[Federal Register Volume 77, Number 155 (Friday, August 10, 2012)]
[Rules and Regulations]
[Pages 48008-48044]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-19557]
[[Page 48007]]
Vol. 77
Friday,
No. 155
August 10, 2012
Part III
Department of Health and Human Services
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Office of the Secretary
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45 CFR Part 162
Administrative Simplification: Adoption of Operating Rules for Health
Care Electronic Funds Transfers (EFT) and Remittance Advice
Transactions; Final Rule
Federal Register / Vol. 77 , No. 155 / Friday, August 10, 2012 /
Rules and Regulations
[[Page 48008]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Office of the Secretary
45 CFR Part 162
RIN 0938-AR01
Administrative Simplification: Adoption of Operating Rules for
Health Care Electronic Funds Transfers (EFT) and Remittance Advice
Transactions
AGENCY: Office of the Secretary, HHS.
ACTION: Interim final rule with comment period.
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SUMMARY: This interim final rule with comment period implements parts
of section 1104 of the Affordable Care Act which requires the adoption
of operating rules for the health care electronic funds transfers (EFT)
and remittance advice transaction.
DATES: Effective Date: These regulations are effective on August 10,
2012. The incorporation by reference of the publications listed in this
interim final rule with comment period is approved by the Director of
the Office of the Federal Register August 10, 2012.
Compliance Date: The compliance date for operating rules for the
health care electronic funds transfers (EFT) and remittance advice
transaction is January 1, 2014.
Comment Date: To be assured consideration, comments must be
received at one of the addresses provided in the ADDRESSES section of
this interim final rule with comment period on or before October 9,
2012.
ADDRESSES: In commenting, please refer to file code CMS-0028-IFC.
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-0028-IFC, 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-0028-IFC, 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:
Matthew Albright (410) 786-2546.
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://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,
phone 1-800-743-3951.
I. Executive Summary
A. Purpose of the Regulatory Action
Health care spending in the United States constitutes nearly 18
percent of the U.S. Gross Domestic Product (GDP) and costs an average
of $9,000 per person annually.\1\ Many factors contribute to the high
cost of health care in the United States, but studies point to
administrative costs as having a substantial impact on the growth of
spending \2\ and an area of costs that could likely be reduced.\3\
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\1\ Keehan, S.P.; Sisko, A.M.; Truffer, C.J.; Poisal, J.A.;
Cuckler, G.A.; Madison, A.J. ; Lizonitz, J.M.; & Smith, S.D.;
``National Health Spending Projections Through 2020: Economic
Recovery and Reform drive faster Spending Growth,'' Health Affairs
30,(8): doi:10.1377/hlthaff.2011.0662, 2011.
\2\ ``Technological Change and the Growth of Health Care
Spending,'' A CBO Paper, Congressional Budget Office, January 2008,
pg.4, http://www.cbo.gov/ftpdocs/89xx/doc8947/01-31-TechHealth.pdf.
\3\ Morra, D., Nicholson, S., Levinson, W., Gans, D. N.,
Hammons, T., & Casalino, L.P. ``U.S. Physician Practices versus
Canadians: Spending Nearly Four Times as Much Money Interacting with
Payers,'' Health Affairs: 30(8):1443-1450, 2011.
Blanchfield, Bonnie B., James L. Hefferman, Bradford Osgood,
Rosemary R. Sheehan, and Gregg S. Meyer, ``Saving Billions of
Dollars--and Physician's Time--by Streamlining Billing Practices,''
Health Affairs: 29(6):1248-1254, 2010.
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One area of administrative burden that can be lessened for health
care providers is the time and labor spent interacting with multiple
health insurance plans, called billing and insurance related (BIR)
tasks. The average physician spends a cumulative total of 3 weeks a
year on BIR tasks according to one study,\4\ and, in a physician's
office, two-thirds of a full-time employee per physician is necessary
to conduct BIR tasks.\5\
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\4\ Casalino, L.P., Nicholson, S., Gans, D.N., Hammons, T.,
Morra, D., Karrison, T., & Levinson, W., ``What does it cost
physician practices to interact with health insurance plans?''
Health Affairs: 28(4) (2009): w533-w543).
\5\ Sakowski, J.A., Kahn, J.G., Kronick, R.G., Newman, J.M., &
Luft, H.S., ``Peering into the black box: Billing and insurance
activities in a medical group,'' Health Affairs: 28(4): w544-w554,
2009.
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The tasks and costs of activities directly related to collecting
payments is a category of BIR tasks. Nearly 40 percent of nonclinical
staff time spent on BIR tasks in a physician practice is dedicated to
activities directly related to collecting payments.\6\ According to
estimates that are discussed more broadly in the Regulatory Impact
Analysis (RIA), most health care providers collect and deposit paper
[[Page 48009]]
checks, and manually post and reconcile the health care claim payments
in their accounting systems. By automating some of these tasks, time
and labor spent on the collection of payments can be decreased.
Automation can be achieved through the electronic transfer of
information or electronic data interchange (EDI). Through the use of
electronic funds transfers (EFT) for health care claim payments and the
use of electronic remittance advice (ERA) that describes adjustments to
the payments, BIR costs can be decreased.
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\6\ Ibid, p. w547.
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The benefits of EFT have been realized in many other industries.
The benefits include material cost savings, fraud control, and improved
cash flow and cash forecasting. The benefits of ERA have also been
demonstrated in terms of cost savings in paper and mailings. By
receiving remittance advice electronically, providers can use
electronic denial management tools that dramatically improve payment
recovery and reconciliation. Despite these advantages, an estimated 70
percent of health care claim payments continue to be in paper check
form and an estimated 75 percent of remittance advice is sent through
the mail in paper form.\7\
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\7\ Estimates for the percentage of EFT are taken from the
interim final rule ``Administrative Simplification: Adoption of
Standards for the Health Care Electronic Funds Transfers (EFT) and
Remittance Advice'' published in the January 10, 2012 Federal
Register (77 FR 1556). Estimates for the percentage of ERA are taken
from the proposed rule ``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,'' published in the April 17, 2012 Federal Register (77 FR
22950). The calculations from these two rules are explained in more
detail in the Regulatory Impact Analysis of this rule.
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There is evidence that the use of operating rules for specific
electronic health care transactions results in higher use of EDI by
health care providers.\8\ We expect usage of EFT and ERA by the health
care industry will increase and administrative savings will be realized
when industry implements the operating rules for those transactions.
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\8\ ``CAQH CORE Phase I Measures of Success Final Report, July
7, 2009,'' PowerPoint presentation; and ``CORE Certification and
testing: A Step-by-Step Overview,'' February 17, 2011, CAQH and
Edifecs Webinar.
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B. Legal Authority for the Regulatory Action
The legal authority for the adoption of operating rules rests in
section 1173(g) of the Social Security Act (the Act). Section 1173(g)
of the Act was added by section 1104(b)(2) of the Patient Protection
and Affordable Care Act (Pub L. 111-148), enacted on March 23, 2010, as
amended by the Health Care and Education Reconciliation Act of 2010
(Pub. L. 111-152), enacted on March 30, 2010 (collectively known as and
hereinafter referred to as the Affordable Care Act).
C. Summary of the Major Provisions of the Regulatory Action
In this interim final rule with comment period (IFC), we are
adopting the Phase III Council for Affordable Quality Healthcare (CAQH)
Committee on Operating Rules for Information Exchange (CORE) EFT & ERA
Operating Rule Set, including the CORE v5010 Master Companion Guide
Template, for the health care EFT and remittance advice transaction
(hereinafter referred to as the EFT & ERA Operating Rule Set), with one
exception: We are not adopting Requirement 4.2, titled ``Health Care
Claim Payment/Advice Batch Acknowledgement Requirements,'' of the Phase
III CORE 350 Health Care Claim Payment/Advice (835) Infrastructure Rule
because that requirement requires the use of the Accredited Standards
Committee (ASC) X12 999 acknowledgement standard, and the Secretary has
not adopted standards for acknowledgements.
Covered entities must be in compliance with the EFT & ERA Operating
Rule Set by January 1, 2014.
D. Costs and Benefits
Both costs and benefits are analyzed by examining the costs and
cost savings of implementing and using the EFT & ERA Operating Rule Set
adopted in this IFC in the following four areas of administrative
tasks--
Provider enrollment in EFT and ERA;
Implementing infrastructure and communication networks
between trading partners;
Reassociation of the payment information with the
remittance information; and
Posting payment adjustments and claim denials.
To a large extent, the costs of implementing the EFT & ERA
Operating Rule Set will be borne by the health plans, with much of the
benefits accruing to providers. Many health plans actively participated
in the development of these rules, and the requirements they put on
themselves were carefully deliberated. In the RIA of this IFC, we
estimate that the cost to implement the EFT & ERA Operating Rule Set is
$1.2 to $2.7 billion for government and commercial health plans,
including third party administrators (TPAs), hospitals, and physician
offices. The savings from and cost benefit of using the EFT & ERA
Operating Rule Set is $3 to $4.5 billion for government and commercial
health plans, hospitals, and physician offices. The net savings derived
from using the EFT & ERA Operating Rule Set over 10 years ranges from
approximately $300 million to $3.3 billion.
II. Background
A. Statutory and Regulatory Background
1. The Health Insurance Portability and Accountability Act of 1996
(HIPAA)
Congress addressed the need for a consistent framework for
electronic health care transactions and other administrative
simplification issues through the Health Insurance Portability 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 of the
Department of Health and Human Services (HHS) (the Secretary) to adopt
standards for certain transactions to enable health information to be
exchanged more efficiently and to achieve greater uniformity in the
transmission of health information.
In the August 17, 2000 Federal Register (65 FR 50312), we published
a final rule titled ``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 for
electronic health care transactions developed by standard setting
organizations (SSOs) and medical data code sets to be used in those
transactions. We adopted the ASC X12 Version 4010 standards and the
National Council for Prescription Drug Programs (NCPDP)
Telecommunication Version 5.1 standard.
Section 1172(a) of the Act states that--
Any standard adopted under [HIPAA] shall apply, in whole or in
part, to * * *
(1) A health plan.
(2) A health care clearinghouse.
(3) A health care provider who transmits any health information
in electronic form in connection with a [HIPAA transaction].
These entities are referred to as covered entities.
In the January 16, 2009 Federal Register (74 FR 3296), we published
a final rule titled, ``Health Insurance Reform; Modifications to the
Health Insurance Portability and Accountability Act (HIPAA) Electronic
Transaction Standards'' (hereinafter referred to as the Modifications
final rule). Among other things, the
[[Page 48010]]
Modifications final rule adopted updated versions of the standards, ASC
X12 Version 5010 (hereinafter referred to as Version 5010) and NCPDP
Telecommunication Standard Implementation Guide Version D.0
(hereinafter referred to as Version D.0) and equivalent Batch Standard
Implementation Guide, Version 1, Release 2 (hereinafter referred to as
Version 1.2) for the electronic health care transactions, which are
specified at 45 CFR part 162, Subparts I through R. Covered entities
were required to comply with Version 5010 and Version D.0 on January 1,
2012. We also adopted a standard for the Medicaid pharmacy subrogation
standard, NCPDP Version 3.0, in the Modifications final rule, specified
at 45 CFR part 162, Subpart S, with which covered entities were
required to comply on January 1, 2012, except small health plans, which
have until January 1, 2013.
As January 1, 2012 approached, we became aware that there were
still a number of outstanding issues and challenges impeding full
implementation of Version 5010 and Version D.0. Therefore, we announced
two consecutive 90-day periods during which we would not initiate
enforcement action against any covered entity through June 30, 2012.
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.
Table 1--Current Adopted Standards for HIPAA Transactions
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Transaction Standard
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Health care claims or equivalent encounter ASC X12 Standards for Electronic Data Interchange Technical Report
information--Dental. Type 3--Health Care Claim: Dental (837), May 2006, ASC X12N/
005010X224, and Type 1 Errata to Health Care Claim: Dental (837),
ASC X12 Standards for Electronic Data Interchange Technical
Report Type 3, October 2007, ASC X12N/005010X224A1.
Health care claims or equivalent encounter ASC X12 Standards for Electronic Data Interchange Technical Report
information--Professional. Type 3--Health Care Claim: Professional (837), May 2006, ASC X12N/
005010X222.
Health care claims or equivalent encounter ASC X12 Standards for Electronic Data Interchange Technical Report
information--Institutional. Type 3--Health Care Claim: Institutional (837), May 2006, ASC X12/
N005010X223, and Type 1 Errata to Health Care Claim:
Institutional (837), ASC X12 Standards for Electronic Data
Interchange Technical Report Type 3, October 2007, ASC X12N/
005010X223A1.
Health care claims or equivalent encounter Telecommunication Standard Implementation Guide, Version D,
information--Retail pharmacy. Release 0 (Version D.0), August 2007 and equivalent Batch
Standard Implementation Guide, Version 1, Release 2 (Version
1.2), National Council for Prescription Drug Programs.
Health care claims or equivalent encounter Telecommunication Standard, Implementation Guide Version 5,
information--Retail pharmacy supplies and Release 1, September 1999; The Telecommunication Standard
professional services. Implementation Guide, Version D, Release 0 (Version D.0), August
2007, and equivalent Batch Standard Implementation Guide, Version
1, Release 2 (Version 1.2), National Council for Prescription
Drug Programs; and ASC X12 Standards for Electronic Data
Interchange Technical Report Type 3--Health Care Claim:
Professional (837), May 2006, ASC X12N/005010X222.
Coordination of Benefits--Retail pharmacy Telecommunication Standard Implementation Guide, Version D,
drugs. Release 0 (Version D.0), August 2007, and equivalent Batch
Standard Implementation Guide, Version 1, Release 2 (Version
1.2), National Council for Prescription Drug Programs.
Coordination of Benefits--Dental............ ASC X12 Standards for Electronic Data Interchange Technical Report
Type 3--Health Care Claim: Dental (837), May 2006, ASC X12N/
005010X224, and Type 1 Errata to Health Care Claim: Dental (837),
ASC X12 Standards for Electronic Data Interchange Technical
Report Type 3, October 2007, ASC X12N/005010X224A1.
Coordination of Benefits--Professional...... ASC X12 Standards for Electronic Data Interchange Technical Report
Type 3--Health Care Claim: Professional (837), May 2006, ASC X12,
005010X222.
Coordination of Benefits--Institutional..... ASC X12 Standards for Electronic Data Interchange Technical Report
Type 3--Health Care Claim: Institutional (837), May 2006, ASC X12/
N005010X223, and Type 1 Errata to Health Care Claim:
Institutional (837), ASC X12 Standards for Electronic Data
Interchange Technical Report Type 3, October 2007, ASC X12N/
005010X223A1.
Eligibility for a health plan (request and ASC X12 Standards for Electronic Data Interchange Technical Report
response)--Dental, professional, and Type 3--Health Care Eligibility Benefit Inquiry and Response (270/
institutional. 271), April 2008, ASC X12N/005010X279.
Eligibility for a health plan (request and Telecommunication Standard Implementation Guide, Version D,
response)--Retail pharmacy drugs. Release 0 (Version D.0), August 2007, and equivalent Batch
Standard Implementation Guide, Version 1, Release 2 (Version
1.2), National Council for Prescription Drug Programs.
Health care claim status (request and ASC X12 Standards for Electronic Data Interchange Technical Report
response). Type 3--Health Care Claim Status Request and Response (276/277),
August 2006, ASC X12N/005010X212, and Errata to Health Care Claim
Status Request and Response (276/277), ASC X12 Standards for
Electronic Data Interchange Technical Report Type 3, April 2008,
ASC X12N/005010X212E1.
Enrollment and disenrollment in a health ASC X12 Standards for Electronic Data Interchange Technical Report
plan. Type 3--Benefit Enrollment and Maintenance (834), August 2006,
ASC X12N/005010X220.
Health care payment and remittance advice... ASC X12 Standards for Electronic Data Interchange Technical Report
Type 3--Health Care Claim Payment/Advice (835), April 2006, ASC
X12N/005010X221.
Health plan premium payments................ ASC X12 Standards for Electronic Data Interchange Technical Report
Type 3--Payroll Deducted and Other Group Premium Payment for
Insurance Products (820), February 2007, ASC X12N/005010X218.
Referral certification and authorization ASC X12 Standards for Electronic Data Interchange Technical Report
(request and response)--Dental, Type 3--Health Care Services Review--Request for Review and
professional, and institutional. Response (278), May 2006, ASC X12N/005010X217, and Errata to
Health Care Services Review--Request for Review and Response
(278), ASC X12 Standards for Electronic Data Interchange
Technical Report Type 3, April 2008, ASC X12N/005010X217E1.
[[Page 48011]]
Referral certification and authorization Telecommunication Standard Implementation Guide, Version D,
(request and response)--Retail pharmacy Release 0 (Version D.0), August 2007, and equivalent Batch
drugs. Standard Implementation Guide, Version 1, Release 2 (Version
1.2), National Council for Prescription Drug Programs.
Medicaid pharmacy subrogation............... Batch Standard Medicaid Subrogation Implementation Guide, Version
3, Release 0 (Version 3.0), July 2007, National Council for
Prescription Drug Programs.
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In general, the HIPAA transaction standards enable electronic data
interchange using a common interchange structure, thus minimizing the
industry's reliance on multiple data transmission formats. According to
a recent report to Congress by the National Committee on Vital and
Health Statistics (NCVHS), ``[t]he HIPAA electronic data requirements
for standardized formats and content were intended to move the health
care industry from a manual to an electronic system to improve
security, lower costs, and lower the error rate.'' \9\
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\9\ ``The Tenth Report to Congress on the Implementation of the
Administrative Simplification Provisions of the Health Insurance
Portability and Accountability Act (HIPAA) of 1996 (As Required by
the Health Insurance Portability and Accountability Act, Public Law
104-191, Section 263),'' submitted to the Senate Committee on
Finance and Committee on Health, Education, Labor and Pensions,
House Committee on Ways and Means, Committee on Education and Labor
and Committee on Energy and Commerce by the National Committee on
Vital and Health Statistics, December, 2011, p. 1.
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However, according to the NCVHS report, ``the speed of adoption [of
electronic transactions] across industry has been disappointing.'' \10\
The NCVHS report continues, ``The achievement of the vision of seamless
electronic flow of information in a confidential and secure manner has
been slow.'' \11\
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\10\ Ibid, p. 1.
\11\ Ibid, p. 2.
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2. The Introduction of Operating Rules in the Affordable Care Act
The use of operating rules is widespread and varied among other
industries. For example, uniform operating rules for the exchange of
Automated Clearing House (ACH) EFT payments among financial
institutions are used in accordance with U.S. Federal Reserve
regulations (12 CFR Part 370) and maintained by the Federal Reserve and
NACHA--The Electronic Payments Association (known as NACHA).
Additionally, credit card issuers employ detailed operating rules (for
example, Cirrus Worldwide Operating Rules) describing things such as
types of members, their responsibilities and obligations, and licensing
and display of service marks.
Before the passage of the Affordable Care Act, States enacted
various laws that were analogous to operating rules, in that they
established business rules directed toward more efficient and effective
transmission of electronic health care transactions. Similarly, the
CAQH Committee on Operating Rules for Information Exchange (CORE), a
nonprofit alliance of health care stakeholders, developed voluntary
operating rules for the health care industry. CAQH CORE's operating
rules include business rules that require common platform standards,
establish companion guide formats, define the rights and
responsibilities of all parties in a transaction, establish response
times and error resolution, require specific acknowledgement standards
and data content, remove optionality from specific data content, and
establish business rules directed at efficient and effective business
practices. Voluntary agreements among health care industry stakeholders
to use operating rules were shown to reduce costs and administrative
complexities.\12\
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\12\ ``CAQH CORE Phase I Measures of Success Final
Report,,''(presentation), July 7, 2009.
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Through the Affordable Care Act, Congress sought to promote
implementation of electronic transactions and achieve cost reduction
and efficiency improvements by creating more uniformity in the
implementation of standard transactions. This was done by mandating the
adoption of a set of operating rules for each of the HIPAA
transactions. Section 1173(g)(1) of the Act, as added by section
1104(b)(2)(C) of the Affordable Care Act, requires the Secretary to
``adopt a single set of operating rules for each transaction * * * with
the goal of creating as much uniformity in the implementation of the
electronic standards as possible.'' The Affordable Care Act defines
operating rules and specifies the role of operating rules in relation
to the standards. Operating rules are defined by section 1171(9) of the
Act (as added by section 1104(b)(1) of the Affordable Care Act) as
``the necessary business rules and guidelines for the electronic
exchange of information that are not defined by a standard or its
implementation specifications as adopted for purposes of this part.''
Additionally, section 1173(a)(4)(A) of the Act (as added by section
1104(b)(2)(B) of the Affordable Care Act) requires that--
The standards and associated operating rules adopted by the
Secretary shall--
(i) To the extent feasible and appropriate, enable determination
of an individual's eligibility and financial responsibility for
specific services prior to or at the point of care;
(ii) Be comprehensive, requiring minimal augmentation by paper
or other communications;
(iii) Provide for timely acknowledgment, response, and status
reporting that supports a transparent claims and denial management
process (including adjudication and appeals); and
(iv) Describe all data elements (including reason and remark
codes) in unambiguous terms, require that such data elements be
required or conditioned upon set values in other fields, and
prohibit additional conditions (except where necessary to implement
State or Federal law, or to protect against fraud and abuse).
Further, section 1104(b)(2) of the Affordable Care Act amended
section 1173 of the Act by adding new subsection (a)(4)(B), which
states that ``[i]n adopting standards and operating rules for the
transactions * * *, the Secretary shall seek to reduce the number and
complexity of forms (including paper and electronic forms) and data
entry required by patients and providers.''
Section 1104(b)(2) of the Affordable Care Act added section
1173(g)(1) to the Act, which states that ``[s]uch operating rules shall
be consensus-based and reflect the necessary business rules affecting
health plans and health care providers and the manner in which they
operate pursuant to standards issued under Health Insurance Portability
and Accountability Act of 1996.''
New sections 1173(g)(2)(D), (g)(3)(C), and (g)(3)(D) of the Act
also clarify the scope of operating rules. They provide that--
(2) Operating Rules Development.-- In adopting operating rules
under this subsection, the Secretary shall consider recommendations
for operating rules developed by a qualified nonprofit entity that
meets the following requirements * * *
[[Page 48012]]
(D) The entity builds on the transactions standards issued under
Health Insurance Portability and Accountability Act of 1996. * * *
(3) Review and recommendations.-- The National Committee on
Vital and Health Statistics shall * * *
(C) Determine whether such operating rules represent a consensus
view of the health care stakeholders and are consistent with and do
not conflict with other existing standards;
(D) Evaluate whether such operating rules are consistent with
electronic standards adopted for health information technology.
3. Adoption of Operating Rules for Eligibility for a Health Plan and
Health Care Claim Status Transactions
In the July 8, 2011 Federal Register (76 FR 40458), we published an
IFC titled, ``Administrative Simplification: Adoption of Operating
Rules for Eligibility for a Health Plan and Health Care Claim Status
Transactions'' (hereinafter referred to as the Eligibility and Claim
Status Operating Rules IFC). That rule adopted operating rules for two
HIPAA transactions: (1) Eligibility for a health plan; and (2) health
care claim status. The Eligibility and Claim Status Operating Rules IFC
also added the definition of operating rules to 45 CFR 162.103 and
describes their relationship to standards. For details on operating
rules and their relationship to standards, please see the Eligibility
and Claim Status Operating Rules IFC (76 FR 40458).
4. Affordable Care Act: Standards and Operating Rules for Electronic
Funds Transfers (EFT) and Remittance Advice Transactions
Section 1104(b)(2)(A) of the Affordable Care Act amended section
1173(a)(2) of the Act by adding the EFT transaction to the list of
electronic health care transactions for which the Secretary must adopt
a standard under HIPAA. Section 1104(c)(2) of the Affordable Care Act
required the Secretary to promulgate a final rule to establish an EFT
standard, and authorized the Secretary to do so by an interim final
rule. That section further required the standard to be adopted by
January 1, 2012, in a manner ensuring that it is effective by January
1, 2014.
Section 1104(b)(2)(C) of the Affordable Care Act also added a
requirement, at section 1173(g)(4)(B)(ii) of the Act, for the Secretary
to adopt a set of operating rules for electronic funds transfers (EFT)
transactions and health care payment and remittance advice transactions
that shall ``(I) allow for automated reconciliation of the electronic
payment with the remittance advice; and (II) be adopted not later than
July 1, 2012, in a manner ensuring that such operating rules are
effective not later than January 1, 2014.''
Section 1104(b)(2)(C) of the Affordable Care Act also amended
section 1173 of the Act by adding section 1173(g)(4)(C) of the Act,
which provides that ``[t]he Secretary shall promulgate an interim final
rule applying any standard or operating rule recommended by the [NCVHS]
pursuant to paragraph (3). The Secretary shall accept and consider
public comments on any interim final rule published under this
subparagraph for 60 days after the date of such publication.''
To better explain the context in which a standard for EFT was
adopted, we review below how the health care electronic funds transfers
(EFT) and remittance advice transaction is used to transmit health care
claim payments.
5. Payment of Health Care Claims via EFT and ERA
In the January 10, 2012 Federal Register (77 FR 1556), we published
an IFC titled, ``Administrative Simplification: Adoption of Standards
for the Health Care Electronic Funds Transfers (EFT) and Remittance
Advice'' (hereinafter referred to as the Health Care EFT Standards
IFC). In the Health Care EFT Standards IFC, we defined the health care
electronic funds transfers (EFT) and remittance advice transaction,
found in 45 CFR 162.1601, as the transmission of either of the
following for health care:
The transmission of any of the following from a health
plan to a health care provider:
++ Payment.
++ Information about the transfer of funds.
++ Payment processing information.
The transmission of either of the following from a health
plan to a health care provider:
++ Explanation of benefits.
++ Remittance advice.
The transmission described in Sec. 162.1601(a), hereinafter
referred to as a health care EFT, is primarily a financial
transmission, and the data content is payment information.
Traditionally, health care payments were in the form of paper checks
sent through the mail, and use of EFT for health care claim payments
remains low. When an EFT is used, the payment is generally transmitted
through the ACH Network, the same network that transmits salary
payments via Direct Deposit, though there are instances when other
networks are used, such as Fedwire.
The transmission described in Sec. 162.1601(b) is the ERA. A
health plan rarely pays a provider the exact amount a provider bills
the health plan for health care claims. A health plan adjusts the claim
charges based on contract agreements, secondary payers, benefit
coverage, expected copays and co-insurance, and other factors. These
adjustments are described in the ERA through the use of four codes:
Claim Adjustment Reason Codes (CARCs), Remittance Advice Remark Codes
(RARCs), Claim Adjustment Group Codes (CAGCs), and NCPDP External Code
List Reject Codes (NCPDP Reject Codes).
CARCs identify reasons why the claim or services are not being paid
as charged. For instance, ``163'' means ``attached references on the
claim was not received.'' RARCs provide additional information about
the adjustment. For instance, ``M30'' means ``missing pathology
report.'' CAGCs categorize CARCs by financial liability. For instance,
``PR'' means ``patient responsibility.'' NCPDP Reject Codes identify
reasons why a retail pharmacy claim was rejected. For instance, ``73''
means ``refills are not covered.''
With few exceptions, the ERA and the health care EFT are sent in
different electronic formats through different networks, contain
different data that have different business uses, and are often
received by the health care provider at different times. The health
care EFT is transmitted from the health plan's treasury system. It is
then processed by financial institutions, and ultimately entered into
the health care provider's treasury system. The path of the health care
EFT through the ACH Network from health plan to provider is represented
in Illustration A by the solid arrow.
In contrast, the ERA is traditionally sent from the health plan's
claims processing system and processed through the provider's billing
and collections system. The path of the ERA from health plan to
provider is represented in Illustration A by the arrow with dashes.
When both the health care EFT and the ERA to which it corresponds
arrive at the health care provider (often at different times), the two
transmissions must be matched back together or ``reassociated'' by the
provider; that is, the provider must associate the ERA with the payment
that it describes. This process is referred to as ``reassociation.''
Providers receive many payments from different health plans, often
separated from the ERA or paper remittance advice by days or even
weeks. This makes reassociation of the payment with the remittance
advice a slow burdensome task, especially when
[[Page 48013]]
the two cannot be associated by matching identical data elements. In
order to realize the greatest level of time- and cost-savings,
reassociation of the ERA with the health care EFT should be automated
through the provider's practice management system. Reassociation can
only be automated if there are data elements in the ERA that can be
matched with data elements in the EFT.
[GRAPHIC] [TIFF OMITTED] TR10AU12.000
6. Adoption of Standards for the Health Care Electronic Funds Transfers
(EFT) and Remittance Advice Transaction
The Health Care EFT Standards IFC adopted standards for the format
and the data content for the electronic transmission that a health plan
sends to its financial institution in order to initiate a health care
claim payment to a health care provider via the ACH Network.
One of the goals of the Health Care EFT Standards IFC was to adopt
standards for the format and data content of the health care EFT that
would ensure that the provider could reassociate the health care EFT
with the ERA by matching identical data elements between the two. The
Health Care EFT Standards IFC requires that a specific ACH file format
be used with specific data content when health plans originate a health
care EFT with their financial institutions to transmit through the ACH
Network.
Specifically, the Health Care EFT Standards IFC adopts the ACH
Network format known as the Corporate Credit or Deposit Entry (CCD)
with Addenda Record (CCD+Addenda) as the standard that health plans
must use to originate an EFT for health care payments made through the
ACH Network. The data content of the Addenda Record is also
standardized by the Health Care EFT Standards IFC: Health plans must
include the TRN Segment, an ASC X12 data segment the implementation
specifications of which are found in the ASC X12 835 TR3 (hereinafter
referred to as the X12 835 TR3) in the Addenda Record of the
CCD+Addenda. No protected health information (PHI) is to be included in
the health care EFT transaction according to the standards adopted in
the Health Care EFT Standards IFC. For a comprehensive description of
the EFT transmission through the ACH Network, please see the Health
Care EFT Standards IFC (77 FR 1556).
The standard for the ERA is the X12 835 TR3, adopted in the
Transactions and Code Sets final rule. An updated version of the X12
835 TR3, Version 5010, was adopted in the Modifications final rule.
By requiring health plans to use the same format to originate a
health care EFT as that used by financial institutions to transmit an
EFT through the ACH Network, there will be one less step in formatting/
translating the data in the overall transaction and, therefore, a
decrease in the risk that an error or omission will be made in that
translation. Consistent format and data elements in the file format
used by health plans to originate an EFT through the ACH Network will
make it more likely that the provider will be able to reassociate the
health care EFT with the ERA because of identical data elements
contained in both.
B. The National Committee on Vital and Health Statistics (NCVHS)
December 2010 Hearings on EFT
The NCVHS was established by Congress to serve as an advisory body
to the Secretary on health data, statistics, and national health
information policy, and has been assigned a significant role in the
Secretary's adoption of standards, code sets, and operating rules under
HIPAA.
Per the Affordable Care Act, the Health Care EFT Standards IFC was
based on recommendations from the NCVHS after a hearing the NCVHS
Subcommittee on Standards held on December 3, 2010 on standards and
operating rules for the health care payment and remittance advice
transaction. During the December 2010 hearing titled ``Administrative
Simplification under the Patient Protection and Affordable Care Act
Standards and Operating Rules for Electronic Funds Transfer (EFT) and
Remittance Advice (RA),'' \13\ the NCVHS subcommittee conducted a
comprehensive review of potential standards and operating rules for the
health care electronic funds transfers (EFT) and remittance advice
transaction.
[[Page 48014]]
The December 2010 hearing also included a review of standard setting
organizations and operating rule authoring entities, for purposes of
making a recommendation to the Secretary as to whether such standards
and operating rules should be adopted. The NCVHS hearing consisted of a
full day of public testimony with participation by stakeholders
representing a cross-section of the health care industry, including
health plans, health care provider organizations, health care
clearinghouses, retail pharmacy industry representatives, standards
developers, professional associations, representatives of Federal and
State health plans, the Workgroup for Electronic Data Interchange
(WEDI), the banking industry, and potential standard setting
organizations (also known as standards development organizations or
SDOs) for EFT standards and authoring entities for operating rules,
including CAQH CORE, ASC X12, the NACHA, and the NCPDP.
---------------------------------------------------------------------------
\13\ For agenda and testimony, see http://www.ncvhs.hhs.gov.
---------------------------------------------------------------------------
The testimony, both written and verbal, described many aspects and
issues of the health care electronic funds transfers (EFT) and
remittance advice transaction. Testifiers described the advantages to
using EFT to pay health care claims. The savings in time and money for
health plans and health care providers that EFT affords was paramount
amongst these advantages. Testifiers presented a number of case studies
to illustrate these benefits as well as a number of obstacles to
greater EFT use in health care. We refer the reader to the testimonies
posted to the NCVHS Web site at http://www.ncvhs.hhs.gov for a more
comprehensive discussion of the issues.
During the December 2010 NCVHS hearing, it became evident that no
operating rules for the heath care electronic funds transfers (EFT) and
remittance advice transaction had yet been written by any entity. On
February 17, 2011, following the December 2010 NCVHS Subcommittee on
Standards hearing, the NCVHS sent a letter to the Secretary stating
that ``NCVHS has formally requested potential operating rules authoring
entities to develop and present their applications to be authoring
entities for operating rules for the health care EFT standard and ERA
standard. These will be reviewed by NCVHS after they are received, and
further recommendations will be considered.'' \14\
---------------------------------------------------------------------------
\14\ February 17, 2011 Letter to Kathleen Sebelius, Secretary,
Department of Health and Human Services, from the National Committee
on Vital and Health Statistics (NCVHS), p. 6.
---------------------------------------------------------------------------
After the February 17, 2011 letter was sent, three entities applied
to be the authoring entity for the EFT and ERA operating rules: ASC X12
(for nonpharmacy ERA transactions); NCPDP (for pharmacy ERA
transactions); and CAQH CORE (for all EFT and ERA transactions). The
NCVHS evaluated the applications from the three potential authoring
entities. Each application was evaluated based on the statutory
requirements including: (1) Focus on administrative simplification; (2)
having a multistakeholder and consensus-based process for development
of operating rules; (3) building on the transaction standards issued
under HIPAA; and (4) plans to develop operating rules that meet the
functional requirements defined in the statute.
On March 23, 2011 the NCVHS sent a letter to the Secretary
recommending that CAQH CORE, in collaboration with NACHA-The Electronic
Payments Association, be named as the ``candidate authoring entity for
operating rules for all health care EFT and ERA transactions, with the
provision that this entity submit to NCVHS fully vetted operating rules
for consideration by the committee, by August 1, 2011.'' \15\ The
letter noted that the proposed operating rules would be reviewed by
NCVHS and further recommendations would be considered, including that
the operating rules submitted may or may not be deemed acceptable for a
recommendation for adoption.
---------------------------------------------------------------------------
\15\ March 23, 2011 letter to Kathleen Sebelius, Secretary of
the Department of Health and Human Services, from Justine M. Carr,
Chairperson, National Committee on Vital and Health Statistics,
Affordable Care Act (ACA), Administrative Simplification:
Recommendation for entity to submit proposed operating rules to
support the Standards for Health Care Electronic Funds Transfers and
Health Care Payment and Remittance Advice, pp. 4-5, http://www.ncvhs.hhs.gov/110323lt.pdf.
---------------------------------------------------------------------------
C. CAQH CORE Operating Rules for the Health Care Electronic Funds
Transfers (EFT) and Remittance Advice Transaction
Between March and August 2011, CAQH CORE held more than 30 open
calls and over 15 straw polls with industry and government
representatives to discuss, debate, and develop operating rules for EFT
and ERA. Over 80 health care entities, including health plans,
clearinghouses, providers, and financial institutions, were represented
at weekly meetings and spent hundreds of hours of analyzing, reviewing,
and consensus-building on the operating rules.\16\
---------------------------------------------------------------------------
\16\ August 1, 2011 letter to Walter Suarez and Judith Warren,
Co-Chairs of the National Committee on Vital Health Statistics
(NCVHS) Subcommittee on Standards from Gwendolyn Lohse, Deputy
Director CAQH and Managing Director of CORE and Janet Estep,
President and CEO, NACHA (p. 2).
---------------------------------------------------------------------------
CAQH CORE collaborated with the medical, pharmacy, and financial
services industries in the following ways in order to draft the
operating rules:
Conducted research, for example, reviewed over 100 EFT and
ERA enrollment forms to identify gaps in data collection.
Held open calls and shared draft documentation with a wide
range of constituents, many of which in turn forwarded copies of the
drafts to their affiliates.
Vetted the complete draft CAQH CORE operating rules
through the weekly call process, open update calls, surveys, and straw
polls, and shared updates on the CAQH CORE and NACHA Web sites.
On August 1, 2011 CAQH CORE and NACHA-The Electronic Payments
Association, submitted five separate draft EFT and ERA operating rules
to the NCVHS for consideration \17\:
---------------------------------------------------------------------------
\17\ August 1, 2011 letter to Walter Suarez and Judith Warren,
Co-Chairs of the National Committee on Vital Health Statistics
(NCVHS) Subcommittee on Standards from Gwendolyn Lohse, Deputy
Director CAQH and Managing Director of CORE and Janet Estep,
President and CEO, NACHA (pgp. 1).
---------------------------------------------------------------------------
Draft Phase III CORE ERA Infrastructure (835) Rule
Draft Phase III CORE EFT Enrollment Data Rule
Draft Phase III CORE ERA Enrollment Data Rule
Draft Phase III CORE EFT & ERA Reassociation (CCD+/835)
Rule
Draft Phase III CORE Uniform Use of CARCs and RARCs (835)
Rule; includes Draft CORE-required Code Combinations for CORE-defined
Business Scenarios.
In its August 1, 2011 letter to the NCVHS, CAQH CORE urged the
NCVHS to consider the rules as draft: ``Further vetting is underway to
finalize the rules per the CAQH CORE process or to identify further
dialogue that should occur within the industry.'' \18\
---------------------------------------------------------------------------
\18\ August 1, 2011 letter to Walter Suarez and Judith Warren,
Co-Chairs of the National Committee on Vital Health Statistics
(NCVHS) Subcommittee on Standards from Gwendolyn Lohse, Deputy
Director CAQH and Managing Director of CORE and Janet Estep,
President and CEO, NACHA (p. 1).
---------------------------------------------------------------------------
On October 10, 2011, CORE produced another draft of the EFT & ERA
Operating Rule Set in which the five rules were packaged as a set,
titled: ``Draft Phase III CORE EFT & ERA Operating Rule Set.''
Hereinafter, we will refer to the complete set of Draft Phase III CORE
EFT & ERA Operating Rules as of October 10, 2011 as the EFT & ERA Draft
Operating Rule Set.
[[Page 48015]]
D. The December 2011 NCVHS Recommendation to the Secretary
On December 7, 2011, the NCVHS sent a letter to the Secretary
recommending that the EFT & ERA Draft Operating Rule Set be adopted,
conditional on the authoring entities making certain revisions to the
proposed operating rules (recommendations 1.1 and 1.2), including the
following:
All references to the CORE certification requirement are
removed from any documents that are adopted as mandatory by HHS, and
that the CAQH CORE Web site be similarly updated and amended. The NCVHS
noted that one of the items specifically excluded in the Eligibility
and Claim Status Operating Rules IFC is the requirement that all
entities (providers, health plans and clearinghouses) using the
operating rules be CORE certified, and stated that the ``language in
the operating rules that requires CORE certification specifically can
be misleading.'' \19\
---------------------------------------------------------------------------
\19\ December 7, 2011 letter to Kathleen Sebelius, Secretary,
Department of Health and Human Services, ``Re: Affordable Care Act
(ACA), Administrative Simplification: Recommenation to adopt
operating rules to support the Standards for Health Care Electronic
Funds Transfers and Health Care Payment and Remittance Advice,''
from Justine M. Carr, Chairperson, National Committee on Vital and
Health Statistics, pp. 5.
---------------------------------------------------------------------------
``The Secretary worked with CAQH CORE to develop a naming
convention that consistently and easily identifies the transaction to
which the rule applies.'' \20\ CORE currently names its operating rules
using the term ``Phase'' in each one. The NCVHS letter observed that
certain operating rules were common to all operating rules (``technical
rules'') while other operating rules applied only to the specific
transactions (``business rules''). The NCVHS suggested that the
technical rules could be more appropriately maintained in a separate
set of ``base infrastructure'' operating rules. Industry users could
apply the technical rules across all transactions and use separate
documents for individual transactions to implement the business rules
for that specific transaction.
---------------------------------------------------------------------------
\20\ Ibid, pp. 5-6.
---------------------------------------------------------------------------
Subsequent to the December 7, 2011 NCVHS letter, CORE edited the
Draft EFT & ERA Operating Rule Set per the NCVHS recommendation that
references to the CORE certification be removed. The final version,
published by CAQH CORE on June 27, 2012, is titled the Phase III CORE
EFT & ERA Operating Rule Set (June 27, 2012).
Discussions are underway between the Secretary and CORE as to
NCVHS' second recommendation that a different naming convention be
developed for operating rules. However, it was not possible to develop
a new naming convention in the period between the December, 2011
recommendation from NCVHS and the publication of this IFC.
III. Provisions of the Interim Final Rule with Comment Period
A. Adoption of Phase III CORE EFT & ERA Operating Rule Set (Sec.
162.1603)
In 45 CFR 162.1603, we adopt CAQH CORE Phase III CORE EFT & ERA
Operating Rule Set (Approved June 2012), hereinafter referred to as the
EFT & ERA Operating Rule Set, for the health care EFT and remittance
advice transaction, with one exception noted later in this section of
the IFC. In Sec. 162.920, we list the EFT & ERA Operating Rule Set as
being incorporated by reference.
The EFT & ERA Operating Rule Set includes the following rules: (1)
Phase III CORE 380 EFT Enrollment Data Rule; (2) Phase III CORE 382 ERA
Enrollment Data Rule; (3) Phase III Core 360 Uniform Use of Claim
Adjustment Reason Codes and Remittance Advice Remark Codes (835) Rule;
(4) CORE-required Code Combinations for CORE-defined Business Scenarios
for the Phase III Core Uniform Use of Claim Adjustment Reason Codes and
Remittance Advice Remark Codes (835) Rule; (5) Phase III CORE 370 EFT &
ERA Reassociation (CCD+/835) Rule; and (6) Phase III CORE 350 Health
Care Claim Payment/Advice (835) Infrastructure Rule.
The Phase III CORE 350 Health Care Claim Payment/Advice (835)
Infrastructure Rule includes a requirement, at 4.4.1, that entities'
companion guides must follow the format/flow as defined in the CORE v
5010 Master Companion Guide Template, so we are also adopting the CORE
v 5010 Master Companion Guide Template.
We exclude the Phase III CORE 350 Health Care Claim Payment/Advice
(835) Infrastructure Rule Requirement 4.2 in Sec. 162.1603(a)(6). We
are not adopting the Phase III CORE 350 Health Care Claim Payment/
Advice (835) Infrastructure Rule Requirement 4.2, titled ``Health Care
Claim Payment/Advice Batch Acknowledgement Requirements'' because that
requirement requires the use of the ASC X12 999 acknowledgement
standard, and the Secretary has not adopted standards for
acknowledgement transactions.
Table 2 summarizes the high level requirements of the EFT & ERA
Operating Rule Set. Table 2 does not include all aspects of the EFT &
ERA Operating Rule Set, and readers are advised to refer to the EFT &
ERA Operating Rule Set itself.
Table 2--Summary of the Phase III Core EFT & ERA Operating Rule Set
Adopted in this IFC
------------------------------------------------------------------------
Rule High level requirements
------------------------------------------------------------------------
Phase III CORE 380 EFT 1. Requirement 4.2: Identifies a maximum
Enrollment Data Rule. set of standard data elements that
health plans can request from providers
for enrollment to receive EFT.
2. Requirement 4.2: Applies a
``controlled vocabulary''--predefined
and authorized terms--for health plans
to use when referring to the same data
element. For instance, ``Financial
Institution Routing Number'' is to be
used instead of, for example, ``Routing
Number'' or ``Bank Routing Number.''
3. Requirements 4.3.1 and 4.3.2: Require
standard data elements to appear on
paper enrollment forms in a standard
format and flow, using Master Templates
for paper-based and electronic
enrollment.
4. Requirement 4.3.1: Requires health
plans to give specific information or
instruction to providers to assist in
manual paper-based EFT enrollment. For
instance, for paper-based enrollment,
health plans are required to inform the
provider that it must contact its
financial institution to arrange for the
delivery of the data elements in the EFT
required for reassociation of the
payment and the ERA.
5. Requirement 4.4: Requires that a
health plan offer electronic EFT
enrollment. (It does not require health
plans to discontinue manual or paper-
based methods of enrollment, but that
electronic EFT enrollment be made
available by a health plan if requested
by a trading partner.)
6. Requirement 4.5: Requires health plans
to convert all their paper-based
enrollment forms to comply with this
rule no later than six months after the
compliance date specified in this IFC.
[[Page 48016]]
Phase III CORE 382 ERA 1. Requirement 4.2: Identifies a maximum
Enrollment Data Rule. set of standard data elements that
health plans can request from providers
for enrollment to receive ERA.
2. Requirement 4.2: Applies a
``controlled vocabulary''--predefined
and authorized terms--for health plans
to use when referring to the same data
element. For instance, ``Provider Name''
is to be used instead of ``Provider'' or
``Name.''
3. Requirements 4.3.1 and 4.3.2: Require
standard data elements to appear on
paper enrollment forms in a standard
format and flow, using Master Templates
for paper-based and electronic
enrollment.
4. Requirement 4.3.1: Requires health
plans to give specific information or
instruction to providers to assist in
manual paper-based ERA enrollment. For
instance, for paper-based enrollment,
health plans are required to provide
specific information regarding the
enrollment form, a fax number and/or
address to send it to, and contact
information for provider questions.
5. Requirement 4.4: Requires that a
health plan offer electronic ERA
enrollment. (It does not require health
plans to discontinue manual or paper-
based methods of enrollment, but that
electronic ERA enrollment be made
available by a health plan if requested
by a trading partner.)
6. Requirement 4.5: Requires health plans
to convert all their paper-based
enrollment forms to comply with this
rule no later than six months after the
compliance date specified in this IFC.
Phase III CORE 360 Uniform Requirements 4.1.1 and 4.1.3: Identify
Use of CARCs and RARCs (835) four business scenarios with a maximum
Rule, including CORE- set of CARCs/RARCs/CAGCs/NCPDP Reject
required Code Combinations Codes combinations that can be applied
for CORE-defined Business to convey details of the claim denial or
Scenarios. payment adjustment to the provider.
Health plans can only use the CARC/RARC/
CAGC/NCPDP Reject Code combinations
specified in the ``CORE-required Code
Combinations for CORE-defined Business
Scenarios'' document except that new or
adjusted combinations can be used if the
code committees responsible for
maintaining the codes create a new code
or adjust an existing code. The four
business scenarios are the minimum set
of business scenarios; health plans may
develop additional ones. The four
business scenarios include:
1. Additional Information Required--
Missing/Invalid/Incomplete
Documentation.
2. Additional Information Required--
Missing/Invalid/Incomplete Data from
Submitted Claim.
3. Billed Service Not Covered by Health
Plan.
4. Benefit for Billed Service Not
Separately Payable.
Phase III CORE 370 EFT& ERA 1. Requirement 4.1: Requires that
Reassociation (CCD+/835) providers must proactively contact their
Rule. financial institutions to arrange for
the delivery of the CORE-required
Minimum CCD+ Data Elements necessary for
successful reassociation of the EFT with
the ERA. The five (plus one situational)
CORE-required Minimum CCD+ Data Elements
are:
a. Effective Entry Date.
b. Amount.
c. Trace Type Code.
d. Reference Identification (EFT Trace
Number).
e. Originating Company Identifier
(Payer Identifier).
f. Reference Identification
(Originating Company Supplemental
Code), which is only required in some
situations.
2. Requirements 4.2: Requires health
plans to transmit the EFT within three
days of the transmission of the ERA.
3. Requirement 4.2.1 For retail pharmacy,
the health plan may release the ERA
anytime before the EFT is released, but
must release the ERA within three days
after the EFT is released.
4. Requirement 4.3: Outlines requirements
for resolving late or missing EFT and
ERA transmissions.
Phase III CORE 350 Health 1. Requirement 4.1: Requires covered
Care Claim Payment/Advice entities to implement HTTP/S Version 1.1
(835) Infrastructure Rule. over the public Internet as a transport
method for the health care electronic
funds transfers (EFT) and remittance
advice transaction. The requirements are
designed to provide a ``safe harbor''
that application vendors, providers, and
health plans (or other information
sources) can be assured will be
supported by all covered entities. The
rule does not require that all CORE
trading partners remove existing
connections that do not match the rule,
nor is it intended to require that
covered entities must use this method
for all new connections. The
connectivity safe harbor also includes
requirements for a minimum set of
metadata outside the ASC x12 payload and
aspects of connectivity/security such as
response times, acknowledgements and
errors. As part of this, two envelope
standards are to be used.
2. Requirement 4.3: Requires health plans
that issue proprietary paper claim
remittance advices to continue to offer
paper remittance advice for a minimum of
31 days from the implementation of ERA.
3. Requirement 4.4.1: Requires the use of
the CORE Master Companion Guide Template
for the flow and format of companion
guides. This is the same CORE Master
Companion Guide Template that was
adopted in the Eligibility and Claim
Status Operating Rules IFC.
------------------------------------------------------------------------
B. Summary of Reasons for Adopting the EFT & ERA Operating Rule Set
As is demonstrated in the RIA of this IFC, the EFT & ERA Operating
Rule Set will bring efficiencies to four areas of administrative tasks
and, in so doing, will incentivize more health care entities to utilize
electronic transactions. The four areas of administrative tasks that
EFT & ERA Operating Rule Set will streamline include:
Provider enrollment in EFT and ERA: As detailed in Table
2, the EFT & ERA Operating Rule Set includes requirements for health
plans to use common format, flow, and vocabulary in their enrollment
forms for EFT and ERA, as well as a maximum set of data elements that
can be used in the enrollment forms and shared between the EFT and ERA
enrollment forms. These requirements make EFT and ERA enrollment easier
from the perspective of providers because all health plan enrollment
forms will be similar, and a provider will be able to identify and
collect all the required data for the multiple health plan forms
simultaneously.
Setting up initial trading partner connectivity and
processes between
[[Page 48017]]
providers, clearinghouses and health plans: The connectivity or ``safe
harbor'' requirements of the Phase III CORE 350 Health Care Claim
Payment/Advice (835) Infrastructure Rule allow for quick initial
connectivity between new trading partners. The connectivity
requirements set up ``ground rules'' between trading partners with
regard to connectivity over the public Internet. Although trading
partners are not required to remove existing connections, providers and
other trading partners can be assured that this connectivity can be
used for transactions, that is, providers and other trading partners
will find that this connectivity over the public Internet is always
available to them, should they want to use it (safe harbor). The Phase
III CORE 350 Health Care Claim Payment/Advice (835) Infrastructure Rule
also requires health plans to format their ERA companion guides
according to a CORE Master Companion Guide Template. These requirements
could save days and perhaps weeks in terms of setting up with new
trading partners.
Reassociation of the EFT data with the ERA data. The
maximum set of standard data elements required by the Phase III CORE
380 EFT Enrollment Data Rule and Phase III CORE 382 ERA Enrollment Data
Rule ensures that the health plan will have the proper data necessary
for the required data content--the data elements of the X12 TRN
Segment--for the health care EFT so that automated reassociation is
supported. The Phase III CORE 370 EFT & ERA Reassociation (CCD+/835)
Rule has further data content requirements for the CCD+ and a
requirement of plus or minus three days between transmission of the EFT
and ERA, both of which facilitate automated reassociation by the
provider. The Phase III CORE 370 EFT & ERA Reassociation (CCD+/835)
Rule also requires a transition period between paper and electronic
remittance advice, allowing a provider a test period before
implementing ERA exclusively.
Posting payment adjustments and claim denials. The Phase
III CORE 360 Uniform Use of CARCs and RARCs (835) Rule, including CORE-
required Code Combinations for CORE-defined Business Scenarios, puts
limits on the number of code combinations used for four common
rejection scenarios. This rule makes it easier for providers to
understand the reasons for a health plan's rejection or adjustment of a
claim payment, and will decrease time spent on the manual follow-up
(telephone calls, emails, etc.) on rejections and adjustments.
C. Operating Rules on Acknowledgements
The CORE EFT & ERA Operating Rule Set requires the use of the
Version 5010 999 acknowledgements standard in the Phase III CORE 350
Health Care Claim Payment/Advice (835) Infrastructure Rule Requirement
4.2, titled ``Health Care Claim Payment/Advice Batch Acknowledgement
Requirements.'' As noted previously, we are not adopting that
particular requirement within the EFT & ERA Operating Rule Set.
Acknowledgements are responses transmitted by electronic data
interchange (EDI) that inform transaction senders whether or not their
transaction has been received or if there are problems with the
transaction. The use of acknowledgements adds value to the underlying
transactions for which they are sent by informing the sender that a
transaction has been received or has been rejected. Without
acknowledgements, it is difficult for the sender to know whether the
intended recipient received the transmission, which often results in
the sender repeatedly querying the intended receiver as to the status
of the transmission.
In its September 22, 2011 letter to the Secretary, the NCVHS
forwarded some observations and recommendations on the adoption of a
standard for electronic acknowledgment transactions based on a hearing
of the NCVHS Subcommittee on Standards on April 27, 2011.\21\ In the
letter, the NCVHS noted that ``[d]uring the April 2011 hearing,
virtually all testifiers were supportive of a mandate for
acknowledgment standards because of the time and costs savings
benefits.'' \22\ The NCVHS recommended that ASC X12 Acknowledgment
standards be adopted for three different Acknowledgments
transactions.\23\
---------------------------------------------------------------------------
\21\ September 22, 2011 letter to the Honorable Kathleen
Sebelius, Secretary, Department of Health and Human Services, from
the National Committee on Vital and Health Statistics, ``Re:
Observations and Recommendations on the Adoption of a Standard for
Electronic Acknowledgment Transactions.''
\22\ Ibid., pp 3.
\23\ Ibid., pp. 4
---------------------------------------------------------------------------
Section 1173(a)(4)(A)(iii) of the Act, as added by section 1104(b)
of the Affordable Care Act, provides that standards and associated
operating rules shall ``provide for timely acknowledgement, response,
and status reporting that supports a transparent claims and denial
management process (including adjudication and appeals).'' This
provision is an indication of Congress' recognition of the important
role acknowledgements play in EDI.
Although we are not requiring compliance with Phase III CORE 350
Health Care Claim Payment/Advice (835) Infrastructure Rule requirement
4.2, we are addressing the important role acknowledgements play in EDI
by strongly encouraging the industry to implement the acknowledgements
requirements in the CAQH CORE rules we are adopting herein. We reflect
the exclusion of the requirement to use acknowledgments in Sec.
162.1603(a)(6).
Until such time as the Secretary adopts a standard for
acknowledgments, we support the industry's ongoing voluntary use of
acknowledgements and encourage even more widespread use.
D. Applicability (Sec. 162.100)
Per 45 CFR 162.100, the health care electronic funds transfers
(EFT) and remittance advice transaction operating rules adopted in this
interim final rule with comment period apply to all covered entities:
Health plans, health care clearinghouses, and health care providers who
transmit any health information in electronic form in connection with a
transaction for which a standard has been adopted under HIPAA.
E. Technical Changes (Sec. 162.1601)
In the Health Care EFT Standards IFC, we named the new transaction
the ``Health Care Electronic Funds Transfers (EFT) and Remittance
Advice'' Transaction. In this IFC, we are making a conforming change to
the title and introductory language of Sec. 162.1601 to reference the
transaction by the new name.
Specifically, we are changing the heading of Sec. 162.1601 from
``health care payment and remittance advice transaction'' to ``health
care electronic funds transfers (EFT) and remittance advice
transaction.'' In the introductory text, we are revising the statement
``The health care payment and remittance advice transaction is the
transmission of either of the following for health care'' to read ``The
health care electronic funds transfers (EFT) and remittance advice
transaction is the transmission of either of the following for health
care.''
F. Effective and Compliance Dates
Section 1173(g)(4)(B)(ii) of the Act, as added by section
1104(b)(2)(C) of the Affordable Care Act, states that ``[t]he set of
operating rules for electronic funds transfers and health care payment
and remittance advice transactions shall * * * be adopted not later
than July 1, 2012, in a manner ensuring that such operating rules are
effective not later than January 1, 2014.'' In each of our previous
HIPAA rules, the date on
[[Page 48018]]
which the rule was effective was the date on which the rule was
considered to be established or adopted or, in other words, the date on
which adoption took effect and the CFR was accordingly amended.
Typically, the effective date of a rule is 30 or 60 days after
publication in the Federal Register. Under certain circumstances, the
delay in the effective date can be waived, in which case the effective
date of the rule may be the date of filing for public inspection or the
date of publication in the Federal Register.
The effective date of standards, implementation specifications,
modifications, or operating rules that are adopted in a rule, however,
is different than the effective date of the rule. The effective date of
standards, implementation specifications, modifications, or operating
rules is the date on which covered entities must be in compliance with
the standards, implementation specifications, modifications, or
operating rules. The Act requires that the operating rules for the
health care electronic funds transfers (EFT) and remittance advice
transaction be effective not later than January 1, 2014. This means
that covered entities must be in compliance with the operating rules by
January 1, 2014. New Sec. 162.1603 reflects this compliance date for
the EFT & ERA Operating Rule Set.
If we change any of the policies we are finalizing in this interim
final rule with comment period as a result of comments received, we
will seek to finalize any such changes to allow sufficient time for
industry preparation for compliance.
IV. Other Considerations: Process for Maintaining and Revising the EFT
& ERA Operating Rule Set
The CORE EFT & ERA Operating Rule Set includes a number of
statements about how the operating rules will be reviewed and updated.
According to the Phase III CORE 382 ERA Enrollment Data Rule and the
Phase III CORE 380 EFT Enrollment Data Rule, CORE will review the
enrollment data sets on an annual or semi-annual basis. The Phase III
CORE 382 ERA Enrollment Data Rule and the Phase III CORE 380 EFT
Enrollment Data Rule state: ``The first review shall commence one year
after the [adoption] of a federal regulation requiring'' implementation
of the two CORE enrollment rules.\24\ ``Substantive changes necessary
to the data set will be reviewed and approved by CORE as necessary to
ensure accurate and timely revision to the data set.'' \25\
---------------------------------------------------------------------------
\24\ CAQH Committee on Operating Rules for Information Exchange
(CORE), Phase III CORE EFT & ERA Operating Rules Set (As of May XX,
2012), Phase III CORE 382 ERA Enrollment Data Rule, Section 3.4. and
Phase III CORE 380 EFT Enrollment Data Rule, Section 3.4.
\25\ Ibid.
---------------------------------------------------------------------------
The Phase III CORE 360 Uniform Use of CARCs and RARCs (835) Rule
states that--
CAQH CORE will establish an open process for soliciting feedback
and input from the industry on a periodic basis, no less than 3
times per year, on the CARC/RARC/CAGC and CARC/NCPDP Reject Codes/
CAGC combinations in the CORE-required Code Combinations for CORE-
defined Business Scenarios.doc and convene a Subgroup to agree on
appropriate revisions. As part of this process, it will be expected
that health plans/providers/vendors will report to CORE additional
business Scenarios that health plans may be using on a frequent
basis that are not covered by this CORE rule for consideration for
additional Business Scenarios.\26\
---------------------------------------------------------------------------
\26\ CAQH Committee on Operating Rules for Information Exchange
(CORE), Phase III CORE EFT & ERA Operating Rules Set (As of May XX,
2012), Phase III CORE 360 Uniform Use of CARCs and RARCs (835) Rule,
Section 3.5.
Note that these processes will be applied by CORE to update and
revise those particular rules in the EFT & ERA Operating Rule Set.
However, any modified versions of the EFT & ERA Operating Rule Set
would be vetted through the rulemaking process before covered entities
would be required to comply with them under HIPAA.
The CORE process for updating the operating rules is separate and
distinct from the HHS process for updating standards and operating
rules. Section 1104(b)(2)(C) of the Affordable Care Act added new
section 1773(i) to the Act, which requires the establishment of a
``review committee'' to evaluate and review the adopted standards and
operating rules and to report recommendations for updating and
improving standards and operating rules to the Secretary. We will
establish the review committee at a later date and a description of the
review, evaluation, and update process will be presented at that time.
V. Waiver of Proposed Rulemaking and Delay in Effective Date
Under 5 U.S.C. 553(b) of the Administrative Procedure Act (APA), we
are required to publish a notice of proposed rulemaking in the Federal
Register. In addition, the APA mandates a 30-day delay in the effective
date. Sections 553(b) and (d) of the APA provide for an exception from
these APA requirements. Section 553(b)(B) of the APA authorizes the
Department to waive normal rulemaking requirements if the Department
for good cause finds that notice and comment procedures are
impracticable, unnecessary, or contrary to the public interest. Section
553(d)(3) of the APA allows the Department to waive the 30-day delay in
effective date where the Department finds good cause to do so and
includes a statement of support.
Subsection (C) of section 1173(g)(4) of the Act is titled
``Expedited Rulemaking'' and provides that ``[t]he Secretary shall
promulgate an interim final rule applying any standard or operating
rule recommended by the [NCVHS] pursuant to paragraph (3). The
Secretary shall accept and consider public comments on any interim
final rule published under this subparagraph for 60 days after the date
of such publication.'' As discussed previously, this interim final rule
applies the recommendations made by the NCVHS to adopt the EFT & ERA
Operating Rule Set.
Because the statute requires us to publish an interim final rule
with comment period for the adoption of these operating rules, we
conclude that it is unnecessary to undertake ordinary notice and
comment procedures. On this basis, we waive the ordinary notice and
comment provisions of the APA. In accordance with the requirements of
section 1173(g)(4)(C) of the Act, we are providing a 60-day public
comment period.
We also find that it is unnecessary to undertake ordinary notice
and comment procedures to revise the name in the title and introductory
language of the transaction in Sec. 162.1601. In the Health Care EFT
Standards IFC, we named the new transaction the ``Health Care
Electronic Funds Transfers (EFT) and Remittance Advice,'' and we are
simply making a conforming change to the title and introductory
language of that regulatory section to call the transaction by the new
name.
We also find good cause for waiving the 30-day delay in the
effective date of this interim final rule with comment period. The 30-
day delay is intended to give affected parties time to adjust their
behavior and make preparations before a final rule takes effect.
Sometimes a waiver of the 30-day delay in the effective date of a rule
directly impacts the entities required to comply with the rule by
minimizing or even eliminating the time during which they can prepare
to comply with the rule. In this case, covered entities are not
required to comply with the adopted operating rules until January 1,
2014, approximately one-and-one-half years after the publication of
this interim final rule with comment period; a waiver of the 30-day
delay in the effective date of
[[Page 48019]]
the rule does not change that fact. A waiver is in fact inconsequential
here to covered entities; their statutorily prescribed date of
compliance remains January 1, 2014. Because we believe the 30-day delay
is unnecessary, we find good cause to waive it.
VI. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995, we are required to
provide 60-day notice in the Federal Register and solicit public
comment before a collection of information is 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 Paperwork Reduction Act of 1995
requires that we solicit comment on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our 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.
We are soliciting public comment on the information collection
requirements (ICRs) on each of these issues that contains information
collection requirements (ICRs): Specifications: Companion Guides
Template, CORE-Required Maximum ERA Enrollment Data Elements, and CORE-
Required Maximum EFT Enrollment Data Elements.
A. Health Plans Are Required To Format Companion Guides According to
Companion Guide Template
In current practice, companion guides are developed by individual
health plans and require providers to adhere to different transaction
implementation rules for each health plan. Health plans have created
these companion guides to describe the specifics of how they implement
the HIPAA transactions and how they will work with their trading
partners.
Health plans' companion guides vary not only in format and
structure, but also in size, being anywhere from a few to 60 pages or
more. Such variance can be confusing to trading partners and providers
who must implement them along with the standard implementation guides,
and who must refer to different companion guides for different health
plans. There are more than 1,200 such companion guides in use today.
The Phase III CORE 350 Health Care Claim Payment/Advice (835)
Infrastructure Rule, Requirement 4.4, adopted in this interim final
rule with comment period, requires a standard template/common structure
that health plans must use that is more efficient for providers to
reference, given the multiple industry companion guides they must
consult today.
OMB has determined that this regulatory requirement (which mandates
that the private sector disclose information and do so in a particular
format) constitutes an agency-sponsored third-party disclosure as
defined under the PRA. The burden associated with the requirements of
this interim final rule with comment period, which is subject to the
PRA, includes the initial one-time burden on health plans to use a
standardized template for companion guides.
Common practice in the industry is for companion guides to be
published as electronic documents and updated periodically in the
routine course of business. Companion guides are posted to and made
available on health plan Web sites for trading partners, including
providers, to access; therefore, printing and shipping costs are not
considered.
The burden associated with the routine or ongoing maintenance of
the information reported in the standard template format for companion
guides is exempt from the PRA as defined in 5 CFR 1320.3(b)(2).
Based on the assumption that the burden associated with systems
modifications that need to be made to implement the standard template
for companion guides may overlap with the systems modifications needed
to implement other HIPAA standards, and the fact that the standard
template for companion guides will replace the use of multiple
companion guides, resulting in an overall reduction of burden for
providers, commenters should take into consideration when drafting
comments that: (1) One or more of these current companion guides may
not be used; (2) companion guide modifications may be performed in an
aggregate manner during the course of routine business; and/or (3)
systems modifications may be made by contractors such as practice
management vendors, in a single effort for a multitude of affected
entities.
Health plans that issue companion guides do so, in part, to direct
providers on how to implement the ASC X12 standards and, in the case of
the NCPDP standards, issue payer sheets specific to their requirements,
and often provide other plan-specific information, such as contact
information, address, etc. It is expected that even with the advent of
operating rules, companion guides will never be completely eliminated,
but the companion guides themselves may be greatly reduced in size and
complexity as a result of the use of operating rules.
The CORE Master Companion Guide Template serves the purpose of
providing a uniform structure for health plans to use when preparing
companion guides. The use of this template by health plans currently
issuing companion guides is considered to be a one-time action and is
considered a permanent standard template for a health plan companion
guide.
As the transition to the CORE Master Companion Guide Template is a
one-time requirement, we do not estimate any ongoing labor costs
associated with the use of CORE Master Companion Guide Template beyond
the initial first year conversion.
In the Eligibility and Claim Status Operating Rules IFC, we
estimated the one-time conversion to the template will cost health
plans across the industry $3,028,000. The calculations in the
Eligibility and Claim Status Operating Rules IFC Collection of
Information section were as follows: The current length of health plan
companion guides related to the eligibility for a health plan and
health care claim status transactions is anecdotally estimated as
ranging from just a few to 60 or more pages. We estimate it will take a
health plan staff person, most likely a technical writer, from 1 to 4
hours per page to reformat companion guides into the standard template
for companion guides. This burden would involve re-entering
information, reconfiguring the sequence in which information appears,
adding information, and other word processing and related tasks. Also,
it would require specific technical knowledge, such as expertise in the
Version 5010 standard transactions.
Using the high estimate obtained in testimony to the NCHVS by the
American Medical Association of 1,200 companion guides currently in
use, we calculated in the Eligibility and Claim Status Operating Rules
IFC an estimated average of 40 pages, (48,000 responses) at an average
rate of 2 hours per page (1,200 guides x 40 pages x 2 hours per page),
for a one-time burden of approximately 96,000 hours across the industry
to implement the CORE Master Companion Guide Template.
The total burden calculated in the Eligibility and Claim Status
Operating Rules IFC applied to the transition to the template for two
transactions, while we are only considering one here: the health care
electronic funds transfers (EFT) and remittance advice transaction.
Therefore, for purposes of this IFC, in
[[Page 48020]]
order to calculate the burden to transition companion guides to the
CORE Master Companion Guide Template, we have taken the total burden as
estimated in the COI section of the Eligibility and Claim Status
Operating Rules IFC and divided it in two, to result in approximately
48,000 hours (Table 3).
As existing word processing capabilities would be used for this
task, we do not anticipate any software, hardware or other specialized
equipment to be purchased and/or maintained for this specific purpose.
B. Health Plans Are Required To Use CORE-Required Maximum ERA
Enrollment Data Elements and CORE-Required Maximum EFT Enrollment Data
Elements in ERA and EFT Enrollment Forms
Requirements 4.2 and 4.3 of both the Phase III CORE 380 EFT
Enrollment Data Rule and the Phase III CORE 382 ERA Enrollment Data
Rule require health plans to change the forms they currently use for
enrolling providers in EFT and ERA, as these rules require a maximum
set of standard data elements, a controlled vocabulary, and a standard
format and flow to the forms. We assume that most, if not all, health
plans will have to alter their current enrollment forms for EFT and ERA
in order to comply with these requirements.
Health plans make alterations to their forms on a fairly routine
basis in order to comply with internal business needs and State and
Federal mandates. Changing or altering an existing form will often
include a technical writer to make the actual changes, and an approval
process that guarantees that the changes do not alter business
processes in the organization. The burden associated with the
requirements of this interim final rule with comment period is the
initial one-time burden on health plans to use the CORE-required
Maximum ERA Enrollment Data Elements and CORE-required Maximum EFT
Enrollment Data Elements.
The burden associated with the routine or ongoing maintenance of
the enrollment forms is exempt from the PRA as defined in 5 CFR
1320.3(b)(2).
We assume that, for each of the two forms, it will take a technical
writer 16 hours to reformat and alter the form according to the
requirements in the Phase III CORE EFT 380 Enrollment Data Rule and
Phase III CORE ERA 382 Enrollment Data Rule (2 forms * 16 hours = 32
hours). This includes the time it takes to incorporate revisions that
may result from the approval process.
We assume that the two forms will have to get a number of levels of
approval before they can be used, so we have added 4 hours of time
being reviewed by general and operations managers. We multiply these
hours (36) by the number of health plans and third party administrators
(2,577) for a total burden to the industry of approximately 92,772
hours (Table 3).
As existing word processing capabilities would be used for this
task, we do not anticipate any software, hardware or other specialized
equipment to be purchased and/or maintained for this specific purpose.
Table 3--The One-Time Burden to Health Plans of Reformatting Existing
Companion Guides and Altering EFT and ERA Enrollment Forms
------------------------------------------------------------------------
Burden of
reformatting
One-time burden of reformatting EFT and ERA Total burden
companion guides (in hours) enrollment (in hours)
forms (in
hours)
------------------------------------------------------------------------
48,000................................ 92,772 140,772
------------------------------------------------------------------------
C. Cost of Provider Enrollment
The EFT & ERA Operating Rule Set adopted herein does not require
providers to accept payments via EFT or remittance advice via ERA, so
there is no requirement that providers must enroll in EFT to receive
these transactions.
However, we do assume that, in part due to this regulation,
physician practices, and hospitals will increase their usage of EFT,
or, in some cases, will begin accepting EFT for health care claim
payments for the first time. As we relay in the RIA of this interim
final rule with comment period, for the savings for health plans, the
high range of estimated increase in EFT usage attributable to
implementation of the EFT and ERA standards makes up a percentage of
the total increase.
Therefore, we have included the cost of enrollment in EFT to both
physician practices and hospitals (Table 3), as we did in the Health
Care EFT Standards IFC. This cost will also be reflected in the summary
included in the RIA of the cost and benefits of implementing the EFT &
ERA Operating Rule Set.
We have not included the cost of enrollment in ERA to providers in
this COI or RIA. The standard for the ERA was adopted in the
Transaction and Code Sets final rule and the costs for implementing EDI
were considered in that rule. A provider's enrollment in ERA with a
health plan is a cost that would be included in initial implementation
of EDI.
Data have demonstrated that hospitals have a much higher usage of
EDI than physician practices and, by extension, we assume that
hospitals have a higher usage of EFT than physician practices. However,
there is no valid data on EFT usage among hospitals and so we will
include them with physician practices, knowing that cost estimates are
likely conservative.
Many physician practices and hospitals already accept EFT for
health care claim payments from the health plans that pay them the most
(as a percentage of total payments to the provider), pay them most
often, or transmit payment/processing information that works most
successfully with the particular provider's practice management system.
The burden associated with this requirement of the EFT & ERA
Operating rules is the completion of the health care EFT enrollment
which is accomplished by filling out and submitting what is generally a
3- to 18-page form, obtaining signatures, and transmitting the
completed document. The burden associated with the providers' routine
or ongoing enrollment in order to receive payments from health plans is
exempt from the PRA as defined in 5 CFR 1320.3(b)(2).
In order to quantify the average cost per physician practice or
hospital, we have applied the following assumptions:
In the Health Care EFT Standards IFC, we assumed that, for
the typical physician practice, the time burden of an EFT enrollment
with a single health plan is 2 hours. We base this time burden on the
estimated length of time
[[Page 48021]]
it would take an average consumer to complete and submit a 3 to 18 page
form, including obtaining bank account, bank routing, and necessary
signatures to allow an employer to Direct Deposit an employee's salary
into the employee's account (a common consumer EFT enrollment).
However, Phase III CORE 380 EFT Enrollment Data Rule Requirement 4.4
requires health plans to offer electronic EFT enrollment. The rule does
not require health plans to discontinue manual or paper-based methods
of enrollment, but that electronic EFT enrollment be made available by
a health plan if requested by a trading partner. We assume that
providers that take advantage of the electronic EFT enrollment will
find the time it takes to enroll cut significantly. If we assume that
up to 50 percent of physician practices may opt to use the electronic
enrollment in EFT, then the time it takes for a physicians practice to
enroll will be decreased to between 1 to 2 hours. For simplicity, we
are using the average enrollment time of 1.5 hours.
The majority of the enrollment will be done by a billing
and posting clerk, at that position's average salary rate of
approximately $17.50 per hour. This rate is based on Bureau of Labor
Statistics adjusted to 2014 by factoring an increase in labor costs at
the rate of 3 percent per year.
The model physician practice receives the vast majority of
its payments from 25 or less plans.\27\ From the beginning of 2014
through 2018, we assume that the number of health plans with whom the
model physician practice does business will remain constant because
industry trends indicate that the number of health plans will remain
constant, or even decrease.
---------------------------------------------------------------------------
\27\ American Medical Association, ``Competition in Health
Insurance: A Comprehensive Study of U.S. Markets,'' 2008 and 2009.
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,'' United States Government Accountability Office
(GAO), July 31, 2009 (GAO-09-864R).
---------------------------------------------------------------------------
According to our projections, the typical physician
practice will receive 34 percent of its health care claim payments via
EFT at the beginning of 2014, and this will increase to 56 percent by
the end of 2018 (reflecting our calculation in the RIA of this interim
final rule with comment period for the whole industry). Using these
factors, we can calculate that the typical physician practice is
already enrolled in an EFT program with approximately eight of the
twenty five health plans with which it does business (34 percent) at
the beginning of 2014. We predict that the model physician practice
would be expected to add six new EFT enrollments from 2014 through
2018, 18 percent of which are due to the positive consequences of the
EFT & ERA Operating Rule Set. The 18 percent attribution is the
percentage of total EFT usage that is attributable to the EFT & ERA
Operating Rule Set as calculated in the RIA of this IFC. Any updates to
the enrollments would be in the normal course of business.
Table 4--Costs and Number of Enrollments in EFT by Physicians and Hospitals for 2014 Through 2018
--------------------------------------------------------------------------------------------------------------------------------------------------------
Col. 1 Col. 2 Col. 3 Col. 4 Col. 5 Col. 6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Total number of
Total number of EFT enrollments Number of annual
Base hourly rate Number of increased EFT attributable to enrollments in EFT
(in dollars) for physician enrollments adoption of EFT & attributable to
Time (in hours) per enrollment form (column 1) billing and practices/ (column 3 * 6 ERA operating adoption of
posting clerks* hospitals (column enrollments) rules set at 18% operating rules
(column 2) 3) (column 4) of total (column set (column 6)
5)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.5................................................. $17.5 240,727 1,444,362 259,985 52,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
The total burden to providers that move to EFT due to the EFT & ERA
Operating Rule Set from 2014 through 2018 is $7.27 million. Table 5
illustrates the annualized burden.
Table 5--Estimated Annualized Burden
----------------------------------------------------------------------------------------------------------------
Year
-------------------------------------------------- Total
2014 2015 2016 2017 2018
----------------------------------------------------------------------------------------------------------------
Cost (Burden Hours for total hospitals & providers) $1.4 $1.4 $1.5 $1.5 $1.5 $7.3
(in millions)......................................
----------------------------------------------------------------------------------------------------------------
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-0028-IFC
Fax: (202) 395-6974; or
Email: OIRA_submission@omb.eop.gov.
VII. Regulatory Impact Analysis
We have examined the impacts of this interim final rule with
comment period 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 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
(March 22, 1995; Pub. L. 104-4), Executive Order 13132 on Federalism
(August 4, 1999), and the
[[Page 48022]]
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 to not only
engage public 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 (RIA) must be prepared for major rules
with economically significant effects ($100 million in 1995 dollars or
more in any 1 year). We estimate that this rulemaking is ``economically
significant,'' 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.
Accordingly, we have prepared an RIA that, to the best of our ability,
presents the costs and benefits of this interim final rule with comment
period, and the rule has been reviewed by the Office of Management and
Budget. We anticipate that the adoption of the EFT & ERA Operating Rule
Set would result in benefits that outweigh the costs to health care
providers and health plans.
The Regulatory Flexibility Act (RFA) 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).
We have determined, and certify, that this rule will not have a
significant economic impact on a substantial number of small entities,
and that a regulatory flexibility analysis is not required. Our
reasoning is as follows:
Most physician practices, hospitals and other health care
providers are small entities, either by nonprofit status or by having
revenues of $7 to $34.5 million in any 1 year. However, the costs to
individual providers will be minimal.
The health insurance industry was examined in depth in the
RIA prepared for the August 3, 2004 proposed rule on establishment of
the Medicare Advantage program (69 FR 46866). In that analysis, it was
determined that there were few if any ``insurance firms,'' including
health maintenance organizations (HMOs), that fell below the size
thresholds for ''small'' business established by the SBA. Then, and
even more so now, the market for health insurance is dominated by a
relatively small number of firms with substantial market shares. We
assume that the ``insurance firms'' are synonymous, for the most part,
with health plans that make health care claims payments to health care
providers and are, therefore, the entities that will have costs
associated with implementing health care EFT standards. However, there
are a number of 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 health
plans that are nonprofit organizations, like the other firms affected
by this interim final rule, will be required to implement the EFT & ERA
Operating Rule Set.
Accordingly, this IFC will affect a ''substantial number'' of small
entities; that is, nonprofit health plans. However, as illustrated in
the RIA, we estimate that the costs for implementation of this IFC are,
at most, approximately $460,000 to $1 million per health plan
(regardless of size or non-profit status). We assume that the nonprofit
HMOs that are considered ``small'' by virtue of their nonprofit status
are not small in terms of revenue. Therefore, we do not consider the
cost of implementation to be substantial for these nonprofit health
plans.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a significant economic
impact on the operations of a substantial number of small rural
hospitals. This analysis must conform to the provisions of section 604
of the RFA. This IFC would not affect small rural hospitals, under the
same reasoning previously given with regard to health care providers.
Therefore, the Secretary has determined that this rule would not have a
significant impact on the operations of a substantial number of small
rural hospitals.
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 IFC will impose unfunded
mandates in excess of $139 million on the private sector.
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 law, or otherwise has Federalism
implications. This IFC does not have a substantial direct effect on
State or local governments, preempt State law, or otherwise have a
Federalism implication.
A. Current State, Need for the EFT & ERA Operating Rule Set, and
General Impact of Implementation
1. EFT and Remittance Advice Usage
a. Billing and Insurance Related (BIR) Costs
As noted in the preamble, a significant portion of administrative
costs for physician practices and hospitals are billing and insurance-
related (BIR) costs. It is estimated that half of administrative costs
for physician practices are BIR costs \28\--or between 10 to 12 percent
of a physician practice's annual revenue.\29\ In contrast, the U.S.
retail sector spends about 2 percent of annual revenue on payment
processing.\30\
---------------------------------------------------------------------------
\28\ Kahn, J. G., Kronick, R., Kreger, M., & Gans, D.N. ``The
Cost of Health Insurance Administration in California: Estimates for
Insurers, Physicians, and Hospitals,'' Health Affairs: 24(6):1629-
1639, 2005.
\29\ Sakowski, J.A., Kahn, J.G., Kronick, R.G., Newman, J.M., &
Luft, H.S., ``Peering Into the Black Box: Billing and Insurance
Activities in a Medical Group,'' Health Affairs: 28(4):w544-w554,
2009.
\30\ ``Overhauling the U.S. Healthcare Payment System,''
conducted by McKinsey & Company, published in The McKinsey
Quarterly, June 2007.
---------------------------------------------------------------------------
Along with estimated increases in all health care administrative
costs, we can expect BIR costs to grow as well: In a study by the
Washington State Office of the Insurance Commissioner, BIR costs grew
between 1997 and 2005 at an average pace of 20 percent per year for
hospitals in Washington State and 10 percent per year for
physicians.\31\ In some cases, the increasing administrative cost of
processing claims threatens the survival of small and mid-size
physicians' offices.\32\
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\31\ ``Health Care Administrative Expense Analysis, Blue Ribbon
Commission Recommendation 6: Final Report 11/26/07;''
Washington State Office of the Insurance Commissioner.
\32\ Akscin J., Barr T., & Towle E.; ``Key Practice Indicators
in Office-Based Oncology Practices: 2007 Report on 2006 Data.'' J
Oncol Pract 3:200-203, 2007, and Mulvey, T.: ``The Time Has Come for
National Insurance Cards,'' J. Oncol Pract, 4:161, 2008.
---------------------------------------------------------------------------
[[Page 48023]]
BIR tasks include: Patient billing, insurance verification,
responding to patients' cost questions, contracting with health plans,
health care provider credentialing, processing payer requests for
additional information, authorizations (procedures, referrals), payment
for services provided outside the group, coding support, entering
charges, claims review and edits, filing claims, creating and mailing
patient statements, data entry and payment processing managements,
collecting payments and posting to patient accounts, depositing checks
and payments, account reconciliation, discrepancy research, follow-up,
write-offs, posting refunds, filing for shared risk-pool payments,
filing for contractual payments, and follow-up on denials, underpaid
and nonresponsive claims.\33\
---------------------------------------------------------------------------
\33\ Casalino, L.P., Nicholson, S., Gans, D.N., Hammons, T.,
Morra, D., Karrison, T., & Levinson, W., ``What Does It Cost
Physician Practices to Interact With Health Insurance Plans?''
Health Affairs, 28(4) (2009):w533-w543).
---------------------------------------------------------------------------
BIR tasks are costly, in part, because physician practice staff
must often manually customize transactions depending on the separate
requirements of multiple health plans, insurance companies,
clearinghouses, and TPAs with which the physician practice contracts.
Because of the manual nature of BIR tasks, the majority of BIR costs
are associated with staffing costs. Hospitals, physician offices and
other health care providers employ more billing and posting staff than
any other industry, according to the U.S. Bureau of Labor
Statistics.\34\
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\34\ http://data.bls.gov/cgi-bin/print.pl/oes/current/oes433021.htm.
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These costs include not just the labor costs of employing staff,
but also the opportunity cost of providers whose time would otherwise
be spent caring for patients. A 2009 study found that the average
physician spent three hours a week interacting with health plans--
nearly 3 weeks a year--while physicians' nursing and clerical staff
spent much more time.\35\ Even beyond the financial costs of manual BIR
tasks, interruptions in the work of physician practices to deal with
BIR tasks may interfere with patient care.
---------------------------------------------------------------------------
\35\ Casalino, et al., 2009.
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Twenty-eight percent of administrative staff time on BIR tasks in a
physician practice is spent simply receiving and posting payments,
follow-up, and payment reconciliation in accounts receivable.\36\ The
operating rules adopted in this IFC are designed specifically to
streamline the receipt of and the posting of payments, follow-up, and
payment reconciliation in accounts receivable in the provider office.
---------------------------------------------------------------------------
\36\ Sakowski et al., 2009.
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b. The Benefits of ERA and EFT
As described in the preamble, three standards have been adopted for
the health care electronic funds transfers (EFT) and remittance advice
transaction. In August 2000, the Secretary adopted the ASC X12 835 TR3
in the Transaction and Code Sets final rule as the standard for what
was then the health care payment and remittance advice transaction. The
Modifications final rule adopted a new version of the ASC X12 835 TR3.
In January 2012, the Secretary adopted two standards for the health
care EFT transmission in the Health Care EFT Standards IFC: The CCD +
Addenda for the Stage One payment initiation and the TRN Segment from
the ASC X12 835 TR3 as the standard data elements that are inputted
into the Addenda of the CCD. In the Health Care EFT Standards IFC, the
Secretary maintained the ASC X12 835 TR3 as the standard for the ERA
transmission.
There is some evidence that adoption of a standard for the ERA in
August 2000 returned benefits for the health care industry. The Medical
Group Management Association (MGMA) suggests that, for many physician
practices, when the EFT and ERA are sent instead of paper checks and
paper remittance advice, payment posting time has gone from six to
seven hours per day to 3 to 4 hours.\37\
---------------------------------------------------------------------------
\37\ March 12, 2012 letter from the Medical Group Management
Association (MGMA) to Secretary Sebelius as public comment on the
health care EFT standards IFC.
---------------------------------------------------------------------------
As an anecdote, a large health system, with 20 hospitals, 400
clinical locations, and a 1.6 million member health plan, found that
the adoption of the X12 835 standard required its staff to spend less
time programming individual file formats, significantly reduced
staffing expenses incurred in applying payments to billing systems, and
provided a better understanding of the root causes of denied payments.
For this health system, over 85 percent of payment data was applied
electronically to the health system's patient accounts as of early
2012.\38\
---------------------------------------------------------------------------
\38\ March 9, 2012 letter from UPMC, submitted to HHS as public
comment on the health care EFT standards IFC.
---------------------------------------------------------------------------
Similarly, the Veterans Health Administration (VHA) conducted a
study of cost avoidance after implementing an ``E-payment system'' in
2003 with the 1,675 health care ``payers'' from which it collect health
care claim payments. The new E-payment system implemented a number of
changes to how payers paid VHA claims, including: (1) Enabling the VHA
to accept ERA (X12 835 TR3) and health care EFT, and urging health
plans to transmit remittance advice and payment electronically; (2)
routing the payment to a single lockbox bank; and (3) routing the
health care EFT and ERA together for accounts receivable posting.\39\
---------------------------------------------------------------------------
\39\ ``E-Payment Cures for Healthcare,'' presentation, Barbara
C. Mayerick, Department of Veterans Affairs, April 26, 2010, https://admin.nacha.org/userfiles/File/Healthcare%20Resource/Epayments%20Cures%20for%20Healthcare.pdf and ``Comments from VHA
Health Care as Health Care Provider,'' testimony by Barbara Mayerick
for NCVHS December 3, 2010 hearing: http://hhs.granicus.com/MediaPlayer.php?publish_id=11.
---------------------------------------------------------------------------
In cases where health plans transmitted both the health care EFT
and the ERA electronically, the VHA found two substantial consequences
resulted from the new system. There was a: (1) 71 percent reduction in
the time between when a claim was submitted and when the payment was
received by the VHA, from 49 days down to 14 days; and (2) 64 percent
time savings for accounts receivable management and related tasks by
2010. The first result is especially important when applied to small
physician practices for which cash-on-hand is crucial for continuity of
operations. The second consequence resulted in $9.3 million in annual
cost avoidance for the VHA. In a clear example of how cost avoidance
can be of benefit, the 64 percent time saving resulted in the VHA being
able to handle 2.5 times the number of claims that were processed
before the E-payment system was implemented in 2003 without adding
additional staff.
However, in both examples, simply developing the capability to
transmit or receive EDI in the standard format was not enough to
realize the efficiencies of EFT and ERA. Both entities needed to create
new processes, assure there were specific data elements in the
transactions, coordinate with trading partners, and apply best
practices to transmitting and receiving the transactions.
2. Current and Projected EFT and ERA Usage
For this impact analysis, we make a base assumption that the usage
of EFT and ERA will increase over the next 10 years for a number of
reasons. We base this projection on many of the same reasons we gave
for projecting an increased usage of EFT in the RIA of the Health Care
EFT Standards IFC.
First, the number of total health care claim payments are expected
to increase
[[Page 48024]]
considerably due to the anticipated increase in the number of claims,
and usage of EFT is expected to rise with it. Health care 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.\40\
Moreover, the Affordable Care Act is expected to increase the number of
insured adults by 32 million in 2014,\41\ though this anticipated rise
in the number of health care claims may be countered somewhat by the
Affordable Care Act's initiatives to encourage the bundling of
payments.\42\ Not only will more health care claims mean more payments,
but the expected increase in claims will drive health care providers to
seek more automated BIR processes in order to handle them all.
---------------------------------------------------------------------------
\40\ ``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.
\41\ http://www.whitehouse.gov/healthreform/relief-for-americans-and-businesses.
\42\ http://www.whitehouse.gov/healthreform/timeline.
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Second, it is anticipated that the use of electronic payments is
expected to become more widespread and acceptable for U.S. businesses
and society at large. ACH payments increased 9.4 percent every year
between 2006 and 2009.\43\ Business-to-business transactions have
increasingly moved to EFT. E-commerce is expected to have a compound
average growth rate of 11 percent each year from 2009 to 2014.\44\
Growth of ACH payments is expected in sectors of the economy that have
remained largely untapped by electronic payments; for instance,
business-to-consumer transactions and person-to-person EFT
transactions.\45\
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\43\ ``The 2010 Federal Reserve Payments Study: Noncash Payment
Trends in the United States: 2006-2009,'' Research Sponsored by the
Federal Reserve System, April 2011, http://www.frbservices.org/files/communications/pdf/press/2010_payments_study.pdf.
\44\ Sucharita Mulpuru, P. Hult, ``U.S. Online Retail Forecast,
2009 to 2014: Online Retail Hangs Tough for 11% Growth in a
Challenging Economy,'' March, 2010, Forrester Research, http://www.forrester.com/rb/Research/us_online_retail_forecast,_2009_to_2014/q/id/56551/t/2.
\45\ Shy, Oz, ``Person-to-Person Electronic Funds Transfers:
Recent Developments and Policy Issues,'' Public Policy Discussion
Paper No. 10-1, Federal Reserve Bank of Boston, http://www.bostonfed.org/economic/ppdp/2010/ppdp1001.pdf.
---------------------------------------------------------------------------
Third, statutory and regulatory initiatives at the State and
Federal levels will drive or attract health care entities to increased
usage of EFT and ERA. On the Federal level, regulatory initiatives
include EFT requirements for Federal payments issued by the Department
of the Treasury, and implementation of provisions in the Affordable
Care Act, including the required use of EFT for health care claim
payments for Medicare mandated in section 1104(d) of the Affordable
Care Act, the health care EFT standards adopted in the Health Care EFT
Standards IFC, and the EFT & ERA Operating Rule Set adopted herein.
Other nonregulatory initiatives promote adoption of the EFT and ERA
over paper and manual-based transactions as well. For instance,
Medicare offers a free application to providers, Medicare Remit Easy
Print (MREP), that allows providers to view and print remittance advice
and special reports from the ERA.\46\
---------------------------------------------------------------------------
\46\ More information on the MREP: https://www.cms.gov/Research-Statistics-Data-and-Systems/CMS-Information-Technology/AccesstoDataApplication/MedicareRemitEasyPrint.html.
---------------------------------------------------------------------------
In order to calculate our assumed increase in ERA and EFT, we start
with an estimate of the current usage of EFT and ERA to establish a
baseline.
a. ERA Usage: 2013 Baseline
For the RIA of the April 17, 2012 proposed rule (77 FR 22950),
titled ``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 the
International Classification of Diseases, 10th Edition (ICD-10-CM and
ICD-10-PCS) Medical Code Sets,'' (hereinafter referred to as the HPID/
NPI/ICD-10 Delay Proposed Rule), we calculated the baseline usage of
ERA in 2013. In that proposed rule, we used the baseline and projected
an increase in the use of ERA across the industry from 2014 to 2022 in
order to arrive at a savings for health plans and providers
attributable to the implementation of a standard health plan identifier
(HPID). We apply the same calculation here to arrive at a baseline ERA
usage in 2013 and projected increase in use.
In the HPID/NPI/ICD-10 Delay Proposed Rule and in this IFC, we
calculate the 2013 estimates of ERA usage (illustrated in Table 6)
based on a number of sources and calculations:
We use national health expenditures \47\ and Medicare data
to arrive at the average dollar amount of a single batch payment for
health care claims, projected from 2013 through 2023.\48\
---------------------------------------------------------------------------
\47\ National Health Expenditure Projections 2009-2019 (CMS),
http://www.cms.gov/NationalHealthExpendData/25_NHE_Fact_Sheet.asp.
\48\ CMS Electronic Data Interchange (EDI) Performance
Statistics (http://www.cms.gov/EDIPerformanceStatistics/) and CMS
CROWD data.
---------------------------------------------------------------------------
We used the ratio of remittance advice to single batch
payment according to Medicare data and applied that to industry
payments and remittance advice at large.\49\
---------------------------------------------------------------------------
\49\ 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.
---------------------------------------------------------------------------
The percentage estimate of electronic remittance advice as
a proportion of total remittance advice (electronic and paper) industry
wide was calculated using a weighted average of Medicare data
(electronic remittance advice as a percentage of total remittance
advice), VA data,\50\ and industry studies \51\ on ERA usage.
---------------------------------------------------------------------------
\50\ 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.
\51\ The National Progress Report on Healthcare Efficiency,
2010, Produced by the U.S. Healthcare Efficiency Index.
---------------------------------------------------------------------------
b. EFT Usage: 2013 Baseline
We calculate the baseline 2013 estimates of EFT usage with the same
calculations we used in the Health Care EFT Standards IFC. We summarize
the assumptions in calculating 2013 usage of EFT by industry and
government payers as follows:
We considered numerous health care and other industry
studies, but all report that EFT is generally used for less than 40
percent of all health care claim payments to providers. According to
the ``2010 AFP Electronic Payments: Report of Survey Results,''
produced by the Association for Financial Professionals and
underwritten by J.P. Morgan,\52\ the typical U.S. business makes 43
percent of its business-to-business payments by EFT. There was general
agreement among industry representatives who testified at the December
2010 NCVHS hearing that EFT usage in the health care industry was
considerably less than other industries (that is, less than 43
percent). Based on data supplied by Emdeon, a national health care
clearinghouse, the National Progress Report on Healthcare Efficiency,
2010 (sponsored by Emdeon) reports that
[[Page 48025]]
only 10 percent of all health care claim payments are conducted
electronically,\53\ though other anecdotal evidence suggests that
estimate may be low. PNC Bank representatives testified at the December
3, 2010 NCVHS hearing that 30 percent of health care claim payments it
initiated on behalf of health industry clients in September 2010 were
EFT payments.\54\
---------------------------------------------------------------------------
\52\ ``2010 AFP Electronic Payments: Report of Survey Results,''
Association for Financial Professionals, underwritten by J.P.
Morgan, November, 2011.
\53\ The National Progress Report on Healthcare Efficiency,
2010, Produced by the U.S. Healthcare Efficiency Index.
\54\ http://www.ncvhs.hhs.gov.
---------------------------------------------------------------------------
Based on this data and research, we estimate that approximately 10
to 20 percent of commercial health plan payments are made via EFT. This
range reflects our uncertainty. For simplicity sake, we will use the
average, 15 percent, as the EFT usage rate for commercial health plans.
Seventy percent of Medicare payments to health care
providers are made via EFT, and Medicare EFT payments to health care
providers account for 20 percent of all industry health care claim
payments.\55\
---------------------------------------------------------------------------
\55\ ``Medicare Contractor Transaction Report, MAC Part A
Electronic Funds Transfer (EFT) Data by Year (2007-2011).''
---------------------------------------------------------------------------
Knowing the percentage of payments made by EFT for
Medicare, we calculated a weighted average of usage by the entire
health care industry as making up approximately 32 percent of all
health care claim payments in 2010.
The baseline estimates on EFT and ERA usage are not precise, and we
welcome comments on our assumptions and calculations.
We have noted previously in this IFC the reasons why we predict
that electronic transactions, overall, will increase. These reasons
include a substantial increase in the number of claims, a broader
acceptance of the use of electronic transactions by U.S. businesses and
society at large, and State and Federal mandates and initiatives
requiring or promoting electronic transactions of health information.
Due to these reasons, we foresee a 20 percent increase in ERA usage
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 ERA
as a proportion of all remittance advice increases at a slower rate,
averaging less than 5 percentage points a year over 11 years.
Based on the reasons given previously, we assume that EFT usage
will increase by 52 percentage points, as a percentage of total
payments, across the whole industry, from 33 percent in 2013 to 84
percent in 2023 (Table 6).
Table 6 illustrates the predicted increase in usage of EFT and ERA
by health plan category, driven by the increased number of health care
claims, business acceptance, and regulatory initiatives. 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 6--EFT and ERA Usage for Medicare, Medicaid and Other Government Health Plans, and Commercial Health Plans
Between 2013 and 2023
----------------------------------------------------------------------------------------------------------------
EFT Usage as a ERA Usage as a EFT Usage as a ERA Usage as a
percentage of percentage of all percentage of percentage of all
Payment source payments per remittance advice payments per remittance advice
payment source in per payment payment source in per payment
2013 source in 2013 2023 source in 2023
----------------------------------------------------------------------------------------------------------------
Medicare............................ 76% 65% 98% 90%
Medicaid, CHIP, VHA, and Other 18 37 79 80
Federal, State, and Local
Governmental Payers................
Commercial Health Plans............. 15 27 79 75
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Entire Industry................. 33 * 35 * 84 * 82 *
----------------------------------------------------------------------------------------------------------------
* Weighted average, based on proportion of payments per category.
c. Overall Assumption for Industry Savings in RIA: A Projected Increase
in EFT and ERA Attributable to the EFT & ERA Operating Rule Set
We have assumed that, in addition to the causes listed previously,
some of the anticipated increase in EFT and ERA will be attributable to
the implementation of the EFT & ERA Operating Rule Set adopted herein
because these operating rules will make health care claim payments via
EFT and the transmission of ERA more cost effective, thus incentivizing
increased use of EFT and ERA.
We have applied the same basic assumption--that improvements to the
standards and transactions will incentivize more providers and health
plans to use EDI--in the RIA of other Administrative Simplification
regulations. For instance, the Modifications Proposed Rule, the
Eligibility and Claim Status Operating Rules IFC, the HPID/NPI/ICD-10
Delay Proposed Rule, and the Health Care EFT Standards IFC all
suggested that, with improved standards and transactions, more
providers and health plans will move from manual and paper-based
transactions to EDI.
Anecdotally, representatives of the health care industry agree with
this assumption. For instance, during public comment for the Health
Care EFT Standards IFC, a large provider association suggested that the
adopted standard ``should increase the number of providers willing to
take EFT as the preferred method of receiving payments.'' \56\
---------------------------------------------------------------------------
\56\ March 7, 2012 Letter to Marilyn Taverner for Public Comment
from American Hospital Association, ``RE: CMS Administrative
Simplification: Adoption of Standards for Health Care Electronic
Funds Transfers (EFTs) and Remittance Advice; File Code CMS-0024-
IFC.''
---------------------------------------------------------------------------
The RIA in this interim final rule with comment period illustrates
that savings to physician practices, hospitals and commercial and
government health plans will be derived through two avenues: (1) Time/
staff savings realized by the adoption of operating rules that
streamline provider payment processes; and (2) material savings (paper,
printing, postage) derived from an overall increased use in EFT and ERA
over paper and manual remittance advice. The time/staff savings
incentivizes the increase usage in EFT
[[Page 48026]]
and ERA by industry and thus results in the material savings.
B. Alternatives Considered
1. Do Not Adopt the EFT & ERA Operating Rule Set at This Time
We considered delaying the adoption of the EFT & ERA Operating Rule
Set. There are a number of advantages to delaying the EFT & ERA
Operating Rule Set, including the following:
A delay would give the industry more time to develop more
comprehensive EFT and ERA operating rules. The EFT & ERA Operating Rule
Set adopted herein were developed and vetted over a 6-month period in
2011. Given a longer period to develop operating rules, we might expect
more comprehensive rules. A longer period to develop operating rules
might also allow time for a more comprehensive analysis by industry of
the costs and benefits of specific operating rules.
A delay would give the industry more time to implement the
EFT & ERA Operating Rule Set. Over the next few years, the health care
industry as a whole is working to comply with a number of different
Federal and State laws and regulations. Delaying implementation of
operating rules would allow more time for the health care industry to
prepare for the compliance dates of these Federal and State laws and
regulations.
However, a delay in adopting operating rules would not be an
appropriate approach for a number of reasons:
The adoption and compliance dates for the health care EFT
and remittance advice transaction operating rules is mandated by the
Affordable Care Act.
By implementing these operating rules, we believe the
health care industry will make large strides toward automating
reassociation, yielding a fairly immediate return on investment.
The EFT & ERA Operating Rule Set is not dependent on or
directly impacted by other Federal regulations or their adoption and
compliance dates.
The expected positive return on investment represents more
benefit than burden to the industry.
2. Adopt a Different Set of EFT and ERA Operating Rules
We considered adopting a different set of EFT and ERA operating
rules. Other organizations have worked on some of the problem areas of
the health care EFT and remittance advice transaction, although they
are not labeled as operating rules. For instance, the state of
Minnesota has developed and implemented the ``Minnesota Uniform
Companion Guide for the Implementation of the Health Care Claim Payment
and Remittance Advice.'' \57\ The Minnesota Uniform Companion Guide
includes requirements that are analogous in scope to operating rules;
for instance, it includes data content requirements that further
clarify the implementation specifications in the X12 835 TR3 and a
crosswalk of CARCs, CAGCs, and RARCs that establishes limits to the
combinations of those codes that can be used.
---------------------------------------------------------------------------
\57\ ``Minnesota Uniform Companion Guide for the Implementation
of the Health Care Claim Payment and Remittance Advice Electronic
Transaction (ANSI ASC X12 835),'' Minnesota Department of Health,
Division of Health Policy, Center for Health Care Purchasing
Improvement, Prepared in Consultation with Minnesota Administrative
Uniformity Committee, October, 2009, Version 4.0.
---------------------------------------------------------------------------
Nevertheless, we have adopted the operating rules as developed by
CAQH CORE for a number of reasons:
The NCVHS recommended CAQH CORE as the authoring entity of
the EFT and ERA operating rules and the Draft EFT & ERA Operating Rule
Set that CORE developed for adoption by the Secretary. The NCVHS based
both of these recommendations on requirements established in section
1104 (b)(2)(C) of the Affordable Care Act that they believed the
authoring entity CAQH CORE met, including--
(A) The entity focuses its mission on administrative
simplification.
(B) The entity demonstrates a multi-stakeholder and consensus-
based process for development of operating rules * * *;
(C) The entity has a public set of guiding principles that
ensure the operating rules and process are open and transparent, and
support nondiscrimination and conflict of interest policies that
demonstrate a commitment to open, fair, and nondiscriminatory
practices.
(D) The entity builds on the transaction standards issued under
Health Insurance Portability and Accountability Act of 1996.
(E) The entity allows for public review and updates of the
operating rules.
The CAQH CORE had robust participation by health care
entities in the development of its operating rules in terms of types of
health care entities, geographic location of the entities, and numbers
of entities represented.
The CAQH CORE considered the work done by many
organizations on the health care electronic funds transfer (EFT) and
remittance advice transaction that fit the scope of operating rules,
including work by WEDI, ASC X12, and Minnesota.\58\ In some cases, the
operating rules reflect some of this work.
---------------------------------------------------------------------------
\58\ ``Committee on Operating Rules for Information Exchange
(CORE) ACA Operating Rules Status for AMA Federation Staff: EFT and
ERA,'' presentation April, 2011 (http://www.caqh.org/Audiocast/AMA/April2011/ERA-1slide.pdf).
---------------------------------------------------------------------------
3. Adopt Certain EFT & ERA Operating Rules of Those Recommended by
NCVHS
While there was some consideration given to adopting some but not
all of the EFT & ERA Operating Rule Set developed by CAQH CORE, this
idea was abandoned (with the exception of the decision not to adopt
operating rules related to acknowledgements). First, as reflected in
our RIA, all of the rules in the EFT & ERA Operating Rule Set result in
net savings. Second, as noted in the preamble, the EFT & ERA Operating
Rule Set was developed with representation from over 80 health care
entities. These representatives developed the operating rules with the
understanding that the rules would likely become required law on
January 1, 2014. That is, as industry developed these rules, their
decision making process was guided by what they believed was most
likely to be ultimately implemented by the industry. Many votes, both
formal and straw votes, were taken at every step in the development of
the rules in order to gauge industry's acceptance of the operating
rules as they were written. Given the net savings and the prudence of
the entities represented, we think it is appropriate to adopt the EFT &
ERA Operating Rule Set nearly in its entirety.
C. Impacted Entities
All HIPAA covered entities may be affected by the EFT & ERA
Operating Rules adopted in this IFC. 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 impacted by the
EFT & ERA Operating Rules, along with the sources for that data:
[[Page 48027]]
Table 7--Type and Number of Affected Entities
------------------------------------------------------------------------
Type Number Source
------------------------------------------------------------------------
Health Care Providers--Offices 234,222 Health Insurance Reform;
of Physicians (includes Modifications to the Health
offices of mental health Insurance Portability and
specialists). Accountability Act (HIPAA)
Electronic Transaction
Standards; Proposed Rule
http://edocket.access.gpo.gov/2008/pdf/E8-19296.pdf (based on
the AMA statistics).
Health Care Providers-- 5,764 Health Insurance Reform;
Hospitals. 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 66,464 The number of providers was
and Residential Care obtained from the 2007
Facilities not associated with Economic Census Data--
a hospital. Health Care and Social
Assistance (sector 62)
using the number of
establishments: http://factfinder.census.gov/servlet/IBQTable?_bm=y&-ds_name=EC0762A1&-geo_id=01000US&-dataitem=* and
http://factfinder.census.gov/servlet/IBQTable?_bm=y&-fds_name=EC0700A1&-_skip=100&-ds_name=EC0762SLLS1&-NAICS2007=62&-_lang=en.
~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 The number of providers was
Offices of dentists, obtained from the 2007
chiropractors, optometrists, Economic Census Data--
mental health practitioners, Health Care and Social
speech and physical Assistance (sector 62)
therapists, podiatrists, using the number of
outpatient care centers, establishments: http://
medical and diagnostic factfinder.census.gov/
laboratories, home health care servlet/IBQTable?--bm=y&-
services, and other ambulatory ds--name=EC0762A1&-geo--
health care services, resale id=01000US&-dataitem=* and
of health care and social http://
assistance merchandise factfinder.census.gov/
(durable medical equipment). servlet/IBQTable?--bm=y&-
fds--name=EC0700A1&---
skip=100&-ds--
name=EC0762SLLS1&-
NAICS2007=62&---lang=en.
~NAICS code 621: All
ambulatory health care
services (excluding offices
of physicians) = 313,339
(547,561 total--234,222
offices of physicians).
~NAICS code 62-39600
(product code): Durable
medical equipment = 70,853.
Health Care Providers-- 18,000 Health Insurance Reform;
Independent Pharmacies. 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--Pharmacy 200 Health Insurance Reform;
chains. 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 Plans--Commercial: 1,827 This number represents the
Impacted commercial health most recent number as
plans considered in this RIA referenced in ``Patient
are health insurance issuers; Protection and Affordable
that is, insurance companies, Care Act; Standards Related
services, or organizations, to Reinsurance, Risk
including HMOs, that are Corridors, and Risk
required to be licensed to Adjustment, 2011 Federal
engage in the business of Register (Vol. 76), July,
insurance in a State. 2011,'' from
www.healthcare.gov.
Health Plans--Government....... 60 Represents the 56 Medicaid
programs, Medicare, the
Veteran's Administration
(VHA), Indian Health
Service (IHS), and TRICARE.
Health Plans--All.............. 1,887 Insurance issuers (n =
1,827) + Government
agencies (N = 60).
Clearinghouses and Vendors..... 162 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.
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.
------------------------------------------------------------------------
D. Scope and Methodology of the Regulatory Impact Analysis
This impact analysis analyzes the costs and benefits to be realized
by implementation of the EFT & ERA Operating Rule Set.
While we assume that adoption of the EFT & ERA Operating Rule Set
may impact a broad range of health care providers, as illustrated in
Table 7, we will only be examining the costs and benefits of the
operating rules on two types of providers: hospitals and physician
practices. There are two reasons for narrowing the scope of this
analysis to only two categories of health care providers: (1) We have
very little data on the adoption rate or usage of the health care
electronic funds transfers (EFT) and remittance advice transaction
among pharmacies, 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; \59\ and (2) we assume that hospitals
and physician practices, which receive the majority of health care
claim payments, stand to gain the greatest benefits.
---------------------------------------------------------------------------
\59\ Kahn, James, ``Excess Billing and Insurance-Related
Administrative Costs,'' in The Healthcare Imperative; Lowering Costs
and Improving Outcomes: Workshop Series Summary, edited by Yong,
P.L., Saunders, R.S., & Olsen, L.A., The National Academies Press:
2010.
---------------------------------------------------------------------------
We do not analyze the impact on nursing and residential care
facilities,
[[Page 48028]]
dentists or suppliers of durable medical equipment. Also, based on the
information we have regarding EFT and ERA usage for pharmacies, we do
not anticipate that there will be a significant benefit, though there
may be some costs.
We welcome comments from industry and the public as to our
assumptions.
We include health care clearinghouses and vendors as impacted
entities in Table 7. However, we did not calculate costs and benefits
in our impact analysis for these entities because we assume that any
associated costs and benefits will be passed on, and included in the
costs and benefits we apply, to health plans.
Although we acknowledge the impact to self-funded health plans and
non-Federal government plans, we did not include the costs or benefits
of such ``health plans'' or other employers who might be defined as
``health plans'' in our analysis due to the lack of data with regard to
these types of health plans. Only a very small percentage of employers
with self-insured health plans conduct their own health care
transactions. The majority employ TPAs. For our analysis, we use the
number of TPAs (~750) estimated in the August 22, 2011 proposed rule
(76 FR 52455) titled ``Summary of Benefits and Coverage and the Uniform
Glossary.'' Self-funded and non-Federal government health plans meet
the definition of covered entities under HIPAA, while TPAs, in general,
do not. However, TPAs employed by self-funded and non-federal
government health plans will ultimately be the party that implements
the health care EFT standards. Ostensibly, these TPAs will pass on
their costs and benefits to the self-funded and non-Federal government
health plans that they serve. In order to reflect the costs to self-
insured plans, we will estimate the costs and benefits to TPAs in this
analysis, and assume that TPAs will be impacted similarly to the 1,827
commercial health insurance issuers indicated in Table 7. In this RIA,
we do not separate the analysis of the costs and benefits of TPAs and
commercial health insurers, and, hereinafter, we refer to both
collectively as ``commercial health plans'' for purposes of this
analysis.
We use the total number of health insurance issuers as the number
of commercial health plans that will be affected by this IFC, and will
use this number, plus the number of TPAs 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 of ``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.
We estimate that, because of the time savings that will be
quantified in the analysis of benefits, patients will benefit
downstream from a health care delivery system that spends less time on
administrative tasks. However, we do not quantify the benefits to
patients.
Table 8 summarizes the sectors that will be analyzed in the impact
analysis.
Table 8--Entities Analyzed in the Regulatory Impact Analysis
------------------------------------------------------------------------
Number of
Entities entities
------------------------------------------------------------------------
Physician Practices (includes offices of mental health 234,222
specialists)................................................
Hospitals.................................................... 5,764
Commercial Health Plans (includes TPAs and health insurance 2,577
issuers)....................................................
Medicare..................................................... 1
Other Government Health Plans (Medicaid, VHA, TRICARE, IHS).. 60
------------------------------------------------------------------------
In general, the high and low range approach used in this impact
analysis illustrates both the range of probable outcomes, based on our
analysis, as well as the uncertainty germane to a mandated application
of a operating rules on an industry with highly complex business needs
and processes.
E. Costs
We assume that the costs of implementing the EFT & ERA Operating
Rule Set will fall mostly on health plans, and that providers as a
whole will garner most of the benefits.
The EFT & ERA Operating Rule Set requires health plans to implement
best business practices that will make it less difficult for providers
to: enroll in EFT and ERA, connect with health plans, and reassociate
and reconcile the EFT and the ERA data.
A provider is not required to accept EFT under this IFC for health
care claim payments, nor is a provider required to accept ERA. If a
provider decides or has decided to accept EFT or ERA, there are no
requirements within the EFT & ERA Operating Rule Set that would result
in substantial costs for providers. However, in our COI and in the
summary tables of the RIA, we have calculated a provider cost
associated with the initial enrollment in EFT and ERA because our
projection of savings for the health care industry is dependent upon
this enrollment.
There is a requirement that a provider ``must proactively contact
its financial institution to arrange for the delivery of the CORE-
required Minimum CCD+ Data Elements necessary for successful
reassociation of the EFT payment with the ERA remittance advice * * *''
(Phase III CORE 370 EFT & ERA Reassociation (CCD+835) Rule, Requirement
4.1) We have not attributed a provider cost to this requirement, as it
is dependent on the relationship a provider has with its bank, the
bank's policies and customer service, and other variable factors. The
specific requirement can be met by simply sending an email, but the
intent of the rule, we assume, is for a provider to work with its bank
to assure that the data elements are delivered, and meeting that intent
may take more time. We assume that most providers maintain routine
communication with their banks, and that this discussion can take place
within one of those routine communications.
Aside from specific requirements of the EFT & ERA Operating Rule
Set, the efficiencies that are possible through a provider's use of EFT
and ERA are dependent upon the sophistication of a provider's practice
management software (PMS) system used for the day-to-day management of
a provider's office. There is a wide range of sophistication among
providers' PMS systems and accounts receivable processes. An underlying
assumption in this RIA is that even providers with the most elementary
PMS systems will garner savings when these operating rules are
implemented because the sophistication of PMS systems is not a factor
in the cost and savings calculations.
For example, these operating rules will produce time savings for
providers in the EFT & ERA enrollment process, and the sophistication
of a provider's PMS system is not a factor in the enrollment process.
These operating rules also include data content requirements that will
make it easier for a provider to reassociate the EFT with the ERA data
and reconcile accounts through the use of RARCs and CARCs. We have
assumed that these savings
[[Page 48029]]
will occur even if the reassociation and reconciliation processes
remain manual processes because the operating rule requirements address
data necessary for streamlining both automated and manual processes.
Finally, these operating rules include connectivity requirements for
health plans that will give providers a choice on how to connect to
their health plan. The sophistication of the PMS system may be a factor
in a provider's decision on which network to choose; however, the
connectivity requirements allow more flexibility with regard to
choosing a network that works well with PMS system, not less.
We believe the implementation of the EFT & ERA Operating Rule Set
provides an opportunity for substantial savings beyond what is
estimated in this RIA if a provider has a sophisticated PMS that is
able to automate many of the payment and reconciliation processes. The
amount of investment in PMS systems and the amount of time and
resources spent on business processes is dependent upon the size and
complexity of the provider and the provider's priorities with regard to
resources and budget. Because there are no substantive requirements for
providers in this IFC, and because the cost savings for providers are
not dependent on the level of sophistication of the provider PMS
system, an analysis of such factors is not calculated in this RIA.
We have divided the costs of implementation of the EFT & ERA
Operating Rule Set into four areas. The majority of these costs are
one-time costs. The four areas of costs parallel the four areas of
administrative tasks in which the cost savings will be found when the
EFT & ERA Operating Rule Set is implemented. The four areas of costs
are associated with:
Implementing the operating rules regarding provider
enrollment in EFT and ERA.
Implementing connectivity requirements.
The data requirements for health plans for providers to
successfully reassociate the EFT data with the ERA data.
The data requirements for health plans associated with
posting payment adjustments and claim denials.
We present each of the areas of costs by detailing the operating
rules that apply to them and the assumptions we use for each cost.
1. The Cost of Implementing the Operating Rules With Regard to Provider
Enrollment in EFT and ERA
Requirements 4.2 and 4.3 of both the Phase III CORE 380 EFT
Enrollment Data Rule and the Phase III CORE 382 ERA Enrollment Data
Rule require health plans to change the forms they currently use for
enrolling providers in EFT and ERA, as these rules require a maximum
set of standard data elements, a controlled vocabulary, and a standard
format and flow respectively. We assume that most, if not all, health
plans will have to alter their current enrollment forms for EFT and ERA
in order to comply with these requirements.
We estimate that a technical writer, at an estimated hourly salary
rate of approximately $32,\60\ would make these revisions. As noted in
the Collection of Information section of this IFC, we assume that, for
each of the two forms, it will take a technical writer 16 hours to
reformat and alter the form according to the requirements in the Phase
III CORE EFT 380 Enrollment Data Rule and Phase III CORE ERA 382
Enrollment Data Rule (2 forms * 16 hours = 32 hours) resulting in a
cost of approximately $1,024. This includes the time it takes to
incorporate revisions that may result from the approval process.
---------------------------------------------------------------------------
\60\ Mean hourly wage for Technical Writers (27-3042), ``May
2011 National Occupational Employment and Wage Estimates, United
States,'' Bureau of Labor Statistics, United States Department of
Labor, http://www.bls.gov/oes/current/oes_nat.htm#43-0000.
---------------------------------------------------------------------------
We assume that the two forms will have to get a number of levels of
approval before they can be used, so we have added 4 hours of time
priced at the hourly salary rate of approximately $55,\61\ the mean
hourly wage of general and operations managers, for a total cost of
$1,244. We multiply this cost to health plans by the number of health
plans and third party administrators (2,577) for a total cost to the
industry of approximately $3.2 million.
---------------------------------------------------------------------------
\61\ Mean hourly wage for General and Operations Managers (11-
1021), ``May 2011 National Occupational Employment and Wage
Estimates, United States,'' Bureau of Labor Statistics, United
States Department of Labor, http://www.bls.gov/oes/current/oes_nat.htm#43-0000.
---------------------------------------------------------------------------
We will include that cost in our summary of costs in Table 13.
Please refer to the Collection of Information section for more details
on our assumptions with regard to that calculation.
Requirement 4.4 of both the Phase III CORE 380 EFT Enrollment Data
Rule and the Phase III CORE 382 ERA Enrollment Data Rule requires
health plans to offer electronic enrollment for EFT and ERA. (It does
not require health plans to discontinue manual or paper-based methods
of enrollment, but that electronic EFT enrollment be made available by
a health plan if requested by a trading partner.) We have made a number
of assumptions in order to calculate the cost of setting up an
electronic enrollment form for both the EFT and ERA:
We assume that 60 to 80 percent of health plans do not
currently have electronic enrollment for both EFT and ERA and will be
required to offer it to providers. This assumption is based on an
informal review of payers, including Medicare, a Medicaid health plan,
four commercial health plans, and one vendor that found that only two
of the seven offered electronic forms (or 30 percent).\62\ As the
survey has little statistical validity, the range of 60 to 80 percent
reflects the uncertainty in this estimate.
---------------------------------------------------------------------------
\62\ ``Healthcare EFT Enrollment: Stakeholder Meeting; Pre-read
material, March 25, 2011,'' Research sponsored by CAQH, NACHA--The
Electronic Payments Association, The Clearinghouse, pg 14.
---------------------------------------------------------------------------
For all IT infrastructure estimates in this RIA, which
includes software updates, we have based the costs on a wide range of
projected ``person-months'' required at each phase of the
implementation. It is important to view these estimates as an attempt
to furnish a realistic context rather than as precise budgetary
predictions. In this estimate and in the other IT infrastructure
estimates, we have tried to detail specific steps, periods of time, and
personnel that we assume would be necessary for IT infrastructure
alterations. We welcome comments that might speak to specific
assumptions in our calculations.
We assume that creating on-line forms is a comparatively
simple technological upgrade. Based on cost estimates for large
institutions such as universities and financial institutions, the
software cost for developing an online form that can interact with
existing databases and systems is approximately $4,500 a year.\63\ This
cost is for infrastructure, and not for the more complex task of
actually integrating an online form with existing systems so that
enrollment is truly automated. For the task of integrating an online
form with existing systems, we estimate a cost of $10,000 to $50,000,
reflecting a range of costs dependent on the complexity of a health
plans' systems. The $10,000 represents 2 weeks full time work by two
computer
[[Page 48030]]
programmers and one computer systems analyst. The $50,000 represents 2
months full time work by two computer programmers, one computer system
analyst, and one administrative services manager.\64\
---------------------------------------------------------------------------
\63\ Based on case studies from PerfectForms,
www.perfectforms.com.
\64\ Mean hourly wages, ``May 2011 National Occupational
Employment and Wage Estimates, United States, '' Bureau of Labor
Statistics, United States Department of Labor, http://www.bls.gov/oes/current/oes_nat.htm#43-0000.
---------------------------------------------------------------------------
However, we believe this range to be high, because an electronic
enrollment will not be any more expensive to integrate into systems
than the paper forms that are currently being used. We welcome comments
on these estimates.
As the range of costs could encompass both large and small
health plans, we have combined the government health plans, including
Medicare, with the commercial health plans for the total number of
health plans. The low and high totals illustrated in Table 9 reflect
the cost for all health plans, government, and commercial.
With these assumptions, the cost of creating on-line forms for EFT
and ERA enrollment are calculated in Table 9.
Table 9--The Cost of Creating On-Line Enrollment Forms for EFT and ERA Enrollment
--------------------------------------------------------------------------------------------------------------------------------------------------------
LOW one- HIGH one- LOW number HIGH number
Ongoing cost time cost time cost of health of health
of for for plans plans LOW total HIGH total
on[dash]line business business without without cost (in cost (in
enrollment process process electronic electronic millions) millions)
forms changes changes forms (60%) forms (80%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2014........................................................ $4,500 $10,000 $50,000 1,582 2,110 $22.9 $115
2015........................................................ 4,500 ........... ........... 1,582 2,110 7.1 9.5
2016........................................................ 4,500 ........... ........... 1,582 2,110 7.1 9.5
2017........................................................ 4,500 ........... ........... 1,582 2,110 7.1 9.5
2018........................................................ 4,500 ........... ........... 1,582 2,110 7.1 9.5
2019........................................................ 4,500 ........... ........... 1,582 2,110 7.1 9.5
2020........................................................ 4,500 ........... ........... 1,582 2,110 7.1 9.5
2021........................................................ 4,500 ........... ........... 1,582 2,110 7.1 9.5
2022........................................................ 4,500 ........... ........... 1,582 2,110 7.1 9.5
2023........................................................ 4,500 ........... ........... 1,582 2,110 7.1 9.5
Total................................................... ............ ........... ........... ........... ........... 87 200
--------------------------------------------------------------------------------------------------------------------------------------------------------
2. The Cost of Implementing Infrastructure Rule Requirements
Requirement 4.1 of the Phase III CORE 350 Health Care Claim
Payment/Advice (835) Infrastructure Rule requires health plans to offer
connectivity over the internet, with specific rules regarding usage
patterns for batch transactions, the exchange of security identifiers,
and communications-level errors and acknowledgements. There will be
costs associated with developing this connectivity in order to have the
ability to offer it to trading partners, though we assume that much of
the development of this connectivity will have already occurred in
order to comply with the Eligibility and Claim Status Operating Rules
IFC.
The Eligibility and Claim Status Operating Rules IFC adopted Phase
I and Phase II Operating Rules (with the exception of operating rules
from those phases that refer to acknowledgments or CORE certification).
Requirement 4.1 of the Phase III CORE 350 Health Care Claim Payment/
Advice (835) Infrastructure Rule requires health plans to offer the
same infrastructure, with accompanying security, usage patterns, and
errors and acknowledgments that are required under Phase I and Phase II
CORE Operating Rules.
Therefore, though there will be some costs associated with offering
the same connectivity as is used for the eligibility for a health plan
transaction and the claim status transaction, the costs will be minimal
in comparison to the costs associated with developing this
infrastructure from the ground up.
We have no concrete costs associated with offering this
connectivity for transmission of the ERA. Therefore, we have made the
assumption that it will be 10 to 20 percent of the cost to establish
the connectivity for Phase I and Phase II Operating Rules as estimated
in the Eligibility and Claim Status Operating Rules IFC (Table 10,
Columns IV and V). We adjusted the costs to account for the smaller
number of health plans that we have estimated in this IFC in contrast
to the number that was used in the Eligibility and Claim Status
Operating Rules IFC (Table 10, Column VI). We have calculated these
costs in Table 10. The low cost is calculated by multiplying the low
cost from the Eligibility and Claim Status Operating Rules IFC times
the low adjustment, 10 percent (Table 10, Column IV), times the percent
adjustment to account for a lower number of health plans than was used
in the Eligibility and Claim Status Operating Rules IFC. The high cost
is calculated using the same factors. We welcome comments on this
assumption.
[[Page 48031]]
Table 10--Costs to Health Plans To Implement Connectivity Requirments of the EFT and ERA Operating Rules in Millions
--------------------------------------------------------------------------------------------------------------------------------------------------------
I II III IV V VI VII VIII
--------------------------------------------------------------------------------------------------------------------------------------------------------
Percent
adjustment
Low costs from High cost from to account
eligibility and eligibility and for smaller
claim status claim status Low percent High number of
operating rules operating rules adjustment percent health plan Low cost High cost
(implementation (implementation adjustment than
+ transition + transition operating
costs) costs) rules
estimate
--------------------------------------------------------------------------------------------------------------------------------------------------------
2014................................................. $1742 $3484 10% 20% 58% $100.34 $401.36
2015................................................. 410 820 10 20 58 23.62 94.41
2016................................................. 410 820 10 20 58 23.62 94.41
--------------------------------------------------------------------------------------------------
Total............................................ ............... ............... ........... ........... ........... 147.57 590.17
--------------------------------------------------------------------------------------------------------------------------------------------------------
Requirement 4.4 requires health plans to conform to form and format
standards for their companion guides for the ERA. In the Collection of
Information section of this IFC, we have estimated the burden in hours
for health plans to change their current companion guides so that they
meet the flow and format requirements of the operating rules. We stated
in that section that we used the same calculation that was used in the
Eligibility and Claim Status Operating Rules IFC to arrive at an
estimate of the time that was required. As we noted in that section,
the total cost calculated in the Eligibility and Claim Status Operating
Rules IFC applied to the transition to the template for two
transactions, while we are only considering one here: The health care
electronic funds transfers (EFT) and remittance advice transaction.
Therefore, for purposes of this IFC, in order to calculate the cost to
transition companion guides to the CORE Master Companion Guide
Template, we have taken the total cost as estimated in the COI section
of the Eligibility and Claim Status Operating Rules IFC and divided it
in two, to result in approximately $1.5 million. We have adjusted for a
slight rise in the salary of a technical writer that has occurred since
the calculations for the Eligibility and Claim Status Operating Rules
IFC were made (2011 mean hourly wage: $32).\65\
---------------------------------------------------------------------------
\65\ Mean hourly wage for Technical Writers (27-3042), ``May
2011 National Occupational Employment and Wage Estimates, United
States,'' Bureau of Labor Statistics, United States Department of
Labor, http://www.bls.gov/oes/current/oes_nat.htm#43-0000.
---------------------------------------------------------------------------
We will include that cost in our summary of costs in Table 13.
Please refer to the Collection of Information section of this IFC for
details on our assumptions with regard to that calculation.
3. The Cost of Meeting Data Requirements for Successful Reassociation
of the EFT Data With the ERA Data
Although Phase III CORE 370 EFT & ERA Reassociation (CCD+/835)
Rule, Requirement 4.1, does not explicitly require health plans to
include five (plus one situational) defined data elements in the CCD+,
it does define CORE-required Minimum Data Elements from the CCD+ that a
provider must access. This rule builds on the standards adopted in the
Health Care EFT Standards IFC which included the standard for the data
content of the addenda record for the CCD+, the TRN Segment from the
X12 835 TR3. The standard for the data content of the addenda record
for the CCD+ includes three of the data elements required in this
operating rule, plus the situational data element.
The Health Care EFT Standards IFC (77 FR 1581) accounted for the
costs of including these 3 data elements, plus the situational data
element, noting that ``[t]he high range of costs takes into
consideration the possible difficulties associated with coordinating
the health plan's payment or treasury systems so that the TRN Segment
is duplicated in both the ERA and the health care EFT.''
Requirement 4.1 of the Phase III CORE 370 EFT & ERA Reassociation
(CCD+/835) Rule requires two data elements in addition to the three
data elements required by the Health Care EFT Standards IFC that must
be inputted in the CCD+. We assume the cost of inputting these two data
elements is insignificant: These data elements include the ``Effective
Entry Date'' and the ``Amount'' of the payment, both of which, we
assume, are relatively easy to establish and input, regardless of the
system. We have not included any costs associated with inputting these
two data elements.
Both Requirements 4.2 and 4.2.1 place time restrictions on health
plans with regard to synchronizing EFT with the corresponding ERA and
will likely require health plans to incur costs by making sure their
systems and process can meet these requirements.
Phase III CORE 370 EFT & ERA Reassociation (CCD+/835) Rule,
Requirement 4.2, requires health plans to transmit the ERA
corresponding to the CCD+ within 3 days before or after the CCD+
Effective Entry Date. The CCD+ Effective Entry Date is defined as ``the
date the payer intents to provide good funds to the payee via EFT as
specified in the ACH CCD+ Standard in Field 9 of the Company
Batch Header Record 5.'' \66\
---------------------------------------------------------------------------
\66\ ``CAQH Committee on Operating Rules for Information
Exchange (CORE), CORE Steering Committee, Draft Phase III EFT & ERA
Reassociation (CCD+/835) Rule For Steering Committee Review--as of
10/10/11,'' p. 19, referencing NACHA Operating Rules and Guidelines
2011.
---------------------------------------------------------------------------
Phase III CORE 370 EFT & ERA Reassociation (CCD+/835) Rule,
Requirement 4.2.1 applies to health care claim payments to retail
pharmacy and allows a health plan to transmit the ERA any time prior to
the CCD+ Effective Entry Date of the corresponding EFT, but no later
than 3 days after the CCD+ Effective Entry Date.
In order to meet the requirements of these rules, health plans will
have to make alterations in their IT infrastructures and business
processes in order to coordinate the treasury system--that often is the
source of the EFT transmission--and the claims processing system--that
often is the source of the ERA transmission. In addition, health plans
may have to coordinate with their trading partners
[[Page 48032]]
that process the EFT or ERA in order to meet this requirement.
For purposes of this RIA, we are defining IT infrastructure as the
equipment, systems, software, and services used in common across an
organization, regardless of mission, program, or project. IT
infrastructure also serves as the foundation on which mission, program,
or project-specific systems and capabilities are built.\67\ However, we
assume that the majority of costs will be in altering software.
---------------------------------------------------------------------------
\67\ ``GAO Cost Estimating and Assessment Guide: Best Practices
for Developing and Managing Capital Program Costs,'' March 2009,
United States Government Accountability Office, Applied Research and
Methods (GAO-09-3SP), p. 138.
---------------------------------------------------------------------------
In terms of software alterations, this is a difficult estimate to
make and we welcome comments from health plans as to our assumptions
and estimates. As noted in a Department of Defense cost estimating
handbook, ``[o]ne of the first steps in any estimate is to understand
and define the system to be estimated. Software, however, is
intangible, invisible, and intractable * * *. Software grows and
changes as it is written.'' \68\ This is especially true with regard to
the legacy software and IT systems of health plans and TPAs that are
altered according to a swiftly changing world of business needs and
State and Federal regulations.
---------------------------------------------------------------------------
\68\ Parametric Cost Estimating Handbook, ``Chapter 5--Software
Parametric Cost Estimating,'' Joint Government/Industry Initiative,
Fall 1995, Department of Defense, p. 114.
---------------------------------------------------------------------------
Estimating an overall average cost to health plans and TPAs is
further complicated because the systems for each entity will have a
range of differences with regard to the complexity and reliability of
their software, the analyst and programmer capabilities, the experience
of the team that will apply the changes, schedule overlaps, number of
locations, management and executive oversight and the use of tools and
software engineering practices.\69\ Because of these variables, it
would be difficult to apply a parametric or ``bottoms up'' analysis
that could be applied to calculate an industry-wide estimate.
---------------------------------------------------------------------------
\69\ Some of these elements are taken from ``Table 17: Common
Software Risks That Affect Cost and Schedule,'' GAO Cost Estimating
and Assessment Guide: Best Practices for Developing and Managing
Capital Program Costs,'' March 2009, United States Government
Accountability Office, Applied Research and Methods (GAO-09-3SP), p.
138.
---------------------------------------------------------------------------
The major cost associated with system changes is the staff time
required to develop and carry out the business requirements. We assume
that there will be no hardware costs to meeting the requirements of
this rule. The software costs will be a one-time cost, with a few years
of transitional costs. The costs associated with altering business
processes--that is, the organizational processes that feed the input to
the systems and process the output--will also be a one-time cost with a
few years of transitional costs.
For all IT infrastructure estimates in this RIA, we have based the
costs on a wide range of projected ``person-months'' required at each
phase of the implementation. It is important to view these estimates as
an attempt to furnish a realistic context rather than as precise
budgetary predictions. In our estimates, we detailed specific steps,
periods of time, and personnel that we assume would be necessary for IT
infrastructure alterations. We welcome comments that might speak to
specific assumptions in our calculations.
In Table 11, we have broken down the major tasks required to
implement any software implementation project, based on the Government
Accountability Office's ``work breakdown structure'' for software
projects as referenced in the ``GAO Cost Estimating and Assessment
Guide.'' \70\
---------------------------------------------------------------------------
\70\ ``GAO Cost Estimating and Assessment Guide: Best Practices
for Developing and Managing Capital Program Costs,'' March 2009,
United States Government Accountability Office, Applied Research and
Methods (GAO-09-3SP).
---------------------------------------------------------------------------
For each task, we have assigned a group of employees, calculated
their total annual salaries and monthly salaries based on Bureau of
Labor statistics, \71\ then estimated a low and high range of time that
the team would spend on a particular task. The group of employees is to
be understood to likely include more than just the specific employees
listed; that is, the group of employees represents a cumulative effort
that a health plan would expend on a task. For example, project
management includes four employees--one Computer and Info Systems
manager, one operations manager, one computer Systems analyst, and one
computer programmer--that together spend 2 weeks (0.5 to 1 month) full
time defining the project and assigning roles to employees and team. We
expect that more than four employees will be involved at different
levels in this task; however, the total anticipated time spent in the
task is expected not to exceed four full time employees working at
these organizational levels full time for 2 weeks.
---------------------------------------------------------------------------
\71\ Mean hourly wages, ``May 2011 National Occupational
Employment and Wage Estimates, United States,'' Bureau of Labor
Statistics, United States Department of Labor, http://www.bls.gov/oes/current/oes_nat.htm#43-0000.
---------------------------------------------------------------------------
Although we expect that some health plans already transmit ERA and
its associated EFT within 3 days of each other, we have no basis for
that expectation. We have multiplied the cost per health plan, as
calculated in Table 11, times the number of commercial health plans and
TPAs in order to arrive at the range of total cost for all commercial
health plans and TPAs: $474 million to $931 million.
We assume that government health plans, including the VHA, Indian
Health Plans, Medicaid, and Medicare, will have more difficulty
altering systems. In many cases, government health plans will have to
work across agencies--for example, with the Department of Treasury--to
meet the requirements of the EFT & ERA Operating Rule Set while also
ensuring that their own Federal requirements and business needs are
met. In addition, agencies such as Medicare may have more complex
implementation solutions because multiple systems will be affected. We
have doubled the average cost to arrive at a total for all government
health plans: $22 to $43 million.
We assume that the majority of health plan costs with regard to
meeting data content requirements will occur in 2013, with some
transition costs occurring in 2014. For simplicity's sake, we include
the costs as occurring in 2013.
We welcome comments addressing our assumptions and calculations.
BILLING CODE 4120-01-P
[[Page 48033]]
[GRAPHIC] [TIFF OMITTED] TR10AU12.001
4. The Data Requirements Associated With Posting Payment Adjustments
and Claim Denials
Phase III CORE 360 Uniform Use of CARCs and RARs (835) Rule, 4.1.1
defines four business scenarios with a maximum set of CARC/RARC/CAGC
combinations that can be applied to convey details of the claim denial
or payment adjustment to the provider. Health plans can only use the
CARC/RARC/CAGC combinations specified in the ``CORE-required Code
Combinations for Core-defined Business Scenarios'' document except that
new or adjusted combinations can be used if the code committees
responsible for maintaining the codes create a new code or adjust an
existing code. The four business scenarios are the minimum set of
business scenarios; health plans may develop additional scenarios.
In order to meet the requirements of this rule, health plans will
likely have to make alterations to their business processes, and, in
some instances, to their IT infrastructures. It is likely that health
plans will have to remove certain coding combinations from their
business processes. IT infrastructure changes are only required if the
health plan needs to alter its payment system with regard to certain
code combinations that will no longer be allowed. We assume that this
is a minimum IT infrastructure cost, though
[[Page 48034]]
it may be a more extensive cost to business processes, as reflected in
Table 12.
We have adopted the same categories of IT infrastructure and
business process changes that we applied for Table 11, with many of the
same factors. A major distinction between the two estimates is the
higher cost to business processes and training in order to meet the
requirements of this rule compared to the IT infrastructure changes
necessary under the Phase III CORE 370 EFT & ERA Reassociation (CCD+/
835) Rule.
We assume that the majority of health plan costs with regard to
meeting data content requirements will occur in 2013, with some
transition costs occurring in 2014. For simplicity's sake, we include
the costs as occurring in 2013. Again, it is important to view these
estimates as an attempt to furnish a realistic context rather than as
precise budgetary predictions. We welcome comments that might speak to
specific assumptions in our calculations.
[[Page 48035]]
[GRAPHIC] [TIFF OMITTED] TR10AU12.002
BILLING CODE 4120-01-C
Table 13 summarizes all the estimated costs to commercial and
government health plans and providers for implementing the EFT & ERA
Operating Rule Set. It includes figures from Table 5 with regard to
providers and Tables 3, 9, 10, 11, and 12 for costs to health plans.
The costs are from 2013 through 2023, but the majority of the costs are
incurred from 2013 through 2016.
[[Page 48036]]
Table 13--Summary of Costs To Implement the EFT & ERA Operating Rule Set for Providers, and Commercial and
Government Health Plans
----------------------------------------------------------------------------------------------------------------
Low (in millions) High (in millions)
----------------------------------------------------------------------------------------------------------------
Health Plan EFT and ERA $87.................................... $200
Electronic Enrollment Costs
for Health Plans.
Health Plan Infrastructure $148................................... $590
Costs (SAFE HARBOR/HTTPS)
Costs for Health Plans.
EFT & ERA Reassociation rule $474 for commercial plans.............. $931 for commercial plans
4.2: Transmit ERA within 3 $22 for government plans............... $43 for government plans
days before/after EFT --Cost
to Health Plans.
EFT & ERA Uniform Use of CARCs $467 for commercial plans.............. $892 for commercial plans
and RARs (835 Rule) Cost to $22 for government plans............... $42 for government plans
Health Plans.
One-Time Cost to Health Plans $1.5................................... $1.5
of Reformatting Companion
Guides.
Cost to Health Plans of $3.2................................... $3.2
Reformatting EFT and ERA
Enrollment Forms.
Cost to providers to enroll in $15.7.................................. $15.7
EFT.
--------------------------------------------------------------------------------
TOTAL COSTS................ $1,239................................. $2,719
----------------------------------------------------------------------------------------------------------------
F. Savings
The quantifiable savings estimated in this RIA are derived from two
means: (1) time savings will be realized by the adoption of operating
rules that streamline provider payment processes; and (2) material
savings will be derived from an overall increased use in EFT and ERA
over paper and manual remittance advice and payment processes and the
decrease in printing, paper, and mailing costs as a consequence of this
increase. The time savings of the former incentivizes the increase
usage in EFT and ERA and thus results in material savings.
We have based our time savings on the assumption that four areas of
administrative tasks will be streamlined by the implementation of the
EFT & ERA Operating Rule Set adopted in this IFC. The four areas of
administrative tasks include the following:
Provider enrollment in EFT and ERA.
Setting up connectivity between trading partners.
Reassociation of the EFT data with the ERA data.
Posting payment adjustments and claim denials.
We will consider the time and material savings for commercial and
government health plans and then analyze the time and material savings
for physician practices and hospitals.
1. Commercial Health Plans, Government Health Plans, and Third Party
Administrators: Time Savings From Implementation of the EFT & ERA
Operating Rule Set
We estimate that commercial and government health plans will
achieve savings in two of the four areas of tasks that implementation
of EFT & ERA Operating Rule Set adopted in this IFC will streamline:
Setting up connectivity between trading partners and the processing of
rejection and denial codes by provider practice management systems.
However, these time savings cannot be easily quantified for health
plans and TPAs. We will give narrative description below about how
health plans and TPAs can achieve time savings through streamlining
these tasks, but we are unable to quantify the savings on these two
particular tasks.
a. Setting Up Connectivity Between Trading Partners
The requirements in the Phase III CORE 350 Health Care Claim
Payment/Advice (835) Infrastructure Rule will streamline the process
for setting up new trading partner arrangements. The Phase III CORE 350
Health Care Claim Payment/Advice (835) Infrastructure Rule broadens the
infrastructure requirements contained in the Phase I and Phase II CORE
Operating Rules, adopted in July, 2011, to include the health care
electronic funds transfers (EFT) and remittance advice transaction.
The Phase III CORE 350 Health Care Claim Payment/Advice (835)
Infrastructure Rule requires health plans to use the CORE V5010 Master
Companion Guide Template for their companion guides that describe
implementation of the X12 835 to their trading partners. Requiring
health plans to use a common flow and format for their companion guides
will enable providers to more efficiently and effectively configure
their accounting systems to automatically process the ERA successfully.
The Phase III CORE 350 Health Care Claim Payment/Advice (835)
Infrastructure Rule also requires that health plans have the capability
to use the public Internet for connectivity. Currently, multiple
connectivity methods are in use for electronic transaction between
trading partners. Health care providers and health plans support
multiple connectivity methods to connect to different health plans,
clearinghouses, provider organizations and others. Supporting multiple
connectivity methods for different entities adds costs for health plans
and providers. When new trading partners set up connectivity
parameters, knowing that all entities are capable of using the public
Internet for connectivity saves time.
b. Posting Payment Adjustments and Claim Denials
The requirements in the Phase III CORE 360 Uniform Use of CARCs and
RARCs (835) Rule will reduce the time needed by health plans and TPAs
spent interacting with providers who have questions concerning a
payment denial and adjustment codes used on the ERA. We expect that
phone calls to the health plan help desk by providers with questions
about denied claims will decrease considerably.
c. Commercial Health Plans, Government Health Plans, and TPAs: Material
Cost Savings in Increase in Use of EFT and ERA
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 nonelectronic, 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 the additional staff time
required to conduct paper-based transactions.
[[Page 48037]]
Table 14 lists our estimates of the savings for health plans and
TPAs per transaction when they move from a nonelectronic transaction
for payment and remittance to usage of ERA and EFT. We have used the
following assumptions to arrive at these per transaction savings for
health plans:
The estimated savings associated with the ERA is taken
from Medicare data. Medicare found that the average estimated cost
avoidance in terms of printing and mailing charges was $4.24 per ERA
transaction when it was sent electronically as opposed to through the
mail in paper form.\72\ We have assumed that an equivalent savings can
be realized for commercial and other government health plans.
---------------------------------------------------------------------------
\72\ ``Trend in Remittance Advice (Abstract),'' October 26,
2011, Center for Medicare and Medicaid Services.
---------------------------------------------------------------------------
Table 14 reflects the same dollar savings per EFT
transaction that we used in the Health Care EFT Standards IFC. There
are a number of different analyses and case studies with regard to the
possible savings realized when a health plan switches from paper checks
to EFT for health care claim payments. We considered a 2007 analysis by
McKinsey and Company that concluded that the ``system wide cost'' of
using paper checks for health care claim payments was $8.00 per
check.\73\ We did not use the McKinsey's conclusion because we do not
know what methodology was used and wanted to be specific about the
difference between health care provider savings and health plan
savings. A United Healthcare report found that it costs the company
$30.7 million to pay 145 million health care claims with paper checks
compared with the cost of $2.7 million to pay the same amount of claims
using EFT.\74\ We did not use United Healthcare's savings estimate
since, apparently, it is based on single claims, and the metric we used
is based on health care claim payments. A single health care claim
payment from a health plan often includes payments for multiple claims
submitted by a provider.
---------------------------------------------------------------------------
\73\ ``Overhauling the U.S. 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).
\74\ ``E-Payment Cures for Healthcare,'' presentation by J.W.
Troutman (PNC Healthcare), D. Lisi (United Healthcare), B.C.
Mayerick (Department of Veterans Affairs), April 26, 2010, https://admin.nacha.org/userfiles/File/Healthcare%20Resource/Epayments%20Cures%20for%20Healthcare.pdf.
---------------------------------------------------------------------------
For our calculations, we use data from the Financial Management
Service (FMS), a bureau of the United States Department of the
Treasury. We use FMS data because they are the lowest estimates, and
because we consider them the most valid. According to FMS, it costs the
U.S. government $0.11 to issue an EFT payment compared to $1.03 to
issue a check payment--a difference of $0.92 per payment.\75\ This
estimate includes the cost of material such as postage, envelopes, and
checks, but does not include labor costs. FMS processes millions of
transactions so it enjoys economies of scale that health plans may not
experience, thus the $0.92 estimate is probably less than the amount
plans will experience. Table 14 summarizes the estimated increase and
savings based on the Department of the Treasury's numbers.
---------------------------------------------------------------------------
\75\ www.fms.treas.gov/eft/index.html.
Table 14--Baseline Cost Savings for EFT and ERA for Commercial and
Governmental Health Plans (Difference Between NonElectronic Transaction
and Electronic Transaction)
------------------------------------------------------------------------
Savings per
transaction
for
commercial
Transaction and
government
health
plans
------------------------------------------------------------------------
Health care electronic funds transfer (EFT)................ $0.92
Electronic remittance advice (ERA)......................... $4.24
------------------------------------------------------------------------
* Based on 2012 dollars.
In Table 15, we illustrate a projected annual increase of 6 (LOW)
to 8 (HIGH) percent in the use of the ERA attributable to the
implementation of the EFT & ERA Operating Rule Set over the next 10
years. We estimate an annual increase of 6 (LOW) to 8 (HIGH) percent in
the use of the EFT resulting from the adoption of the EFT & ERA
Operating Rule Set. These are not annual increases in percentage
points, but rather percent increases in the use of electronic
transactions from the year before attributable to implementation of the
EFT & ERA Operating Rules Set. The total annual increases in EFT and
ERA implementation will be greater, attributable to implementation of
the EFT & ERA Operating Rule Set, the health care EFT standards, and
other factors as discussed in section VII.A.2. of this IFC and
illustrated in Table 15.
Based on these assumptions, we estimate that the savings to health
plans because of increased usage in the EFT and ERA will be at least
$50 million within 10 years of implementation of the EFT & ERA
Operating Rule Set. This represents total quantified savings for all
government and commercial health plans attributable to EFT & ERA
Operating Rule Set.
Table 15--Annual Cost Savings for Government and Commercial Health Plans From Increase in EFT and ERA Attributable to the EFT & ERA Operating Rule Set *
--------------------------------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------------------------------
I II III IV V
--------------------------------------------------------------------------------------------------------------------------------------------------------
Savings from Increase in ERA attributable
to the EFT & ERA Operating Rule Set
Savings from Increase in EFT attributable
to the EFT & ERA Operating Rule Set
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year LOW HIGH LOW HIGH
Annual Annual Annual Annual
Cost Savings Cost Savings Cost Savings Cost Savings
Attributable to Attributable to Attributable to Attributable to
Operating Rules Operating Rules Operating Rules Operating Rules
(in millions) (in millions) (in millions) (in millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2014............................................................ $26.6 $35.5 $1.82 $2.42
2015............................................................ 31.9 42.6 2.36 3.15
[[Page 48038]]
2016............................................................ 38.3 51.1 3.07 4.09
2017............................................................ 46.0 61.3 3.99 5.32
2018............................................................ 55.2 73.6 5.18 6.91
2019............................................................ 44.2 66.2 4.49 6.74
2020............................................................ 49.5 74.2 5.39 8.09
2021............................................................ 55.4 83.1 6.47 9.71
2022............................................................ 62.0 93.1 7.76 11.65
2023............................................................ 69.5 104.2 9.32 13.98
---------------------------------------------------------------------------------------
Total....................................................... 478.7 685.0 49.86 72.04
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Based on 2012 dollars.
2. Physician Practices and Hospitals: Time Savings in BIR Tasks
According to a 2009 study published in Health Affairs,\76\ the
cumulative time, on a per physician basis, that a physician and his or
her staff and administration spend interacting with health plans is
approximately 60 hours per week. (Staff includes office managers,
receiving and posting clerks etc. Administration includes attorneys,
accountants, physician practice directors, and administrators, etc.) Of
that time, 88 percent is spent on authorizations and claims/billing
issues.
---------------------------------------------------------------------------
\76\ 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 the EFT & ERA Operating Rule Set
will eliminate some of the manual intervention that is required when
providers re-associate the EFT with the ERA and reconcile the
adjustments on the ERA in their systems. We estimate that 3 percent to
5 percent of the time spent on reconciling and following-up on payments
and posting can be trimmed on account of implementation of the EFT &
ERA Operating Rule Set. This is equivalent to 7 to 11 minutes a week
for every health plan from which a provider receives EFT payments.
We estimate that the 3 percent to 5 percent of time on follow-up
and reconciliation can be saved because the EFT & ERA Operating Rule
Set will streamline the following four areas of administrative tasks:
a. Provider Enrollment in EFT and ERA: Standardizing the Flow, Format,
and Data Content of Enrollment Forms
Both the Phase III CORE 380 EFT Enrollment Data Rule and the Phase
III CORE 382 ERA Enrollment Data Rule require that health plans request
specific data elements on the EFT enrollment form when first setting
providers up for health care claim payments through EFT. This addresses
a key barrier to the use of EFT by providers and further enables
automated processing of healthcare payments.
Currently, providers face significant challenges when enrolling to
receive EFT payments from a health plan. These challenges include
health plans requesting a diverse set of data elements, health plans
using a variety of terms to refer to the same data elements (``Routing
number'' vs. ``Bank Routing number''), differences in enrollment
processes and approvals that each health plan requires, and, in some
cases, an absence of critical data elements providers need health plans
to know in order for health plans to correctly route the payments to
providers.
Due to these variations across health plans in the data elements
requested, providers manually process enrollment forms for each plan to
which they bill claims and from which they wish to receive an EFT
payment. This results in unnecessary manual processing of multiple
forms requesting a range of information.
Both the Phase III EFT and ERA Enrollment Data Rules require that
health plans offer an electronic way for providers to complete and
submit ERA and EFT enrollment. Once the EFT & ERA Operating Rule Set is
implemented, we assume that there will be time savings for providers
when they first enroll with EFT or ERA, due to the fact that now the
flow, format, and data requirements of different health plan enrollment
forms will be similar and enrollment can be done electronically. The
enrollment process for EFT, it has been noted, is considered burdensome
for providers and has been characterized as an obstacle to providers
making the switch from receiving paper checks to receiving EFT.
However, we have not quantified the cost savings associated with a
more standardized enrollment form in terms of the staff time saved.
Instead, we will attribute some staff time saved in the reassociation
process, previously defined, because the EFT & ERA Operating Rule Set
will require data elements in the enrollment process that will make it
easier for reassociation to occur.
b. Reassociation of the EFT Data With the ERA Data in the Provider's
Practice Management System
The main intent of the health care EFT standards, adopted in the
Health Care EFT Standards IFC on January 10, 2012 (77FR 1565), is to
provide some assurance that providers could automate the reassociation
of the ERA with the EFT that it describes. The Health Care EFT
Standards IFC did this by requiring a specific NACHA format be used,
the CCD+Addenda, and specific data content, the X12 TRN Segment, be
placed in the addenda. The Health Care EFT Standards IFC did not
require that the X12 TRN Segment in a particular EFT be the same X12
TRN Segment that is included in the associated ERA because ``[w]e
believe that the details of any such requirement are best addressed
through operating rules for the health care EFT and remittance advice
transaction.''
The EFT & ERA Operating Rule Set includes a number of requirements
that will facilitate reassociation, including the following:
Phase III, CORE 370 EFT & ERA Reassociation (CCD+/835)
Rule,
[[Page 48039]]
Requirement 4.1: Requires five (plus one situational) defined data
elements in the CCD+Addenda.
Phase III, CORE 370 EFT & ERA Reassociation (CCD+/835)
Rule, Requirement 4.2: Requires health plans to transmit the EFT within
three days of the transmission of the ERA.
Phase III, CORE 370 EFT & ERA Reassociation (CCD+/835)
Rule, Requirement 4.3: Outlines requirements for the resolving late or
missing EFT and ERA transmissions.
Phase III, CORE 370 EFT & ERA Reassociation (CCD+/835)
Rule, Requirement 4.1: Requires that providers proactively contact
their financial institutions to arrange for the delivery of minimum
data elements necessary for successful reassociation of the EFT with
the ERA.
Phase III CORE 382 ERA Enrollment Data Rule and Phase III
CORE 380 EFT Enrollment Data Rule, Requirement 4.2: Identifies a
maximum set of standard data elements that health plans can request
from providers for enrollment to receive ERA.
Phase III CORE 382 ERA Enrollment Data Rule and Phase III
CORE 380 EFT Enrollment Data Rule, Requirement 4.2: Applies a
``controlled vocabulary''--predefined and authorized terms--for health
plans to use when referring to the same data element. For instance,
``Provider Name'' is to be used instead of ``Provider'' or ``Name.''
Phase III CORE 382 ERA Enrollment Data Rule and Phase III
CORE 380 EFT Enrollment Data Rule, Requirements 4.3.1 and 4.3.2:
Requires standard data elements to appear on paper enrollment forms in
a standard format and flow, using Master Templates for paper-based and
electronic enrollment, respectively.
We assume that, given all the rules and how their implementation
will facilitate reassociation, a physician practice or hospital can
expect a decrease in the time spent on receiving and posting claim
payments. For instance, in our calculation for physician practices, we
assume that, for every health plan with which a provider enrolls to
receive payment via EFT, 7 to 11 minutes a week will be saved.
The EFT & ERA Operating Rule Set, complementing the Health Care EFT
Standards IFC, will allow for automation of the reassociation process.
However, complete automation of reassociation rests with the provider
and the capability of the provider's practice management system, so the
requirements in the EFT & ERA Operating Rule Set facilitate manual
reassociation as well.
c. Posting Payment Adjustments and Claim Denials
Consistent and uniform rules enabling providers to reassociate the
EFT with the ERA will help to decrease manual provider follow-up,
faulty electronic secondary billing, inappropriate write-offs of
billable charges, incorrect billing of patients for co-pays and
deductibles, and posting delays. This allows for less staff time spent
on phone calls and Web sites, increased ability to conduct targeted
follow-up with health plans and/or patients, and more accurate and
efficient payment of claims.
We assume that implementation of the Phase III CORE 360 Uniform Use
of CARCs and RARCs (835) Rule, including CORE-required Code
Combinations for CORE-defined Business Scenarios will lead to a
decrease in ``follow up and payment reconciliation'' BIR tasks.
d. Time Savings Calculation
In order to estimate the cost avoidance of a 3 to 5 percent
decrease in the time (cost) spent on following up and reconciling
payments, we used the following assumptions and calculations:
A study of BIR tasks by Sarkowski, et al. (2009)
categorized BIR tasks within a physician practice office, specifying a
dollar cost per single physician to specific tasks.\77\ The study found
that 28 percent of the equivalent of a full-time staff was dedicated to
``follow-up and payment reconciliation'' and ``receiving and posting
payments.'' Sarkowski, et. al. assigned a dollar amount to these tasks,
which included collecting payments and posting to patients' accounts;
depositing checks and payments; account reconciliation; discrepancy
research, follow up, and write-offs; receiving and allocating capitated
payments; posting refunds; follow-up on denials, underpaid, or
nonresponsive claims; filing for stop-loss and other contractual
payments; filing for shared risk-pool payments, and follow-up
supervision. This is a category of tasks that will be most affected by
the streamlining of the four areas of administrative tasks that we
detailed previously.
---------------------------------------------------------------------------
\77\ Sakowski, Julie Ann, James G. Kahn, Richard G. Kronick,
Jefferey M. Newman and Harold S. Luft, ``Peering into The Black Box:
Billing and Insurance Activities in a Medical Group,'' Health
Affairs, 28, No. 4 (2009): w544-w554.
---------------------------------------------------------------------------
The total cost per physician for these tasks is reflected
in Table 16, Column II, adjusted for 2013 dollars and increased
annually by 3 percent to reflect cost of living increases, because the
majority of this cost is for salaries and benefits (70 percent). A
smaller percentage of the cost is for operating expenses, purchased
services, and allocation of overhead, and for the purchase and
operation of IT systems.
We have projected the increase in the number of physicians
in physician practices between 2014 and 2023 (Table 16, Column I) based
on the average between the projected supply and demand of physicians
according to the Association of American Medical Colleges.\78\
---------------------------------------------------------------------------
\78\ 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,''Association of
American Medical Colleges.
---------------------------------------------------------------------------
Table 16, Column III illustrates the total cost of
receiving and posting payments, follow up and payment reconciliation
for all physicians in physician practices.
We have previously assumed, in the Health Care EFT
Standards IFC, that the average provider will newly enroll to receive
payments in EFT from 12 health plans from 2014 through 2023, reflected
in Table 16, Column VI. We make an identical projection here--the
average provider will newly enroll to receive payments in EFT from 12
health plans from 2014 through 2023. Therefore, a factor in the
calculation will be a multiplier of 1.2 every year that represents the
number of health plans with which typical provider has newly to receive
EFT.
We assume that there will be a reduction of 3 to 5 percent
in time costs for each of the 12 new EFT enrollments that the typical
physician practice will enroll between 2014 and 2023, compounded yearly
(Table 16, Columns IV and VII). By 2023, this will result in a cost
savings of as much as 50 percent (high estimate) in tasks related to
follow up and payment reconciliation and receiving and posting
payments.
The number of billing and posting clerks in physician
practices is approximately double the number of billing and posting
clerks in hospitals.\79\ We used this ratio as representative of the
physician practice to hospital administrative burden of receiving and
posting payments, follow-up and payment reconciliation. To arrive at
the cost to hospitals, therefore, we halved the costs that physician
practices experienced carrying out these tasks (Table 16, Columns V and
VIII). Although 55 percent of physicians are employed in hospitals, BIR
tasks in
[[Page 48040]]
hospitals would likely be significantly less on a per physician basis
due to economies of scale that are found in hospital billing and
payment processes.
---------------------------------------------------------------------------
\79\ Occupational Employment and Wages, May 2011, 43-3021
Billing and Posting Clerks, Bureau of Labor Statistics, http://www.bls.gov/oes/current/oes433021.htm.
Table 16--EFT & ERA Operating Rule Set: 3 Percent to 5 Percent Decrease in Cost Spent in Physician Practices and Hospitals on Receiving and Posting, Follow-Up and Reconciliation of Payments
2013-2023
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
I II III IV V VI VII VIII
-----------------------------------------------------------------------------------------------------------------------------
Physician Hospital low 3%
practice low 3% reduction in Physician
Total reduction in reduction in practice high Hospital high
reduction in cost of cost of 5% reduction in 5% reduction in
Total cost per cost of receiving and receiving and BIR time BIR time
Total practice of receiving and posting posting Average (number of (number of
number of receiving and posting payments, payments, number of minutes per minutes per
physicians posting payments, follow-up and follow-up and new EFT week per EFT week per EFT
in payments, follow-up and payment payment enrollment enrollment) enrollment)
physician follow up and payment reconciliation reconciliation per attributable to attributable to
practices * payment reconciliation attributable to attributable to provider EFT & ERA EFT & ERA
reconciliation [col.I * EFT & ERA EFT & ERA operating rule operating rule
(28%) ** col.II] (in operating rule operating rule set--compounded set--compounded
millions) set--compounded set--compounded yearly (in yearly (in
yearly (in yearly (in millions) millions)
millions) millions)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2013.............................................................. 335,120 $15,028 $5036 $0.0 $0 0 $0.0 $0.0
2014.............................................................. 340,146 15,479 5265 181 91 1.2 302 151
2015.............................................................. 345,173 15,943 5503 175 87 1.2 284 142
2016.............................................................. 348,638 16,421 5725 168 84 1.2 267 133
2017.............................................................. 352,103 16,914 5955 162 81 1.2 251 125
2018.............................................................. 355,568 17,421 6194 157 78 1.2 236 118
2019.............................................................. 359,033 17,944 6442 151 75 1.2 222 111
2020.............................................................. 362,498 18,482 6700 145 73 1.2 208 104
2021.............................................................. 366,561 19,037 6978 140 70 1.2 196 98
2022.............................................................. 370,625 19,608 7267 135 68 1.2 184 92
2023.............................................................. 374,688 20,196 7567 130 65 1.2 173 87
-----------------------------------------------------------------------------------------------------------------------------
Total......................................................... ........... .............. .............. 1,545.79 772.90 12 2,324 1,162
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* Occupational Employment and Wages, May 2011, 43-3021 Billing and Posting Clerks, Bureau of Labor Statistics, http://www.bls.gov/oes/current/oes433021.htm.
** Based on Sakowski, et. al. 2009, adjusted to 2012 dollars.
3. Physician Practices and Hospitals: Material Cost Savings in Increase
in Use of EFT and ERA
As noted previously, the more efficient and streamlined EDI
becomes, the more providers and health plans will be incentivized to
use EDI for their billing and insurance related tasks. Our assumption
is that implementation of the EFT & ERA Operating Rule Set will result
in time and staff savings for both providers and health plans.
Therefore, more providers and health plans will decide to switch their
payment and remittance advice to electronic transactions.
Table 17 illustrates estimates on the material costs that can be
avoided for every EFT or ERA that is transmitted electronically instead
of produced on paper and sent through the post. For Table 17, we used
the following assumptions.
The estimated savings associated with the ERA are taken
from the ``The National Progress Report on Healthcare Efficiency,
2010,'' \80\ which calculates its data based on available studies of
cost from a variety of sources, and which is sponsored by Emdeon, a
national health care clearinghouse. We found no other resources for
this estimate, though other reports, such as the Oregon survey,\81\
used the same Emdeon report for its projections.
---------------------------------------------------------------------------
\80\ ``The National Progress Report on Healthcare Efficiency,
2010,'' Produced by the U.S. Healthcare Efficiency Index.
\81\ ``Oregon Administrative Simplification Strategy and
Recommendations: Final Report of the Administrative Simplification
Work Group, June 2010,'' Oregon Health Authority, Office for Oregon
Health Policy and Research.
---------------------------------------------------------------------------
The estimated savings for using EFT over paper checks is
taken from a 2009 American Medical Association white paper on
Administrative Simplification.\82\ As noted in our discussion of
estimated savings of EFT over paper checks for health plans, we found a
number of estimates with regard to EFT that estimate the combined cost
avoided for both health plan and provider. However, we found no other
resources for the more specific cost avoidance for providers.
---------------------------------------------------------------------------
\82\ ``Standardization of the Claims Process: Administrative
Simplification White Paper,'' Prepared by the American Medical
Association, Practice Management Center, June 22, 2009, adjusted for
2012 dollars.
\83\ ``Standardization of the Claims Process: Administrative
Simplification White Paper, '' Prepared by the American Medical
Association, Practice Management Center, June 22, 2009, adjusted for
2012 dollars.
[[Page 48041]]
Table 17--Summary of Savings Attributable to the EFT & ERA Operating
Rule Set: Baseline Cost Savings for EFT and ERA for Providers
(Difference Between Non-Electronic Transaction and Electronic
Transaction)
------------------------------------------------------------------------
Savings per
transaction
Transaction for health
care
providers
------------------------------------------------------------------------
Health care electronic funds transfers (EFT)............... $1.63 \83\
Electronic remittance advice (ERA)......................... 1.55
------------------------------------------------------------------------
Based on 2012 dollars.
In Table 18 we illustrate a projected annual increase of 6 (LOW) to
8 (HIGH) percent in the use of the ERA attributable to the
implementation of the EFT & ERA Operating Rule Set over the next 10
years. We estimate an annual increase of 6 (LOW) to 8 (HIGH) percent in
the use of the EFT resulting from the implementation of the EFT & ERA
Operating Rule Set. These are not annual increases in percentage
points, but rather annual percent increases in the use of ERA and EFT
compounded yearly.
Based on these assumptions, we estimate that the savings to
providers because of increased usage in three transactions will be at
$172 million to $249 million over the 10 years after implementation of
the EFT & ERA Operating Rule Set.
Table 18--Annual Cost Savings in Reduced Use of Materials for Providers From Increase in EFT and ERA
Attributable to the EFT & ERA Operating Rule Set *
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
I II III IV V
----------------------------------------------------------------------------------------------------------------
Savings from Increase in EFT
attributable to the EFT & ERA
Operating Rule Set
Savings from Increase in ERA
attributable to the EFT & ERA
Operating Rule Set
----------------------------------------------------------------------------------------------------------------
Year LOW HIGH LOW HIGH
Annual Annual Annual Annual
Cost Savings Cost Savings Cost Savings Cost Savings
Attributable Attributable Attributable Attributable
to Operating to Operating to Operating to Operating
Rules Rules Rules Rules
(in millions) (in millions) (in millions) (in millions)
----------------------------------------------------------------------------------------------------------------
2014............................................ $3.22 $4.29 $3.06 $4.08
2015............................................ 4.18 5.57 3.98 5.30
2016............................................ 5.44 7.25 5.17 6.89
2017............................................ 7.07 9.42 6.72 8.96
2018............................................ 9.19 12.25 8.73 11.65
2019............................................ 7.96 11.94 7.57 11.36
2020............................................ 9.55 14.33 9.08 13.63
2021............................................ 11.46 17.20 10.90 16.35
2022............................................ 13.76 20.63 13.08 19.62
2023............................................ 16.51 24.76 15.70 23.55
---------------------------------------------------------------
Total....................................... 88.33 127.64 83.99 121.38
----------------------------------------------------------------------------------------------------------------
* Based on 2012 dollars.
Table 19--Summary of Savings for Providers Attributable to the EFT & ERA Operating Rule Set
--------------------------------------------------------------------------------------------------------------------------------------------------------
LOW Increase in HIGH Increase in
EFT & ERA EFT & ERA
transactions transactions
LOW Time savings HIGH Time savings attributable to attributable to
for physician for physician EFT & ERA EFT & ERA LOW Total HIGH Total
Year practices and practices and operating rule operating rule provider savings/ provider savings/
hospitals (Table hospitals (Table set for physician set for physician cost avoidance cost avoidance
16) (in millions) 16) (in millions) practices and practices and
hospitals (Table hospitals (Table
18) (in millions) 18) (in millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2014.................................. $272 $453 $6 $8 $278 $462
2015.................................. 262 426 8 11 270 437
2016.................................. 253 400 11 14 263 415
2017.................................. 244 376 14 18 257 395
2018.................................. 235 354 18 24 253 378
2019.................................. 226 333 16 23 242 356
2020.................................. 218 313 19 28 237 341
2021.................................. 210 294 22 34 233 327
2022.................................. 203 276 27 40 230 317
[[Page 48042]]
2023.................................. 196 260 32 48 228 308
-----------------------------------------------------------------------------------------------------------------
Cumulative total over 10 years.... 2,319 3,485 172 249 2491 3734
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table 20 reflects the total costs and benefits for the years 2013
through 2023 detailed in this RIA according to sector. The net savings
for the health care industry as a whole (savings minus costs) ranges
from approximately $300 million (low savings minus high costs) to $3.3
billion (high savings minus low cost) over ten years, or an expected
net savings of $1.8 billion.
Table 20--Summary of Total Costs and Benefits for Commercial and Governmental Health Plans, TPAs, Physician Practices, and Hospitals Attributable to the
EFT & ERA Operating Rule Set
[In millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Savings: Costs:
Commercial and Savings: Commercial and Costs:
government Physician Total savings government Physician Total costs Net savings
health plans/ practices & health plans/ practices &
TPAs hospitals TPAs hospitals
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low..................................... $529 $2,491 $3,020 $1,224 $16 $1,239 $301
High.................................... 757 3,734 4,491 2,703 16 2,719 3,252
Mean.................................... 643 3,113 3,755 1,963 16 1,979 1,777
--------------------------------------------------------------------------------------------------------------------------------------------------------
Table 21 is a summary of the costs and benefits annualized and
discounted.
Table 21--Summary of Total Costs and Benefits for Commercial and
Governmental Health Plans, TPAs, Physician Practices, and Hospitals
Attributable to the EFT & ERA Operating Rules Set
[In millions]
------------------------------------------------------------------------
Present values
------------------------------------------------------------------------
7% 3%
------------------------------------------------------------------------
BENEFITS Monetized ($millions):
Low....................................... $1,986 $2,503
High...................................... 2,982 3,738
COSTS Monetized ($millions):
Low....................................... 1,133 1,190
High...................................... 2,497 2,618
------------------------------------------------------------------------
G. Accounting Statement
As required by OMB Circular A-4 (available at link http://www.whitehouse.gov/sites/default/files/omb/assets/regulatory_matters_pdf/a-4.pdf), we have prepared an accounting statement.
[[Page 48043]]
Table 22--Accounting Statement 2013-2023
[In millions, 2012 dollars]
----------------------------------------------------------------------------------------------------------------
Source citation
Category Primary estimate Minimum estimate Maximum estimate (RIA, preamble,
(millions) (millions) (millions) etc.)
----------------------------------------------------------------------------------------------------------------
BENEFITS
----------------------------------------------------------------------------------------------------------------
Annualized Monetized benefits:
7% Discount................. Not estimated..... $265.............. $398.............. RIA
3% Discount................. Not estimated..... $270.............. $404.............. RIA
Qualitative (un-quantified) benefits
Benefits generated from health plans to health care providers, and health care providers to health plans.
----------------------------------------------------------------------------------------------------------------
COSTS
----------------------------------------------------------------------------------------------------------------
Annualized Monetized costs:
7% Discount................. Not Estimated..... $151.............. $333.............. RIA and Collection
of Information.
3% Discount................. Not Estimated..... $129.............. $283.............. RIA and Collection
of Information.
Qualitative (unquantified) costs .................. None.............. None.............. ..................
Health plans and health care providers will pay costs to software vendors, programming and IT staff/contractors,
transaction vendors, and health care clearinghouses.
----------------------------------------------------------------------------------------------------------------
TRANSFERS
----------------------------------------------------------------------------------------------------------------
Annualized monetized transfers: N/A............... N/A............... N/A. ..................
``On budget''.
From whom to whom?.............. N/A............... N/A............... N/A. ..................
Annualized monetized transfers: N/A............... N/A............... N/A. ..................
``Off[dash]budget''.
----------------------------------------------------------------------------------------------------------------
In accordance with the provisions of Executive Order 12866, this
regulation was reviewed by the Office of Management and 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 amends 45 CFR part 162 to read as follows:
PART 162--ADMINISTRATIVE REQUIREMENTS
0
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.
0
2. Section 162.920 is amended as follows:
0
A. In paragraph (c)(2), the references ``Sec. Sec. 162.1203 and
162.1403'' are removed and the references ``Sec. Sec. 162.1203,
162.1403, and 162.1603'' are added in their place.
0
B. Adding a new paragraph (c)(4).
The addition reads as follows:
Sec. 162.920 Availability of implementation specifications and
operating rules.
* * * * *
(c) * * *
(4) Council for Affordable Quality Healthcare (CAQH) Phase III
Committee on Operating Rules for Information Exchange (CORE) EFT & ERA
Operating Rule Set, Approved June 2012, as specified in this paragraph
and referenced in Sec. 162.1603.
(i) Phase III CORE 380 EFT Enrollment Data Rule, version 3.0.0,
June 2012.
(ii) Phase III CORE 382 ERA Enrollment Data Rule, version 3.0.0,
June 2012.
(iii) Phase III 360 CORE Uniform Use of CARCs and RARCs (835) Rule,
version 3.0.0, June 2012.
(iv) CORE-required Code Combinations for CORE-defined Business
Scenarios for the Phase III CORE 360 Uniform Use of Claim Adjustment
Reason Codes and Remittance Advice Remark Codes (835) Rule, version
3.0.0, June 2012.
(v) Phase III CORE 370 EFT & ERA Reassociation (CCD+/835) Rule,
version 3.0.0, June 2012.
(vi) Phase III CORE 350 Health Care Claim Payment/Advice (835)
Infrastructure Rule, version 3.0.0, June 2012, except Requirement 4.2
titled ``Health Care Claim Payment/Advice Batch Acknowledgement
Requirements''.
* * * * *
0
3. Section 162.1601 is amended by revising the section heading and
introductory text to read as follows:
Sec. 162.1601 Health care electronic funds transfers (EFT) and
remittance advice transaction.
The health care electronic funds transfers (EFT) and remittance
advice transaction is the transmission of either of the following for
health care:
* * * * *
0
4. Section 162.1603 is added to Subpart P to read as follows:
Sec. 162.1603 Operating rules for health care electronic funds
transfers (EFT) and remittance advice transaction.
On and after January 1, 2014, the Secretary adopts the following
for the health care electronic funds transfers (EFT) and remittance
advice transaction:
(a) The Phase III CORE EFT & ERA Operating Rule Set, Approved June
2012 (Incorporated by reference in Sec. 162.920) which includes the
following rules:
(1) Phase III CORE 380 EFT Enrollment Data Rule, version 3.0.0,
June 2012.
(2) Phase III CORE 382 ERA Enrollment Data Rule, version 3.0.0,
June 2012.
[[Page 48044]]
(3) Phase III 360 CORE Uniform Use of CARCs and RARCs (835) Rule,
version 3.0.0, June 2012.
(4) CORE-required Code Combinations for CORE-defined Business
Scenarios for the Phase III CORE 360 Uniform Use of Claim Adjustment
Reason Codes and Remittance Advice Remark Codes (835) Rule, version
3.0.0, June 2012.
(5) Phase III CORE 370 EFT & ERA Reassociation (CCD+/835) Rule,
version 3.0.0, June 2012.
(6) Phase III CORE 350 Health Care Claim Payment/Advice (835)
Infrastructure Rule, version 3.0.0, June 2012, except Requirement 4.2
titled ``Health Care Claim Payment/Advice Batch Acknowledgement
Requirements''.
(b) ACME Health Plan, CORE v5010 Master Companion Guide Template,
005010, 1.2, March 2011 (incorporated by reference in Sec. 162.920),
as required by the Phase III CORE 350 Health Care Claim Payment/Advice
(835) Infrastructure Rule, version 3.0.0, June 2012.
Dated: June 26, 2012.
Marilyn Tavenner,
Acting Administrator, Centers for Medicare & Medicaid Services.
Approved: August 1, 2012.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2012-19557 Filed 8-7-12; 11:15 am]
BILLING CODE 4120-01-P