care providers.
The providers we seek to reach are prescribers who are not required
to obtain and disclose an individual NPI under the current NPI
regulations. To the best of our understanding, these prescribers are
largely hospital-based providers who staff clinics and emergency
departments, or otherwise provide on-site medical services, such as
medical residents and interns, as well as prescribers in group
practices, whose services are billed under a group or ``Entity type
code 2'' NPI regardless of whether they have obtained an individual, or
``Entity type code 1,'' NPI. These prescribers are using the ``Entity
type code 2'' to identify themselves on prescriptions, or an other or
no identifier, which does not identify them as individuals. We believe
this proposal describes the various relationships that organization
health care providers have with such prescribers, and that the
relationship is one in which organizations can exercise control over
these prescribers and require them to do something.
For instance, a physician or dentist who prescribes may be a member
of a group practice. As noted in the 2004 NPI final rule (69 FR 3439
and 3440), ``group health care providers are entities composed of one
or more individuals (members), generally created to provide coverage of
patients' needs in terms of office hours, professional backup and
support, or range of services resulting in specific billing or payment
arrangements.'' For purposes of this rule, we consider group health
care providers to be organization health care providers.'' By virtue of
the contractual or other relationship between a group and a member, a
group can require the member to do certain things, such as work certain
on-call hours. Likewise, a resident or nurse practitioner who performs
medical services at a hospital can be required to do certain things,
such as to abide by medical staff by-laws and hospital policies and
procedures, as a hospital employee or contractor. This proposed rule
does not specify how organization covered health care providers should
impose the requirement to obtain an NPI and disclose it on prescribers.
Organization covered health care providers may have a number of
alternatives by which they may accomplish this, for example, through a
written agreement, an employment contract, or a directive to abide by
the organization health care provider's policies and procedures.
The requirement for a prescriber to disclose his or her NPI would
apply for prescriptions written pursuant to the prescriber's
relationship with the covered health care organization provider. For
example, if a physician works for two group practices, A and B, group
practice A would be required to require the physician to disclose his
or her NPI for pharmacy claims that are for prescriptions written by
the prescriber for a patient of group practice A, and group practice B
would be required to do the same for pharmacy claims for
[[Page 22967]]
prescriptions written by the prescriber for a patient of that group
practice.
We considered expanding our proposal to organization covered health
care providers that grant clinical privileges to individual health care
providers who are not covered entities and are prescribers, so that we
would be certain to encompass hospital residents and interns under our
proposal (to the extent they are not otherwise required to obtain Type
1 NPIs). However, it is our belief such prescribers will be encompassed
under our proposal as drafted, as we further believe our proposal would
encompass virtually all prescribers who are not currently required to
obtain and disclose an individual NPI. Exceptions may include, by way
of example, a self-employed physician who does not bill insurance plans
and does not have a member, employee or contractual relationship with
an organization covered health care provider (or has one with a
noncovered organization health care provider), such as a psychiatrist
or plastic surgeon who only accepts cash from patients. Even with
respect to these prescribers, we hope this rule highlights the
importance of voluntarily obtaining NPIs to facilitate their patients'
access to prescribed items. We seek comment regarding the extent to
which residents, interns, and any other prescribers would not be
reached under our proposal and any alternative approach that would
encompass them.
We believe this proposal furthers several goals and purposes
identified in the Act. First, the statutory purpose of the
Administrative Simplification provisions of HIPAA (see section 261 of
the Act (42 U.S.C. 1320d note)) is,
To improve the Medicare program under title XVIII of the Social
Security Act, the Medicaid program under title XIX of such Act, and
the efficiency and effectiveness of the health care system, by
encouraging the development of a health information system through
the establishment of uniform standards and requirements for the
electronic transmission of certain health information and to reduce
the clerical burden on patients, health care providers, and health
plans.
In accord with this statutory purpose, our proposal would improve
the Medicare program by virtually ensuring the availability of an NPI
as a prescriber identifier on pharmacy claims in the Part D program
because virtually all prescribers would have to obtain an NPI and
disclose it to entities that need it for use in standard transactions.
That in turn would support program integrity efforts described in the
April 2012 final rule noted previously which requires Part D sponsors
to submit PDEs that contain only individual NPIs as prescriber
identifiers, effective January 1, 2013. As noted in the April 2012
final rule, ``[w]hen multiple prescriber identifiers, not to mention
dummy or invalid identifiers, are used, authorities must take an
additional step in their data analysis before even achieving a refined
data set to use for further analysis to identify possible fraud. For
example, having to cross-reference multiple databases that update on
different schedules to be certain of the precise prescribers involved
when multiple identifiers were used, would necessitate several
additional steps of data pre-analysis and also would introduce
potential errors in correctly matching prescribers among databases.''
Invalid identifiers are generally those that do not appear as
current in any prescriber identifier registry. Dummy or default
identifiers have never appeared in any prescriber identifier registry
but have been used successfully on pharmacy claims in place of valid
prescriber identifiers (for instance, when the prescriber's NPI was not
available), because they met the length and format requirements of a
prescriber identifier. Default identifiers present additional
challenges to authorities, since the actual prescription must be
researched to identify the prescriber. Valid prescriber identifiers are
essential to conducting claims analyses to identify aberrant claims
prescribing patterns that may indicate fraudulent activity, such as
drug diversion schemes or billing for prescription drugs not provided,
which includes circumstances with active prescriber participation and
those involving forged prescriptions. Improving the accuracy and
dependability of the prescriber identifier on Part D claims and PDEs,
improves the ability to identify fraud and, in turn, protects and
improves the Medicare program.
This proposal would further improve the Medicare program by nearly
eliminating the instances in which Part D sponsors' reimbursement (or
possibly their network pharmacies' reimbursement, depending on the
contractual relationship between the sponsors and the pharmacies) would
be negatively impacted due to the actions of prescribers with whom they
may have no business relationship. Part D sponsors would be expected to
price any measurable expectation of financial risk, if any, due to
nonreimbursement by CMS into their Part D bids, thus possibly
increasing premiums and subsidies paid under the program. This proposal
would make such action by Part D sponsors unnecessary by virtually
ensuring the availability of prescriber NPIs.
This proposal also accords with the purpose of HIPAA as amended by
the Affordable Care Act. Section 1104(a)(2) of the Affordable Care Act
revised the statutory purpose of HIPAA Administrative Simplification by
adding, at the end, that its purpose is to ``reduce the clerical burden
on patients, health care providers, and health plans.'' To the extent
pharmacies only have to accept one identifier--the NPI--rather than
four possible identifiers from prescribers for the majority of their
claims, the administrative burden on all parties involved in the
processing and payment of these claims would be lessened. Pharmacies
and payers would no longer have to cross-check provider identifier
databases to determine if the prescriber had an NPI when an alternate
identifier was used, or contact the prescriber. Moreover, pharmacies
and prescribers would no longer have to respond to inquiries from
payers regarding the existence of an NPI when an alternate prescriber
identifier was used.
The proposal is also supported by section 1173(a)(3) of the Act,
which requires the transaction standards adopted by the Secretary to
accommodate the needs of different types of health care providers. Our
proposal would accommodate the needs of pharmacies, a type of health
care provider, by ensuring that a prescriber NPI is available to them
when needed for their claims and reducing the instances in which they
must cross-reference provider information databases or research a
prescription. Similarly, section 1173(b)(1) of the Act states that,
[t]he Secretary shall adopt standards providing for a standard
unique health identifier for each individual, employer, health plan,
and health care provider for use in the health care system. In
carrying out [this requirement] for each health plan and health care
provider, the Secretary shall take into account multiple uses for
identifiers and multiple locations and specialty classifications for
health care providers.
Our proposal takes into account the particular needs of pharmacies
by addressing a problem they have under HIPAA.
While some prescribers will have to apply to obtain an NPI under
this proposed requirement, the NPI is free of charge and requires only
the completion of a three-page application form that seeks primarily
identifying and location information. Thus, we believe the reduction in
administrative burden that will be achieved by our proposal outweighs
the minimal burden placed on prescribers who will have to obtain NPIs.
[[Page 22968]]
The 2004 NPI final rule, as noted previously, foretold the issues
that could arise if noncovered health care providers did not obtain
NPIs, and therefore encouraged them to do so. The preamble of the 2004
NPI final rule stated that disclosing NPIs to entities for use in
standard transactions will greatly enhance the efficiency of health
care transactions throughout the health care industry, and that the
absence of NPIs when required in those claims by the implementation
specifications may delay preparation or processing of those claims, or
both. Health care providers responded by obtaining NPIs in large
numbers even when not required to, and we believe the vast majority of
prescribers already have NPIs. CMS data shows that approximately 90
percent of Medicare Part D claims as reported in PDEs currently
submitted contain valid prescriber NPIs even though alternate
prescriber IDs are permitted at this time. But, while the vast majority
of Medicare Part D claims contain individual NPIs, 10 percent do not.
This proposal would help ensure this last 10 percent is addressed.
After discussions with representatives of the provider data industry,
we estimate there are approximately 1.4 million active prescribers in
the United States, of which approximately 160,000 do not have an NPI.
It is these prescribers who would have to obtain an NPI if this rule is
finalized as proposed.
C. Effective and Compliance Dates
We propose that the date by which an organization covered health
care provider must comply is 180 days after the effective date of the
final rule. In other words, if the final rule is effective on October
1, 2012, then by April 7, 2013, organization covered health care
providers that have a prescriber as a member, employ, or contract with
a prescriber who is not a covered entity, must require him or her to
(1) obtain an NPI and; (2) to the extent the prescriber writes a
prescription while acting within the scope of the prescriber's
relationship with the organization, to disclose the NPI upon request to
any entity that needs it to identify the prescriber in a standard
transaction.
IV. Proposed Change to the Compliance Date for ICD-10-CM and ICD-10-PCS
A. Background
As discussed in section I. of this proposed rule, the final rule
adopting ICD-10-CM and ICD-10-PCS (collectively, ``ICD-10'') as HIPAA
standard medical data code sets was published in the Federal Register
on January 16, 2009 (74 FR 3328) (the ``ICD-10 final rule''). The ICD-
10 final rule requires covered entities to use ICD-10 beginning October
1, 2013.
In late 2011 and early 2012, three issues emerged that led the
Secretary to reconsider the compliance date for ICD-10: (1) The
industry transition to Version 5010 did not proceed as effectively as
expected; (2) providers expressed concern that other statutory
initiatives are stretching their resources; and (3) surveys and polls
indicated a lack of readiness for the ICD-10 transition.
1. The Transition to Version 5010 and Its Effect on ICD-10 Readiness
Concurrent with the publication of the ICD-10 final rule, HHS
published in the Federal Register the Modifications final rule which
set January 1, 2012 as the compliance date for Version 5010 (74 FR
3296). As the industry approached the January 1, 2012 Version 5010
compliance date, a number of implementation problems emerged, some of
which were unexpected. These included--
Trading partners were not ready to test the Version 5010
standards due to vendor delays in delivering and installing Version
5010-compliant software to their provider clients;
Version 5010 errata were issued to correct typographical
mistakes and other maintenance issues that were discovered as the
industry began its internal testing of the standards, which delayed
vendor delivery of compliant products and external testing;
Differences between address requirements in the ``provider
billing address'' and ``pay to'' address fields adversely affected
crossover claims processing;
Inconsistent payer interpretation of standard requirements
at the front ends of systems resulted in rejection of claims, as well
as other technical and standard misinterpretation issues;
Edits made in test mode that were later changed when
claims went into production without adequate notice of the change to
claim submitters; and
Insufficient end to end testing with the full scope of
edits and business rules in place to ensure a smooth transition to full
production.
Given concerns that industry would not be compliant with the
Version 5010 standards by the January 1, 2012 compliance date, we
announced on November 17, 2011 that we would not initiate any
enforcement action against any covered entity that was not in
compliance with Version 5010 until March 31, 2012, to enable industry
adequate time to complete its testing and software installation
activities. On March 15, 2012, this date was extended an additional 3
months, until June 30, 2012.
The ICD-10 final rule set October 1, 2013 as the compliance date,
citing industry testimony presented to NCVHS and many of the over 3,000
industry comments received on the ICD-10 proposed rule. The analysis in
the ICD-10 final rule with regard to setting a compliance date
emphasized the interdependency between implementation of ICD-10 and
Version 5010, and the need to balance the benefits of ICD-10 with the
need to ensure adequate time for preparation and testing before
implementation. As noted in the ICD-10 final rule, ``[w]e cannot
consider a compliance date for ICD-10 without considering the
dependencies between implementing Version 5010 and ICD-10. We recognize
that any delay in attaining compliance with Version 5010 would
negatively impact ICD-10 implementation and compliance.'' (74 FR 3334)
Based on NCVHS recommendations and industry feedback received on the
proposed rule, we determined that ``24 months (2 years) is the minimum
amount of time that the industry needs to achieve compliance with ICD-
10 once Version 5010 has moved into external (Level 2) testing.'' (74
FR 3334) In the ICD-10 final rule, we concluded that the October 2013
date provided the industry adequate time to change and test systems
given the 5010 compliance date of January 1, 2012.
As implementation of ICD-10 is predicated on the successful
transition of industry to Version 5010, we are concerned that the
delays encountered in Version 5010 have affected ICD-10 planning and
transition timelines.
2. Providers have Expressed Concern That Other Statutory Initiatives
Are Stretching Their Resources
Since publication of the ICD-10 and Modifications final rules, a
number of other statutory initiatives were enacted, requiring health
care provider compliance and reporting. Providers are concerned about
their ability to expend limited resources to implement and participate
in the following initiatives that all have similar compliance
timeframes.
The EHR Incentive Program was established under the Health
Information Technology for Economic and Clinical Health (HITECH) Act, a
part of the American Recovery and Reinvestment Act of 2009 (Pub. L.
111-5). Medicare and Medicaid incentive payments are available to
eligible professionals and hospitals for adopting electronic health
record (EHR)
[[Page 22969]]
technology and demonstrating meaningful use of such technology.
Eligible professionals and hospitals that fail to meaningfully use EHR
technology could be subject to Medicare payment adjustments beginning
in FY 2015. The Physician Quality Reporting System is a voluntary
reporting program that provides incentives payments to eligible
professionals and group practices that satisfactorily report data on
quality measures for covered Physician Fee Schedule services furnished
to Medicare Part B Fee-for-Service beneficiaries. The eRx Incentive
Program is a reporting program that uses a combination of incentive
payments and payment adjustments to encourage electronic prescribing by
eligible professionals. Beginning in 2012 through 2014, eligible
professionals who are not successful electronic prescribers are subject
to a payment adjustment. Finally, section 1104 of the Affordable Care
Act imposes additional HIPAA Administrative Simplification requirements
on covered entities, shown in Chart 1.
Chart 1: HIPAA Compliance Dates From the Affordable Care Act
----------------------------------------------------------------------------------------------------------------
Covered entity compliance date HIPAA requirements from the Affordable Care Act
----------------------------------------------------------------------------------------------------------------
January 1, 2013........................ Operating rules for eligibility for a health plan and health
care claim status transactions.
December 31, 2013...................... Health plan compliance certification requirements for health
care electronic funds transfers (EFT) and remittance advice,
eligibility for a health plan, and health care claim status
transactions.
January 1, 2014........................ Standards and operating rules for health care electronic funds
transfers (EFT) and remittance advice transactions.
December 31, 2015...................... Health plan compliance certification requirements for health
care claims or equivalent encounter information, enrollment and
disenrollment in a health plan, health plan premium payments, health
care claims attachments, and referral certification and authorization
transactions.
January 1, 2016........................ Standard for health care claims attachments.
Operating rules for health care claims or equivalent encounter
information, enrollment and disenrollment in a health plan, health
plan premium payments, referral certification and authorization
transactions
Proposed October 1, 2014............... Unique health plan identifier.
----------------------------------------------------------------------------------------------------------------
3. Current State of Industry Readiness for ICD-10
It is crucial that all segments of the health care industry
transition to ICD-10 at the same time because the failure of any one
industry segment to successfully implement ICD-10 has the potential to
affect all other industry segments. Ultimately, such failure could
result in returned claims and provider payment delays that disrupt
provider operations and negatively impact patient access to care.
In early 2012, it became evident that sectors of the health care
industry would not be prepared for the October 1, 2013 ICD-10
compliance date. Providers in particular voiced concerns about their
ability to meet the ICD-10 compliance date as a result of a number of
factors, including obstacles they experienced in transitioning to
Version 5010 and the other initiatives that stretch their resources. A
CMS survey conducted in November and December 2011 (hereinafter
referred to as the CMS readiness survey) found that 26 percent of
providers surveyed indicated that they are at risk for not meeting the
October 1, 2013 compliance date.\4\
---------------------------------------------------------------------------
\4\ ``Version 5010 and ICD-10 Readiness Assessment: Conducted
among Health Care Providers, payers, and Vendors for the Centers for
Medicare & Medicaid Services (CMS),'' December, 2011, Prepared by
CMS. Survey responses received from 404 health care providers, 101
payers, and 90 vendors.
---------------------------------------------------------------------------
In February 2012, the Workgroup for Electronic Data Interchange
(WEDI) conducted a survey on ICD-10 readiness, hereinafter referred to
as the WEDI readiness survey.\5\ WEDI received responses from more than
2,600 providers, health plans, and vendors showing that the industry is
uncertain about its ability to meet ICD-10 compliance milestones. Data
from the WEDI survey indicated that nearly 50 percent of the provider
respondents did not know when they would complete their impact
assessment.\6\ In addition, the survey found that approximately 33
percent of providers did not expect to begin external testing in 2013,
while approximately 50 percent of providers did not know when testing
would occur.\7\
---------------------------------------------------------------------------
\5\ ``Survey: ICD-10 Brief Progress,'' February 2012, conducted
by the Workgroup for Electronic Data Interchange (WEDI).
\6\ An impact assessment for ICD-10 is performed by a covered
entity to determine business areas, policies, processes and systems,
and trading partners that will be affected by the transition to ICD-
10. An impact assessment is a tool to aid in planning for
implementation.
\7\ For providers, the CMS ICD-10 Implementation Guide
recommends that they complete their impact assessments by Winter
2012 and begin external testing in the Fall of 2012. CMS provides
implementation guides for providers, payers, and vendors to assist
with the transition from ICD-9 to ICD-10 codes. It is a resource for
covered entities providing detailed information for planning and
executing the ICD-10 transition process. CMS recommends industry use
the guide as a reference.
---------------------------------------------------------------------------
Other segments of the industry, such as health plans and software
vendors, also reported that they would benefit from additional time for
implementation. While the CMS ICD-10 Implementation Guide recommends
that payers begin external testing in the fall of 2012, the WEDI
readiness survey found that most health plans do not expect to begin
external testing until 2013. In addition, about 50 percent of vendors
are not yet halfway through development of ICD-10 products. Vendor
delays in product development can result in provider and payer delays
in implementing ICD-10.
Given the evidence that segments of the health care industry will
likely not meet the October 1, 2013 compliance date, the reasons for
that likelihood, and the likelihood that a compliance date delay would
significantly improve the successful and concurrent implementation of
ICD-10 across the health care industry, we are proposing to extend the
compliance date for ICD-10.
B. One-Year Delay
We are proposing to extend the compliance date for ICD-10 for 1
year, from October 1, 2013 to October 1, 2014. This change would be
reflected in the regulations at 45 CFR 162.1002. While we considered a
number of alternatives for the delay, as discussed in the Impact
Analysis of this proposed rule, we believe a 1-year delay would provide
sufficient time for small providers and small hospitals to become ICD-
10 compliant and would be the least financially burdensome to those who
had planned to be compliant on October 1, 2013.
To determine the new compliance date for ICD-10, we balanced the
need for additional time for small providers and small hospitals to
become compliant with the financial burden of
[[Page 22970]]
a delay on entities that have developed budgets and planned process and
system changes around the October 1, 2013 compliance date. Entities
that have started planning and working toward an October 1, 2013
implementation would incur costs by having to reassess and adjust
implementation plans and maintain contracts to manage the transition
beyond October 1, 2013. We concluded that a 1-year delay would strike a
reasonable balance by providing sufficient time for small providers and
small hospitals to become compliant and would minimize the financial
burden on those entities that have been actively planning and working
toward being compliant on October 1, 2013.
Data from two surveys helped us in our determination to propose 1
additional year for compliance. First, the CMS readiness survey
revealed that 26 percent of providers reported that they are at risk
for non-compliance on October 1, 2013, citing insufficient time as one
risk factor.\8\ Second, an informal survey conducted by Edifecs, a
health care IT company, of 50 senior health care officials representing
a wide range of organizations found that thirty-seven percent of
respondents stated that a 1-year delay would be beneficial to them.\9\
---------------------------------------------------------------------------
\8\ ``Version 5010 and ICD-10 Readiness Assessment: Conducted
among Health Care Providers, payers, and Vendors for the Centers for
Medicare & Medicaid Services (CMS),'' December, 2011, Prepared by
CMS.
\9\ ``Survey: Industry Reaction to Potential Delay of ICD-10--A
Delay will be Costly, but Manageable * * * Unless it's more than a
Year,'' February 27, 2012, conducted by Edifecs. The survey's
participants included commercial payers (25%), Blue Cross Blue
Shield plans (25%), healthcare providers (18%), government entities
such as State Medicaids (9%), medical claim clearinghouses (6%), and
other healthcare industry organizations (17%).
---------------------------------------------------------------------------
While we considered a 2-year delay, we determined that the
financial burden could be too significant for those entities that would
otherwise be ready on October 1, 2013. As discussed further in the
Impact Analysis of this proposed rule, we estimate it will cost health
plans up to an additional 30 percent of their current ICD-10
implementation budgets for a 1-year delay and therefore, we assume that
a 2-year delay would be at least double the cost of a 1-year delay;
that is, a 2-year delay would cost at least $13 billion for all
commercial and government health plans. In addition to financial
concerns, industry has suggested that a 2-year delay may stop the
implementation of ICD-10 completely. The Edifecs poll found that nearly
70 percent of respondents believe that a 2-year delay would be either
``potentially catastrophic or cause an unrecoverable failure,'' and
that ``a delay of longer than a year will likely freeze budgets, slow
down schedules, or stop work altogether.'' \10\ Only 2 percent of
Edifecs respondents said there would be a benefit to a 2-year delay.
---------------------------------------------------------------------------
\10\ Edifecs poll, 2012.
---------------------------------------------------------------------------
Finally, in its March 2, 2012 letter to the Secretary on a possible
delay of the ICD-10 compliance date, the NCVHS urged that any delay
should be announced as soon as possible and should not be for more than
1 year. The NCVH made this recommendation in consideration of its
belief that a delay would cause a significant financial burden ``that
accrues with each month of delay.'' \11\
---------------------------------------------------------------------------
\11\ Letter to Kathleen G. Sebelius, Secretary, U.S. Department
of Health and Human Services, from the National Committee of Vital
and Health Statistics (NCVHS), ``Possible Delay of Deadline for
Implementation of ICD-10 Code Sets,'' March 2, 2012.
---------------------------------------------------------------------------
We believe that a 1-year delay would benefit all covered entities,
even those who had are actively planning and striving for a 2013
implementation. A 1-year delay would enable the industry as a whole to
test more robustly and implement simultaneously, which would foster a
smoother and more coordinated transition to ensure the continued and
uninterrupted flow of health care claims and payment. Therefore, we are
proposing that covered entities must comply with ICD-10 on October 1,
2014.
V. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995 (PRA), agencies are
required to provide a 60-day notice in the Federal Register and solicit
public comment on a collection of information requirement submitted to
the Office of Management and Budget (OMB) for review and approval. In
order to fairly evaluate whether an information collection should be
approved by OMB, section 3506(c)(2)(A) of the PRA requires that we
solicit comment on the following issues:
Whether the information collection is necessary and useful
to carry out the proper functions of the agency.
The accuracy of the agency's estimate of the information
collection burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
A. Information Collection Requirements (ICRs) Regarding HPID/OEID on
Health Plan and Other Entities (Sec. 162.512 and Sec. 162.514)
In order to apply for an HPID or OEID, there is an initial one-time
requirement for information from health plans that seek to obtain an
HPID and other entities that elect to obtain an OEID. In addition,
health plans and other entities may need to provide updates to
information.
With respect to the collection of information requirements for the
HPID, it is important to bear in mind that: (1) Systems modifications
necessary to implement the HPID/OEID may overlap with the other systems
modifications needed to implement other Affordable Care Act standards;
(2) some modifications may be made by contractors such as practice
management vendors, in a single effort for a multitude of affected
entities; and (3) identifier fields are already in place and HPID/OEID
will, in many instances, simply replace the multiple identifiers
currently in use.
Under this proposed rule, a CHP, as defined in 45 CFR 162.103, will
have to obtain an HPID from a centralized electronic Enumeration
System. A SHP, as defined in 45 CFR 162.103, would be eligible but not
required to obtain an HPID. If a SHP obtains an HPID, it would apply
either directly to the Enumeration System or its CHP would apply to the
Enumeration System on its behalf. Other entities may apply to obtain an
OEID from the Enumeration System. Health plans that obtain an HPID and
other entities that obtain an OEID would have to communicate any
changes to their information to the Enumeration System within 30 days
of the change. A covered entity must use an HPID to identify a health
plan in a standard transaction.
We estimate that there will be up to 15,000 entities that will be
required to, or will elect to, obtain an HPID or OEID. We based this
number on the following data in Chart 2.
Chart 2: Number and Type of Entities That May Obtain an HPID or OEID
------------------------------------------------------------------------
Number of
Type of entity entities
------------------------------------------------------------------------
Self insured group health plans............................ 12,000*
Health insurance issuers, individuals and group health 1,827**
markets, HMOs, including companies offering Medicaid
managed care..............................................
[[Page 22971]]
Medicare, Veterans Health Administration (VHA), Indian 60
Health Service (IHS), TRICARE, and State Medicaid programs
Clearinghouses and Transaction Vendors..................... 162***
Third Party Administrators................................. 750 ****
------------
Total.................................................. ~15,000
------------------------------------------------------------------------
*``Report to Congress: Annual Report on Self -Insured Group Health
Plans,'' by Hilda L. Solis, Secretary of Labor, March 2011.
** ``Patient Protection and Affordable Care Act; Standards Related to
Reinsurance, Risk Corridors, and Risk Adjustment, 2011 Federal
Register (Vol. 76), July, 2011,'' referencing data from
www.healthcare.gov.
*** Health Insurance Reform; Modifications to the Health Insurance
Portability and Accountability Act (HIPAA) Electronic Transaction
Standards; Proposed Rule http://edocket.access.gpo.gov/2008/pdf/E8-19296.pdf, based on a study by Gartner.
**** Summary of Benefits and Coverage and the Uniform Glossary; Notice
of Proposed
Rulemaking http://www.gpo.gov/fdsys/pkg/FR-2011-08-22/pdf/2011-21193.pdf.
Note that the number of health plans that will be required, or have
the option, to obtain an HPID is considerably larger than the number of
health plans for which we used in the calculations in section V. of
this proposed rule. This is because self-insured health plans are
required to obtain HPIDs if they meet the requirements of a Controlling
health plan under this proposed rule. However, we assume that very few
self-insured group health plans conduct standard transactions
themselves; rather, they typically contract with TPAs or insurance
issuers to administer the plans. Therefore, there will be significantly
fewer health plans that use HPIDs in standard transactions than health
plans that are required to obtain HPIDs, and only health plans that use
the HPIDs in standard transactions will have direct costs and benefits.
To comply with these requirements, health plans and other entities
will complete the appropriate application/update form online through
the Enumeration System. This online form serves two purposes: applying
for an identifier and updating information in the Enumeration System.
Most health plans and other entities will not have to furnish
updates in a given year. However, lacking any available data on rate of
change, we elected to base our assumptions on information in the
Medicare program that approximately 12.6 percent of health care
providers provide updates in a calendar year. We anticipate this figure
would be on the high end for health plans and other entities. Applying
this assumption, we can expect that 1,764 health plans will need to
complete and submit the HPID application update form in a given year.
Applying for HPID or OEID is a one-time burden. In future years,
this burden would apply only to new health plans and as an option for
other entities as described in the section V of this proposed rule.
From 2013 to 2018, industry trends indicate that the number of health
plans will remain constant, or even decrease.\12\ We assume that the
number of new health plans will be small, and that the costs will be
negligible. Therefore, our calculations reflect that there will be no
statistically significant growth in the number of health plans or other
entities and we calculate zero growth in new applications.
---------------------------------------------------------------------------
\12\ See Robinson, James C., ``Consolidation and the
Transformation of Competition in Health Insurance,'' Health Affairs,
23, no.6 (2004):11-24; ``Private Health insurance: Research on
Competition in the Insurance Industry,'' U.S. Government
Accountability Office (GAO), July 31, 2009 (GAO-09-864R); American
Medical Association, ``Competition in Health Insurance: A
Comprehensive Study of US Markets,'' 2008 and 2009.
---------------------------------------------------------------------------
We estimate it will take 30 minutes to complete the application
form and use an hourly labor rate of approximately $23/hour, the
average wage reported for professional and business and services
sector, based on data from the Department of Labor, Bureau of Labor
Statistics, June 2011, ``Average hourly and weekly earnings of
production and nonsupervisory employees (1) on private nonfarm
payrolls.'' (ftp://ftp.bls.gov/pub/suppl/empsit.ceseeb11.txt). This
represents a unit cost of $11.50 per application for both HPID and
OEID.
Because our initial estimate for the number of applications for
OEID is small (162 Clearinghouses and Transaction Vendors + 750 TPAs =
912) and the costs negligible, we do not include separate calculations.
We have elected instead to offer the unit cost figure as a baseline if
commenters demonstrate that the universe of applications for OEID is
likely to expand significantly.
To further reduce burden and plan for compliance with the
Government Paperwork Elimination Act, we propose accepting electronic
applications and updates over the internet. We explicitly solicit
comment on how we might conduct this activity in the most efficient and
effective manner, while ensuring the integrity, authenticity, privacy,
and security of health plan and other entity information.
B. ICRs Regarding Implementation Specifications: Health Care Providers
(Sec. 162.410)
We are proposing to put an additional requirement on covered
organization health care providers that employ, have as members, or
have contracts with individual health care providers who are not
covered entities but who are prescribers. By 180 days after the
effective date of the final rule, such organizations must require such
health care providers: (1) To obtain, by application if necessary, an
NPI from the National Plan and Provider Enumeration System (NPPES); (2)
to the extent the prescriber writes a prescription while acting within
the scope of the prescriber's relationship with the organization,
disclose his or her NPI, upon request to any entity that needs the NPI
to identify the prescriber in a standard transaction.
The burden associated with the addition to the requirements of
Sec. 162.410 as discussed in this proposed rule is the one-time
application burden, and later update burden as necessary, on
prescribers who do not already have an NPI, who have a relationship
with a covered health care provider, and who must be identified in a
standard transaction. We estimate that there are approximately 1.4
million prescribers in the United States, of which approximately
160,000 do not have an NPI. It is these prescribers who would have to
obtain an NPI if this rule is finalized as proposed. Based on the
estimations in the NPI final rule, we estimate that it will take 20
minutes to complete an application for an NPI and use an hourly labor
rate of approximately $23/hour, the average wage reported for
professional and business and services sector, based on data from the
Department of Labor, Bureau of Labor Statistics, June 2011, ``Average
hourly and weekly earnings of production and nonsupervisory employees
(1) on private nonfarm payrolls.'' (ftp://ftp.bls.gov/pub/suppl/empsit.ceseeb11.txt). Additionally, we have calculated an increase of 3
percent for labor costs for each of the years 2013 through 2016 for an
hour rate of approximately $24/hour for year 2013.
Table 4 shows the estimated annualized burden for the HPID and NPI
PRA in hours.
[[Page 22972]]
Table 4--Annual Information Collection Burden*
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hourly
Burden per Total labor cost Total capital/
Regulation section OMB control Respondents Responses response annual of Total labor maintenance Total cost
No. (hours) burden reporting cost costs ($) ($)
($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sec. 162.410............... 0938-New 160,000 160,000 0.33 52,800 24 1,267,200 0 1,267,200
Sec. 160.512............... 0938-New 15,000 15,000 0.50 7,500 24 180,000 0 180,000
-------------------------------------------------------------------------------------------------------------
Total.................... ........... 175,000 175,000 ........... 60,300 ........... ........... .............. 1,447,200
--------------------------------------------------------------------------------------------------------------------------------------------------------
*2013 dollars.
To obtain copies of the supporting statement and any related forms
for the proposed paperwork collections referenced previously, access
our Web Site address at http://www.cms.hhs.gov/PaperworkReductionActof1995, or Email your request, including your
address, phone number, OMB number, and CMS document identifier, to
Paperwork@cms.hhs.gov, or call the Reports Clearance Office on (410)
786-1326. If you comment on these information collection and
recordkeeping requirements, please do either of the following:
1. Submit your comments electronically as specified in the
ADDRESSES section of this proposed rule; or
2. Submit your comments to the Office of Information and Regulatory
Affairs, Office of Management and Budget, Attention: CMS Desk Officer,
CMS-0040-P Fax: (202) 395-6974; or Email: OIRA_submission@omb.eop.gov
VI. Regulatory Impact Analysis
A. Need for Regulatory Action
1. NPI for Non-Covered Health Care Providers
The compliance date for use of the NPI by health care providers was
May 23, 2007. At this point, we believe there are 160,000 health care
providers who do not already have an NPI. For these health care
providers, obtaining an NPI is not a burdensome endeavor, as it is free
of charge and takes approximately 20 minutes to file an application to
obtain one. However, the availability of these additional prescriber
NPIs will greatly assist entities who need them for use in standard
transactions, including for the Medicare Part D program, as described
previously. See section V.B. of this proposed specifically for a
summary of the time costs associated with obtaining an NPI. We have
included the costs associated with obtaining an NPI detailed in section
V.B in the summary Tables 32 and 33 of the RIA. Because there are few
health care providers who do not already have an NPI, we estimate that
the addition to the NPI requirements will have little impact on health
care providers and on the health industry at large. We solicit comment
on this.
2. HPID
As noted in section I of this proposed rule, health plans and other
payers are identified in a number of different ways in covered
transactions by the health care industry. Health plan identifiers are
currently used to facilitate routing of covered transactions or, in
other words, ``to determine either where the standard electronic
transactions are to be sent if the receiver is [a] health plan or from
where they came from if the sender is a health plan.''\13\ The primary
function of the HPID proposed in this rule is to create a standard data
element for covered entities to identify health plans in HIPAA covered
transactions.
---------------------------------------------------------------------------
\13\ J. Daley, ``Testimony before the NCVHS Subcommittee on
Standards on the National Health Plan Identifier on behalf of
America's Health Insurance Plans and the Blue Cross and Blue Shield
Association,'' July 19, 2010, http://www.ncvhs.hhs.gov.
---------------------------------------------------------------------------
Different segments in each HIPAA standard transaction require an
identifier to identify the payer or sender/recipient of a particular
transaction. (See Table 1 for a list of HIPAA standard transactions,
and Table 3 for an example of a segment that requires a payer
identifier.) Currently, when a covered entity, for business reasons,
inputs an identifier that identifies a health plan into a transaction
segment, the identifier is proprietary or based on the NAIC code, EIN,
or TIN of the health plan or other entity. Some health plans use
multiple identifiers to identify themselves in transactions.
Standardization of the health plan identifier is expected to
ameliorate some routing issues. It is expected to clarify, to some
extent, the sender or recipient of standard transactions, when the
sender or recipient is a health plan. For instance, a health plan that
uses different identifiers to identify itself in covered transactions
creates inefficiencies and potential confusion among its trading
partners. Participating health care providers that are its trading
partners, for instance, could be required to use different identifiers
for different transactions, even to identify the same health plan. If
the HPID is adopted, such a health plan would likely use one
identifier, thereby making it easier for the covered health care
provider to identify the health plan as the sender or recipient of the
standard transaction.
By ameliorating routing issues, the HPID and OEID will add
consistency to identifiers, which will provide for a higher level of
automation, particularly for provider processing of the X12 271
(eligibility response) and X12 835 (remittance advice). In the case of
the X12 835, the HPID and OEID will allow reconciliation of claims with
the claim payments to be automated at a higher level.
However, according to testimony and industry studies, the most
significant value of the HPID and what is being proposed as the OEID is
that they will serve as foundations for other regulatory and industry
initiatives. The implementation of HPID, in and of itself, may not
provide significant monetary savings for covered entities, with the
exception of providing time savings by immediately solving certain
routing issues. Instead, financial benefits are expected to be realized
mostly downstream, when the HPID is used in coordination with other
regulatory and industrial administrative simplification initiatives.
Testimony from the July 19, 2010 NCVHS hearing reinforced this idea.
As an analogy, the standardization of the width of railroad tracks
does not, in and of itself, result in monetary savings. However, such
standardization has ensured connectivity between diverse railroad
systems that has resulted in time and cost savings in the movement of
freight across the country. In a like manner, standardization of a
single data element in health care transactions does not, in and of
itself, produce substantial time or cost savings. However, the diverse
identifiers currently used by multiple health plans are akin to the
different track widths used by various railroad systems. Like the
standardization of railroad track widths, the HPID serves as a
foundation for more efficient and cost effective transmission of health
care information.
[[Page 22973]]
In an industry white paper, one health care provider association
echoed the foundational importance of the HPID and stated that a
standard identifier for health plans is ``viewed by many as a crucial
step toward one-stop, automated billing.'' In the same paper, that
association stated that, in order to begin the movement toward
automated billing, standard identifiers were needed for more entities
with ``payer'' function than just ``health plans,'' including entities
with primary financial responsibility for paying a particular claim,
entities responsible for administering a claim, entities that have the
direct contract with the health care provider, and secondary or
tertiary payers for the claim.\14\ The association went on to contend
that fee schedules and plan and product types would need to be
identified with this health plan identifier.
---------------------------------------------------------------------------
\14\ ``National Health Plan Identifier White Paper,'' prepared
by the American Medical Association (AMA) Practice Management Center
(PMC), September 22, 2009.
---------------------------------------------------------------------------
In this rule, we are not proposing that the HPID or the OEID
contain intelligence that would include fee schedules or benefit plans
or product types. However, we are proposing that entities other than
health plans may get an OEID. We view the adoption of the HPID and the
suggested option of an OEID as foundations for the ``one-stop,
automated billing'' that this professional association advocated.
This impact analysis will take these foundational benefits of HPID
and, for the sake of illustration, attribute some of the monetary
savings from the downstream results to implementation and use of the
HPID. It is important to view these estimates as an attempt to
illustrate the foundational effect of the HPID rather than as a precise
budgetary prediction.
3. Need for a Delay in Implementation of ICD-10, and General Impact of
Implementation
The ICD-10 final rule requires covered entities to comply with ICD-
10 on October 1, 2013. The provisions of this proposed rule would
change the compliance date to October 1, 2014.
The process of transitioning from ICD-9 to ICD-10, if not carefully
coordinated, poses significant risk to provider reimbursement. Should
health care entities' infrastructure not be ready or thoroughly tested,
providers may experience returned claims and delayed payment for the
health care services they render to patients. There has been mounting
evidence over the past several months that a significant percentage of
providers believe they do not have sufficient resources or time to be
ready to meet the October 1, 2013 ICD-10 compliance deadline.
Two distinct types of issues are implicated by a transition of this
magnitude, and the costs associated with both might be avoided if the
ICD-10 compliance date is delayed as proposed in this rule. First,
there may be entities that have not readied their systems, personnel,
or processes to achieve compliance by October 1, 2013. For example,
vendor practice management and/or other software must be updated to
process claims with ICD-10 codes, then installed and tested internally.
Likewise, staff needs to be trained and systems and forms prepared for
the new code set. In a CMS survey conducted in November and December
2011 (hereinafter referred to as the CMS readiness survey), 25% of
providers surveyed indicated that they are at risk for not meeting the
October 1, 2013 compliance date.\15\ In February 2012, the Workgroup
for Electronic Data Interchange (WEDI) conducted a survey on ICD-10
readiness (WEDI readiness survey) that indicated that nearly 50 percent
of the 2,140 provider respondents did not know when they would complete
their impact assessment.\16\ An illustration of what could occur if
elements of industry are not prepared for the transition to ICD-10 can
be seen by the January 1, 2012 transition to Version 5010, where we
have heard from several provider organizations reporting numerous
practices have not been paid for long periods due to the Version 5010
transition.
---------------------------------------------------------------------------
\15\ ``Version 5010 and ID-10 Readiness Assessment: Conducted
among Health Care Providers, payers, and Vendors for the Centers for
Medicare & Medicaid Services (CMS),'' December, 2011, Prepared by
CMS.
\16\ ``Survey: ICD-10 Brief Progress,'' February 2012, conducted
by the Workgroup for Electronic Data Interchange (WEDI).
---------------------------------------------------------------------------
Second, beyond ``readiness'' and ``compliance,'' there are issues
that will arise if trading partners have not thoroughly tested ICD-10.
``Readiness'' is only a self-reported indicator of the potential
success of an ICD-10 transition and can be unreliable; we know this
from similar industry surveys done for Version 5010 that indicated high
levels of readiness only to find multiple issues once claims were
submitted in production mode. The other indicator of success is the
quality and robustness of testing. Clearinghouses cannot assist in the
ICD-10 transition as they are unable to correct coding issues without
viewing the underlying documentation, which is not a typical
clearinghouse role. In general, only a provider can change/modify a
code, so it is incumbent upon providers to ensure a successful ICD-10
conversion. In many cases, providers' success will be predicated upon
timely vendor delivery of ICD-10-compliant software, and coordination
must be developed with payer systems and new fee schedules. Providers'
practice management systems (PMS) must be programmed to process ICD-10
codes, and, with many providers transitioning to EHRs, there needs to
be a well-tested interface between electronic health records and the
PMS.
In an informal poll conducted by Edifecs (hereinafter referred to
as the Edifecs poll), a health care IT company, with responses from 50
senior health care officials representing a wide range of
organizations, 37 percent of respondents stated that a 1-year delay
would be beneficial for them.\17\ According to the Edifecs analysis,
``For those organizations that have the determination to keep moving
forward as if the delay had never been announced, it may end up being a
true gift on the testing front.''\18\
---------------------------------------------------------------------------
\17\ ``Survey: Industry Reaction to Potential Delay of ICD-10--A
Delay will be Costly, but Manageable * * * Unless it's more than a
Year,'' February 27, 2012, conducted by Edifecs. The survey's
participants included commercial payers (25%), Blue Cross Blue
Shield plans (25%), healthcare providers (18%), government entities
such as State Medicaids (9%), medical claim clearinghouses (6%), and
other healthcare industry organizations (17%).
\18\ Ibid.
---------------------------------------------------------------------------
In the CMS readiness survey, 75 percent of providers surveyed cited
the lack of time and/or staff as a barrier to implementing ICD-10 on
time. The survey also indicated that given just 3 additional months, an
additional 14 percent of providers would be able to achieve compliance
by December 31, 2013. This indicates that a delay would be helpful in
overcoming one of the major obstacles to compliance--lack of time--and
that a delay of a year would enable providers to achieve not only
``readiness'' in terms of system interoperability, but also give the
time for more thorough testing of ICD-10.
B. Introduction
We have examined the impacts of this notice of proposed rulemaking
as required by Executive Order 12866 on Regulatory Planning and Review
(September 30, 1993, as further amended), Executive Order 13563 on
Improving Regulation and Regulatory Review (January 18, 2011), the
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354)
(as amended by the Small Business
[[Page 22974]]
Regulatory Enforcement Fairness Act of 1996, Pub. L. 104-121), section
1102(b) of the Social Security Act, section 202 of the Unfunded
Mandates Reform Act of 1995 (Pub. L. 104-4), Executive Order 13132 on
Federalism (August 4, 1999), and the Congressional Review Act (5 U.S.C.
804(2)).
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, of reducing costs, of harmonizing rules, and of promoting
flexibility. Executive Order 13563 also directs agencies not only to
engage the public and provide an opportunity to comment on all
regulations, but also calls for greater communication across all
agencies to eliminate redundancy, inconsistency, and overlapping, as
well as outlines processes for improving regulation and regulatory
review.
A Regulatory Impact Analysis must be prepared for major rules with
economically significant effects ($100 million in 1995 dollars or more
in any 1-year). Because of the impact on the health care industry of
the proposed adoption, implementation, and use of the HPID and the
proposed delay in the compliance date for ICD-10, this rule has been
designated an ''economically'' significant regulatory action, under
section 3(f)(1) of Executive Order 12866 as it will have an impact of
over $100 million on the economy in any 1 year.
The impacts of implementing HPID and delaying the compliance date
for transition to ICD-10 are quite different, and, because of their
respective impacts, both provisions of the proposed rule would be
considered economically significant. Accordingly, we have prepared two
independent RIAs: One analysis of the impact of the proposed adoption
and use of the HPID and one for the proposed delay of compliance date
for transition to the ICD-10. These RIAs, to the best of our ability,
present the costs and benefits of this notice of proposed rulemaking,
and this proposed rule has been reviewed by the Office of Management
and Budget. The RIA on the proposed delay of ICD-10 follows the RIA on
the proposed implementation and use of the HPID.
We anticipate that the adoption of the HPID and the OEID and the
additional requirement for organization covered health care providers
to require certain non-covered individuals who are prescribers to
obtain and use an NPI would result in benefits that outweigh the costs
to providers and health plans. We anticipate that the delay of ICD-10
will have costs to health plans and clearinghouses, though it will be
beneficial to a group of providers.
In addition, under section 205 of the UMRA (2 U.S.C. 1535), having
considered at least three alternatives for the HPID that are referenced
in the section VI.D. of this proposed rule, HHS has concluded that the
provisions in this rule are the most cost effective alternative for
implementing HHS' statutory requirements concerning administrative
simplification. We did not consider alternatives to the addition to the
NPI requirements that is proposed in this rule, as the NPI is the
standard identifier for health care providers under HIPAA and based on
ongoing industry feedback, prescriber NPIs are not always available.
Therefore, we believe a regulatory requirement closing the prescriber
loophole in the NPI rule is necessary to ensure that the remaining
prescribers without an NPI obtain one. We estimate that the proposed
addition will have little financial impact on industry and is therefore
cost effective in its own right.
Similarly, we have considered four alternatives for delaying ICD-10
compliance.
The Regulatory Flexibility Act (RFA), as amended, requires agencies
to analyze options for regulatory relief of small businesses if a rule
has a significant impact on a substantial number of small entities. For
purposes of the RFA, small entities include small businesses, nonprofit
organizations, and small government jurisdictions. Small businesses are
those with sizes below thresholds established by the Small Business
Administration (SBA). Individuals and States are not included in the
definition of a small entity.
For purposes of the RFA, most physician practices, hospitals and
other health care providers are small entities, either by nonprofit
status or by having revenues less than $10 million for physician
practices and less than $34.5 million for hospitals in any 1 year. We
have determined that the proposed adoption of the HPID in this proposed
rule will have an impact on a substantial number of small entities and
that an initial regulatory flexibility analysis, an analysis on the
impact of this proposed rule on small entities, is required. The
regulatory flexibility analysis on the impact of the proposed adoption
of HPID will come after the RIA. However, the initial regulatory
flexibility analysis for HPID concludes that, although a significant
number of small entities may be affected by this proposed rule, the
economic impact on small entities will not be significant.
We have also determined that the proposed delay of the compliance
date for ICD-10 will have an impact on a substantial number of small
entities and this regulatory flexibility analysis will follow the RIA
for the proposed delay of ICD-10. The initial regulatory flexibility
analysis for the proposed delay of ICD-10 concludes that small entities
will be positively impacted economically by the proposed compliance
date delay and that there will be no significant burden.
In addition, section 1102(b) of the Act requires a regulatory
impact analysis for ``any rule or regulation proposed under title
XVIII, title XIX, or part B of [the Act] that may have a significant
impact on the operations of a substantial number of small rural
hospitals.'' This proposed rule, however, is being proposed under title
XI, part C, ``Administrative Simplification,'' of the Act, and,
therefore, does not apply. As to the addition to the NPI requirements,
the method for compliance by covered organization health care
providers, including small rural hospitals, is discretionary, and could
vary. It could take the form of a verbal directive to prescribers whom
they employ or contract with, to revising hospital policies and
procedures as part of routine updating, or some other option. We
believe there will not be a significant impact to the operations of a
substantial number of small rural hospitals. We seek industry feedback
on this assumption.
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also
requires that agencies assess anticipated costs and benefits before
issuing any rule whose mandates require spending in any 1-year of $100
million in 1995 dollars, updated annually for inflation. In 2012, that
threshold is approximately $139 million. This proposed rule contains
mandates that would likely impose spending costs on State governments
and the private sector, of more than $139 million. We will illustrate
the costs of adoption of the HPID to the State governments,
specifically the impact to State Medicaid programs, and to the private
sector in our consideration of costs to health plans in the RIA. As to
the addition to the NPI requirements, again, since the method for
compliance by covered organization health care providers is
discretionary and could vary, for example, from a verbal directive to
prescribers whom they employ or contract with, to updating employment
or contracting
[[Page 22975]]
agreements, we believe there is no mandate which imposes spending costs
on State government or the private sector in any 1 year of $139 million
or more.
We will illustrate the costs of the proposed delay of ICD-10 to
State Medicaid programs and to the private sector in our consideration
of costs to health plans in the RIA that addresses costs and benefits
of the delay of compliance of ICD-10.
Executive Order 13132 establishes certain requirements that an
agency must meet when it promulgates a proposed rule (and subsequent
final rule) that imposes substantial direct requirement costs on State
and local governments, preempts State laws, or otherwise has Federalism
implications. The proposed adoption of the HPID in this proposed rule
will not have a substantial direct effect on State or local
governments, does not preempt States, or otherwise have Federalism
implications. The proposed delay of compliance with ICD-10 in this
proposed rule will not have a substantial direct effect on State or
local governments, does not preempt States, or otherwise have
Federalism implications.
C. HPID: Assumptions Regarding the Use of Transaction Standards
1. Current and Projected Use of Three Transactions
A major assumption in our impact analysis of the HPID is that the
health care industry will experience increased use of three electronic
health care standard transactions over the next 10 to 15 years. The
three transactions are the eligibility for a health plan transaction,
the health care claim status transaction, and the health care
electronic funds transfer (EFT) and remittance advice transaction. The
reason we chose these three transactions in particular is because we
assume these three transactions will see the greatest increase in use
from 2013 to 2023. We base the assumption that these three transactions
will increase in use on the following three premises:
First, the number of total health care claims is expected to
increase considerably in the United States. Claims are expected to
increase due to an aging population that will require an increasing
number of health care services. For instance, aging baby boomers will
double Medicare's enrollment between 2011 and 2031.\19\ Also, the
Affordable Care Act is expected to increase the number of insured
adults by 30 to 33 million from 2016 on.\20\ Moreover, the average
American has increased the number of visits to a physician's practice:
According to data from HHS, ``From 1997 through 2007, the annual number
of ambulatory care visits increased by 25 percent, driven both by the
aging of the population, as older persons have higher visit rates than
younger persons in general, and by an increase in utilization by older
persons.'' \21\ All these indicators point to a substantial increase in
patients and patient visits to providers. The expected increase in
patients and patient visits will drive providers to seek more automated
processes in order to check patients' eligibility through the
eligibility for a health plan transaction, check claim status with the
health care claim status transaction, and receive payments and
remittance advice through the health care EFT and remittance advice
transaction.
---------------------------------------------------------------------------
\19\ ``The 2011 Medicare Trustees Report: The Baby Boomer
Tsunami,'' presentation by the American Enterprise Institute for
Public Policy Research, May 2011: http://www.aei.org/event/100407
\20\ http://www.whitehouse.gov/healthreform/relief-for-americans-and-businesses
\21\ S.M. Schappert and E.A. Rechsteiner, ``Ambulatory Medical
Care Utilization Estimates for 2007,'' Vital and Health Statistics,
Series 13, Number 169, 2011.
---------------------------------------------------------------------------
Second, it is anticipated that the use of electronic business
transactions and electronic transmissions in general is expected to
become more widespread for U.S. businesses and society at large. For
example, in 2007, the typical organization made 26 percent of its
payments to other business (B2B) electronically; by 2010, that
percentage rose to 43 percent.\22\ Overall, the number of noncash
payments among consumers and businesses alike increased about 4.5
percent per year from 2003 to 2009.\23\
---------------------------------------------------------------------------
\22\ ``2010 AFP Electronic Payments: Report of Survey Results,''
November 2010, Association for Financial Professionals, underwritten
by J.P. Morgan.
\23\ ``The 2010 Federal Reserve Payments Study; Noncash Payment
Trends in the United States 2006-2009,'' sponsored by the Federal
Reserve System, April 5, 2011.
---------------------------------------------------------------------------
Third, statutory and regulatory initiatives at the State and
Federal level will drive or attract health care entities to increased
usage of health care electronic transactions. On the Federal level,
initiatives include the adoption and implementation of standards for
health care EFT and the implementation of a unique health plan
identifier as proposed by this rule. Likewise, the increase will be due
to the adoption of operating rules for the eligibility for a health
plan transaction and for the health care EFTs, and remittance advice
transaction. The operating rules for the eligibility for a health plan
transaction will go into effect in 2013 and the operating rules for the
health care EFTs transaction, will take effect in 2014.
While our impact analysis is based on the expected increase in
usage of three HIPAA transactions, other HIPAA transactions may
increase in use as well. However, we have not attempted to draw
conclusions about other HIPAA transactions because (1) there are no
regulatory attempts to streamline other transactions in the near term
(with, for example, the adoption of operating rules); and (2) we have
less of an understanding of the impact that implementation of the HPID
will have on covered transactions other than these three.
Table 5 lists our assumptions on the increased use of these three
HIPAA transactions between 2013 and 2023. We have calculated the 2013
estimates--for example, our baseline--based on a number of sources and
calculations:
We estimated the number of eligibility requests
(electronic and non-electronic) by taking 90 percent \24\ of the total
the projected number of claims.\25\ The percentage estimate of
electronic eligibility requests as a proportion of total eligibility
requests in 2013 is derived from an analysis of a number of different
industry studies on electronic data interchange (EDI) usage.\26\
---------------------------------------------------------------------------
\24\ The Oregon Survey found that, for every claim, .9 requests
for eligibility were conducted. ``Oregon Provider and Payer
Survey,'' 2010 (http://www.oregon.gov/OHPPR/HEALTHREFORM/AdminSimplification/Docs/FinalReport_AdminSimp_6.3.10.pdf).
\25\ An average of high and low projected estimates of claims
from Health Insurance Reform; Modifications to the Health Insurance
Portability and Accountability Act (HIPAA) Electronic Transaction
Standards; Proposed Rule http://edocket.access.gpo.gov/2008/pdf/E8-19296.pdf.
\26\ ``Oregon Provider and Payer Survey,'' 2010 ``Overhauling
the US Healthcare Payment System,'' conducted by McKinsey & Company,
published in The McKinsey Quarterly, June 2007. (http://www.mckinseyquarterly.com/Overhauling_the_US_health_care_payment_system_2012).
The National Progress Report on Healthcare Efficiency, 2010,
Produced by the U.S. Healthcare Efficiency Index.
---------------------------------------------------------------------------
Similarly, we estimated the number of claim status
requests by taking 0.14 percent of the total projected number of
claims.\27\ The percentage estimate of electronic claim status requests
as a proportion of total claim status request in 2013 is derived from
an analysis of a number of different industry studies on EDI usage.\28\
---------------------------------------------------------------------------
\27\ The Oregon Survey found that, for every claim, .14 were
followed up by a claim status request. ``Oregon Provider and Payer
Survey,'' 2010.
\28\ ``Oregon Provider and Payer Survey,'' 2010 ``Overhauling
the US Healthcare Payment System,'' conducted by McKinsey & Company,
published in The McKinsey Quarterly, June 2007. (http://www.mckinseyquarterly.com/Overhauling_the_US_health_care_payment_system_2012).
---------------------------------------------------------------------------
[[Page 22976]]
For remittance advice, we started with the projection for
national health expenditures \29\ and used Medicare data to arrive at
the average dollar amount of a single payment.\30\ Using that
calculation, we were able to estimate the projected number of health
care claim payments for 2013 considering the ratio of remittance advice
per payment according to Medicare data.\31\ The percentage estimate of
electronic remittance advice as a proportion of total remittance advice
was calculated using a weighted average of Medicare data (electronic
remittance advice as a percentage of total remittance advice), VHA
data,\32\ and industry studies.\33\
---------------------------------------------------------------------------
\29\ National Health Expenditure Projections 2009-2019 (CMS),
http://www.cms.gov/NationalHealthExpendData/25_NHE_Fact_Sheet.asp).
\30\ CMS Electronic Data Interchange (EDI) Performance
Statistics (http://www.cms.gov/EDIPerformanceStatistics/) and CMS
CROWD data.
\31\ There are 6 percent more remittance advice sent than
payments (some remittance advice adjusts to no payment). CMS
Electronic Data Interchange (EDI) Performance Statistics (http://www.cms.gov/EDIPerformanceStatistics/) and CMS CROWD data.
\32\ Financial Management Service, U.S. Department of Treasury,
Payment Volume Charts Treasury-Disbursed Agencies
(www.fms.treas.gov/eft/reports.html).
``Comments from VHA Health Care as Health Care Provider,''
testimony by Barbara Mayerick for NCVHS December 3, 2010 hearing.
``FY10 Geographic Distribution of VA Expenditures (GDX),''
Veterans Health Administration Chief Business Office.
\33\ The National Progress Report on Healthcare Efficiency,
2010, Produced by the U.S. Healthcare Efficiency Index.
---------------------------------------------------------------------------
We have projected the percentage use of EDI out to 2023 using a
number of calculations:
In the Eligibility and Claim Status Operating Rules IFC
published in the July 8, 2011 Federal Register (76 FR 40458), we
projected that electronic eligibility requests will increase by 15
percent year over year from 2013 through 2017 and by 8 percent year
over year from 2018 through 2022 due to a number of factors. See the
Eligibility and Claim Status Operating Rules IFC (76 FR 40481) for the
assumptions behind that projection. Note that, despite the 15 percent
increase, the number of claims (patient visits) will increase
substantially over that same period, so the percentage of electronic
eligibility requests as a proportion of all eligibility requests will
increase at a much slower rate.
In the Eligibility and Claim Status Operating Rules IFC,
we projected that electronic claim status inquiries will increase by 20
percent year over year from 2013 through 2017 and by 10 percent year
over year from 2018 through 2022 due to a number of factors. See the
Eligibility and Claim Status Operating Rules IFC (76 FR 40481) for the
assumptions behind that projection. Again, despite the year over year
increases, the number of claims (patient visits) will increase
substantially over that same period, so the percentage of electronic
claim status requests as a proportion of all claim status requests will
increase at a much slower rate.
We have noted previously the reasons why we predict that
electronic transactions, overall, will increase, including a
substantial increase in the number of claims, more widespread use of
electronic transactions by U.S. businesses and society at large, and
State and Federal mandates requiring or promoting electronic
transactions of health information. Due to these reasons, we estimate
20 percent increase of electronic remittance advice transactions year
over year from 2013 through 2018, and a 12 percent increase year over
year from 2019 through 2023. Again, despite the year over year
increases, the number of total remittance advice transactions will
increase substantially over that same period, so the percentage of
electronic remittance advice as a proportion of all remittance advice
will increase at a much slower rate.
We believe these estimates to be conservative: The increase in
patients and patient visits in the next decade alone may drive a
greater number of health care entities to adopt EDI. However, we
recognize the uncertainties inherent in this projection, and we are
specifically soliciting comments on these assumptions.
Table 5--Predicted Percentage in EDI Usage
----------------------------------------------------------------------------------------------------------------
Health care payment and
remittance advice
Eligibility for a Health care claim (electronic remittance
health plan status transaction: advice) transaction:
transaction: percentage percentage of percentage of
Year of electronic electronic transactions electronic transactions
transactions as a as a proportion of as a proportion of
proportion of total total claim status total remittance advice
eligibility inquiries transactions transactions (does not
and responses include percentage of
electronic payments)
----------------------------------------------------------------------------------------------------------------
2013................................. 14..................... 12..................... 26
2023................................. 25..................... 26..................... 70
----------------------------------------------------------------------------------------------------------------
2. Projected Increased Use of Three Transactions Attributable to
Implementation of HPID
When attempting to quantify anticipated savings, we recognize that
some of increased use of three HIPAA transactions from 2013 to 2023
will be attributable to the implementation of administrative
simplification initiatives, including the adoption of the EFT standard,
operating rules for four transactions, and Version 5010 of the HIPAA
transactions as implemented by the Modifications final rule. Therefore,
we attribute some of the savings that are derived from an increased use
in these transactions to these other initiatives.
For purposes of this impact analysis, we will assume a percentage
of the increase in use of electronic transactions by health care
providers and health plans as attributable to implementation of an HPID
in order to illustrate that the HPID is foundational for overall
administrative simplification (Table 6).
Our basic argument is echoed in the Transactions and Code Sets
proposed rule, NPI proposed rule, and the Modifications to the Health
Insurance Portability and Accountability Act (HIPAA) Electronic
Transaction Standards proposed rule (73 FR 49742), published in the
Federal Register on August 22, 2008, (hereinafter referred to as the
Modifications proposed rule): Administrative simplification initiatives
drive covered entities to increase their usage of electronic
transactions, and electronic transactions have substantial cost savings
over manual transactions. The implementation of administrative
simplification initiatives mandated by the Affordable Care Act is
expected to streamline HIPAA electronic
[[Page 22977]]
transactions, make them more consistent, and decrease the dependence on
manual intervention in the transmission of health care and payment
information. This, in turn, will drive more health care providers and
health plans to utilize electronic transactions in their operations.
The anticipated cost savings of all administrative simplification
regulations and initiatives, therefore, can be divided into two
categories: Materials and time. First, the material cost savings that
results from each transaction that moves from a non-electronic, manual
transmission of information to an electronic transaction. These cost
savings result from covered entities using less paper, postage, and
equipment which are required for paper-based transactions. Second, the
use of electronic transactions to conduct billing and insurance related
tasks takes considerable less time than when the same transactions are
done through phone, email or postal mail, or manually. Therefore, each
move from non-electronic transaction to an electronic transaction
results in staff-time savings and cost reductions.
The estimated cost and benefits of implementation and use of HPID
need to be understood in the context of the HPID being foundational to
other administrative simplification initiatives, both those initiated
by industry and those regulated by State or Federal governments. If
other initiatives do not follow, then the HPID will likely have little
substantive impact. The ranges given of possible cost and benefit
impacts are reflective of the uncertainty inherent in multifactorial
environments such as the health care industry.
To illustrate the foundational aspects of the HPID, we estimated a
range of overall increase of 1 to 2 percent per year, starting in 2015,
in the use of both the eligibility for a health plan transaction and
the claim status transaction ``attributable'' to implementation of the
HPID over the next decade. In addition, we estimate a 1 to 3 percent
increase in the use of electronic health care payment and remittance
advice transaction attributable to implementation of the HPID because
the routing of that transaction is especially important for the payment
process. Given the overall increase in both EDI and health care
transactions in general expected over the next decade, this annual
increase attributable to HPID accounts for a small percentage of
electronic transactions as a proportion of total transactions over
those 10 years. For example, after an annual increase in remittance
advice due to implementation of the HPID of 1 to 3 percent from 2013
through 2023, ultimately, only 1 to 2 percent of all electronic
remittance advice transactions from 2013 through 2023 will be
attributable to implementation of the HPID. We welcome comments about
this approach from industry and other stakeholders.
Table 6--Predicted Percentage of EDI Usage from 2013 to 2023 Attributable to Implementation of HPID
----------------------------------------------------------------------------------------------------------------
Health care payment and
remittance advice
Eligibility for a (electronic remittance
health plan Health care claim advice) transaction:
transaction: percentage status transaction: percentage of
of electronic percentage of electronic transactions
transactions electronic transactions attributable to
Year attributable to attributable to implementation of HPID
implementation of HPID implementation of HPID/ as a proportion of
as a proportion of OEID as a proportion of total remittance advice
eligibility inquiries total claim status transactions (does not
and responses transactions include percentage of
health care claim
payments EFT)
----------------------------------------------------------------------------------------------------------------
2023................................. 1% to 2%............... 1% to 2%............... 1% to 2%
----------------------------------------------------------------------------------------------------------------
D. Alternatives Considered Regarding the HPID and NPI
In deciding to adopt the HPID as the format for the national unique
health plan identifier, we considered a number of alternatives, on
which we solicit public and stakeholder comments. As noted, we did not
consider alternatives to the addition to the NPI requirements.
For the most part, the HPID alternatives were not chosen because
they were inconsistent with the testimony given at the July 2010 NCVHS
hearing on HPID and because they were not included in NCHVS'
recommendations. As noted previously, section 1172(f) of the Act
provides that ``the Secretary shall rely on the recommendations of the
National Committee on Vital and Health Statistics established under
section 306(k) of the Public Health Service Act (42 U.S.C. 242k(k)). *
* *'' Section 1104(c) (1) of the Affordable Care Act directs the
Secretary to promulgate a final rule to establish a unique health plan
identifier ``based on input of the National Committee on Vital and
Health Statistics.'' The NCVHS recommendations recommended what it
thought was the most cost effective and efficient approach to
standardizing the HPID, and, consequently, the Secretary has relied
heavily on its recommendations for these proposals.
1. The NAIC Company Code
The NAIC Company Code is a 5-digit alphanumeric identifier that
resides in a proprietary database maintained by the NAIC. The company
code is assigned to insurers, including managed care organizations, to
identify insurance companies on financial reports filed with the
States. We decided against using the NAIC company code because it has
embedded intelligence, multiple company codes have been assigned to the
same insurer for the same line of business, and fewer than half of the
entities with NAIC company codes are entities listed in the statute as
health plans. In addition, a 5-digit number would only allow 100,000
entities to be enumerated. We also considered the NAIC Company Code to
be a comparably expensive alternative.
2. The Federal Tax Identification Number
The EIN, also referred to as a Federal Tax Identification Number,
was designed and is used to identify business entities for tax
purposes. While the EIN is an appropriate and cost-effective standard
for the unique employer identifier, we do not believe it would be
appropriate for the standard for the unique health plan identifier for
the following reasons. Using the EIN to identify employers and health
plans under HIPAA could cause confusion among users of the numbers.
Also, the current EIN scheme does not cover all health plans, for
instance, an employer group health plan would not have its own EIN, so
the EIN would need to be expanded to accommodate all health plans.
3. IRS Identifier
We also considered the IRS and DOL Identifier. An Employee Benefit
Plan subject to ERISA may be required to file
[[Page 22978]]
an Annual Report/Report of Employee Benefit Program Plan (Form 5500
Series Reports). This includes Pension Benefit Plans, and Direct Filing
Entities. The IRS and DOL have combined their filing requirements on
Form 5500 Series Report to minimize the efforts of plan administrators
and employers. The Form 5500 Series Reports are used by both the IRS
and the DOL for audit purposes to ensure that the employee benefit
plans are operated and managed in accordance with certain prescribed
standards and to protect the rights and benefits of participants. These
benefit plans use their 9-digit EIN with a 3-digit suffix that is
assigned according to the type of plan they offer. The IRS provides
very specific guidelines on the selection of the 3-digit suffix. The 3-
digit suffix has required guidelines that would be too specific for the
purposes of the HPID. In addition, this format would not be capable of
incorporating a check digit without modification. Therefore, we did not
consider the IRS identifier as a viable alternative for identifying
health plans in a manner consistent with our statutory mandates and our
program objectives.
E. Impacted Entities--HPID and NPI
All HIPAA covered entities may be affected by the standard proposed
in this proposed rule although, as we estimate, only a segment of
covered entities will have substantive cost or benefits associated with
the adoption of the HPID. HIPAA covered entities include all health
plans, health care clearinghouses, and health care providers that
transmit health information in electronic form in connection with a
transaction for which the Secretary has adopted a standard.
Table 7 outlines the number of entities that may be affected by the
HPID and OEID, along with the sources of those data.
Table 7--Types and Numbers of Affected Entities
------------------------------------------------------------------------
Type Number Source
------------------------------------------------------------------------
Health Care Providers--Offices of 234,222 Health Insurance Reform;
Physicians (includes offices of Modifications to the
mental health specialists and Health Insurance
substance use treatment Portability and
practitioners). Accountability Act
(HIPAA) Electronic
Transaction Standards;
Proposed Rule http://edocket.access.gpo.gov/2008/pdf/E8-19296.pdf
(based on AMA
statistics).
Health Care Providers--Hospitals.. 5,764 Health Insurance Reform;
Modifications to the
Health Insurance
Portability and
Accountability Act
(HIPAA) Electronic
Transaction Standards;
Proposed Rule http://edocket.access.gpo.gov/2008/pdf/E8-19296.pdf.
Health Care Providers--Nursing and 66,464 2007 Economic Census
residential Care Facilities not Data--Health Care and
associated with a hospital. Social Assistance
(sector 62) using the
number of
establishments.
~NAICS code 623: Nursing
Homes & Residential Care
Facilities n = 76,395 x
87 percent (percent of
nursing and residential
care facilities not
associated with a
hospital) = 66,464.
Other Health Care Providers-- 384,192 2007 Economic Census
Offices of dentists, Data--Health Care and
chiropractors, optometrists, Social Assistance
mental health practitioners, (sector 62) using the
substance use treatment number of
practitioners, speech and establishments:
physical therapists, podiatrists, ~NAICS code 621: All
outpatient care centers, medical ambulatory health care
and diagnostic laboratories, home services (excluding
health care services, and other offices of physicians) =
ambulatory health care services, 313,339 (547,561 total -
resale of health care and social 234,222 offices of
assistance merchandise (durable physicians).
medical equipment). ~NAICS code 62[dash]39600
(product code): Durable
medical equipment =
70,853.
Health Plans--Commercial: Impacted 1,827 This number represents
commercial health plans the most recent number
considered in this RIA are health as referenced in
insurance issuers; that is, ``Patient Protection and
insurance companies, services, or Affordable Care Act;
organizations, including HMOs, Standards Related to
that are required to be licensed Reinsurance, Risk
to engage in the business of Corridors, and Risk
insurance in a State. Adjustment,'' Proposed
Rule, 2011 Federal
Register (76 FR 41930),
July 15, 2011,'' from
http://federalregister.gov/a/2011-17609.
Health Plans--Government.......... 60 Represents the 56 State
Medicaid programs,
Medicare, the Veteran's
Administration (VHA),
and Indian Health
Service (IHS), TRICARE.
Health Plans--All................. 1,887 Insurance issuers (n =
1,827) + Medicaid
agencies + Medicare,
VHA, TRICARE, and IHS (n
= 60) = 1,887 total
health plans.
Third Party Administrators........ 750 Summary of Benefits and
Coverage and the Uniform
Glossary; Notice of
Proposed Rulemaking
http://www.gpo.gov/fdsys/pkg/FR-2011-08-22/pdf/2011-21193.pdf.
Transaction Vendors and 162 Health Insurance Reform;
Clearinghouses. Modifications to the
Health Insurance
Portability and
Accountability Act
(HIPAA) Electronic
Transaction Standards;
Proposed Rule http://edocket.access.gpo.gov/2008/pdf/E8-19296.pdf,
based on a study by
Gartner.
------------------------------------------------------------------------
F. Scope and Methodology of the Impact Analysis for the HPID and NPI
This impact analysis estimates the costs and benefits that will be
realized through the implementation and use of the HPID. We do not
analyze the costs and benefits of the addition to the NPI requirements,
apart from the costs associated with applying for an NPI that are
already addressed in section V.B. of this proposed rule concerning the
collection of information requirements. Aside from the time necessary
to apply, we do not anticipate any financial impact as a result of the
addition to the NPI requirements. We ask for comments on this approach.
In this RIA, we do not analyze the impact of implementation and use
of the OEID. The OEID, as proposed herein, would be a data element that
could be voluntarily used by entities other than health plans. These
other entities may include, for example, health care clearinghouses,
transaction vendors, and third party administrators that provide
administration or management for self-insured health plans. The range
of total entities that may apply for and use an OEID is zero to
approximately 900 entities (750 Third party administrators + 169
transaction
[[Page 22979]]
vendors). Therefore, using the methodology we use in this RIA, the cost
for implementation of the OEID for other entities ranges from no cost
to approximately $500 million, depending on choices made by those
entities. Because of the uncertainty inherent in this range of cost,
based on the number of entities that may apply for the OEID we will not
attempt to quantify the impact of applying for or using an OEID beyond
this limited analysis. Nor will we include this range of costs in our
summary of this RIA. However, we can assume that implementing and using
OEID would be accompanied by a proportional range of costs and benefits
akin to the cost and benefits estimated for health plans in this RIA.
We welcome comments on the number and kind of entities that may apply
for and use an OEID. We estimate the cost of the Enumeration System to
be $1.5 million. The Federal Government will bear the costs associated
with the Enumeration System that will enumerate health plans and other
entities and maintain their information. These include the costs of
enumerating health plans and other entities, the cost of maintaining
health plan and other entity information in the Enumeration System, and
the costs of disseminating HPID and OEID data to the health care
industry and others, as appropriate. HHS will develop the Enumeration
System, and conduct the updating and data dissemination activities. We
will apply this cost to our summary of costs and the accounting
statement, but will not provide any further analysis of this cost
within the narrative of the RIA.
The costs to health plans of applying for an HPID and updating and
maintaining the information in the Enumeration System are detailed in
section III of this proposed rule. We will reflect these costs in the
summary of the costs to health plans in this RIA.
While we assume that adoption of the health plan identifier
standards will affect a broad range of health care providers, as
illustrated in Table 7, we will only be examining the costs and
benefits of implementation and use of the HPID on two types of health
care providers: Hospitals and physician practices. We will not analyze
the impact to nursing and residential care facilities, dentists, or
suppliers of durable medical equipment.
There are two reasons for narrowing the scope of this analysis to
only two categories of health care providers: we have very little data
on the usage of EDI among dentists, suppliers of durable medical
equipment, nursing homes, and residential care facilities. The lack of
data for these types of health care providers has been noted in other
studies on administrative simplification.\34\ We assume that the
greatest benefits will be gained by hospitals and physician practices
as they conduct the majority of standard transactions. We welcome
comment from industry and the public as to our assumptions.
---------------------------------------------------------------------------
\34\ ``Excess Billing and Insurance-Related Administrative
Costs,'' by James Kahn, in The Healthcare Imperative; Lowering Costs
and Improving Outcomes: Workshop Series Summary, edited by Pierre L.
Yong, Robert S. Saunders, and Leigh Anne Olsen, Institute of
Medicine of the National Academies, the National Academies Press,
Washington, DC: 2010.
---------------------------------------------------------------------------
We have not included an analysis of the impact on pharmacies
because the HPID will not be used extensively in electronic
transactions by the pharmacy industry. This industry will instead be
using the BIN/IIN and PCN as described previously in this proposed
rule. Therefore, we assume no impact on pharmacies.
With respect to health care providers, only health care providers
that transmit health information in electronic form in connection with
a transaction for which the Secretary has adopted a HIPAA transaction
standard are considered covered entities.
We assume that the HPID may be used to identify health plans in
non-electronic transactions as well, but, as this standard is only
required for use in HIPAA standard transactions, we have not tried to
measure the impact on non-electronic transactions. The costs and
benefits included in this analysis do not include infrastructure or
software costs for health care providers who are equipping their
practices for the transmittal of electronic transactions for the first
time. The costs in this impact analysis include only those that are
necessary to implement the standard for the national unique health plan
identifier.
We include health care clearinghouses and transaction vendors as
affected entities in Table 7. Transaction vendors are entities that
process claims or payments for other entities, which may include health
plans. Transaction vendors may not meet the HIPAA definition of health
care clearinghouse, but as used in this context, health care
clearinghouses would constitute a subset of transaction vendors.
Payment vendors would be a type of transaction vendor--a transaction
vendor that ``associates'' or ``reassociates'' health care claim
payments with the payments' remittance advice for either a health plan
or provider. For our purposes here, transaction vendors do not include
developers or retailers of computer software, or entities that are
involved in installing, programming or maintaining computer software.
Health care clearinghouses and transaction vendors may be impacted
because their systems would have to accommodate the adoption of the new
standards such as the HPID to identify health plans in standard
transactions. However, we did not calculate costs and benefits to
health care clearinghouses and transaction vendors in this cost
analysis because we assume that any associated costs and benefits will
be passed on to the health plans or providers, and will be included in
the costs and benefits we apply to health plans or providers.
We use the total number of health insurance issuers as the number
of commercial health plans that will be affected by this proposed rule,
and will use this number in our impact analysis. A health insurance
issuer is an insurance company, insurance service, or insurance
organization, including an HMO, that is required to be licensed to
engage in the business of insurance in a State, and that is subject to
State law that regulates insurance. Although this number is specific to
the individual and small group markets, we assume that many health
insurance issuers in the large group market are included in this number
because they are likely to market to individuals and small groups as
well. While the category or ``health insurance issuers'' represents a
larger number of health plans than those included in the NAICs codes
for ``Direct Health and Medical Insurance Carriers'' (897 firms), we
believe the category of health insurance issuers is a more accurate
representation of companies conducting HIPAA transactions. Companies
that provide Medicaid managed care plans are included in the category
of commercial health plans.
Although self-insured group health plans meet the HIPAA definition
of ``health plan,'' we did not include them in this impact analysis.
While self-insured group health plans will be required to obtain the
HPID, we assume that, with a few exceptions, such plans do not send or
receive HIPAA electronic transactions because most are not involved in
the day-to-day activities of a health plan and outsource those services
to third party administrators or transaction vendors. Because they do
not meet the definition of ``health plans,'' TPAs and transactions
vendors are not required to obtain or use an HPID, though they may
elect to obtain and use an OEID. The costs and benefits associated with
the HPID are applicable only to entities that are directly involved in
sending or receiving
[[Page 22980]]
standard transactions, though we recognize that some of the cost and
benefits will trickle down to employers and their employees.
We have no data concerning how many health plans are actually
identified in standard transactions, as opposed to ``other entities''
that are identified in their stead. Therefore, we have no assurance of
how many health plans may be affected by this proposed rule. We base
our cost estimates on the highest number of entities that would likely
be affected. The number of health plans is used as a factor in our
calculation of costs, but not in our calculation for savings. We are
therefore taking a conservative approach to the costs to health plans
which we believe is warranted given the uncertainties in our estimates.
We solicit industry and stakeholder comments on our assumptions.
G. Costs Associated with HPID and NPI
Due to a lack of baseline data, we use the cost estimate
calculations provided in the impact analysis for the Modifications
proposed rule and the clarifications of that impact analysis contained
in the Modifications final rule.
We chose the costs in the Modifications proposed and final rules as
our baseline for costs for a number of reasons:
The cost categories in the Modifications rules are similar
to the cost categories anticipated by implementation of the HPID: one-
time or short-term costs such as software conversion, and cost of
automation, training, implementation, and implementation guides.
There are no analogous national standard identifiers from
which to derive costs and benefits.
In our discussion of the HPID, we considered the NPI as a potential
analogous identifier; however, the cost/benefit analysis for the NPI,
included in the ``National Standard Health Care Provider Identifier,''
proposed rule,'' published in the May 7, 1998 Federal Register (63 FR
25320) does not analyze the cost/benefits of implementation of the NPI
itself. Instead, the analysis reiterates the cost/benefits of the
Transactions and Code Sets final rule (65 FR 50312). The Transactions
and Code Sets final rule analyzes the costs/benefits of sending and
receiving all HIPAA transactions. The Modifications final rule is
another reiteration of the original cost/benefit analysis of the
Transactions and Code Sets final rule, but the data has been adjusted
to 2009, and so we will use it because it is more recent but adjust the
costs to 2012 dollars. In the impact analysis for the Modifications
final rule, the estimated costs to implement the update to the
standards were 25 percent less (minimum) to 50 percent (maximum) of the
costs estimated in the Transactions and Code Sets final rule.
To determine the anticipated costs for health care providers and
health plans, we used 25 percent of the cost estimates for the
Modifications final rule. We used this percentage because we determined
that implementation of HPID will not be as significant as the impact of
Version 5010 adopted in the Modifications final rule for the following
reasons: First, the implementation of the Modifications final rule is
much broader and more complex than the implementation of a unique
health plan identifier. The Modifications rule broadly amends or alters
every HIPAA transaction standard. This rule proposes a standard that
will need to be included in every HIPAA transaction; however, it is
only one data field, compared to a multitude of data fields that were
affected by the adoption of the transaction standards outlined in the
Modifications final rule.
Second, we believe covered entities are more prepared for the
implementation of the HPID than they may have been for the
Modifications final rule. Because the standards for transactions and
codes sets, security and privacy, employer identifier, and health care
provider identifier have already been adopted, we assume that covered
entities have already made significant system investments. In addition,
a data field already exists for the health plan identifier in the HIPAA
standard transactions.
To support our estimate that the HPID will cost 25 percent of the
costs of the Modifications final rule, we make a number of assumptions.
We assume many of the implementation costs covered entities will
experience will be short term or one-time costs for system
implementation and transition costs. System implementation costs
include software and software development, testing, training, and other
conversion costs. Conversion will require training for staff and will
require changes to documentation, procedures, records, and software.
Some covered health care entities may choose to use the services of
software system vendors, billing companies, transaction vendors, and/or
health care clearinghouses to facilitate the transition to the HPID.
``Transition'' costs, which we assume will occur in the second and
third years of implementation, are defined as the post-implementation
costs for monitoring, maintaining, and adjusting the upgraded systems
and related processes with trading partners until all parties reach a
``steady state'' with regard to utilizing the HPID. While there will be
initial costs to implement the HPID, we believe a standard HPID will
simplify standard transactions and improve their efficiency and
effectiveness. In addition, the lack of embedded intelligence within
the HPID will result in lower implementation and maintenance costs for
covered entities.
1. Costs of HPID to Health Plans
Health plans will bear most of the cost of implementing the HPID.
We estimate the cost to health plans to implement and use an HPID will
be 25 percent of the costs that the impact analysis in the
Modifications final rule calculated in order for industry to implement
Version 5010 of the standard transactions. As noted previously,
implementation of the HPID will be analogous to--yet significantly less
than--implementation of Version 5010 because the same systems will be
affected, and, in both cases, there are both implementation and
transition costs. Beyond these general similarities, we assume that
implementation of HPID will be much less expensive for the reasons
stated previously.
The estimate that HPID implementation and transition will be 25
percent of the cost of Version 5010 is a conservative estimate, we
believe, and it is probable that the costs will be much less. However,
by estimating HPID implementation at 25 percent of the cost of Version
5010, we are able to reflect the uncertainty in our calculations
because our calculations maintain the range of minimum and maximum
costs from the Modifications final rule.
In addition, the cost estimates from the Modifications final rule
have been adjusted down because we estimate there will be fewer health
plans impacted by this rule than are impacted by the Modifications
final rule. For costs associated with applying for and obtaining an
HPID, see section V.A. of this proposed rule. We welcome comments and
data from the industry and other stakeholders on this assumption.
To comply with this proposed rule, a health plan that is not a
small health plan must start using the HPID in the standard
transactions on or after October 1, 2014 (small health plans must start
using the HPID in the standard transactions on or after October 1,
2015). As we note in the RFA, section V.J.1.d of this proposed rule,
there are, perhaps, 100 health plans that can be defined as small
health plans. While we expect these
[[Page 22981]]
costs will accrue between the time the final rule is published and the
date the HPID is fully implemented, for purposes of simplification we
have placed all system implementation costs--including those for small
health plans--in 2014. Transition costs will occur in 2015 and 2016.
Table 8-- HPID Cost for Commercial and Government Health Plans*
--------------------------------------------------------------------------------------------------------------------------------------------------------
Minimum Maximum
Minimum cost Maximum cost estimated cost estimated cost
estimate per estimate per Applied of of
Cost category modifications modifications percentage implementing implementing
rule (in rule (in HPID (in HPID (in
millions) millions) millions) millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Commercial Health Plans **................ System Implementation....... $1935.0 $3870.5 25 $483.76 $967.63
Transition (Year 2 and 3)... 341.5 683.0 25 85.37 170.76
Government Health Plans (Medicare, System Implementation....... 281.0 537.8 25 70.25 134.45
Medicaid, VHS, TRICARE, IHS).
Transition (Year 2 and 3)... 49.6 94.9 25 12.40 23.73
All Health Plans.......................... Enrollment and Updates***... .............. .............. .............. 0.18 0.18
System Implementation....... .............. .............. .............. 554.19 1102.26
Transition (Year 2 and 3)... .............. .............. .............. 97.77 194.48
Total....................... .............. .............. .............. 651.95 1296.74
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Based on 2012 dollars.
** Minimum and maximum cost estimates per Modifications Rule for commercial health plans is adjusted to account for a lesser number of health plans
considered than is estimated in the Modifications Rule.
*** See section V.A of this proposed rule; Collection of Information Requirements, for calculations on enrollment to HPID enumeration system.
2. Costs of HPID for Physician Practices and Hospitals
Covered physician practices and hospitals will be required to use
the HPID in standard transactions. Health care providers that do not
conduct covered transactions (for example, by submitting a paper claim
that the health plan subsequently transmits electronically to a
secondary payer) could also use the HPID, but would not be required to
do so. Implementation costs for covered physician practices and
hospitals depend on whether they generate claims directly or use a
health care clearinghouse or transaction vendor.
If covered physician practices and hospitals submit claims
directly, they would incur implementation costs in converting their
systems to accommodate the HPID. Some covered health care providers may
choose to use the services of software system vendors, billing
companies, transaction vendors, and/or health care clearinghouses to
facilitate the transition to the HPID. These health care providers
would incur costs in the form of potential fee increases from billing
agents or health care clearinghouses. For example, if a health care
provider pays a fee to a billing agent or health care clearinghouse to
process its health care transactions, the billing agent or health care
clearinghouse might increase the cost to perform this service for the
health care provider.
Table 9 illustrates the costs to covered hospitals and physician
practices. Again, the costs are 25 percent of the costs estimated in
the Modifications proposed and final rules. We invite comments on our
assumptions and method for estimating the implementation costs.
Table 9--HPID Costs to Covered Hospitals and Physician Practices *
--------------------------------------------------------------------------------------------------------------------------------------------------------
II III IV V VI VII
---------------------------------------------------------------------------------------------------------
Minimum Maximum
Minimum cost Maximum cost estimated estimated
I estimate per estimate per Applied cost of cost of
Cost category modifications modifications percentage implementing implementing
rule (in rule (in HPID (in HPID (in
millions) millions) millions) millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hospitals..................................... System Implementation............ 1042.5 $2085.9 25% $260.63 $521.48
Transition (Year 2 and 3)........ 184.0 368.1 25% 45.99 92.03
Physician Practices........................... System Implementation............ 486.8 973.6 25% 121.70 243.40
Transition (Year 2 and 3)........ 85.9 171.8 25% 21.48 42.95
All Providers (Total)......................... System Implementation............ 1529.3 3059.5 25% 382.33 764.88
Transition (Year 2 and 3)........ 269.9 539.9 25% 67.47 134.98
---------------------------------------------------------------------------------------------------------
Total............................ ............. ............. ........... 449.80 899.86
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Based on 2012 dollars.
H. Savings Associated With HPID and NPI
1. Savings to Health Plans
We have identified two areas in which health plans will experience
savings due to the adoption of HPID: A reduction in the number of
pended claims and an increased use of electronic health care
transactions.
2. Pended Claims
Pended claims are claims that necessitate a manual review by the
health plan. Pended claims are more expensive than ``clean'' claims,
which do not require a manual review or
[[Page 22982]]
additional information in order to be processed. We are projecting a 5
to 10 percent annual reduction of pended claims as attributable to
implementation of the HPID. We have calculated the savings that would
come from this estimated projection from: data about claims receipts
from the trade association America's Health Insurance Plans (AHIP),\35\
information about eligibility transactions from the Oregon Provider and
Payer Survey,\36\ and data from the Modifications proposed and final
rules.
---------------------------------------------------------------------------
\35\ ``An Updated Survey of Health Care Claims Receipt and
Processing Times, May 2006,'' America's Health Insurance Plans
(AHIP) Center for Policy and Research.
\36\ A comprehensive survey of 55 percent of Oregon's hospitals
and 225 of the State's ambulatory clinics. http://www.oregon.gov/OHPPR/HEALTHREFORM/AdminSimplification/Docs/FinalReport_AdminSimp_6.3.10.pdf.
---------------------------------------------------------------------------
One of the main goals of the use of the HPID is to have a
consistent identifier for each health plan for use in standard
transactions. This lack of a single identifier has resulted in the need
for manual intervention to resolve eligibility questions and billing
and payment issues when there are inconsistent approaches for
identifying health plans. Covered health care providers would no longer
have to keep track of and use multiple identifiers for a single health
plan. After the initial outlay for changes to their systems, health
care providers would be able to consistently identify the health plan
to which they must submit claims.
According to AHIP, 14 percent of all claims were pended by health
plans.\37\ Assuming 6 billion claims will be submitted in 2014, as is
projected in the Modifications proposed rule, this calculates to about
850 million pended claims (Table 10, Column 2).
---------------------------------------------------------------------------
\37\ AHIP, 2006.
---------------------------------------------------------------------------
We will assume that pended claims will decrease by a minimum of 5
percent to a maximum of 10 percent annually attributable to use of the
HPID (Table 10, Columns 4 and 6). This estimate is based on an AHIP
survey entitled, ``An Updated Survey of Health Care Claim Receipt and
Processing Times.'' The survey concluded that 35 percent of all claims
are pended because they are duplicate claims (or assumed to be
duplicate claims), 12 percent are pended because of the lack of
necessary information, 5 percent because of coordination of benefits
(COB), and 1percent because of invalid codes.\38\ The HPID may help
alleviate these particular pended claims issues by enabling the
automation of the COB process \39\ and providing for more accurate
routing of claims to the correct payer. This conclusion presumes that
providing an HPID will lead to a measurable reduction of duplicate
claims and/or claims pended because of a lack of necessary information.
There is a large measure of uncertainty in this assumption and, as
noted, the HPID would be foundational for subsequent activities such as
the automation of the COB process. By itself, though, the HPID does not
automate any processes. To reflect the uncertainty, we apply a range of
percentages to the assumption.
---------------------------------------------------------------------------
\38\ ``An Updated Survey of Health Care Claims Receipt and
Processing Times, May 2006,'' America's Health Insurance Plans
(AHIP) Center for Policy and Research.
\39\ ``National Health Plan Identifier White Paper,'' prepared
by the American Medical Association (AMA) Practice Management Center
(PMC), September 22, 2009.
---------------------------------------------------------------------------
According to AHIP, it costs a health plan $0.85 to reply
electronically to a ``clean'' claim submission and $2.05 to reply to
claims that ``necessitate manual or other review cost.'' Therefore, a
health plan could save $1.20 per claim by automating a claim otherwise
needing manual review (Table 10, Column 3). In order to calculate the
savings from a 5 to 10 percent decrease in pended claims due to
implementation of the HPID, we multiply the projected number of pended
claims (Table 10, Column 2) times 5 percent for the low estimate and 10
percent for the high estimate. We then multiplied the high and low
range of numbers of pended claims that will be avoided due to use of
HPID times the $1.20 per claim that can be saved.
In considering how to project this cost avoidance, we decided that
the 5 to 10 percent savings should continue each year over the 10 years
following implementation of the standard, resulting in a savings of
approximately $700 million to $1.4 billion. As stated previously, we
consider the HPID standards in this notice of proposed rulemaking to be
foundational standards that will be built upon by future operating
rules and regulations over the next decade.
We welcome input and data from industry and other stakeholders with
regard to these assumptions.
Table 10--Annual Savings to Health Plans Due to Decrease in Pended Claims
(In millions) *
----------------------------------------------------------------------------------------------------------------
LOW number LOW total HIGH number HIGH total
Number of of pended annual of pended annual
pended Cost to claims (5%) savings claims (10%) savings
claims review a that will be through that will be through
Year annually pended avoided reduction avoided reduction
(in claim *** attributable in pended attributable in pended
millions) to HPID (in claims (in to HPID (in claims (in
** millions) millions) millions) millions)
(Col. 1) (Col. 2) (Col. 3) (Col. 4) (Col. 5) (Col. 6) (Col. 7)
-------------------------------------------------------------------------------
2014............................ 848.4 $1.35 .0 .0 0 .00
2015............................ 882.0 1.35 44.1 $59.5 88.2 $119.1
2016............................ 917.0 1.35 45.9 61.9 91.7 123.8
2017............................ 952.0 1.35 47.6 64.3 95.2 128.5
2018............................ 994.0 1.35 49.7 67.1 99.4 134.2
2019............................ 1036.0 1.35 51.8 69.9 103.6 139.9
2020............................ 1077.4 1.35 53.9 72.7 107.7 145.5
2021............................ 1120.5 1.35 56.0 75.6 112.1 151.3
2022............................ 1165.4 1.35 58.3 78.7 116.5 157.3
2023............................ 1212.0 1.35 60.6 81.8 121.2 163.6
2024............................ 1260.5 1.35 63.0 85.1 126.0 170.2
-------------------------------------------------------------------------------
[[Page 22983]]
Total....................... ........... ........... ............ 716.6 ............ 1433.3
----------------------------------------------------------------------------------------------------------------
* Based on 2012 dollars.
** Based on 14% of total number of annual claims as projected in Modifications proposed rule.
*** AHIP, 2006, adjusted to 2012 dollars.
3. Increase in Electronic Transmittal of Three Standard Transactions
The implementation of all administrative simplification initiatives
mandated by the Affordable Care Act are expected to streamline HIPAA
electronic transactions, make them more consistent, and decrease the
dependence on manual intervention in the transmission of health care
and payment information. This, in turn, will drive more health care
providers and health plans to utilize electronic transactions in their
operations. Each transaction that moves from a non-electronic, manual
transmission of information to an electronic transaction, brings with
it material and time cost savings by virtue of reducing or eliminating
the paper, postage, and equipment and additional staff time required to
conduct paper-based transactions.
Table 11 lists our estimates of the savings for health plans when
they move from a non-electronic transaction to an electronic
transaction on a per transaction basis. For a more detailed description
of how we arrived at the savings associated with the eligibility for a
health plan transaction and the health care claim status transactions,
see the RIA in the ``Administrative Simplification: Adoption of
Operating Rules for Eligibility for a Health Plan and Health Care Claim
Status Transactions,'' published in the July 8, 2011 Federal Register
(76 FR 40471).
The estimated savings associated with the health care payment and
remittance advice transaction is taken from Medicare data. Medicare
found that the average estimated cost avoidance in terms of printing
and mailing charges was $4.24 per electronic remittance advice
transaction when it was sent electronically as opposed to through the
mail in paper form.
Table 11--Baseline Cost Savings Per Transaction for Commercial and
Governmental Health Plans (Difference Between Non-electronic Transaction
and Electronic Transaction) In Three Transactions *
------------------------------------------------------------------------
Savings per
transaction
for
commercial
Transaction and
government
health
plans
------------------------------------------------------------------------
Eligibility for a health plan.............................. $3.15
Health care claim status................................... 3.78
Health care electronic funds transfer (EFT) and remittance 4.24
advice (Remittance Advice only)...........................
------------------------------------------------------------------------
* Based on 2012 dollars.
We expect that the use of the HPID will result in greater
efficiency and savings across all HIPAA transactions in addition to the
three transactions we specifically analyze here. However, we expect
that the impact will be considerably less in other transactions because
operating rules for these transactions will likely take effect a number
of years after the implementation of the HPID.
We estimate an annual increase of 1 (LOW) to 2 (HIGH) percent in
the use of the eligibility for a health plan transaction and the health
care claim status transaction attributable to the implementation of the
HPID over the next 10 years as illustrated in Table 12. We estimate an
annual increase of 2 (LOW) to 3 (HIGH) percent in the use of the
electronic remittance advice transaction resulting from the adoption of
the HPID. These are not annual increases in percentage points, but
rather percent increases in the use of electronic transactions from the
year before. The impact of the HPID on the electronic health care
payment and remittance advice transaction is more than the impact on
the other two transactions because NCVHS testimony supported the notion
that the greatest impact of a standardized health plan identifier would
be on the payment process.\40\
---------------------------------------------------------------------------
\40\ Tammy Banks, Director, Practice Management Center and
Payment Advocacy, ``Testimony By The American Medical Association,''
National Committee on Vital and Health Statistics Subcommittee on
Standards, July 19, 2010.
---------------------------------------------------------------------------
Based on these assumptions, we estimate that the savings to health
plans because of increased usage in three transactions will be at least
$500,000 within 10 years of HPID implementation. Health plan savings
are summarized in Table 13.
[[Page 22984]]
Table 12--Annual Cost Savings for Health Plan From Increase Due to HPID in Volume of Three Electronic Transactions *
[In millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
I II III IV V VI VII
--------------------------------------------------------------------------------------------------------------------------------------------------------
Savings from increase in eligibility
for a health plan transaction
attributable to HPID
Savings from increase in health care
claim status transaction
attributable to HPID
Savings from increase in health care
payment and remittance advice
transaction attributable to HPID
(remittance advice only)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year LOW annual cost HIGH annual cost LOW annual cost HIGH annual cost LOW annual cost HIGH annual cost
savings savings savings savings savings savings
attributable to attributable to attributable to attributable to attributable to attributable to
HPID HPID HPID HPID HPID HPID
--------------------------------------------------------------------------------------------------------------------------------------------------------
2014.................................. $.0 $.0 $.0 $.0 $.0 $.0
2015.................................. 31.4 54.6 5.1 8.5 6.4 16.0
2016.................................. 36.1 62.8 6.1 10.2 7.7 19.2
2017.................................. 41.5 72.2 7.4 12.3 9.2 23.0
2018.................................. 44.8 83.0 8.1 14.7 11.0 27.6
2019.................................. 48.4 89.7 8.9 16.2 12.4 33.1
2020.................................. 52.3 96.8 9.8 17.8 13.8 37.1
2021.................................. 56.5 104.6 10.8 19.6 15.5 41.5
2022.................................. 61.0 113.0 11.9 21.6 17.4 46.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cumulative Annual Cost Savings:
LOW: $534 million.
HIGH: $1,042 million.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Based on 2012 dollars.
Table 13--Total Savings For Commercial and Governmental Health Plans *
[In millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
I II III IV V VI
--------------------------------------------------------------------------------------------------------------------------------------------------------
Savings from decrease in pendeSavings from increase usage of EDI in three
transactions
Total savings for health plans
--------------------------------------------------------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH
--------------------------------------------------------------------------------------------------------------------------------------------------------
$717 $1,433 $534 $1,042 $1,250 $2,475
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Based on 2012 dollars.
4. Savings to Health Care Providers
We have quantified two areas of savings for health care providers.
First, time and money will be saved at an administrative-level because
of a decrease in claims issues that require manual intervention.
Medical practices will experience these administrative savings by
virtue of decreased time spent interacting with health plans. Second,
material savings will be derived because of an increase in the number
of transactions that are conducted electronically, as we explained in
our discussion of the potential impact of this rule on health plans.
a. Time Savings for Health Care Providers
One of the main goals of the use of the HPID is to have a
consistent identifier for each health plan for use in standard
transactions. This lack of a single identifier has resulted in the need
for manual intervention to resolve eligibility questions and billing
and payment issues when there are inconsistent approaches for
identifying health plans. Covered health care providers would no longer
have to keep track of and use multiple identifiers for a single
controlling health plan. After the initial outlay for changes to their
systems, health care providers would be able to simplify their billing
systems and processes and reduce administrative expenses.
The HPID would also assist and simplify coordination of benefits.
Health plans that have sole or shared fiduciary responsibilities for
payment would be more readily identified, and the movement of
information among these entities would be enhanced. According to a 2009
study published in Health Affairs, approximately 60 hours per physician
per week are spent on average interacting with health plans when the
time spent by the single physician, the staff, and the physician
practice's administration are totaled.\41\ Of the time spent
interacting with health plans, 88 percent was spent on authorizations
and claims/billing issues.
---------------------------------------------------------------------------
\41\ Lawrence P. Casalino, S. Nicholson, D.N. Gans, T. Hammons,
D. Morra, T. Karrison and W. Levinson, ``What does it cost physician
practices to interact with health insurance plans?'' Health Affairs,
28(4)(2009):w533-w543.
---------------------------------------------------------------------------
We believe the implementation of an HPID will eliminate some of the
manual intervention that is required when there are questions or errors
identifying the entity responsible for eligibility of a patient or the
payment of a claim. We estimate that the implementation and use of an
HPID by health plans would save a physician's practice a number of
phone calls and emails otherwise required to investigate or verify the
identifier needed for the health plan. Of the 60 hours reported
previously, our estimate would be that 15 minutes to 30 minutes per
week--or .4 to .8 percent of the total time spent interacting with
[[Page 22985]]
health plans--could be eliminated if the HPID were implemented. We
welcome input on our assumption.
Table 14 illustrates the savings if a physician's office spends 15
to 30 minutes a week interacting with health plans. Table 14, Column I
shows the number of hours spent per week per physician interacting with
health plans, according to the 2009 Health Affairs study. This number
represents the sum total of hours spent by the physician, the
physician's staff, and senior administrative staff, accountants, and
lawyers that support the physician.
Table 14, Column II is the low to high estimate of 15 to 30 minutes
(or .4 to .8 percent of the total time spent interacting with health
plans) that we estimate would be saved with the implementation of the
HPID.
Table 14, Column III is the annual cost for a physician's office of
interacting with a health plan, based on time spent and hourly wages of
various employees of a physician's office, according to the 2009 Health
Affairs study. The wages are adjusted 3 percent annually to account for
cost of living increases.
Table 14, Column IV is the estimate of savings generated by
decreasing the time spent interacting with health plans by 15 minutes a
week (LOW). It is the low estimate of the percentage reduction in time
(Table 14, Column II) times the annual cost per physicians of
interacting with health plans (Table 14, Column III). Table 14, Column
V is the high estimate of savings generated by decreasing the time
spent interacting with health plans by 30 minutes a week (HIGH
estimate). It is the high estimate of the percentage reduction in time
(Table 14, Column II) times the annual cost per physicians of
interacting with health plans (Table 14, Column III).
Table 14, Column VII is the low and high estimated savings for all
physician offices if their interaction with health plans is reduced by
15 to 30 minutes a week. Table 14, Column VII is the cost avoidance per
year per physician (Table 14, Column IV and V) times the number of
physicians (Table 14, Column VI). The number of physicians was
calculated by taking the average of the projected supply of physicians
in physician practices and the projected demand for physicians in
physician practices as calculated in ``Physician Shortages to Worsen
Without Increases in Residency Training,'' a summary of an analysis by
the Association of American Medical Colleges.\42\
---------------------------------------------------------------------------
\42\ Summary of ``The Complexities of Physician Supply and
Demand: Projections Through 2025, Center for Workforce Studies,
AAMC,'' 2008, by the Association of American Medical Colleges, and
``The Impact of Health Care Reform on the Future Supply and Demand
for Physicians Updated Projections Through 2025,'' June 2010, AAMC.
---------------------------------------------------------------------------
Based on our calculations, we anticipate that the time physicians
in physician practices will spend per week interacting with health
plans will decrease. Due to a lack of baseline data regarding other
providers and physicians working in hospitals, our calculations do not
reflect a similar anticipated decrease in time for other providers and
physicians working in hospitals. We assume, though, that hospitals,
because they typically consolidate their billing functions, will have
analogous savings to physicians in physician practices, albeit less on
a ``per physician'' basis.
Table 14--Physician Savings Through Decrease in Time Interacting With Health Plans *
--------------------------------------------------------------------------------------------------------------------------------------------------------
I II III IV V VI VII
-------------------------------------------------------------------------------------------------------------------
Total
Hours spent LOW to HIGH percent of annual cost LOW HIGH
per week time interacting with per single reduction in Reduction in LOW to HIGH total
Year per health plans (Col I) physician cost per cost per Number of savings per year
physician saved per week per to interact year per year per physicians attributable to HPID
interacting physician attributable with health physician physician (in millions)
with health to HPID (15 to 30 insurance attributable attributable
plans minutes) plans to HPID to HPID
--------------------------------------------------------------------------------------------------------------------------------------------------------
2014................................ 60 0.4 to 0.8%............ $74,605 $0 $0 340,146 $.00
2015................................ 60 0.4 to 0.8%............ 76,843 320 640 345,173 111 to 221.0
2016................................ 60 0.4 to 0.8%............ 79,148 330 660 348,638 115 to 230.0
2017................................ 60 0.4 to 0.8%............ 81,523 340 679 352,103 120 to 239.2
2018................................ 60 0.4 to 0.8%............ 83,969 350 700 355,568 124 to 248.8
2019................................ 60 0.4 to 0.8%............ 86,488 360 721 359,033 129 to 258.8
2020................................ 60 0.4 to 0.8%............ 89,082 371 742 362,498 135 to 269.1
2021................................ 60 0.4 to 0.8%............ 91,755 382 765 366,561 140 to 280.3
2022................................ 60 0.4 to 0.8%............ 94,507 394 788 370,625 146 to 291.9
2023................................ 60 0.4 to 0.8%............ 97,343 406 811 374,688 152 to 303.9
2024................................ 60 0.4 to 0.8%............ 100,263 418 836 378,752 158 to 316.5
-------------------------------------------------------------------------------------------------------------------
Total........................... ........... ....................... ........... ............ ............ ........... 1,330 to 2,659
--------------------------------------------------------------------------------------------------------------------------------------------------------
* In 2012 dollars.
b. Increase in Three Transactions
The second area of savings for providers is the per transaction
savings of moving from non-electronic to electronic transactions. We
used the same assumptions on the number and rate of increase of three
electronic transactions methodology as illustrated for health plans in
Table 12. However, the savings per transaction for health care
providers differ from the savings that health plans will realize, as
reflected in Table 15. For a more detailed description of how we
arrived at the savings associated with the eligibility for a health
plan transaction and the health care claim status transaction, see the
RIA in the ``Administrative Simplification: Adoption of Operating Rules
for Eligibility for a Health Plan and Health Care Claim Status
Transactions,'' published in the July 8, 2011 Federal Register (76 FR
40471). The estimated savings associated with the health care payment
and remittance advice transaction were taken from the ``National
Progress Report on Healthcare Efficiency: 2010'' at
www.ushealthcareindex.com.
[[Page 22986]]
Table 15--Cost Savings per Transaction (Difference Between Non-
Electronic Transaction and Electronic Transaction) in Three Transactions
*
------------------------------------------------------------------------
Savings per
transaction
Transaction for
providers
------------------------------------------------------------------------
Eligibility for a health plan.............................. $2.02
Health care claim status................................... 2.42
Health care payment and remittance advice (Remittance 1.55
Advice)...................................................
------------------------------------------------------------------------
* In 2012 dollars.
Table 16 reflects the same assumption that use of the HPID will
lead to increased use of three electronic transactions. We estimate an
annual increase of 1 (LOW) to 2 (HIGH) percent in the use of the
eligibility for a health plan transaction and the health care claim
status transaction attributable to implementation of the HPID over the
next 10 years as illustrated in Table 15. We estimate an annual
increase of 1 (LOW) to 3 (HIGH) percent in the use of the electronic
health care payment and remittance advice transaction (in the health
care electronic funds transfers (EFT) remittance advice transaction).
The savings in each column are a product of the number increase in each
transaction, with high and low ranges, multiplied by the cost savings
of each move to an electronic transaction detailed in Table 15.
Table 16--Annual Cost Savings for Providers From Increase Due to HPID in Volume of Three Electronic Transactions *
--------------------------------------------------------------------------------------------------------------------------------------------------------
I II III IV V VI VII
--------------------------------------------------------------------------------------------------------------------------------------------------------
Savings from increase in eligibility
for a health plan transaction
attributable to HPID
Savings from increase in health care
claim status transaction
attributable to HPID
Savings from increase in health care
payment and remittance advice
transaction attributable to HPID/
OEID (remittance advice only)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year LOW annual cost HIGH annual cost LOW annual cost HIGH annual cost LOW annual cost HIGH annual cost
savings savings savings savings savings savings
attributable to attributable to attributable to attributable to attributable to attributable to
HPID (in HPID (in HPID (in HPID (in HPID (in HPID (in
millions) millions) millions) millions) millions) millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2014.................................. $0.0 $0.0 $0.0 $0 $0.0 $0
2015.................................. 20.13 35.01 3.28 5.46 2.34 5.84
2016.................................. 23.15 40.26 3.93 6.56 2.80 7.01
2017.................................. 26.62 46.30 4.72 7.87 3.36 8.41
2018.................................. 28.75 53.24 5.19 9.44 4.04 10.09
2019.................................. 31.05 57.50 5.71 10.39 4.52 12.11
2020.................................. 33.53 62.10 6.28 11.42 5.06 13.56
2021.................................. 36.22 67.07 6.91 12.57 5.67 15.19
2022.................................. 39.11 72.43 7.60 13.82 6.35 17.01
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cumulative Annual Cost Savings.
LOW: $316 million.
HIGH: $601 million.
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Based on 2012 dollars.
To summarize health care provider savings, providers can expect
savings from two indirect consequences of the implementation of a
health plan identifier, as demonstrated in Table 17: the cost avoidance
of a decrease in administrative time spent by physician practices
interacting with health plans, and a cost savings for physician
practices and hospitals for every transaction that moves from a manual
transaction to an electronic transaction.
Table 17--Total Health Care Provider HPID Savings *
--------------------------------------------------------------------------------------------------------------------------------------------------------
I II III IV V VI
--------------------------------------------------------------------------------------------------------------------------------------------------------
Savings from decrease in pended claims (in
milliSavings from increase usage of EDI in three
transactions (in millions)
Total savings for providers (in millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW HIGH
--------------------------------------------------------------------------------------------------------------------------------------------------------
$1,330 $2,659 $316 $601 $1,646 $3,260
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Based on 2012 dollars.
c. Savings to Transaction and Software Vendors and Health Care
Clearinghouses
None of the studies considered for this analysis was able to
quantify the costs and savings, or the return on investment of adopting
the HPID for software vendors and health care clearinghouses. As noted
previously, we expect that some indirect costs will be borne by health
care providers in the form of increased fees from transaction vendors
and health care clearinghouses such as upgraded software costs and an
increase in volume of claims transactions.
[[Page 22987]]
We anticipate that the savings, as well as the costs, to software
vendors of upgrading health care provider software will be passed along
to their provider clients. We therefore assume that the return on
investment for software vendors in implementing the operating rules
reflected in our estimates as those for health care providers.
Additionally, since health care clearinghouses work on behalf of
health plans and act as intermediaries between health care providers
and health plans in regard to electronic transactions, we believe that
the savings, as well as the costs, to health care clearinghouses will
be the same savings and costs as those expected by health plans.
I. Summary for the HPID and NPI
Table 18--HPID Summary Table for Health Care Industry
----------------------------------------------------------------------------------------------------------------
I II III IV V VI
----------------------------------------------------------------------------------------------------------------
Savings (in millions)
Costs (in millions)
Range of return on
investment (in millions)
----------------------------------------------------------------------------------------------------------------
LOW HIGH LOW HIGH LOW (low HIGH (high
savings/ savings/low
high costs) costs)
----------------------------------------------------------------------------------------------------------------
Commercial and Governmental Health $1,250 $2,475 $652 $1,297 -$47 $1,823
Plans............................
Health Care Providers............. 1,646 3,260 450 900 746 2,810
-----------------------------------------------------------------------------
Total......................... 2,896 5,735 1,102 2,197 700 4,633
----------------------------------------------------------------------------------------------------------------
J. Regulatory Flexibility Analysis the HPID and NPI
The Regulatory Flexibility Act (RFA) of 1980 (Pub. L. 96-354)
requires agencies to describe and analyze the impact of the proposed
rule on small entities unless the Secretary can certify that the
regulation will not have a significant impact on a substantial number
of small entities. According to the Small Business Administration's
size standards, a small entity is defined as follows according to
health care categories: Offices of Physicians are defined as small
entities if they have revenues of $10 million or less; most other
health care providers (dentists, chiropractors, optometrists, mental
health specialists) are small entities if they have revenues of $7
million or less; hospitals are small entities if they have revenues of
$34.5 million or less. (For details, see the SBA's Web site at http://www.sba.gov/sites/default/files/Size_Standards_Table.pdf. Refer to
Sector 62--Health Care and Social Assistance).
For purposes of this analysis (pursuant to the RFA), nonprofit
organizations are considered small entities; however, individuals and
States are not included in the definition of a small entity. In the
following discussion, we have attempted to estimate the number of small
entities and provide a general discussion of the effects of this
proposed rule, and where we had difficulty or were unable to find
information, we solicit industry comment.
1. Number of Small Entities and Scope of Analysis
a. Individual ``Prescribers''
As detailed in section IV.B. of this proposed rule, the addition to
the requirements for the NPI will impose a time cost to prescribers in
terms of applying for an NPI. These individual prescribers are members
of an organization, or are employed, subcontracted, or given clinical
privileges by an organization. We assume the majority of these
prescribers cannot be defined as small entities, because they are
individuals, not legal businesses. A small number of prescribers are
sole proprietors \43\ and may be considered small business entities
under the RFA. However, the only cost to prescribers is the cost to
obtain an NPI and therefore does not represent a substantive impact.
Therefore, we will not be including the impact to individual
prescribers in this analysis. We request industry feedback on this
assumption.
---------------------------------------------------------------------------
\43\ For purposes of this RFA, a sole proprietor may be
contracted by other business entities.
---------------------------------------------------------------------------
b. Health Care Providers: Physician Practices and Hospitals
As with our RIA for the HPID, in the category of health care
providers, we analyzed physician practices and hospitals only in terms
of how they will be impacted by implementation and use of the HPID.
(There will be no analysis of the impact to physician practices or
hospitals with regard to the addition to the NPI requirements for the
reasons described previously.) We did not analyze the impact to nursing
and residential care facilities, dentists, or suppliers of durable
medical equipment.
We narrowed our analysis to physician practices and hospitals for
two reasons: (1) We have very little data on the usage of EDI among
dentists, suppliers of durable medical equipment, nursing homes, and
residential care facilities. The lack of data for these types of health
care providers have been noted in other studies on administrative
simplification;\44\ and (2) we assume that the greatest costs will be
borne by hospitals and physician practices as they conduct the majority
of standard transactions. While we believe that some small health care
provider entities outside of these two categories may be impacted,
albeit in much fewer numbers, we believe the analysis gathered here
would be indicative of the costs that we would expect all small health
care provider entities to experience. We welcome comment from industry
and the public as to our assumptions.
---------------------------------------------------------------------------
\44\ ``Excess Billing and Insurance-Related Administrative
Costs,'' by James Kahn, in The Healthcare Imperative; Lowering Costs
and Improving Outcomes: Workshop Series Summary, edited by Pierre L.
Yong, Robert S. Saunders, and Leigh Anne Olsen.
---------------------------------------------------------------------------
Because each hospital maintains its own financial records and
reports separately to payment plans, we decided to report the number of
establishments rather than firms. For physician practices, we assumed
that the costs to implement the HPID would be accounted for at the
level of firms rather than at the individual establishments.
[[Page 22988]]
According to the U.S. Census Bureau, Detailed Statistics, 2007
Economic Census, there are approximately 220,100 physician practices.
The U.S. Census Bureau data indicates that two percent of physician
practices have revenues of $10 million or more, therefore approximately
4,400 physician practices are not small entities.
Nevertheless, we have decided to consider all physician practices
small entities. Our basis for this is the fact that Census Bureau data
is calculated from report forms that are sent to only a sample of small
employers (less than 10 employees). Therefore, we can assume that the
estimates from the Census Bureau are low. The estimated number of
physician practices in the Modifications proposed rule (234,222
physician practices) includes physician practices with one to two
physicians and is within 6 percent of the total number of physician
practices estimated by the Census Bureau. Therefore, we will assume
that all physician practices, as calculated by the Census Bureau
(220,100), are small entities, and accept a small margin of error.
The 2007 Census Bureau reports that there are approximately 6,500
hospitals. The data indicates that 85 percent of hospitals have sales/
receipts/revenues of $10 million or more. While we can assume that, of
those 85 percent, some have revenues over $34.5 million; we do not have
specific numbers that detail this assumption. Therefore, as with
physician practices, we will make calculations on the assumption that
all hospitals are small entities.
c. Health Care Clearinghouses and Transaction Vendors
We did not calculate costs and benefits to health care
clearinghouses and transaction vendors in this RFA because we assume
that any associated costs and benefits will be passed on to the health
plans or health care providers, and will be included in the costs and
benefits we apply to health plans and health care providers.
d. Health Plans
The health insurance industry was examined in depth in the RIA
prepared for the proposed rule on establishment of the Medicare
Advantage program (69 FR 46866, August 3, 2004). It was determined, in
that analysis, that there were few, if any, ``insurance firms,''
including HMOs that fell below the size thresholds for ``small''
business established by the SBA Health. We assume that the ``insurance
firms'' are synonymous, for the most part, with health plans that
conduct standard transactions with other covered entities and are,
therefore, the entities that will have costs implementing the use of
HPIDs. In fact, then, and even more so now, the market for health
insurance is dominated by a relative handful of firms with substantial
market shares. There are, however, a number of health maintenance
organizations (HMOs) that are small entities by virtue of their
nonprofit status even though few if any of them are small by SBA size
standards. There are approximately 100 such HMOs. These HMOs and those
Blue Cross and Blue Shield plans that are non-profit organizations,
like the other firms affected by this proposed rule, will be required
to obtain and use HPID in standard transactions. Accordingly, this
proposed rule will affect a ``substantial number'' of small entities.
We estimate, however, that the costs of this proposed rule on health
plans do not remotely approach the amounts necessary to be a
``significant economic impact'' on firms with revenues of tens of
millions of dollars. Therefore, we do not include health plans in our
RFA, but have analyzed the costs and benefits to health plans in our
RIA.
We welcome industry and stakeholder input on our assumption in this
regard.
2. Cost for Small Entities
In Table 19, we take the information from the impact analysis and
break out the costs for both physician practices and hospitals, using
the maximum cost of implementation in any one year. As we are treating
all health care hospitals and physician practices as small entities for
the purpose of this RFA, we allocated 100 percent of the implementation
costs reported in the impact analysis for physician practices and
hospitals. We used the maximum estimated costs from the RIA. Table 19
shows the impact of the implementation costs of HPID as a percent of
the health care provider revenues.
Table 19--Analysis of the Burden of Implementation of HPID on Small Covered Entities*
----------------------------------------------------------------------------------------------------------------
I II III IV V
----------------------------------------------------------------------------------------------------------------
Maximum
cost of
Total Revenues or health care Implementation
Entities number of receipts EFT cost revenue
small (in standard receipts
entities millions) annual (in (percent)
millions)
----------------------------------------------------------------------------------------------------------------
Physician practices...................................... 220,100 $359,853 $272 0.00076
Hospitals................................................ 6,500 729,870 583 0.00080
----------------------------------------------------------------------------------------------------------------
* In 2012 dollars.
Table 19, Column II shows the number of entities as discussed in
this section. Table 19, Column III shows revenues that were reported
for 2009 in the Survey of Annual Services (http://www.census.gov/services/sas_data.html). Table 19, Column IV shows the costs to health
care providers for implementation of the HPID, as described in the RIA.
The estimated high range of costs was used. Table 19, Column V shows
the percent of the small entity share of implementation costs as a
percent of the small entity revenues.
K. Conclusion for the HPID and NPI
We use a baseline threshold of 3 percent of revenues to determine
if a rule would have a significant economic impact on affected small
entities. The anticipated economic effect of this rule on small
entities would not exceed or even come close to meeting this threshold.
Based on the foregoing analysis, we certify that this proposed rule
would not have a significant economic impact on a substantial number of
small entities.
However, because of the relative uncertainty in the data, the lack
of consistent industry data, and our general assumptions, we invite
public comments on the analysis and request any additional data that
would help us determine more accurately the impact on the various
categories of small entities affected by this proposed rule.
[[Page 22989]]
L. Alternatives Considered for the ICD-10
Faced with growing evidence that a group of providers would not be
ready for the transition to ICD-10, and the possibility that payment
for millions of health care claims would be delayed, we considered a
number of options before proposing a 1-year delay in the compliance
date in this proposed rule.
1. Option 1: Maintain October 1, 2013 Deadline
Segments of the health care industry have expressed strong support
for staying the course regarding the 2013 date. Many health plans,
large hospitals, physician practices, and IT vendors have already made
large investments upgrading systems, hiring personnel for the
transition, and making other preparations for implementation. There is
a financial and psychological momentum toward implementing ICD-10 that
may be disrupted by a delay. According to the Edifecs poll, ``a
potential delay of the ICD-10 compliance deadline could have far
reaching--and highly negative--impact to the health care industry's
effort to implement the mandate.'' \45\
---------------------------------------------------------------------------
\45\ Edifecs poll, 2012.
---------------------------------------------------------------------------
A major health informatics association, citing the large
investments that providers, health plans, academic programs, and others
have made in creating new jobs, upgrading systems, deploying new EHR
systems, and other efforts has urged no delay in the ICD-10 2013
compliance date.\46\ Likewise, due to the long lead time required for
textbook development and publication, authors and educational
institutions have already changed their textbooks and coding curricula
to ICD-10. One university coding program has expressed concern that its
30 coding students would have to revert to learning ICD-9 codes and
take additional classes to gain proficiency with ICD-9, at a cost of
$2,036 per student, so that upon graduation they will be employable in
an ICD-9 environment should the compliance date for ICD-10 be delayed.
Other institutions, such as medical schools that include coding as part
of their curricula, technical and vocational schools, community
colleges and other entities that offer coding training, would
experience similar challenges with a delayed ICD-10 compliance date.
---------------------------------------------------------------------------
\46\ Letter to Kathleen G. Sebelius, Secretary, U.S. Department
of Health and Human Services, from American Health Information
Management Association (AHIMA), February 23, 2012.
---------------------------------------------------------------------------
Hospitals also report extensive ICD-10 financial investments in
information technology systems re-programming, business process
changes, and staff training premised upon the October 1, 2013
compliance date. While a major hospital association has advocated
retaining the October 1, 2013 compliance date, it still welcomed a
review of the date as a delay could benefit smaller hospitals with
fewer resources to invest in ICD-10 implementation.\47\
---------------------------------------------------------------------------
\47\ ``CMS Hints at Delay in ICD-10 Implementation Deadline,''
HCPRO Web site, February 14, 2012, http://www.hcpro.com/HOM-276578-6962/CMS-hints-at-delay-in-ICD10-implementation-deadline.html
---------------------------------------------------------------------------
Nevertheless, it is clear that a significant number of health care
entities will not be prepared to meet the October 1, 2013 ICD-10
compliance date. Reasons for this vary--entities may not have altered
their systems, thoroughly analyzed their processes, changed their
forms, prepared for training their personnel, or begun testing their
internal systems. Regardless of the reason entities will not be able to
achieve compliance, given the substantial effect that delayed claim
payments would have on health care delivery industry-wide, a delayed
compliance date appears to be warranted.
As demonstrated in the impact analysis in this proposed rule, we
anticipate that a substantial number of small providers (medical
practices of between 1 to 5 physicians), would not be ready to use ICD-
10-CM codes by the October 1, 2013 compliance date. If 25 percent of
physician claims were to continue to be submitted using ICD-9 codes
after an October 1, 2013 compliance date, millions of claims would
likely be returned and physicians might experience devastating cash
flow problems. Lack of reimbursement could force practices to shut
down, making medical services inaccessible to patients and/or forcing
physicians to ask patients to pay up front, out-of-pocket, for medical
services, which, aside from being barred by the terms of some insurance
programs, would be extraordinarily burdensome to patients.
Although we believe that a majority of the health care industry
supports maintaining the October 1, 2013 ICD-10 compliance date and is
justly concerned that the ill-preparedness of a minority of the
industry might adversely affect its efforts to achieve timely
compliance, as we stated in the January 2009 final rule, successful
ICD-10 compliance is dependent on all industry segments being ready for
ICD-10 at the same time. More importantly, we believe that concern for
patient well-being and physicians' continued rendering of health care
services must be a prime consideration. We have determined that
maintaining the October 1, 2013 ICD-10 compliance date could disrupt
significant numbers of physicians' reimbursements, which in turn could
jeopardize patient care.
2. Option 2: Maintain the October 2013 Compliance Date for ICD-10-PCS
(Procedure Coding) and Delay the Compliance Date for ICD-10-CM
Diagnosis Codes Only
We also considered a split implementation alternative: Maintaining
the compliance date for ICD-10-PCS, which is used for inpatient
hospital procedure coding only, at October 1, 2013, while delaying the
compliance date for ICD-10-CM, the diagnosis codes used by physicians,
to some later date, for example October 1, 2015. The rationale for this
option was that hospitals, with their greater access to resources,
would be in a better position to move forward with ICD-10-PCS, which
would result in at least partial compliance with the October 1, 2013
date. This option would also afford small providers additional time to
become compliant with the ICD-10-CM diagnosis codes.
However, after analysis, we discerned that this option held the
potential for penalizing hospitals in that they would effectively have
to implement ICD-10 twice: Once in 2013 for ICD-10-PCS and then again
in 2015 for ICD-10-CM, increasing their implementation costs. This
option also held great potential for confusion among providers and
payers.
3. Option 3: Forgo ICD-10 and Wait for ICD-11
The option of foregoing a transition from ICD-9 to ICD-10, and
instead waiting for ICD-11, was another alternative that was
considered. This option was eliminated from consideration because the
World Health Organization, which creates the basic version of the
medical code set from which all countries create their own specialized
versions, is not expected to release the basic ICD-11 medical code set
until 2015 at the earliest.
From the time of that release, subject matter experts state that
the transition from ICD-9 directly to ICD-11 would be more difficult
for industry and it would take anywhere from 5 to 7 years for the
United States to develop its own ICD-11-CM and ICD-11-PCS versions.\48\
---------------------------------------------------------------------------
\48\ Rhonda Butler, ``Why we can't skip ICD-10 and go straight
to ICD-11,'' Healthcare Finance News, March 29, 2012;
Carl Natale, ``Why we're not ready to plan ICD-11
implementation,'' ICD10Watch, February 20, 2012, http://www.icd10watch.com/, ''ICD-10 Frequently Asked Questions,'' American
Health Information Management Association (AHIMA), http://www.ahima.org/ICD10/faqsall.aspx#36.
---------------------------------------------------------------------------
[[Page 22990]]
4. Option 4: Mandate a Uniform Delay in Compliance Date for ICD-10
The fourth option considered was a uniform delay in the compliance
date for both ICD-10-CM and ICD-10-PCS. The advantage to contemplating
an across-the-board delay was that it would yield a single compliance
date among all industry segments. Contemplating such an option gave
rise to a secondary question--what length of delay would be
appropriate?
Using the existing October 1, 2013 compliance date as a starting
point, we looked at the potential impact of delaying compliance to
October 1, 2015. While offering, in effect, an additional 3-year
implementation timeline (from 2012 through 2015), a delay to 2015 would
have damaging effects on industry and on the transition to ICD-10 in
general. The Edifecs poll found that nearly 70 percent of respondents
felt that a two-year delay would be either ``potentially catastrophic
or cause an unrecoverable failure,'' and that ``a delay of longer than
a year will likely freeze budgets, slow down schedules, or stop work
altogether.'' \49\ A mere 2 percent of Edifecs respondents said there
would be a benefit to a 2-year delay. Entities' difficulties would
likely include having to modify their preparation now (likely through
actions like staff layoffs or terminating contracts), only to have to
hire other staff or enter into new or revised contracts later.
---------------------------------------------------------------------------
\49\ Edifecs poll, 2012.
---------------------------------------------------------------------------
Based upon the methodology and baseline estimates from the RIA that
follows, we estimate it will cost health plans up to an additional 30
percent of their current ICD-10 implementation budgets for a 1-year
delay. We can assume, therefore, that a 2-year delay would be at least
double the cost; that is, a 2-year delay would cost at least $13
billion for all commercial and government health plans.
An informal survey of State Medicaid programs also indicated that
an October 1, 2015 compliance date may be problematic for some States
that are undergoing IT-intensive Medicaid Management Information System
(MMIS) transitions that same year.
Extending the ICD-10 compliance date to October 1, 2015 would
likely result in having to lift the current code set freeze, as the
industry could not wait an additional 2 years for maintenance updates
to the medical data code sets. A code set freeze is a suspension of
updates to code sets, in this case, ICD-9. Updates to code sets are
usually necessary on an annual basis in order to encompass new
diagnosis and procedure codes that capture new technologies or
diseases. The ICD-9-CM Coordination and Maintenance Committee
implemented a partial code set freeze of the ICD-9-CM and ICD-10 codes
prior to the October 1, 2013 ICD-10 compliance deadline. On October 1,
2012, there will be only limited code updates to both the ICD-9-CM and
ICD-10 code sets to capture new technologies and diseases as required
by section 503(a) of Pub. L. 108-173. On October 1, 2013, there will be
only limited code updates to ICD-10 code sets to capture new
technologies and diagnoses as required by that same provision, while no
updates will be made to the then-obsolete ICD-9-CM. On October 1, 2014,
regular updates to ICD-10 will begin. For more information on the code
set freeze, see http://www.cms.gov/ICD9ProviderDiagnosticCodes/Downloads/Partial_Code_Freeze.pdf.
Lifting the code set freeze would result in the release of
potentially thousands of changes to the ICD-10-CM and ICD-10-PCS code
sets, all of which would have to be re-programmed into systems in order
to be ready for an October 1, 2015 compliance date, at considerable
industry cost. The Medicare fee-for-service health plan estimated that
the cost for re-programming just one of its systems due to a code set
freeze lift would result in, at minimum, $1 million in additional
expense. If each of the nation's approximately 1,887 health plans
incurred a similar cost, it would translate into a minimum additional
expense of nearly $2 billion.
A 2-year delay in the ICD-10 compliance date may also signal a lack
of HHS' ICD-10 commitment, potentially engendering industry fear that
there could be another delay in, or complete abandonment of, ICD-10
implementation, with subsequent heavy financial losses attributable to
ICD-10 investments already made. Industry representatives also
expressed concern about the loss of momentum in progress toward ICD-10
compliance that would result from a 2-year compliance extension.\50\
---------------------------------------------------------------------------
\50\ Edifecs poll, 2012: And February 28, 2012 Letter In Regards
to ICD-10, Implementation Date Delay to Denise M. Buenning,
Director, Administrative Simplification Group, Office of E-Health
Standards and Services (OESS), from Maria Buonos, Business
Development Manager, Wolters Kluwar Law & Business.
---------------------------------------------------------------------------
5. Conclusion
We believe a 1-year delay in compliance with ICD-10-CM and ICD-10-
PCS achieves a balance between the needs of those who have already
taken the initiative to plan for on-time compliance with ICD-10 and the
need for small providers and small hospitals to have additional time to
become ICD-10 compliant. While not without additional costs, a 1-year
delay to October 1, 2014 represents what we consider to be a reasonable
compromise. Short of maintaining the 2013 date, delaying ICD-10-CM and
ICD-10-PCS by 1-year does the least to disrupt existing implementation
efforts, while affording the small provider community an additional
year to become compliant. A 1-year delay does not significantly
penalize those that have made significant investments to become
prepared to implement ICD-10 and better maintains momentum than would a
2-year delay.
Any ICD-10 delay decision must be accompanied by increased industry
and Departmental efforts, including further outreach and education, and
joint pilot testing, to ensure that small providers and hospitals
achieve compliance. Additionally, a 1-year delay means that the current
code freeze--which was not contemplated in either the ICD-10 proposed
or final rules--could be maintained, avoiding costly systems
reprogramming. Finally, as opposed to the likely significant impact of
a possible 2-year delay, a 1-year delay allows the industry to maintain
momentum already achieved in readying for the current October 1, 2013
compliance date.
We invite industry and stakeholder comment on all of our ICD-10
compliance date alternatives and assumptions.
M. Impacted Entities--ICD-10
All covered entities may be affected by a delay in the compliance
date of ICD-10 as proposed in this rule. Covered entities include all
health plans, health care clearinghouses, and health care providers
that transmit health information in electronic form in connection with
a transaction for which the Secretary has adopted a standard.
Table 7 outlines the number of covered entities that may be
affected by a delay in ICD-10, along with the sources of those data.
These are the same entities that will be affected by HPID.
While covered entities are required to transition to ICD-10, many
other entities not required to abide by HIPAA (such as workers'
compensation
[[Page 22991]]
programs and automobile and personal liability insurers) currently use
ICD-9 for a variety of purposes. Because their operational and business
needs often intersect with covered entities, for practical and business
purposes these other entities may voluntarily transition to ICD-10
alongside HIPAA covered entities. ICD codes are used in nearly every
sector of the medical and health industry.
N. Scope and Methodology of the Impact Analysis for ICD-10
This impact analysis estimates the costs and benefits of a proposed
delay in required compliance with ICD-10. We are analyzing only the
impact of a delay, not the impact of ICD-10 implementation that we
addressed in the August 2008 ICD-10 proposed rule (73 FR 49476) and the
January 2009 ICD-10 final rule (74 FR 3328).
Despite the broad utilization of ICD codes that extends beyond
covered entities, with one exception our analysis is restricted only to
those entities as only they fall under the auspices of this rule. With
respect to health care providers, only health care providers that
transmit health information in electronic form in connection with a
transaction for which the Secretary has adopted a HIPAA transaction
standard are considered covered entities. The one area where we provide
additional analysis is the cost to educational institutions to educate
students being trained in ICD-10 coding because such training costs
have been of particular concern to industry and have been included in
the August 2008 and January 2009 ICD-10 proposed and final rules' cost
analyses.
Moreover, while we assume that a delay in the implementation of
ICD-10 will affect a broad range of health care providers, as
illustrated in Table 7, we only examine the costs and benefits of a
delay on two types of health care providers: Hospitals and physician
practices. We do not analyze the impact on other industry sectors,
including, but not limited to, nursing and residential care facilities,
dentists, durable medical equipment (DME) suppliers, or pharmacies for
various reasons. Consistent with our previous impact analysis in the
2008 ICD-10 proposed rule, we continue to have very little data on the
use of EDI among dentists, DME suppliers, nursing homes, and
residential care facilities. The lack of data for these types of health
care providers has been noted in other studies on administrative
simplification.\51\ We assume that the greatest benefits will be gained
by hospitals and physician practices as they conduct the majority of
standard transactions, although it cannot be assumed that the costs
will necessarily be borne by physician practices and hospitals only. We
have not included an analysis of the impact on pharmacies because
pharmacies typically do not use ICD codes in their routine course of
business so we assume there is no impact on pharmacies. We welcome
comment regarding our assumptions.
---------------------------------------------------------------------------
\51\ ``Excess Billing and Insurance-Related Administrative
Costs,'' by James Kahn, in The Healthcare Imperative; Lowering Costs
and Improving Outcomes: Workshop Series Summary, edited by Pierre L.
Yong, Robert S. Saunders, and Leigh Anne Olsen, Institute of
Medicine of the National Academies, the National Academies Press,
Washington, DC: 2010.
---------------------------------------------------------------------------
We include health care clearinghouses and transaction vendors as
affected entities in Table 7. Transaction vendors are entities that
process claims or payments for other entities such as health plans.
Transaction vendors may not meet the HIPAA definition of health care
clearinghouse, but, as used in this context, health care clearinghouses
would constitute a subset of transaction vendors. Payment vendors would
be a type of transaction vendor--a transaction vendor that
``associates'' or ``reassociates'' health care claim payments with the
payments' remittance advice for either a health plan or provider. For
our purposes, transaction vendors do not include developers or
retailers of computer software, or entities that are involved in
installing, programming or maintaining computer software. Health care
clearinghouses and transaction vendors will be impacted because they
will need to transition their systems to accept ICD-10 codes. However,
we did not calculate costs and benefits to health care clearinghouses
and transaction vendors in this cost analysis because, as in our
previous impact analysis in the August 2008 ICD-10 proposed rule, we
assume that any associated costs and benefits will be passed on to the
health plans or providers and will be included in the costs and
benefits we apply to health plans or providers.
Although self-insured group health plans meet the HIPAA definition
of ``health plan,'' we did not include them in this impact analysis.
While self-insured group health plans will be required implement ICD-
10, we assume that, with a few exceptions, such plans do not send or
receive HIPAA electronic transactions because most are not involved in
the day-to-day activities of a health plan and outsource those services
to TPAs or transaction vendors.
However, we do include TPAs in this RIA. Although TPAs do not meet
the definition of ``health plans'' and therefore are not required by
HIPAA to use code sets such as ICD-10, as a practical matter they will
be required to make the transition in order to continue to conduct
electronic transactions on the part of self-insured plans. However, the
impact of a delay of the compliance date of ICD-10 on TPAs will be
similar to the commercial insurer cost/benefit impact profile since
they serve a similar function and will have to implement and test their
systems in the same manner as health plans. Therefore, when we refer to
``commercial health plans'' in this RIA we will be including TPAs, and
we include all TPAs in the category of ``small health plans'' in the
RFA.
Software vendors will incur considerable responsibility and cost
with respect to ICD-10 implementation, but we do not analyze the cost
of delay to software vendors as they ultimately pass their costs to
their clients.
O. Cost Avoidance of a 1-Year Delay in the ICD-10 for the Health Care
Industry
Our analysis of industry benefit is based on cost avoidance. That
is, we anticipate that there will be greater costs associated with the
current compliance date for ICD-10 of October 1, 2013 than if the
compliance date were to be delayed 1 year, as proposed in this rule.
Therefore, our analysis will demonstrate the costs associated with the
current compliance date of October 2013, and apply those as savings or
benefits attributable to a delayed compliance date.
The assumption behind these savings is that a specific number of
physicians and hospitals will not be prepared to use ICD-10 by the
compliance date of October 1, 2013. This lack of readiness would
engender a number of costly consequences.
Estimates on the benefit of a 1-year delay are subject to
considerable variation. A delay in the ICD-10 compliance date increases
the opportunity for a successful, timely transition and provides an
opportunity to reduce disruptions in health care delivery and payment.
A basic assumption in this projection of a benefit is that entities
will take the 1-year delay to become compliant and to conduct robust
testing as discussed previously. This is possible, but by no means
inevitable, even if a vigorous public/private campaign is undertaken to
promote and assist with compliance and testing.
[[Page 22992]]
In order to make these projections on cost avoidance, we must first
estimate the number of physicians and hospitals that we expect will not
be capable of successfully making the transition to ICD-10 on October
1, 2013 such that that their claims would be rejected or returned by
health plans. We base our assumptions on CMS' recent assessment survey.
The survey was an assessment of health care providers, payers, and
vendors to determine their awareness of and preparation for the
transitions to ICD-10 and Version 5010. The research was conducted
November 1 through December 5, 2011. Table 20 illustrates the number of
survey participants from the specific health care entity:
Table 20--Categories of Participants of CMS Readiness Survey
------------------------------------------------------------------------
Payers Including
directors or Vendors Including
higher at health managers at health
Providers Including hospital and insurance IT system
pharmacy chain administrators companies, managed developers,
and health care practice care billing services
managers organizations, and and clearing
pharmacy benefits houses, outlined
managers as follows:
------------------------------------------------------------------------
192 = Provider practices with 10 45 = Private 33 = Software
or fewer physicians. payers. vendors
45 = Provider practices with 11 43 = Public payers 2 = Clearinghouse
or more physicians. (for example,
Medicaid,
TRICARE).
50 = Small hospitals with 99 or 13 = Other insurer 22 = Third party
fewer beds. (for example, biller
property and
casualty).
117 = Large hospitals with 100 .................. 33 = Third party
or more beds. administrator
Total: 404 providers........ 101 payers........ 90 Vendors
------------------------------------------------------------------------
The questions in the survey were aimed at assessing the entities'
self-reported readiness. We believe the question of compliance by
October 1, 2013 is a good baseline from which to draw estimates,
specifically with regard to providers, approximately a quarter of whom
stated that they will not be compliant by the October 1, 2013
compliance date. In general, the survey found no significant
differences in the responses based on the size or type of provider,
payer or vendor.\52\ Table 21 illustrates the self-reported assessments
of readiness for ICD-10 among providers and the other sectors. Refer to
Table 20 for descriptions of the sectors.
---------------------------------------------------------------------------
\52\ Differences among provider subgroup categories are reported
in the CMS Readiness Survey; however, for many questions and
response options, the base sizes of respondents are too small to be
eligibilityfor significance testing.
Table 21--Summary of CMS Readiness Survey Responses
----------------------------------------------------------------------------------------------------------------
Additional
Will be percentage Do not know
compliant will be when they Do not plan
by October compliant will be on being
1, 2013 by December compliant compliant
(percent) 31, 2013 (percent) (percent)
(percent)
----------------------------------------------------------------------------------------------------------------
Providers................................................... 74 14 11 1
Payers...................................................... 72 17 4 8
Vendors..................................................... 78 8 13 1
----------------------------------------------------------------------------------------------------------------
This RIA will base the benefits of the proposed delay of the
compliance date of ICD-10 on cost avoidance, as opposed to an actual
financial savings or cost savings. That is, we are proposing that, by
delaying the compliance date by 1 year, a number of costly, predicted
consequences will be avoided. Therefore, we use the survey results from
providers as our baseline for estimating the issues that may arise if
the compliance date remains October 1, 2013. The providers must first
code and initiate transactions with ICD-10. Ultimately, the costs of
noncompliance--returned unpaid claims--will be borne by the providers.
Based on the CMS readiness survey, we will use the percentage of
providers who believed they would not be compliant by October 1, 2013
(26 percent) as our high estimate and the percentage of providers who
believed they would not be compliant by December 31, 2013 (12 percent)
as our low estimate. We use 12 percent as the low estimate because that
percentage seems to indicate that only 12 percent of providers believe
they will miss the compliance date by more than 3 months. It is
reasonable to assume that, with some tools and careful planning, some
to all of the 14 percent of providers that believe they are within 3
months of making the October 1, 2013 could be assisted in meeting the
compliance date. Therefore, we estimate that 12 to 26 percent of
providers will not have achieved ``readiness'' by the October 1, 2013
compliance date.
We recognize that the providers that were surveyed in the CMS
readiness survey do not represent all the various categories of
providers, and did not include, for example: dentists, chiropractors,
optometrists, mental health practitioners, substance use treatment
practitioners, speech and physical therapists, podiatrists, home health
care services, other ambulatory health care services, resale of health
care and social assistance merchandise (durable medical equipment), and
nursing and residential care facilities not associated with a hospital.
However, as the survey did not find significant differences \53\
between the categories of providers surveyed, we will assume that the
providers in the categories that were not surveyed would have similar
experience with October 2013 readiness for ICD-10. Further, physician
practices and hospitals submit the bulk of total
[[Page 22993]]
health care claims. Therefore, we have based our estimates of the cost
of not delaying the compliance date of ICD-10 on the projection that 12
to 26 percent of providers will not be ready or will not have
appropriately tested for implementation of ICD-10 by October 1, 2013.
---------------------------------------------------------------------------
\53\ Differences among provider subgroup categories are reported
in the CMS Readiness Survey; however, for many questions and
response options, the base sizes of respondents are too small to be
eligibility for significance testing.
---------------------------------------------------------------------------
We also recognize that the survey does not represent a
statistically valid sample of providers, but we have no other recent
data with which to base our readiness estimates. We welcome industry
input and comment on our assumptions with regard to the readiness of
covered entities.
The total savings attributable to the 1-year compliance date delay
is based on the premise that providers who are not ready for ICD-10
will submit claims to payers that will be automatically returned
beginning on the October 1, 2013 compliance date. Providers will then
have to manually crosswalk ICD-9 to ICD-10 codes and ostensibly submit
paper claims. (Alternately, providers who have not readied their
systems or processes may proactively submit paper claims using ICD-10
on October 1, 2013. We assume that the cost to these providers to
manually crosswalk will entail similar costs to what would be required
to resubmit returned claims, as the manual task will be similar in
nature.) We calculate the cost avoidance of a 1-year delay in the
compliance date of ICD-10 based on two probable scenarios: Returned
claims will: (1) Cause expensive manual intervention on the part of
both providers and health plans in order for the ``not ready''
providers to be paid; and (2) financially impact providers by
potentially requiring them to take out loans or apply for lines of
credit to be able to continue to provide health care in the face of
delayed payments. We apply calculations to each of these scenarios in
the analysis that follows. Although the cost to manually process
returned claims will ostensibly occur from, roughly, October 1, 2013
through March, 2014, for simplicity sake our calculations reflect a
cost avoidance that is calculated for 1 year only--the year 2014.
A halt to the payment process for 12 to 26 percent of all providers
has a greater effect than requiring manual intervention and requiring
business loans or lines of credit. In some cases, a payment delay may
pose a serious threat to the continued operation of some providers. For
example, many health care safety net clinics operate with no more than
30 to 60 days of cash on hand, so any prolonged delay would threaten
such entities' viability.
We also anticipate that health care services for a great number of
patients will be adversely affected or interrupted because providers
will need to spend more time to obtain health care claim payments
leaving less time to render health care services.
1. Cost Avoidance: Manual Processing of Returned Claims
Using the estimate of 12 to 26 percent of providers who will not be
ICD-10 compliant on October 1, 2013, we have calculated that 58 to 126
million claims per month will be returned as unprocessable across the
industry. We have estimated the cost of returned claims for health
plans and for physician practices and hospitals that would follow the
implementation of ICD-10 in Table 22, assuming that providers could not
electronically transmit claims with ICD-10 codes for 6 months past an
October 1, 2013 compliance date. From this calculation, based on the
following assumptions, we estimate the cost to the health care industry
to manually process returned claims for 6 months after an October 1,
2013 compliance date to be approximately $2 to $5 billion. This is
based on the following assumptions:
The total number of health care claims in 2013 is
projected to be 5.8 billion. This is an average of the low and high
range estimates of total claims as calculated in the Modifications
proposed rule.
We use the percentage of providers that project they would
not be compliant on October 1, 2013 to calculate the percentage of
claims that will be returned (12 to 26 percent). This is a rough
equivalency. However, the survey assessed both large and small
physician offices and hospitals and found no significant difference in
their readiness. As stated previously, we have projected the readiness
of physician practices and hospitals, as estimated by the CMS readiness
survey, as the readiness of all other providers (dentists, etc.). We
believe the range of the estimate accounts for the great number of
variables and unknowns inherent in this kind of calculation.
We use the cost of pended claims to calculate the cost to
health plans of returned claims. Returned claims are claims that will
be automatically returned by health plans because their systems will
not be able to accept the ICD-9 codes that the non-compliant providers
will submit. Returned claims, in and of themselves, have no cost to
health plans. Pended claims are claims that require manual intervention
by the health plan to be processed for payment. While we assume that 12
to 26 percent of all claims will be returned, we assume that these
claims will be followed up by providers with calls or contacts with the
health plans. Ultimately, it is probable that health plans will have to
manually intervene with the claims submitted in ICD-9, and therefore
the cost of these returned claims will be similar to the cost of pended
claims for health plans. The cost to health plans for manually
processing a pended claim is $2.30 per claim.\54\
---------------------------------------------------------------------------
\54\ ``An Updated Survey of Health Care Claims Receipt and
Processing Times,'' May 2006, American Health Insurance Plans (AHIP)
Center for Policy and Research. Cost in 2006 was $2.05 per claim. We
have adjusted the cost to 2012 dollars.
---------------------------------------------------------------------------
According to the Medical Group Management Association
(MGMA), the staff time required to manually process a returned claim is
15 minutes,\55\ at a cost of approximately $4.14 for labor, a factor
derived from the Bureau of Labor Statistics.\56\ This includes staff
time spent to correct the error and resubmit claims that are returned.
---------------------------------------------------------------------------
\55\ ``Project Swipe IT Savings Model,'' 2009, citing a LEARN
Research median figure.
\56\ For billing and posting clerks in physician offices,
Department of Labor, 2010 dollars.
---------------------------------------------------------------------------
We are basing our estimates on the cost to manually process health
care claims, both to the provider and to the health plan. However, it
should be clear that these claims, so long as they are otherwise
properly payable, would ultimately be paid. The impact to providers is
not that they will lose money from claims altogether. Rather, it will
take costly staff time for the providers to resubmit properly coded
claims in order to receive payment, and it will take costly staff time
for the health plan to manually process and pay the claims. We welcome
comments on this analysis and these assumptions.
[[Page 22994]]
table 22--Cost Avoidance in 2014 for Health Plans and Providers Attributable to a Delay in the Compliance Date
of ICD-10 *
----------------------------------------------------------------------------------------------------------------
LOW to HIGH cost of
processing returned LOW to HIGH cost of
LOW to HIGH number of claims returned claims manually for returned claims for LOW to HIGH total over
per month health plans over 6 providers over 6 months 6 months
months
----------------------------------------------------------------------------------------------------------------
58 to 126 million.................... $800 to 1,700 million.. $1.5 to 3 billion...... $2.2 to 4.7 billion
----------------------------------------------------------------------------------------------------------------
* Calculated in 2012 dollars.
2. Cost Avoidance: Interest on Loans and Lines of Credit
The time between when a provider originally submits the claim and
when the provider finally gets paid will be considerably longer than if
the claim were an electronically submitted ``clean'' claim; that is., a
claim for which no additional information or intervention is needed.
During this time, providers, specifically small physician practices,
will need to have cash on hand in order to ``keep the doors open'' by
paying salaries, staying current with contract and lease obligations,
purchasing equipment and medicines, and maintaining the physical plant.
In some cases, in order to continue as a health care provider, this
will require a business loan or a line of credit with interest.
In Table 23, we estimate the costs in terms of interest if 12 to 26
percent of physician practices were required to take out a loan in
order to continue to provide health care services. We use the following
assumptions in the calculation:
Using data from the National Health Expenditures
Projections 2010 to 2020, we calculate the average expenditure per
physician practice.\57\
---------------------------------------------------------------------------
\57\ The Center for Medicare & Medicaid Services (CMS),
``National Health Expenditure Data,'' https://www.cms.gov/NationalHealthExpendData/.
---------------------------------------------------------------------------
We assume that 12 to 26 percent of physician practices (or
28,107 to 60, 898 providers who would not be ready for the ICD-10
transition) times the average expenditure per physician practice over
half a year would be equal to the monetary amount in payments that
would be delayed.
As per the most recent estimate by the Federal
Reserve,\58\ we use 7.6 percent as the average interest rate on a small
business loan from $100,000 to $1 million.
---------------------------------------------------------------------------
\58\ ``Small Business Rate Report,'' Friday, March 16, 2012,
http://www.businessweek.com/smallbiz/resources/rate_report/lenders.htm.
---------------------------------------------------------------------------
Based on these assumptions, we estimate the cost avoidance for
physician practices to be between $1.4 to $3 billion if interest on
loans to cover delayed payments were to accumulate over 6 months.
Although these avoidable costs will ostensibly occur at the end of 2013
through 2014, for simplicity sake we have calculated the cost avoidance
as occurring in 2014.
For this calculation, we make no distinction between large or small
physician practices, though we assume that the 12 to 26 percent of
providers that may not be ready for the October 1, 2013 compliance date
are mostly small physician practices. Because we make no distinction
between the size of physician practices, however, our cost avoidance
may be high because we are basing our calculation on an average dollar
amount per physician practice that will be delayed. It is likely that
the average expenditure per physician practice is much higher than the
actual expenditure per small physician practices. While there is a high
level of uncertainty in terms of all of our assumptions, we think it
illustrative to make the calculation in order to demonstrate the affect
that a delay in payments will have on small physician practices. In
this RIA, we only account for interest on loans taken out by the 12 to
26 percent of providers that do not anticipate being compliant with
ICD-10 to cover delayed payments. We did not account for any possible
interest accrued by payers that retain claim payments in our
calculations, because we do not have sufficient information on the
financing vehicles used by payers to pay claims. We welcome comments on
our assumptions and calculations.
Table 23--Cost Avoidance in 2014 for Physician Practices Based on Interest on Borrowed Funds
----------------------------------------------------------------------------------------------------------------
Expenditure
over six
months per
physician
practice in LOW to HIGH amount of
millions = delayed payments over Avg Annual
Percent of providers that will not (annual a six month period in interest rate LOW to HIGH Cost to
be ready for October 1, 2013 expenditure on millions (% not ready on small providers in interest
compliance date physician * number of physician business loans in millions
practices) practices) * (Federal
divided by (expenditure per Reserve, 2011)
( of practice)
physician
practices)
divided by 2
----------------------------------------------------------------------------------------------------------------
12% to 26%........................ $1.3 $36,450 to $78,975... 0.076 $1,385 to $3,000
----------------------------------------------------------------------------------------------------------------
* In 2012 dollars
P. Costs for ICD-10
The cost of a 1-year delay falls on the health care entities that
are already far along on their preparation for ICD-10. In summarizing
its February 2012 poll, Edifecs noted that:
``Many entities have brought ICD-10 subject matter experts on
board with defined term contracts. A 1-year delay means entities
will have to choose between two unpleasant scenarios: Either extend
the contract or terminate the contract* * * Most entities will
likely choose [to extend the contract] and retain the expertise they
already have.
[[Page 22995]]
Many are also concerned about the added costs of maintaining
technology resources, such as test regions, for an extended time
period. Unfortunately, this means most organizations will incur a
much greater cost to implement ICD-10 than originally anticipated.''
\59\
---------------------------------------------------------------------------
\59\ Edifecs poll, 2012.
1. Costs of a 1-Year Delay of Implementation of ICD-10 for Health Plans
a. Cost for Commercial Health Plans and TPAs
Health plans are a varied group in terms of size, and the cost of a
delay is calculated using a range that reflects this variance. We
assume that system costs for health plans to transition to ICD-10 have
already been budgeted and funds already spent. A delay of a year for
ICD-10 compliance primarily will allow entities more time to thoroughly
test, but the testing and the continued maintenance of contracts and
personnel required for the transition will be 1 year longer than was
originally budgeted. In fact, one of the main issues for entities that
argue against a delay is the concern that their companies would divert
funds currently dedicated to the transition to ICD-10 to other
priorities.
We use the following assumptions in calculating the costs for
health plans of a 1-year delay in the ICD-10 compliance date.
We assume that continued training, testing, and retention
of personnel and contracts will cost plans an additional 10 to 30
percent of what health plans have already budgeted on the ICD-10
transition to date. We have based this range approximately on the
Edifecs poll. The Edifecs poll found that, ``Forty-nine percent
estimated that every year of delay would increase their required budget
between 11 and 25 percent, while another 37 percent estimated the
increase would be somewhere between 26 and 50 percent.'' \60\ We
summarize this by approximating that nearly 86 percent of respondents
of the Edifecs poll would agree that the cost of a 1-year delay is at
least in the range of 10 to 30 percent of currently budgeted
implementation costs.\61\
---------------------------------------------------------------------------
\60\ Ibid.
\61\ The Edifecs poll found that ``Forty-nine percent estimated
that every year of delay would increase their required budget
between 11 and 25 percent, while another 37 percent estimated the
increase would be somewhere between 26 and 50 percent.''
---------------------------------------------------------------------------
We analyzed the costs that were estimated in studies by
the HayGroup, Inc. (2006), \62\ the Robert E. Nolan Company (2003) \63\
the RAND Corporation (2004),\64\ and AHIP (2010).\65\ The estimates
from the various studies on the costs to health plans are summarized in
Table 24. These studies were authored before ICD-10 implementation
began. Since these studies, we have actual health plan costs dedicated
to the transition to ICD-10. However, we used some of the calculations
that those studies employed in order to project the experience of a few
health plans to the larger universe of all health plans.
---------------------------------------------------------------------------
\62\ ``Examining the Cost of Implementing ICD-10,'' October 12,
2006, White Paper Prepared by Thomas F. Wildsmith, HayGroup, Inc. on
behalf of American's Health Insurance Plans.
\63\ ``Replacing ICD-9-CM with ICD-10-CM and ICD-10-PCS:
Challenges, Estimated Costs and Potential Benefits,'' October, 2003,
prepared by Robert E. Nolan Company, October, 2003.
\64\ Libicki, Martin and Brahmakulam, Irene, ``The Costs and
Benefits of Moving to the ICD-10 Code Sets,'' March 2004, RAND
Corporation, Prepared for the Department of Health and Human
Services.
\65\ ``Health Plans' Estimated Costs of Implementing ICD-10
Diagnosis Coding,'' September, 2010, America's Health Insurance
Plans, Center for Policy & Research.
Table 24--Estimated Cost to Health Plans for Implementing ICD-10
According to Studies
------------------------------------------------------------------------
Estimated Total Cost
to Health Plans (in
Study millions)
---------------------
LOW HIGH
------------------------------------------------------------------------
Nolan (2003)...................................... $432 $913
RAND (2004)....................................... 150 363
Haygroup (2006)................................... 384 868
ICD[dash]10 Proposed Rule (2008) *................ 110 274
AHIP (2010) **................................... 2,000 3,000
------------------------------------------------------------------------
* Estimate under ICD-10 Proposed Rule does not include training costs.
** AHIP study provided costs for specific sized health plans. We have
projected those costs onto all the health plans.
As a baseline, we use the analysis of ICD-10 costs
conducted by the HayGroup, Inc. on behalf of AHIP in 2006. The HayGroup
study analyzed the other ICD-10 cost studies that had been published up
to that point and summarized their shared conclusions, including
studies conducted by the Robert E. Nolan Company (2003) \66\ and RAND
Corporation (2004).\67\ The HayGroup estimated implementation of ICD-10
would cost national health insurers between $324 to $748 million, plus
about 20 percent more in training costs. (The HayGroup estimate was
approximately the average of the Nolan and Rand estimates.) The
HayGroup had a high estimate for national health plans of $25 million
for implementation (plus an implied $5 million for training). Recently,
however, national health plans have announced that their budgets for
ICD-10 add up to nearly $100 million.\68\
---------------------------------------------------------------------------
\66\ Nolan, 2003.
\67\ Libicki, 2004.
\68\ Joseph Zubretsky, Aetna Chief Financial Officer and Senior
Executive Vice President. Aetna Fourth Quarter 2011 Earnings Call
Webcast (transcript), Feb. 1, 2012. Wayne S. Deveydt, WellPoint
Chief Financial Officer and Executive Vice President. WellPoint
Fourth Quarter 2011 Results Conference Call (transcript), Jan. 25,
2012.
---------------------------------------------------------------------------
In other words, the HayGroup high estimate appeared to be off by a
factor of four in its projections. As illustrated in Table 25, we use
$100 million as the high cost of implementing ICD-10 for national
health plans, and $50 million as the low cost. This cost includes both
system implementation and training. From that baseline, we have
attributed costs for multi-regional, large, mid-sized, and small health
plans, proportionate to the costs that are reflected in the HayGroup
estimate.
We calculate 10 to 30 percent of the total costs of health
plans' ICD-10 system implementation and training as the range of costs
for a 1-year delay.
For simplicity sake, we have calculated all costs as if
they occurred in the calendar year 2014.
Health plans made and continue to make a large investment in
preparing for ICD-10 based on the expectation that there would be a
return on investment from the transition to a more robust code set. A
1-year delay in the compliance date of ICD-10 will also postpone the
expected time when health plans can expect to see a return on these
investments (ROI). This delay in ROI will likely have negative impacts
on health plans in terms of their business plans, budgeting, and
investor relations. Because of the uncertainties in predicting impacts
of this sort, we have not attempted to quantify any impact resulting
from a delay in ROI for health plans. We welcome industry comment or
guidance on impacts of this category.
[[Page 22996]]
Table 25--Cost in 2014 of a One-Year Delay in the Compliance Date of ICD-10 *
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Col. 1 Col. 2 Col. 3 Col. 4 Col. 5 Col. 6 Col. 7 Col. 8 Col. 9
----------------------------------------------------------------------------------------------------------------------------
LOW total HIGH total
LOW total HIGH total implementation/ implementation/ LOW percent HIGH LOW HIGH
Health insurer categories Number of cost per cost per training for training for of total percent of estimate of estimate of
health health plan health plan all health all health cost for total cost one-year one-year
plans (in (in plans in plans in one year for one delay (in delay (in
millions) millions) category (Col. category (Col. delay year delay millions) millions)
1 * Col 2) 1 * Col. 3)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
National........................................................... 6 $50.40 100.80 $302.40 $604.80 10 30 $30.24 $181
Multi Regional..................................................... 6 24.00 40.32 144.00 241.92 10 30 14.40 73
Large.............................................................. 75 14.40 24.19 1080.00 1814.40 10 30 108.00 544
Mid[dash]Sized..................................................... 325 3.60 6.05 1170.00 1965.60 10 30 117.00 589
TPAs and Small Health Plans........................................ 2166 1.20 2.02 2599.20 4366.66 10 30 259.92 1310
----------------------------------------------------------------------------------------------------------------------------
Total.............................................................. ........... ........... ........... ............... ............... ........... ........... 530 2,698
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* Calculated in 2012 Dollars.
b. Cost of a One-Year Delay for CMS Health Plans
The Medicare program reports that it is prepared to be ICD-10
compliant on October 1, 2013. CMS components affected by an ICD-10
transition delay estimate that there will be additional costs for
extending contracts for systems programming and testing work and
extended staff training and associated development costs. It is
estimated that a 1-year delay in ICD-10 compliance would be reflected
by additional work at an estimated total cost of $5 to $10 million in
addition to funding already requested for the coming fiscal years.
c. Cost of a One-Year Delay in the Compliance Date of ICD-10 for State
Medicaid Agencies
State Medicaid Agencies (SMAs) were queried informally during
routine status update calls in February 2012 regarding potential
mitigation strategies for ICD-10 implementation. Thirty-nine SMAs
responded, representing all regions of the country from predominantly
rural to densely populated States. We have extrapolated from these
responses as best we could to present a quantitative assessment of
costs and benefits.
The responses were clearly split between 46 percent predicting more
benefits than detriments to a delay in the compliance date of ICD-10
and 37 percent indicated that any delay would prove more detrimental
than beneficial to their transition to ICD-10. Another 10 percent
specifically indicated a delay of 1 year would be preferred even though
a 1 year delay was not a specific option they were asked to consider.
Of the 46 percent of States that indicated benefits to delay, many
cited opportunities to improve testing and risk mitigation strategies.
Another important benefit seen was the ability to spread out
implementation costs over one or more additional fiscal years. A few
indicated they would slow or even stop their existing efforts.
Of the 37 percent of States reporting indicated any delay would be
detrimental, most indicated additional costs associated with
maintaining or sustaining ICD-10-related contracts and staff resources
and potential risks for significant losses of momentum and funding. The
10 percent of SMAs opposed to a delay longer than 1 year expressed
concerns that longer delays would put funding and the priority status
of ICD-10 projects at risk.
One predominantly rural SMA estimated that a 1-year delay could
potentially result in a cost increase of over $4 million to their
overall project. This increase would be due, primarily, to costs
associated with maintaining contracts and the project staffs.
Two SMAs specifically reported significant numbers of providers in
the States that were lagging in preparation and planning. Additionally,
they indicated the complications with the Version 5010 transition is
resulting in less time and fewer resources available for ICD-10. Many
of the resources that would have been working on ICD-10 remediation
were still committed to the Version 5010/D.0 implementation for both
SMAs and many providers.
We note that the types of concerns elicited by SMAs were very
similar to those expressed in the Edifecs poll. The further along a SMA
was in its implementation, the more likely it was to view a delay as
being costly or burdensome and to characterize delays longer than a
year as placing their conversion efforts at great risk for losses of
funding and key resources. At the same time, many felt they could make
good use of a 1 year delay to delay to improve the quality of their
testing and risk mitigation strategies.
Those most supportive of delay were those SMAs with less mature
projects and with few committed resources.
In Table 26, we calculate the cost to SMAs of a 1-year delay in the
compliance date of ICD-10. We use the following assumptions:
Based on the informal poll of SMAs, we assume that 37
percent or 20 SMAs would be ready for the October 1, 2013 compliance
date. Therefore, the assumption is that 21 SMAs would be affected
negatively by a delay.
We assume that $4 million is the low estimate for a cost
increase, as exemplified by the rural State that provided that
estimate, while $7 million is the high estimate for a cost increase, as
reported by an SMA. The high estimate is derived from a SMA that
anecdotally described its costs per year of delay. For simplicity sake,
we have calculated all costs as occurring in calendar year 2014.
Table 26--Cost in 2014 to State Medicaid Agencies of a One-Year Delay in the Compliance Date of ICD-10 *
----------------------------------------------------------------------------------------------------------------
LOW cost of a one- HIGH cost of a one- LOW cost of a one- HIGH cost of a one-
Number of State Medicaid that year delay per year delay per year delay for year delay for
would be negatively affected state agency in state agency in Medicaid agencies Medicaid agencies
millions millions in millions in millions
----------------------------------------------------------------------------------------------------------------
21.............................. $4 $7 $83 $145
----------------------------------------------------------------------------------------------------------------
* In 2012 dollars.
[[Page 22997]]
2. Cost of a 1-Year Delay for Providers
We expect that many, if not most, hospitals and large provider
organizations have already spent funds in preparation for the ICD-10
transition. As with health plans, any delay in compliance date will add
costs because large providers must maintain the personnel and
renegotiate contracts necessary to lengthen preparations an extra year.
Likewise, large providers must maintain technological resources for an
extra year.
Although the expectation is that providers will conduct more robust
and extensive testing than what may have been originally planned, to
the extent possible we have not included any testing costs in our
analysis of provider costs attributable to a 1-year delay. While
continued maintenance of test regions and resources dedicated to
testing will be costly with a 1-year delay, it is assumed that
continued and more robust testing will make it more likely that there
will be a decrease in costly post-production issues such as returned
claims. Increased testing costs will theoretically translate to
decreased post-production error costs, and, therefore, because there is
significant potential for an offset of expense to savings, no costs or
benefits will be attributed to an extra year of testing. Because the
October 1, 2013 compliance date is more than a year out, it is likely
that few small physician practices have invested a modest amount of
money and resources into the implementation of and training for ICD-10,
although they may have begun planning and budgeting for the transition
and may have contracts in place with vendors to purchase tools to
manage the transition. While we recognize that there will be costs, we
assume that these costs are negligible and that the extra time to
prepare for the transition, as will be possible with a 1 year
compliance date delay, will be more beneficial than costly for small
providers. Therefore, we will not include small providers (under 50
physicians) in the cost analysis for providers.
There is an expectation that a 1-year delay will give small
providers more time to analyze their processes, change their forms,
develop their super bills, negotiate with their vendors, and, most
importantly, test before production. In fact, giving small providers
more time to prepare is the main justification for the 1-year delay. As
with large providers, however, we will not attach any costs to these
planning and testing activities since they have already been considered
as costs for implementation of ICD-10 in the January 2009 ICD-10 final
rule.
We use the following assumptions in calculating the costs for large
providers of a 1-year delay, illustrated in Table 27:
We use the Edifecs poll as a guide in establishing a range
of costs for a delay of 1 year in implementing ICD-10 for providers. (A
group of provider representatives participated in the survey.) We will
use the ``HIGH'' and ``LOW'' estimate that the Edifecs poll suggests
itself in its narrative: A 1 year delay will cost 10 to 30 percent of
the costs that providers have spent or have budgeted for ICD-10
transition.
We will use costs estimated by an October 2003 study by
the Robert E. Nolan company commissioned by the Blue Cross and Blue
Shield Association.\69\ We employed this study, along with a March 2004
RAND study, in the IDC-10 proposed rule. We considered, as well, an
October, 2008 analysis on the impact of ICD-10 on physician practices
and clinical laboratories by Nachimson Advisors, LLC.\70\ The Nachimson
study, however, approached cost by examining three very specific
provider environments (for instance, practices with 10 physicians) and
included costs that would occur after the transition to ICD-10, such as
increased documentation and claim inquiries.
---------------------------------------------------------------------------
\69\ Nolan, 2003.
\70\ ``The Impact of Implementing ICD-10 on Physician Practices
and Clinical Laboratories: A Report to the ICD-10 Coalition,''
October 8, 2008, Nachimson Advisors, LLC.
---------------------------------------------------------------------------
In general, the Nachimson study's costs were less than the Nolan
study estimates, but because it is difficult to extrapolate the
Nachimson study's conclusions to a meaningful cost estimate of a 1 year
delay for all large providers, we have not used that study in this RIA.
We have adjusted the Nolan study cost estimates to 2012 dollars.
The number of physician practices and their categorization
by size is derived from the Modifications proposed rule.
The costs to physician practices and hospitals would
probably be incurred during the year of the proposed delay in
compliance date, from October 1, 2013 to October 1, 2014. For
simplicity sake, we have calculated all costs to physician practices
and hospitals as occurring over one calendar year, 2014.
Table 27--Cost to Hospitals and Large Physician Practices In 2014 for One-Year Delay in the Compliance Date of ICD-10 1 2 3
--------------------------------------------------------------------------------------------------------------------------------------------------------
LOW cost for 1- HIGH cost of 1-
Large Mid sized Total cost of Yr delay (10% Yr delay (30%
Hospitals: Hospitals: Hospitals: physician physician ICD-10 of current of current
400 or more 100-400 fewer than practices groups (50- implementation implementation implementation
beds beds 100 beds (over 100 100 (in millions) costs) (in costs) (in
physicians) physicians) millions) millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of entities 521 2486 2757 393 590
LOW Cost Per Entity (in millions) $1.85 $0.62 $0.12 $2.46 $0.5
HIGH Cost Per Entity (in millions)..... $6.16 $1.85 $0.31 $7.39 $1.48
----------------------------------------------------------------------------------------------------------------
Total LOW (in millions)............ $963 $1,531 $339 $968 $291 $4,093 $409 $1,227
----------------------------------------------------------------------------------------------------------------
Total HIGH (in millions)........... $3209 $4,594 $850 $2,905 $872.17 12,429 1,243 3,728
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Numbers are rounded, so totals may not reflect sum of numbers shown.
\2\ Adjusted to 2012 dollars.
\3\ High and low ranges from Nolan 2003, adjusted to 2012 dollars.
[[Page 22998]]
Similar to health plans, we assume that hospitals and large
physician practices have made, and continue to make, a large investment
in preparing for ICD-10 based on the expectation that there would be a
return on investment from the transition to a more robust code set. A 1
year delay in the compliance date of ICD-10 will also postpone the
expected time when these entities can expect to see a return on these
investments. This delay in ROI will likely have negative impacts on
these large providers in terms of their business plans, budgeting, and
investor relations. Because of the uncertainties in predicting impacts
of this sort, we have not attempted to quantify any impact resulting
from a delay in ROI. We welcome industry comment or guidance on impacts
of this category.
3. Cost of Delay to Students
In the ICD-10 proposed rule, we presented an estimate of training
costs to implementation of ICD-10. These training costs were calculated
based on an estimated number of coders working in hospitals and
ambulatory clinics and multiplying that number by a specific cost to
train these coders.
A delay in the implementation of ICD-10 will not substantially
impact training costs because we assume that the training costs are
already a part of any entity's budget and a change in compliance date
will not change the amount of training that is necessary. However, one
consequence of a 1 year delay to ICD-10 will be the impact to students
who are now studying to become coders.
Using the experience of one university's bachelor's-level health
information management program, students take the ICD coding course in
the spring of their junior year. Students enrolling in Spring 2012
courses will graduate in May 2013. Anticipating the October 1, 2013
compliance date, the university started offering ICD-10 courses this
spring in place of ICD-9 with the understanding that it will be
preparing students for employment after graduating in 2013. If ICD-10
is delayed a year, as proposed in this rule, the 30 students in the
program will have to take ICD 9 courses in addition to their ICD-10
courses in order to obtain the ICD 9 competencies to get jobs. The
extra course will cost each of the 30 students approximately $2,000
(in-state tuition) or a total of $61,000.
Taking the university experience, we have projected these costs on
to students in college and university coding curriculum nationwide. We
have illustrated our estimates in Table 28 and calculated all costs as
occurring in 2014.
Although the impact on students is small when compared to the cost
for health plans, this impact illustrates some of the practical
consequences of delay that will affect lives beyond the health care
financial impacts.
Table 28--Cost to Students of a One-Year Delay in the Compliance Date of
ICD-10 *
------------------------------------------------------------------------
Cost to
Number of students/
institutions institutions
Cost of coding courses for 30 students that provide to retrain
coding in ICD-9 (in
courses millions)
------------------------------------------------------------------------
$6,000...................................... 68 $4.15
------------------------------------------------------------------------
* In 2012 dollars.
Q. Summary for ICD-10
We summarize the low and high estimates of a 1-year delay in the
compliance date for ICD-10 in Table 29. The total costs and cost
avoidance of a proposed delay in the compliance date will likely be
incurred over a 12 month period; however, due to the range in impacted
entities, including educational institutions, those 12 months may span
different dates and different budget periods. Further complicating the
question of the timeframe in which the costs occur is the question of
whether the cost should be calculated during the time it is incurred or
in the budget period in which it is attributed. For instance, an
educational institution may base its budget on a school year, September
to August, while health plans and TPAs may base their budgets on
calendar years or on varying fiscal years. Given the diversity of
budgeting in the industry, there is no precise way of calculating how
much of the cost and cost avoidance falls outside of the October 1,
2013 to October 1, 2014 proposed delay in compliance date. For
simplicity sake, we calculate all cost avoidance and costs of a delay
in the compliance date for ICD-10 as occurring in the calendar year
2014.
In Table 30, the net cost avoidance is illustrated with a--
Low net estimate that reflects the low estimate of cost
avoidance less the high estimate of costs;
High net estimate that reflects the high estimate of cost
avoidance less the low estimate of costs; and
Medium net cost avoidance that reflects the average cost
avoidance less the average cost.
Table 29--Summary of Cost Avoidance and Costs in 2014 of a 1-Year Delay
in the Compliance Date of ICD-10 *
------------------------------------------------------------------------
MEAN
LOW (in HIGH (in (average)
millions) millions) (in
millions)
------------------------------------------------------------------------
Cost Avoidance for Providers $1,385 $3,001 $2,193
(manual submission of claims)...
Cost Avoidance for Providers 1,446 3,134 2,290
(cost of loan interest).........
Cost Avoidance for Health Plans 804 1,742 1,273
(manual submission of claims)...
--------------------------------------
TOTAL COST AVOIDANCE FROM A 1- 3,635 7,877 5,756
YEAR DELAY IN THE COMPLIANCE
DATE OF ICD-10..............
------------------------------------------------------------------------
Cost to Commercial Health plans.. 530 2,698 1,614
Cost to Medicare................. 5 10 8
Cost to State Medicaid Agencies.. 83 145 114
Cost to Large Providers.......... 409 3,728 2,069
Cost to Students................. 4 4 4
--------------------------------------
TOTAL COST OF A 1-YEAR DELAY $1,031 $6,586 $3,808
IN THE COMPLIANCE DATE OF
ICD-10......................
------------------------------------------------------------------------
* Calculated in 2012 dollars.
[[Page 22999]]
Table 30--Cost Avoidance Less Cost (Net) of a One-Year Delay in the
Compliance Date of ICD-10
[In millions] *
------------------------------------------------------------------------
------------------------------------------------------------------------
Low Net Estimate (Low Cost Avoidance with High Costs)...... -$2,950
High Net Estimate (High Cost Avoidance with Low Costs)..... 6,846
Mean Net Cost Avoidance (average).......................... 1,948
------------------------------------------------------------------------
* Calculated in 2012 dollars.
R. Regulatory Flexibility Analysis: Impact on Small Entities of a Delay
in the Compliance Date of ICD-10
The Regulatory Flexibility Act (RFA) of 1980 (Pub. L. 96-354)
requires agencies to describe and analyze the impact of the proposed
rule on small entities unless the Secretary can certify that the
regulation will not have a significant impact on a substantial number
of small entities. According to the Small Business Administration's
size standards, a small entity is defined as follows according to
health care categories: Offices of Physicians are defined as small
entities if they have revenues of $10 million or less; most other
health care providers (dentists, chiropractors, optometrists, mental
health specialists) are small entities if they have revenues of $7
million or less; hospitals are small entities if they have revenues of
$34.5 million or less. (For details, see the SBA's Web site at http://www.sba.gov/sites/default/files/Size_Standards_Table.pdf Refer to
Sector 62--Health Care and Social Assistance).
For purposes of this analysis (pursuant to the RFA), nonprofit
organizations are considered small entities; however, individuals and
States are not included in the definition of a small entity. In the
following discussion, we have attempted to estimate the number of small
entities and provide a general discussion of the effects of this
proposed rule, and where we had difficulty or were unable to find
information, we solicit industry comment.
1. Number of Small Entities and Scope of Analysis
a. Health Care Providers: Physician Practices and Hospitals
As with the RIA on the delayed compliance date of ICD-10, in the
category of health care providers, we analyzed physician practices and
hospitals only in terms of how they will be impacted by a delay of 1
year in the compliance date of ICD-10. We did not analyze the impact to
nursing and residential care facilities, dentists, or suppliers of
durable medical equipment, nor did analyze the impact of implementation
of ICD-10, as that analysis is provided in the RIA included in the ICD-
10 proposed rule.
We narrowed our analysis to physician practices and hospitals for
two reasons: (1) We have very little data on the usage of EDI among
dentists, suppliers of durable medical equipment, nursing homes, and
residential care facilities. The lack of data for these types of health
care providers have been noted in other studies on administrative
simplification; \71\ and (2) we assume that the greatest costs will be
borne by hospitals and physician practices as they conduct the majority
of standard transactions. While we believe that some small health care
provider entities outside of these two categories may be impacted,
albeit in much fewer numbers, we believe the analysis gathered here
would be indicative of the costs that we would expect all small health
care provider entities to experience. We welcome comment from industry
and the public as to our assumptions.
---------------------------------------------------------------------------
\71\ ``Excess Billing and Insurance-Related Administrative
Costs,'' by James Kahn, in The Healthcare Imperative; Lowering Costs
and Improving Outcomes: Workshop Series Summary, edited by Pierre L.
Yong, Robert S. Saunders, and Leigh Anne Olsen.
---------------------------------------------------------------------------
Because each hospital maintains its own financial records and
reports separately to payment plans, we decided to report the number of
establishments rather than firms. For physician practices, we assumed
that the costs of a delay of the compliance date for ICD-10 would be
accounted for at the level of firms rather than at the individual
establishments.
According to the U.S. Census Bureau, Detailed Statistics, 2007
Economic Census, there are approximately 220,100 physician practices..
The U.S. Census Bureau data indicates that two percent of physician
practices have revenues of $10 million or more, therefore approximately
4,400 physician practices are not small entities.
Nevertheless, we have decided to consider all physician practices
small entities. Our basis for this is the fact that Census Bureau data
is calculated from report forms that are sent to only a sample of small
employers (less than 10 employees). Therefore, we can assume that the
estimates from the Census Bureau are low. The estimated number of
physician practices in the Modifications proposed rule (234,222
physician practices) includes physician practices with one to two
physicians and is within 6 percent of the total number of physician
practices estimated by the Census Bureau. Therefore, we will assume
that all physician practices, as calculated by the Census Bureau
(220,100), are small entities, and accept a small margin of error.
The 2007 Census Bureau reports that there are approximately 6,500
hospitals. The data indicates that 85 percent of hospitals have sales/
receipts/revenues of $10 million or more. While we can assume that, of
those 85 percent, some have revenues over $34.5 million; we do not have
specific numbers that detail this assumption. Therefore, as with
physician practices, we will make calculations on the assumption that
all hospitals are small entities.
b. Health Care Clearinghouses and Transaction Vendors
We did not calculate costs and benefits to health care
clearinghouses and transaction vendors in this Regulatory Flexibility
Analysis because we assume that any associated costs and benefits will
be passed on to the health plans or health care providers, and will be
included in the costs and benefits we apply to health plans and health
care providers.
c. Health Plans
The health insurance industry was examined in depth in the
Regulatory Impact Analysis prepared for the proposed rule on
establishment of the Medicare Advantage program (69 FR 46866, August 3,
2004). It was determined, in that analysis, that there were few if any
``insurance firms,'' including HMOs that fell below the size thresholds
for ''small'' business established by the SBA Health. We assume that
the ``insurance firms'' are synonymous, for the most part, with health
plans who conduct standard transactions with other covered entities and
are, therefore, the entities that will have costs associated with a
delay of the compliance date for ICD-10. In fact, then, and even more
so now, the market for health insurance is dominated by a relative
handful of firms with substantial market shares.
There are, however, a number of health maintenance organizations
(HMOs) that are small entities by virtue of their nonprofit status even
though few if any of them are small by SBA size standards. There are
approximately 100 such HMOs. These HMOs and those Blue Cross and Blue
Shield plans that are non-profit organizations, like the other firms
affected by this proposed rule, will be required to delay their
implementation of ICD-10. Accordingly, this proposed rule will affect a
``substantial number'' of small entities,
[[Page 23000]]
and we include the impact of a delay in the compliance date of ICD-10
for the 100 HMOs and Blue Cross and Blue Shield plans in this RFA.
We welcome industry and stakeholder input on our assumption in this
regard.
2. Cost for Providers
We have applied the same methodology and assumptions as we applied
in the RIA to arrive at estimates to impacts to small entities. For
providers, as we stated previously in the RIA, there is a distinction
between the costs and benefits for large providers, hospitals and large
physician practices, and smaller physician practices. In general, our
assumption is that the delay in the compliance date of ICD-10 will be
more costly for large providers because many of them have already made
substantial investments. The cost of implementing ICD-10, for all
entities that have already invested funds and resources to that
endeavor, will increase by a factor of 10 to 30 percent of the current
cost.
On the other hand, the justification for a delay in the compliance
date of ICD-10 rests on the assumption that the delay will give many
small providers more time to prepare for the transition. Therefore, our
assumption is that there will be little to no cost for most small
providers and that the cost avoidance of a delay will be high.
Table 31 illustrates the estimated costs and benefits for providers
according to their size. All costs and benefits are calculated as
occurring in 2014. It is important to note that these are very general
estimates, and reflect our assumption for these provider groups at
large. Due to the high variability in provider settings and systems,
these estimates are not meant to reflect costs for specific providers.
We welcome comments on our assumptions.
Table 31--Costs and Benefits in 2014 of a Delay in the Compliance Date of ICD-10 for Providers
[Small Entities] *
--------------------------------------------------------------------------------------------------------------------------------------------------------
Physician Physician Physician
practices practices practices Hospitals Hospitals Hospitals
with less with 50 to with more with less with 100 to with more Totals
than 50 100 than 100 than 100 400 beds than 400
physicians physicians physicians beds beds
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of Entities........................................... 233,239 590 393 2,757 2,486 521 239,986
LOW Costs (in millions)...................................... $.00 $29.07 $97 $34 $153 $96 $409
HIGH Costs (in millions)..................................... $.00 $261.65 $871 $255 $1,378 $963 $3,728
LOW Cost Avoidance (in millions)............................. $1,446 $.00 $.00 $.00 $.00 .00 $1,446
HIGH Cost Avoidance (in millions)............................ $3,134 $.00 $.00 $.00 $.00 .00 $3,134
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Both cost and cost avoidance occur in 2014. In 2012 dollars.
3. Cost to Nonprofit Health Plans
As noted, there are a number of health maintenance organizations
(HMOs) that are small entities by virtue of their nonprofit status even
though few if any of them are small by SBA size standards. There are
approximately one hundred such HMOs and 38 Blue Cross and Blue Shield
plans that are non-profit organizations. We have applied the same
methodology and assumptions as we applied in the RIA to arrive at
estimates to impacts to these non-profit health plans. We have
estimated that all of the Blue Cross and Blue Shield plans are large
health plans, and all of the HMOs are small health plans.
Table 31 illustrates the costs and benefits for nonprofit health
plans. We calculated the costs per health plan from the low and high
range estimates used in the RIA for large health plans (for Blue Cross
and Blue Shield plans), and small health plans (for non-profit HMOs).
We calculated the cost avoidance by assuming that large health plans
would return 10 percent of the total health care claims--and small
health plans would return 5 percent of the total health care claims--if
the compliance date of ICD-10 continued to be October 1, 2013. This
assumption is based on the fact that 25 national and regional health
insurers account for nearly two-thirds of the total market, and that
this proportion accounts can be applied to total claims; for example
that smaller health insurers process one-third of the claims. All costs
and cost avoidance are calculated as occurring in 2014.
Table 32--Costs and Cost Avoidance in 2014 for Non-Profit Health Plans for a 1-Year Delay of the Compliance Date
for ICD-10*
----------------------------------------------------------------------------------------------------------------
Number of LOW COST HIGH COST
non profit per health per health LOW COST HIGH COST
health plan in plan in AVOIDANCE AVOIDANCE
plans millions millions in millions in millions
----------------------------------------------------------------------------------------------------------------
Blue Cross Blue Shield......................... 38 $1.44 $7.26 $88.26 $122.21
HMO............................................ 100 .12 .60 4.02 5.57
----------------------------------------------------------------
Total...................................... .00 1.56 7.86 92.28 127.77
----------------------------------------------------------------------------------------------------------------
* Both cost and cost avoidance occur in 2014. In 2012 dollars.
Tables 31 and 32 both illustrate that a 1-year delay in the
compliance date of ICD-10 will be more beneficial to small and
nonprofit entities than it will be burdensome. Nevertheless, we are
specifically requesting comments on our analysis.
S. Summary and Accounting Statement for HPID, NPI and ICD-10
Table 33 summarizes the impacts of this proposed rule, including
the costs and benefits of implementation of the
[[Page 23001]]
HPID and the costs and cost avoidance of a one-year delay in the
compliance date of ICD-10. The costs and benefits of implementation of
the HPID are calculated over a ten year period, while the cost
avoidance and costs of the delay of the compliance date of ICD-10 will
all occur in 2014.
Table 33--Summary of Costs and Savings/Cost Avoidance, of Implementation
of HPID, NPI and a One-Year Delay in the Compliance Date of ICD-10*
------------------------------------------------------------------------
LOW HIGH MEAN
------------------------------------------------------------------------
Total Savings/Cost Avoidance..... $6,532 $13,612 $10,072
Total Costs...................... 2,133 8,784 5,459
------------------------------------------------------------------------
* Costs and savings of HPID are calculated over 11 years, 2014 through
2024. Costs and cost avoidance of a delay in the compliance date of
ICD-10 are calculated over 1 year, 2014.
In Table 34, the LOW estimate Net Savings/Cost Avoidance is
calculated using the LOW Savings/Cost Avoidance minus the HIGH
estimated Costs; that is, the worst case scenario in terms of low
benefits and high costs. The HIGH estimate Net Savings/Cost Avoidance
is estimated using the HIGH Savings/Cost Avoidance minus the LOW
estimated Costs; that is the best case scenario in terms of high
benefits and low costs. The MEAN Net Savings/Cost Avoidance is the
average of the best case scenario and the worst case scenario.
Table 34--Summary of Net Cost Avoidance/Savings of Implementation of
HPID, NPI and a One-Year Delay in the Compliance Date of ICD-10
------------------------------------------------------------------------
LOW cost HIGH cost
avoidance/ avoidance/
savings savings MEAN (in
less HIGH less LOW millions)
Costs (in costs (in
millions) millions)
------------------------------------------------------------------------
Net Savings/Cost Avoidance....... -$2,252 $11,478 $4,613
------------------------------------------------------------------------
As required by OMB Circular A-4,\72\ Tables 35, 36 and 37 are
accounting statements showing the classification of the expenditures
associated with the provisions of this proposed rule. Table 35 provides
our best estimate of the costs and benefits associated with the
implementation and use of the HPID. Table 36 provides our best
estimates of the costs and benefits associated with a 1-year delay in
the compliance date of ICD-10 proposed herein. Table 37 provides a
combined estimate of the costs and benefits associated with
implementation and use of HPID and a 1-year delay in the compliance
date of ICD-10.
---------------------------------------------------------------------------
\72\ ``Circular A-4,'' September 17, 2003, Office of Management
and Budget (OMB), http://www.whitehouse.gov/omb/circulars_a004_a-4/
Table 35--Accounting Statement for HPID Implementation: Classification of Estimated Expenditures, from FY 2013
TO FY 2023
[In millions of dollars]
----------------------------------------------------------------------------------------------------------------
Source citation
Category Primary estimate Minimum estimate Maximum estimate (RIA, preamble,
(millions) (millions) (millions) etc.)
----------------------------------------------------------------------------------------------------------------
BENEFITS:
Annualized Monetized
benefits:
7% Discount............ $376.................. $252............. $532............. RIA.
3% Discount............ 367................... 258.............. 527.............. RIA.
Qualitative HPID: Environmental
(un[dash]quantified) (electronic over
benefits. paper), patient
benefits (more staff
time), benefits from
a decrease in time
interacting with
health plans for
hospitals, dentists,
suppliers of durable
medical equipment,
nursing homes, and
residential care
facilities, and
providers other than
physician practices.
COSTS:
Annualized Monetized costs:
7% Discount............ $203.................. $135............. $270............. RIA and
Collection of
Information.
3% Discount............ 172................... 115.............. 229.............. RIA and
Collection of
Information.
[[Page 23002]]
Qualitative HPID: Cost for system None............. None.............
(unquantified) costs. changes for dentists,
suppliers of durable
medical equipment,
nursing homes,
residential care
facilities, and
providers other than
physician practices
and hospitals.
TRANSFERS:
Annualized monetized N/A................... N/A.............. N/A..............
transfers: ``on budget''.
From whom to whom?......... N/A................... N/A.............. N/A..............
Annualized monetized N/A................... N/A.............. N/A..............
transfers:
``off[dash]budget''.
----------------------------------------------------------------------------------------------------------------
Table 36--Accounting Statement: Classification of Estimated Expenditures for one-Year Delay of ICD-10 Compliance
Date from FY 2013 to FY 2023
[In millions of dollars]
----------------------------------------------------------------------------------------------------------------
Source citation
Category Primary estimate Minimum estimate Maximum estimate (RIA, preamble,
(millions) (millions) (millions) etc.)
----------------------------------------------------------------------------------------------------------------
BENEFITS:
Annualized Monetized
benefits:
7% Discount............ $717.................. $453............. $982............. RIA.
3% Discount............ 604................... 381.............. 827.............. RIA.
Qualitative Avoidance of returned
(un[dash]quantified) benefits. health care claims.
COSTS:
Annualized Monetized costs:
7% Discount............ $475.................. $128............. $821............. RIA and
Collection of
Information.
3% Discount............ 400................... 108.............. 691.............. RIA and
Collection of
Information.
Qualitative Downstream costs of a None............. None.............
(unquantified) costs. delayed return on
investment for
covered entities..
TRANSFERS:
Annualized monetized N/A................... N/A.............. N/A..............
transfers: ``on budget''.
From whom to whom?......... N/A................... N/A.............. N/A..............
Annualized monetized N/A................... N/A.............. N/A..............
transfers:
``off[dash]budget''.
----------------------------------------------------------------------------------------------------------------
Table 37--Accounting Statement: Classification of Estimated Expenditures for HPID Implementation and One-Year
Delay of ICD-10 Compliance Date, From FY 2013 to FY 2023
[In millions of dollars]
----------------------------------------------------------------------------------------------------------------
Source citation
Category Primary estimate Minimum estimate Maximum estimate (RIA, preamble,
(millions) (millions) (millions) etc.)
----------------------------------------------------------------------------------------------------------------
BENEFITS:
Annualized Monetized
benefits:
7% Discount............ $1,069................ $705............. $1,479........... RIA.
3% Discount............ $960.................. $640............. $1,338........... RIA.
[[Page 23003]]
Qualitative HPID: Environmental
(unquantified) (electronic over
benefits. paper), patient
benefits (more staff
time), benefits from
a decrease in time
interacting with
health plans for
hospitals, dentists,
suppliers of durable
medical equipment,
nursing homes, and
residential care
facilities, and
providers other than
physician practices.
Delay in Compliance
Date for ICD-10:
Avoidance of returned
health care claims.
COSTS:
Annualized Monetized costs:
7% Discount............ $677.................. $264............. $1,091........... RIA and
Collection of
Information.
3% Discount............ $572.................. $223............. $920............. RIA and
Collection of
Information.
Qualitative HPID: Cost for system
(unquantified) costs. changes for dentists,
suppliers of durable
medical equipment,
nursing homes,
residential care
facilities, and
providers other than
physician practices
and hospitals.
DELAY IN COMPLIANCE None............. None............. .................
DATE OF ICD-10:
Downstream costs of a
delayed return on
investment for
covered entities.
TRANSFERS:
Annualized monetized N/A................... N/A.............. N/A.............. .................
transfers: ``on budget''.
From whom to whom?......... N/A................... N/A.............. N/A.............. .................
Annualized monetized N/A................... N/A.............. N/A.............. .................
transfers:
``off[dash]budget''.
----------------------------------------------------------------------------------------------------------------
List of Subjects in 45 CFR Part 162
Administrative practice and procedures, Electronic transactions,
Health facilities, Health insurance, Hospitals, Incorporation by
reference, Medicaid, Medicare, Reporting and recordkeeping
requirements.
For the reasons set forth in this preamble, the Department of
Health and Human Services proposes to amend 45 CFR part 162 to read as
follows:
PART 162--ADMINISTRATIVE REQUIREMENTS
1. The authority citation for part 162 continues to read as
follows:
Authority: Secs. 1171 through 1180 of the Social Security Act
(42 U.S.C. 1320d-1320d-9), as added by sec. 262 of Pub. L. 104-191,
110 Stat. 2021-2031, sec. 105 of Pub. L. 110-233, 122 Stat. 881-922,
and sec. 264 of Pub. L. 104-191, 110 Stat. 2033-2034 (42 U.S.C.
1320d-2 (note)), and secs. 1104 and 10109 of Pub. L. 111-148, 124
Stat. 146-154 and 915-917.
Subpart A--General Provisions
2. Section 162.103 is amended by adding the definitions of
``Controlling health plan (CHP),'' ``Covered health care provider,''
and ``Subhealth plan (SHP)'' in alphabetical order to read as follows:
Sec. 162.103 Definitions.
* * * * *
Controlling health plan (CHP) means a health plan that--
(1) Controls its own business activities, actions, or policies; or
(2)(i) Is controlled by an entity that is not a health plan; and
(ii) If it has a subhealth plan(s) (as defined in this section),
exercises sufficient control over the subhealth plan(s) to direct its/
their business activities, actions, or policies.
Covered health care provider means a health care provider that
meets the definition at paragraph (3) of the definition of ``covered
entity'' at Sec. 160.103.
* * * * *
Subhealth plan (SHP) means a health plan whose business activities,
actions, or policies are directed by a controlling health plan.
Subpart D--Standard Unique Health Identifier for Health Care
Providers
Sec. 162.402 [Removed and Reserved]
3. Section 162.402 is removed and reserved.
4. Section 162.404 is amended as follows:
A. Redesignating paragraph (a) as paragraph (a)(1).
B. Adding a paragraph (a)(2).
The addition reads as follows:
Sec. 162.404 Compliance dates of the implementation of the standard
unique health identifier for health care providers.
(a) * * *
(2) An organization covered health care provider must comply with
the implementation specifications in Sec. 162.410(b) by [Date 180 days
after the effective date of the final rule].
* * * * *
5. Section 162.410 is amended as follows:
A. Redesignating paragraph (b) as paragraph (c).
B. Adding a new paragraph (b).
The addition reads as follows:
[[Page 23004]]
Sec. 162.410 Implementation specifications: Health care providers.
* * * * *
(b) An organization covered health care provider that has as a
member, employs, or contracts with, an individual health care provider
who is not a covered entity and is a prescriber, must require such
health care provider to--
(1) Obtain an NPI from the National Plan and Provider Enumeration
System (NPPES); and
(2) To the extent the prescriber writes a prescription while acting
within the scope of the prescriber's relationship with the
organization, disclose the NPI upon request to any entity that needs it
to identify the prescriber in a standard transaction.
* * * * *
6. Subpart E is added to part 162 to read as follows:
Subpart E--Standard Unique Health Identifier for Health Plans
Sec.
162.502 [Reserved]
162.504 Compliance dates for the implementation of the standard
unique health plan identifier.
162.506 Standard unique health plan identifier.
162.508 Enumeration System.
162.510 Implementation specifications: Covered entities.
162.512 Implementation specifications: Health plans.
162.514 Other entity identifier.
Subpart E--Standard Unique Health Identifier for Health Plans
Sec. 162.502 [Reserved]
Sec. 162.504 Compliance dates for the implementation of the standard
unique health plan identifier.
(a) Covered health care providers. A covered health care provider
must comply with the implementation specifications in Sec. 162.510 no
later than October 1, 2014.
(b) Health plans. A health plan must comply with the implementation
specifications in Sec. 162.510 and Sec. 162.512 no later than one of
the following dates:
(1) A health plan that is not a small health plan--October 1, 2014.
(2) A health plan that is a small health plan--October 1, 2015.
(c) Health care clearinghouses. A health care clearinghouse must
comply with the implementation specifications in Sec. 162.510 no later
than October 1, 2014.
Sec. 162.506 Standard unique health plan identifier.
(a) Standard. The standard unique health plan identifier is the
Health Plan Identifier (HPID) that is assigned by the Enumeration
System identified in Sec. 162.508.
(b) Required and permitted uses for the HPID. (1) The HPID must be
used as specified in Sec. 162.510 and Sec. 162.512.
(2) The HPID may be used for any other lawful purpose.
Sec. 162.508 Enumeration System.
The Enumeration System shall do all of the following:
(a) Assign a single, unique--
(1) HPID to a health plan, provided that the Secretary has
sufficient information to permit the assignment to be made; or
(2) OEID to an entity eligible to receive one under Sec.
162.514(a), provided that the Secretary has sufficient information to
permit the assignment to be made.
(b) Collect and maintain information about each health plan that
applies for or has been assigned an HPID and each entity that applies
for or has been assigned an OEID, and perform tasks necessary to update
that information.
(c) If appropriate, deactivate an HPID upon receipt of sufficient
information concerning circumstances justifying deactivation.
(d) If appropriate, reactivate a deactivated HPID or OEID upon
receipt of sufficient information justifying reactivation.
(e) Not assign a deactivated HPID to any other health plan or OEID
to any other entity.
(f) Disseminate Enumeration System information upon approved
requests.
Sec. 162.510 Implementation specifications: Covered entities.
(a) A covered entity must use an HPID to identify a health plan
where a covered entity identifies a health plan in a transaction for
which the Secretary has adopted a standard under this part.
(b) If a covered entity uses one or more business associates to
conduct standard transactions on its behalf, it must require its
business associate(s) to use an HPID to identify a health plan where
the business associate(s) identifies a health plan in a transaction for
which the Secretary has adopted a standard under this part.
Sec. 162.512 Implementation specifications: Health plans.
(a) A controlling health plan must do all of the following:
(1) Obtain an HPID from the Enumeration System for itself.
(2) Disclose its HPID, when requested, to any entity that needs the
HPID to identify the health plan in a standard transaction.
(3) Communicate to the Enumeration System any changes in its
required data elements in the Enumeration System within 30 days of the
change.
(b) A controlling health plan may do the following:
(1) Obtain an HPID from the Enumeration System for a subhealth plan
of the controlling health plan.
(2) Direct a subhealth plan of the controlling health plan to
obtain an HPID from the Enumeration System.
(c) A subhealth plan may obtain an HPID from the Enumeration
System.
(d) A subhealth plan that is assigned an HPID from the Enumeration
System must comply with the requirements that apply to a controlling
health plan in paragraphs (a)(2) through (a)(3) of this section.
Sec. 162.514 Other entity identifier.
(a) An entity may obtain an Other Entity Identifier (OEID) to
identify itself if the entity meets all of the following:
(1) Needs to be identified in a transaction for which the Secretary
has adopted a standard under this part;
(2) Is not eligible to obtain an HPID;
(3) Is not eligible to obtain an NPI; and
(4) Is not an individual.
(b) An OEID must be obtained from the Enumeration System identified
in Sec. 162.508.
(c) Uses for the OEID. (1) An other entity may use the OEID it
obtained from the Enumeration System to identify itself or have itself
identified on all covered transactions in which it needs to be
identified.
(2) The OEID may be used for any other lawful purpose.
Subpart J--Code Sets
7. Section 162.1002 is amended by revising paragraph (b)
introductory text and paragraph (c) introductory text to read as
follows:
Sec. 162.1002 Medical data code sets.
* * * * *
(b) For the period on and after October 16, 2003 through September
30, 2014:
* * * * *
(c) For the period on and after October 1, 2014:
* * * * *
[[Page 23005]]
Dated: February 2, 2012.
Marilyn Tavenner,
Acting Administrator, Centers for Medicare & Medicaid Services.
Dated: April 5, 2012.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2012-8718 Filed 4-9-12; 11:15 am]
BILLING CODE 4120-01-P