A

Report to

NCVHS Subcommittee

on

Health Data Needs, Standards, and Security

by

Richard C. Sheldon

Executive Vice President

Self-Funded Plans, Inc.

1432 Hamilton Avenue

Cleveland, Ohio 44114

(216) 566-1455

(216) 566-1505 Fax

January 22, 1997

Introduction

Self Funded Plans, Inc. is a Third Party Administrator (TPA) located in Cleveland, Chicago, and Pittsburgh. Self-Funded Plans, Inc. provides administrative services to Payers such as self-insured employers and insurance companies.

Medillume III, Inc., an affiliate of Self-Funded Plans, Inc., provides administrative services to Payers and other organizations such as provider-sponsored community health plans, health maintenance organizations and integrated delivery systems.

It is estimated that 55% of U.S. workers, from every size and format of employment, are covered by employee benefit plans managed by Third Party Administrators. Third Party Administrators are also active in the many new forms of health plans sponsored by doctors, hospitals, HMOs and community pools.

Third Party Administrators operate much like independent CPA or law firms, providing continuing professional outside claims and comprehensive day-to-day benefit plan administration for many client employers, benefits plans, and insurance companies. Many of the plans include self-funding by entities such as small business, big corporations, unions, state & local governments, religious organizations, association-sponsored plans, and every industry and profession.

Third Party Administrator markets have grown over 1,500% over the past 16 years. The Society of Professional Benefit Administrators (SPBA), the national association of Third Party Administrators, currently has about 400 Third Party Administrator firms. The Self-Insurance Institute of America (SIIA), the national organization for Third Party Administrators and the self-funded community, currently has about 1,000 members. This success is, in large part, due to the leading role SPBA and SIIA members have played in successful health cost containment efforts, cost efficient administration techniques for health benefit plans, and attention to complex government compliance requirements.

Questions Raised by NCVHS Subcommittee

1. What are your organization's expectations for the results of the Administrative Simplification standards requirements in the Health Insurance Portability and Accountability Act of 1996? In what ways will the outcome affect the members of your organization, both positively and negatively?

Expectations

• Development of a standard method of transmitting health information. The standard will encompass the transmitting format as well as the codes to be used within the transmitting format.
• Acceleration of the use of electronic transmission by all parties.
• Lower cost of servicing a plan.

Positive Outcomes

• Health plan administration will become more efficient in the long term in the following ways:
• Standardization will result in more data flowing electronically. In 1995, Self-Funded Plans, Inc. began receiving claims electronically. That year we received 6% of our claims electronically. In 1996, that figure only increased to 8%.
• Standardization will allow smooth software or system transitions because data will be moved in a standard format.
• Standardization will result in increased productivity and competitiveness.
• Standardization will speed up transactions, resulting in better service to health plan participants, sponsors and the provider community.
• Standardization will result in more comprehensive data that provides for the improved analysis of health care delivery.
• Standardization will result in the elimination of paper.
• Standardization will result in better accuracy because data is not re-keyed each time it is moved or used.

Negative Outcomes

• Health plan administration will become more expensive in the short term, in the following ways:
• Standardization will require extensive short term investment in systems, staff, training, and communications. This is in addition to the investment already required to operate in the rapidly changing health care industry.
• Standardization will cause an increase in the cost of receiving health data, because it can be keyed in from a hard copy less expensively than to receive it electronically through a clearinghouse at their current fee. For example, some Third Party Administrators can input data from a paper claim for $.40 a claim and the clearinghouse charges $.60 a claim. Additionally there are data entry organizations that offer to input such data for $.25 a claim.
• Standardization will reduce the administrative options (competition) available to health plans because many Third Party Administrators will not have the necessary resources to comply and will have to merge or close their doors.
• The standards will have very little "teeth" because there are so many exceptions that allow state law to supersede them. The federal standards should be determined and should pre-empt state law. To do otherwise flies in the face of the concept of a "standard".
• Compliance with the standardization requirements will result in multiple data processing problems such as:
• The scheduled implementation dates for the standardization coincide with the problem of converting computer systems, worldwide, to be able to recognize the year 2000. This is a major task that must be completed before efforts can be directed elsewhere.
• The concept of electronic signatures can pose great problems and expense if it is interpreted to mean that an "image" must be electronically transmitted and stored. The concept of an imaged signature, is in direct opposition of the goals of Administrative Simplification because it entails receiving and verifying such signature. An approach that is more congruous to the goals would be to use a personal identification number (PIN) to authenticate that a signature was received and transmit such authorization electronically. Another approach would be for the provider to verify that a signature was received at the point of service and indicate such receipt on the electronic transmission. The use of such a public/private key convention is superior to a graphic image.

2. Does your organization have any concerns about the process being undertaken by the Department of Health and Human Services to carry out the Administrative Simplification requirements of this law? If so, what are those concerns and what suggestions do you have for improvements?

Concerns

· Time frame is too aggressive for the scope of the project. Standards should be selected and then tested before final adoption. The testing phase would also help determine the effectiveness of the standard before it is adopted. After adoption, a realistic time frame for implementing the standards should be permitted. Consider that implementation of the standards will require the software companies to program the standards into their software, then each party that has to comply with the standards will have to review each vendors' software for compatibility with hardware and other software requirements and then train their staff to use the software. From past experience, our last aggressive search for a computer software system lasted six months. The implementation period for that software was an additional 6-9 months. Planning for these realistic steps should result in the modification of the compliance dates.

· Will the standards and the use of the standards be effectively communicated to the parties that have to comply before they are required to comply and be subject to penalties? Once the standards are selected there should be easy manuals written explaining the standards and the codes used to comply with the standards. They should be written in a manner that can be easily understood and not like a federal regulation.

3.What major problems are experienced by the members of your organization with the current transactions specified under HIPAA? For users of the data, are you receiving the information you need from the transactions to pay the bill, manage the care process, etc., and what is your perception of its quality?

Problem - Provider identification

Providers are currently identified through a taxpayer identification number (TIN). Problems begin to emerge when more than one provider uses the same TIN. For example, a foundation may use one TIN for both institutional and professional services. The number of entities and professionals using that TIN can be in the hundreds. Similar circumstances occur with a physicians group practice (although the numbers are not as great).

In addition to that problem, the institutions and professionals participate in many Health Maintenance Organizations (HMOs), Exclusive Provider Organizations (EPOs), Preferred Provider Organizations (PPOs), Physician Hospital Organizations (PHOs), and Managed Care Organizations (MCOs.) However, not every member of the foundation or group practice participates in each program. For example Dr. X of group practice XYZ Physicians may be in 8 HMOs and PPOs that differ from those in which Dr. Z participates. It is the responsibility of the HMO, EPO, PPO, PHO or MCO and the health plan to identify when a provider participates in such program. However, each HMO, EPO, PPO, PHO and MCO provides rosters using various formats to identify participating providers (i.e., names [Dr. John Smith/ Smith, John/ John Smith, MD], and identification numbers.) Because there is no unique provider identifier, and each HMO, EPO, PPO, PHO and MCO uses a different name format for their roster of providers, it is extremely labor intensive to identify a provider.

The following additional factors amplify the problem:

• Self-Funded Plans, Inc. is currently administering 200 client accounts which access 40+ PPOs. This is a common experience for Third Party Administrators.
• Many clients need multiple PPOs to accommodate multiple locations.
• Self-Funded Plans, Inc. must be able to match a provider to a PPO (or a EPO within the PPO) when the claim enters our facility. It is very difficult to match the provider with other providers in the data base. Tax payer IDs (currently used to identify providers) do not work well because there could be 50 physicians working under one ID number, and not all of them may be a member of the PPO. Also, each PPO uses a different format for the name i.e., spacing, first and last name switched, etc.
• Some Third Party Administrators have dedicated departments that do nothing but maintain provider files. Furthermore, this is an ongoing problem because each PPO updates their list on a monthly basis.

As a result, currently, the quality of this data is very poor. The implementation of a unique provider identifier attempts to correct this problem. ASC X12N 837 currently has an optional field for "Medicare number or the provider site ID" and it is sometimes filled by a UPIN number. Use of the UPIN number on an expanded basis could be the resolution to the problem of identifying providers. The UPIN number should be randomly assigned to maintain confidentiality. Additionally, to more completely resolve this problem, this solution should be carried over to the paper claims that are permitted to exist under the Administrative Simplification rules.

Problem - Correct Routing

Due to the use of HMOs, EPOs, PPOs, PHOs, MCOs, TPAs and other service providers by health plans, there may be several entities to which a claim must be routed before it can be fully processed. As a result, the standards must recognize and accommodate multiple routing stops before a claim is paid. Failure to recognize these stops, will result in delays and inefficiencies as claims are sent to the incorrect parties. Further examples of these "stops" include a utilization review firm which pre-certifies a hospital admission, a PPO which re-prices a claim and a Third Party Administrator which adjudicates the claim for payment by the Payers.

Problem - Miscoding

There are standards currently in place with respect to filing health claims. However, the mere existence of a standard does not mean that it will be completed accurately. For example, providers currently will insert information into a field that has meaning to that provider only and means nothing to the recipient. Similarly, providers often do not understand the meaning of the codes that are to be inserted into the standard format, resulting in inaccurate data being reported.

4.How can the goal of Administrative Simplification best be achieved while meeting the business needs of all stakeholders?

• The goal of Administrative Simplification can best be achieved by recognizing that many standards already exist and have been accepted at the user level.
• The plan should be to build on those accepted standards, such as ASC X12N.
• The goal can also be achieved through effective communication. Once a standard is chosen, it must be effectively communicated to the end user.
• The goal can also be maintained by planning for change. Periodic updates of standards will be required and should be considered at this stage.
• The goal can be achieved if appropriate time and consideration is given to the selection and implementation of the standards. This is a huge task and 2 or 3 years may not be an achievable time span. Perhaps staggering the implementation dates would provide a benefit to achieving the goals. For example, implement the ASC X12N 837 first, then a year later implement the eligibility standard.
• Lastly, the goal can be achieved if the process is not over complicated. Rules and regulations should be provided in a manner that can be understood and implemented by the end user.

I appreciate the opportunity to assist the NCVHS in its goal to reach Administrative Simplification.

Richard C. Sheldon

Executive Vice President

Self-Funded Plans, Inc.

1432 Hamilton Avenue

Cleveland, Ohio 44114

(216) 566-1455

(216) 566-1505 Fax

Additional Resources

George Pantos Fred Hunt

Self-Insurance Institute of America Society of Professional Benefit Administrators

Suite 401 Suite 670

200 K Street NW Two Wisconsin Circle

Washington, D.C. 20006 Chevy Chase, MD 20815-7003

(202) 463-8161 (301) 718-7722