HIPAA Regulatory Alert

CMS implements contingency plan

Legacy claims accepted for undetermined period

With surveys indicating that the required Oct. 16 compliance with transaction and code sets (T&CS) HIPAA requirements would be spotty at best, the Centers for Medicare & Medicaid Services (CMS) has drawn industry support for deciding to implement its contingency plan and accept legacy claims for an undetermined period of time while efforts toward full compliance continue.

The announcement from the federal agency was followed by one from the Blue Cross and Blue Shield plans saying that they, too, would accept noncompliant claims for a while, as long as good-faith efforts toward compliance continue.

Representatives of all elements in the HIPAA process praised the decision to avoid a major train wreck of claims not being processed by accepting noncompliant claims, but also stressed the need for all parties to make good use of this grace period by taking the steps necessary to come into full compliance.

As the Oct. 16 T&CS deadline loomed closer, CMS first announced on Sept. 11 its contingency plan for temporarily accepting noncompliant claims. "As the largest HIPAA-covered entity," agency acting deputy secretary Leslie Walker said in an announcement, "we at Medicare do understand the difficulties in becoming compliant first-hand. That’s why we’ve been working hard to help our HIPAA partners become compliant. . . . Now we are working on the possibility of Medicare implementing a contingency plan, and I urge other health plans to announce their contingency plans as soon as possible to allow their trading partners enough time to make any needed changes to their business operations to make sure any disruptions in their health care operations are minimal."

Contingency plans will help meet agency goals

CMS administrator Tom Scully later said that implementing the contingency plan moves the agency toward the dual goals of achieving HIPAA compliance while not disrupting provider cash flow and operations. And CMS director of Medicare management Tom Grissom said, "Medicare is able to process HIPAA-compliant transactions, but we need to work with our trading partners to increase the percentage of claims in production."

During the contingency period, CMS regularly will reassess the readiness of its trading partners to determine how long the plan will remain in effect. With the contingency plan in effect, there was no chance that the implementation date would be delayed.

American Association of Health Plans vice president for private market regulation Tom Wilder tells HIPAA Regulatory Alert that stakeholders accepted the CMS announcement because it’s in line with what most health plans will do — accept legacy claims for some period of time from clearinghouses or providers that aren’t ready for the Oct. 16 deadline, so long as the submitter is making a good-faith effort to transition to the new standard.

American Medical Association trustee Joseph Heyman said his organization had a three-step plan for a smooth transition to the T&CS standard — 1) physicians finalize plans to become HIPAA-compliant as quickly as possible; 2) CMS implements its contingency plan; and 3) private sector payers also develop contingency plans to allow legacy claims while the transition to full compliance continues.

American Hospital Association officials had called for implementation of contingency plans before the announcement was made and praised CMS for its decision.

Testifying before the U.S. Senate Special Committee on Aging just after CMS said it would implement its contingency plan, CMS Office of HIPAA Standards director Jared Adair said experiences in other industries have shown the need for health care to standardize transaction information. "Because the banking industry has agreed upon transaction standards," he said, "customers enjoy the safe use of their bankcards at ATMs around the world. Likewise, standards in the shipping industry make it possible to track and deliver parcels worldwide. Such standards and interoperability will benefit the entire health care industry."

There will be cost savings over time

Adair added that while many entities, including CMS, have revised upward their estimated costs for implementation of the T&CS requirements, because of unexpected complications encountered during the assessment and implementation process, "it is clear that HIPAA is going to improve the administrative costs for everyone in the long term. For example, HIPAA is expected to create significant savings for the health care industry and the taxpayer over the first 10 years of implementation. It also is important to note that HIPAA carries significant cost-reduction capabilities over time, when taking into account the start-up costs currently being incurred. Health care providers will be able to submit bills in the same format to all payers and be assured the bills will be accepted. Providers also will have the ability to query claim status and eligibility by computer rather than over the phone. Plans will not have to keep or store paper claims. This will reduce overhead as well as improve turnaround time for transactions, both of which should have a positive impact on cash flow."

Adair said that despite the significant challenges involved, substantial progress has been made toward T&CS implementation, although the progress was not enough to ensure that all health care providers and payers are 100% ready to support the uninterrupted continuation of the nation’s $1.4 trillion in health care payments.

He said as the industry moves toward full implementation, three areas of the process need to be reviewed: 1) use of companion guides that describe situational elements but could be misused to exceed HIPAA standardization requirements; 2) required data elements not necessarily needed to adjudicate a claim; and 3) clarification of implementation guidance that is open to interpretation.

"While difficulties exist in achieving compliance," Adair said, "this is not the time to waver in our commitment to offer order and consistency in health care administrative transactions. Rather, it is a time to work with covered entities as they strive to cross the finish line."

(CMS contingency plan information is available at www.hhs.gov.)