ASC X12 Standards Improve Claims Tracking - Brief Article

Healthcare Financial Management, April, 2001 by James J. Moynihan

Manual claims tracking is a time-consuming process that frequently causes payment delays. With manual claims processing, payers typically do not inform providers of the disposition of their claims, requiring provider collection staff to phone key payers to determine if claims are being processed. Since there seldom is enough staff to phone all payers and track all claims, providers can face a lengthy collection period with considerable cash tied up in accounts receivable.

The claims-tracking process will be revolutionized when payers and providers adopt standards mandated under the Health Insurance Portability and Accountability Act (HIPAA) of 1996. Using HIPAA-mandated standards, claims tracking will be automated, and providers will benefit from improved cash flow.

Three X12 standards will improve claims tracking--the Functional Acknowledgment (ASC X12 997), the Health Care Claim Status Notification (ASC X12 277), and the Health Care Claim Status Inquiry (ASC X12 276). The Functional Acknowledgment (ASC X12 997), which is not required by HIPAA, allows the recipient of a file containing claims in the ASC X12 format to notify the sender that the message has been received. Through a variety of controls, the sender can determine whether the electronic claim file arrived intact. Acknowledgment methods currently in use vary widely from payer to payer. With adoption of the Functional Acknowledgment, every EDI-capable and HIPAA-compliant provider will be informed when electronically transmitted claims are received by the payer.

The Functional Acknowledgment, however, does not address the key issue of what happens when claims are edited by payers upon receipt. Many payers receive electronic claims, edit them, and reject those that fail their particular edits. Payers use a variety of methods to notify providers of rejected claims. Some produce status reports for providers or their clearinghouses. If payers have not accepted these claims into their adjudication systems, no claim number is assigned. If a provider asks claims staff about such a claim, the provider may be told the claim was never received.

The X12 transaction that can best notify providers of edit or rejection reports is the ASC X12 277, which sends detailed information back to the provider. This transaction enables providers to track every claim. This kind of reporting and tracking will improve substantially the integrity of electronic claims submissions. It also will allow providers to determine if there are quality-control problems in the patient-accounting process.

The HIPAA implementation guidelines call for using the ASC X12 277 with the ASC X12 276 in electronic claims transactions. The focus of the HIPAA implementation guidelines for these two standards is their back-and-forth exchange. Some of the early implementers of electronic transactions, such as New York's Empire Blue Cross and Blue Shield and Memorial Sloan-Kettering Cancer Center, New York, New York, use these standards in combination. One status inquiry sent by Memorial Sloan-Kettering in the ASC X12 276 standard on all outstanding claims is responded to by Empire with one ASC X12 277 response. Receipt of a status notification on all outstanding claims allows Memorial Sloan-Kettering to both eliminate status-inquiry phone calls and respond quickly to payers' requests for supplemental or corrected information.

All health plans must support these standards by October 2002, and many payers will begin implementation in 2001. The standards represent a new way of conducting business for many providers and payers. Now is the time for a shared vision of how to do business electronically. Providers need to work with payers to ensure timely, meaningful implementation of claims-tracking procedures.

James J. Moynihan, MBA, is a principal, McLure-Moynihan, Inc., Agoura Hills, california, and a member of HFMA's Southern california chapter.