HIPAA electronic transaction standards: E-commerce or compliance? - Digital Perspectives - Health Insurance Portability and Accountability Act - Brief Article

Healthcare Financial Management, April, 2002 by James J. Moynihan

On December 27, 2001, President George W. Bush signed into law the Administrative Simplification Compliance Act, giving certain healthcare organizations until October 2003 to comply with the electronic transaction set and code set standards mandated by the Health Insurance Portability and Accountability Act (HIPAA) of 1996. (a) To qualify for the deadline extension, providers and health plans must file a compliance plan, complete with supporting material, with the Secretary of HHS by October 16, 2002.

The compliance plan must include:

* A summary of the organization's analysis of the extent to which, and the reasons why, the organization is not in compliance;

* A budget, schedule, work plan, and implementation strategy for achieving compliance;

* A statement of whether the organization intends to use a contractor in achieving compliance; and

* A time frame for testing that begins no later than April 16, 2003.

Most health plans and providers probably will file for an extension. HIPAA requires health plans to support all mandated transactions electronically. Healthcare providers, however, have a choice of which of the transactions they will support. The question remains whether healthcare providers will commit their organizations to EDT and standards-based processing and use HIPAA as the foundation of their e-commerce strategy, or opt for the bare minimum to maintain current functionality and compliance with their Medicare fiscal intermediary.

Some providers might decide to limit their compliance plan to meeting only the HIPAA requirements regarding claims and remittances with government payers such as Medicare and Medicaid. Such a decision, however, may be shortsighted. Now, as never before, it will be important to have the capability to send claims electronically to commercial payers. It is likely that many smaller providers will fail to achieve HIPAA compliance by October 2003 and will revert to paper claims filing. Payers could become swamped with paper claims forms, and hospitals that are unable to submit claims electronically could see their cash flow negatively affected as payers struggle to cope.

Providers can avoid such cash-flow delays only by implementing a plan to send HIPAA-compliant claims to the greatest possible number of commercial payers. The same all-payer strategy should be applied to remittance processing. While providers must upgrade to support the HIPAA-compliant electronic remittance advice from Medicare, they also should take this opportunity to build a solution that works for all commercial payers, thereby eliminating as much data-entry work in patient financial services as possible.

Provider support for HIPAA transactions should not stop at claims and remittance processing. Many providers have not yet even begun to address the electronic transactions for eligibility (ASG X12 270-271), claims status (ASC X12 276-277), and referral/certification (ASC X12 278). Faced with the daunting challenges of complying with the HIPAA privacy requirements, some organizations might be tempted to postpone development of the capabilities necessary to perform these other transactions electronically simply because they are not required to do so. Yet it would be a mistake to delay support for these HIPAA transactions. For all the money hospitals will spend on HIPAA compliance, the investment in the capability to perform these transactions electronically may be among the most important in terms of both cost reduction and true administrative simplification. These transactions offer the clearest opportunities to eliminate misdirected and denied claims, speed collections, automate collection tracking, and elimi nate the errors that plague patient financial services today.

Conclusion

Most hospitals recognize the importance of meeting their minimum requirements under HIPAA to comply with the HIPAA standards for electronic Medicare claims filing and electronic remittance receipt. Ensuring the constant, uninterrupted flow of such transactions electronically is mission-critical to maintaining necessary cash flow.

Healthcare providers, however, also need to recognize that HIPAA offers them an opportunity to develop a comprehensive e-commerce strategy based on the HIPAA standards. The compliance plan each provider submits to HHS will document how well that provider seizes or misses that opportunity.

(a.) To read the Administrative Simplification compliance Act, go to http://thomas.loc.gov (search on FIR 3323 and select the enrolled bill).

James J. Moynihan, MBA, is a principal, McLure-Moynihan, Inc., Agoura Hills, California, and a member of HFMA's Southern California Chapter. His phone number is (818) 706-3882, and his e-mail address is jim.moynihan@mmiec.com