Administrative simplification: a victory for the industry and HFMA - Healthcare Financial Management Association; passage of the Health Insurance Portability and Accountability Act of 1996

Healthcare Financial Management, Dec, 1996 by Warren Hern

On August 21, when President Clinton signed into law the Health Insurance Portability and Accountability Act of 1996, the healthcare industry and HFMA both won an important victory. For the healthcare industry, the bill's signing means less paperwork for payers, providers, and patients; more safeguards to ensure the privacy of patient data; and savings of time and money. For HFMA, the bill's signing culminates 25 years of work toward achieving uniformity in the healthcare administrative process.

To conduct core healthcare administrative activities, two million healthcare providers and 30,000 payers currently share and exchange patient data through a mix of paper-based forms, faxes, telephone calls, and inconsistent electronic-based forms and systems. The new law requires all payers to use standard electronic transactions to conduct these administrative activities - activities such as submission of claims and attachments, processing of enrollments and disenrollments, verification of insurance eligibility, and transmission of payment and remittance advice. While providers are not directly governed by the new law, they will be affected nonetheless. Payers will require providers to comply with the standards.

The HHS secretary must publish the initial requirements 18 months from the law's enactment date. Most payers will have 24 months to comply with the new law.

Standardized electronic transactions will allow healthcare providers and payers to establish more effective security controls over access to patient data. Standardized electronic transactions also will save time and money by reducing the administrative burden of paper processing and the use of inconsistent electronic formats and systems. A study conducted for HFMA by Lewin-VHI estimates the potential dollar savings at between $3 billion and $6 billion per year.

HFMA has promoted uniformity and administrative simplification in healthcare business transactions at the national and state levels for the last 25 years. In the past four years, the Association has increasingly collaborated with policy makers to achieve its goal. HFMA took the lead in developing and promoting uniform electronic standards by founding the National Uniform Billing Committee (NUBC) and the Accredited Standards Committee (ASC) X12 Healthcare Task Force. EDI standards developed by the ASC X12 task force and data sets of the NUBC will become the primary basis for electronic core transactions.

HFMA also worked with a core group of Association members to develop legislation to address the uniformity issue. In 1993, HFMA presented an administrative simplification proposal to Sen. Christopher Bond (R.-Mo.), a longtime proponent of HFMA's initiative. Variations of the proposal subsequently were reintroduced in the Senate and House by a bipartisan group of sponsors. As part of shepherding this proposal through Congress, HFMA members and staff held many informal meetings to ensure that Congressional staff understood the components of and rationale behind the proposal.

I, along with other HFMA leaders as well as staff, testified before various Clinton administration and Congressional committees about the need for administrative simplification. Many HFMA members wrote letters to their Congressional delegations and visited with legislators in their home states and in Washington, D.C.

HFMA's advocacy efforts promote seven principles that must be accepted if true administrative simplification and uniformity are to be achieved. These principles, developed by an Association advisory group and members of the National Matrix, are:

* Mandated industry compliance;

* Coordination of all Federal and private-sector healthcare programs by an industry commission;

* Implementation of electronic solutions using existing EDI standards;

* Adherence to uniform standards for core transactions;

* Access to timely and accurate eligibility data and coordination of benefits data and uniform identifiers;

* Enforcement of confidentiality and privacy of data and preemption of state and Federal laws governing electronic data; and

* Adoption of reasonable and strategic implementation timetables.

All HFMA members and staff should be proud of the work they have done to bring about administrative simplification. HFMA has contributed to a more efficient healthcare system.