Statement
of the
Medical Group Management Association

to the

National Committee on Vital and Health Statistics
Subcommittee on Standards and Security

Presented by
Robert M. Tennant, MA
Senior Policy Advisor

RE: IMPLEMENTATION OF THE HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT TRANSACTIONS AND CODE SETS STANDARDS

May 20, 2003

Mr. Chairman and members of the Subcommittee, the Medical Group Management Association (MGMA) is pleased to submit our testimony to the National Committee on Vital and Health Statistics (NCVHS) Subcommittee on Standards and Security. My name is Robert Tennant and I am the Senior Policy Advisor at MGMA where I lead the association's HIPAA implementation efforts. I am on the Executive Committee of the Workgroup for Electronic Data Interchange (WEDI) and Co-Chair of WEDI's Strategic National Implementation Process (SNIP).

The Medical Group Management Association (MGMA), founded in 1926, is the nation's principal voice for medical group practice. MGMA's 19,000 members manage and lead more than 11,000 organizations in which more than 220,000 physicians practice. MGMA's membership reflects the full diversity of physician organizational structures today, including large, world renowned, tax-exempt integrated delivery systems, taxable multi-specialty clinics, small, single specialty practices, hospital-based clinics, academic practice plans, integrated delivery systems, management service organizations, and physician practice management companies.

We are pleased that the NCVHS has invited MGMA to testify on the one of the most important topics in health care today, implementation of the Transactions and Code Sets provisions of the Health Insurance Portability and Accountability Act of 1996, or HIPAA. In my testimony today, I will offer MGMA's perspective on the recent WEDI letter to Secretary Thompson regarding industry concern over implementation of the electronic transactions and code sets on Oct. 16. In addition, I would like to offer MGMA's recommendations for some potential steps the industry can take to smooth the important transition to HIPAA.

HIPAA is no less than a complete re-engineering of the business side of the health care system. The migration to this new system has proven to be particularly daunting to physician practices. Successful deployment of HIPAA's EDI standards will rely heavily on coordination between critical trading partners-providers, vendors, clearinghouses, and health plans-coordination that has proven to be somewhat elusive. For practices, failure to comply could mean more than simply facing federal government fines; reimbursement, the lifeblood of every provider organization, could be severely impacted.

MGMA has great concern regarding the readiness level of each sector of the health care industry. Surveys appear to indicate that significant numbers of covered entities and vendors are either non-compliant or have yet to begin testing. The recently released HIMSS survey observed that only 50% of respondents reported completion of TCS implementation activities. As of the testing deadline, April 16, fully 61% of providers, 63% of health plans, 47% of clearinghouses, and 61% of vendors had not initiated testing with external trading partners. Even more worrisome, 21% of health plans, 14% of clearinghouses, and 32% of vendors reported that they did not expect to meet the October compliance deadline.

WEDI's Letter to Secretary Thompson

MGMA participated on the WEDI task group that drafted the letter to HHS. We were pleased that WEDI took on the important role of bringing to the attention of the Secretary the growing level of apprehension in the industry regarding the potential of claims payments being disrupted on and after Oct. 16. We would also like to commend David Miller of United Health Care for his work as chair of this task group. MGMA believes that it is critical that claims payments continue unimpeded after the deadline. Smaller and rural providers in particular require constant infusions of cash in order to function properly and offer high quality health care to their patients. Significant disruptions in cash flow have the potential of leading to health care service disruptions.

While MGMA is fully committed to advancing the widespread adoption of electronic data interchange, we are also concerned about the financial relationship between providers and health plans. Health plans appear to have five options on Oct. 16:

1. They continue with their non-complaint proprietary systems, and risk the potential of federal fines.
2. Second, they adopt a strict compliance approach, meaning that they will refuse to accept a claim that is not in the X12N format, or that does not contain all the required data elements, as set out in the implementation guides. This approach would result in large numbers of claims being rejected.
3. In the third approach, health plans accept compliant X12N formatted claims and X12N formatted claims that do not necessarily contain all the required data elements, but do contain enough information to permit adjudication.
4. Health plans in the fourth approach accept both current proprietary claim formats as well as data compliant X12N formatted claims.
5. The final approach would see health plans accepting both their current proprietary claim format, data compliant X12N formatted claims, and X12N "data non-compliant" claims (as long as these claims contained sufficient information for adjudication).

WEDI offered two specific proposals to the Secretary that would allow for increased implementation flexibility. They essentially combine the latter three approaches described above:

• Permit compliant covered entities to utilize standard transactions that may not contain all required data content elements, if these transactions can otherwise be processed to completion by the receiving entity, until such time as compliance is achieved or penalties are assessed.
• Permit compliant covered entities to establish a brief transition period to continue utilizing their current electronic transactions in lieu of reversion to paper transactions.

MGMA supports both of these approaches. It is critical that fully compliant health plans have the flexibility to allow their provider clients a transition period that avoids cash flow disruption. It is clear that the originating legislation and regulations were not designed to negatively impact patient care, thus the industry needs to take every action possible action to head off such an occurrence.

MGMA remains apprehensive that if health plans embrace the approach of strict compliance, the negative repercussions on the provider sector could be significant. Huge numbers of claims may be rejected, potentially impacted the cash flow of providers. Providers might be forced to revert to submitting paper claims, leading to an increase in the costs incurred to adjudicate the claims and significant delays in payment.

MGMA believes that the third approach, requiring the X12N format but allowing data content flexibility, will be best for providers. Allowing health plans this adaptability will most likely move the industry toward full compliance at a much faster rate than the other approaches. In addition, this approach allows the health plan to avoid taking on the role of a "data compliance enforcement agency" and should result in fewer providers being non-compliant.

Provider Contingency Planning

What happens if the progression to the new standards is not orderly? Many practices are developing contingency plans to ensure that they continue to operate smoothly with little or no impact on patient care. Contingency plans may include:

• Setting aside cash reserves;
• Avoiding major capital expenditures around the compliance date;
• Instituting a line of credit at a local bank;
• Identifying which health plans offer claims submissions directly through their Web site, known as direct data entry (DDE); and
• Establishing a relationship with a HIPAA-compliant clearinghouse so they can convert non-compliant electronic claims into HIPAA-compliant submissions.

This latter contingency plan will work only if a provider has contracted with a clearinghouse that not only is ready to convert claims to the standard format, but also has the capacity to handle the claims. There is growing concern that providers are relying on their clearinghouse to "make them" compliant yet many of these clearinghouses have yet to initiate testing. In addition, it is critical that providers identify any "data gaps" that exist. Most provider utilize the 1500 form to capture data. The 1500 form is not "HIPAA compliant" and does not contain all the X12N 837 required data elements. Providers submitting to clearinghouses must provide them data sufficient to populate the X12N 837.

Collaboration Key to HIPAA Success

HIPAA will have unprecedented impact on the business processes between very divergent health care trading partners. However, developing partnerships and coordinating strategies to implement HIPAA has been a challenge in an industry often known for acrimony rather than harmony between its participants.

Typically, medical practices anticipate that their practice management system vendors would provide a "HIPAA-compliant" solution. In many cases this will be true. However, some practice management system vendors may not offer their medical practice customers direct connectivity between the practice and health plans by the Oct. 16, 2003 deadline. These delays will occur for a variety of reasons.

Some vendors will have made the appropriate software remediations by the Oct. 16, 2003, deadline but not found time to test them. Other vendors may not be able to complete all the required software revisions until after the deadline. And, in some case, vendors may not offer any HIPAA solutions to their customers. Some vendors have already decided to not offer their medical practice customers direct connectivity with payers. Instead, they will require customers to use a proprietary clearinghouse to submit electronic claims. This solution will add additional cost to medical practices as they would incur per-transaction or monthly fees in order to submit medical claims for reimbursement.

These delays could make it difficult, perhaps impossible, for some practices to comply with the new standards by the October deadline. At the very least, they would slow the organization's cash flow and add new costs.

MGMA Recommendations

1. Comprehensive Surveys--It is critical that we understand the extent of industry non-compliance. The government should consider conducting a comprehensive national survey of providers, health plans, clearinghouses, and vendors. This would be done to ascertain the compliance level of each sector, identify significant roadblocks, and develop a strategy to address these roadblocks.
2. Operational Compliance Should be An Option for Health Plans-MGMA agrees with the WEDI suggestion that health plans be permitted to accept X12N formatted claims that do not contain all the required data elements, as long as the claim can be adjudicated. Some health plans, however, have indicated that they have designed their systems to conduct edits based on the 4010 implementation guides, and thus would not have the capability to adjudicate claims that do not contain the required elements. We believe that if this approach is recommended by the NCVHS and adopted by the government, it should be offered to health plans on an optional basis. Those health plans that have the capability to run two sets of edits should be permitted that flexibility. Those that do not have this ability should not be mandated to offer it.
3. Health Plans Should be Permitted to Continue Accepting Proprietary Claim Formats-As WEDI has suggested, in order to avoid potential catastrophic cash flow disruptions, compliant health plans should be permitted to continue accepting non-standard, proprietary claims for an interim period of time. MGMA recommends that this period be six months in duration. Health plans should educate their provider customers on proper compliance steps during this period.
4. Health Plans Should Report Missing Data to Providers--At the same time that health plans are adjudicating claims that do not strictly meet the content requirements, it is imperative that health plans report back to the submitting provider any data content deficiencies. This also applies to those health plans that do not plan to offer adjudication of claims that are not data content compliant. Providers will benefit most by having claims sent back with an explanation of data content deficiencies, thus allowing them to enter the missing data and resubmit the claim. This explanation of data content deficiency is especially critical if this particular health plan flexibility is granted for only a specified time period or if the health plans accept proprietary claims only on an interim basis.
5. Clearinghouse Software Should be Disseminated--Some health plans are offering their provider clients software that permits the transmission of non-standard claims to a plan-designated clearinghouse for conversion to the HIPAA format. This is a good short-term measure, although it would allow providers functionality with only that one health plan. This type of contingency software should be disseminated on a broad scale and health plans should be encouraged to adopt such a strategy.
6. Interim Payments Offered to Providers-Those health plans that do not believe they will be compliant by Oct. 16 should offer their provider clients an interim payment to avoid cash flow disruptions. This payment could be based on a calculation of the previous year's payments.
7. Health Plans Should Prepare for Additional Paper Claims-It is anticipated that some percentage providers that have not yet converted their practice management system software will revert to a paper-based system. Health plans should develop contingency plans in order to have the capability to timely adjudicate a greater number of paper claims.
8. Health Plans Should not Impose Clearinghouse Fees on Compliant Providers-Providers submitting compliant claims to a non-compliant health plan may be asked to go through a clearinghouse designated by the plan to convert the claim back to their proprietary format. Should a plan adopt this strategy, they must not be permitted to impose any fee for this transaction.
9. Expansion of CMS Provider Educational Activities-While MGMA acknowledges the excellent effort put forward by CMS's Office of HIPAA Standards, they are clearly underfunded. The coming months are critical to providers seeking to comply with the standards, it is imperative that CMS augment its current level of educational outreach. This outreach should focus on: (1) provider compliance that include vendor strategies; (2) specific assistance aimed at small and rural providers, community health centers, and other "at-risk" organizations; (3) expansion of the current face-to-face and conference call activities; (4) developing appropriate contingency plans; and (5) closer coordination with provider trade associations to ensure that a unified implementation strategy is communicated.
10. Expansion of CMS Vendor Educational Activities-CMS and WEDI have held very successful face-to-face vendor forums in the past year. These should be continued and offered in more areas of the country. CMS should offer technical assistance to vendors to facilitate the development of appropriate compliance products for providers.
11. NCVHS to Revisit Industry Compliance in Three Months-By August, we should have a better sense of how providers and others are preparing for the Oct. 16 deadline. At that point the NCVHS may wish to reexamine industry recommendations and develop additional contingency recommendations to the Secretary.

Conclusion

In conclusion, MGMA is highly supportive of the development and use of national standards for the health care industry. Standards for the collection and transmission of electronic health data will improve the quality of health care, while at the same time lower the cost of providing health care to our communities. While MGMA is confident that HIPAA will ease administrative burdens and facilitate improved data interchange within the health care community, roadblocks exist that must be addressed before full implementation will be achieved. We appreciate the Committee's interest in this important topic and thank the Subcommittee for inviting us to present our views on this issue.