Mr. Chairman and Members of the Committee, I appreciate having the opportunity to present this statement summarizing our views and concerns related to implementation of the Administrative Simplification components of the Health Insurance Portability and Accountability Act of 1996.
My name is Gary Knaus, I am President and Chief Operating Officer of Context Software Systems, Incorporated, a privately held firm with offices in Illinois and Florida. Context specializes in providing technological solutions that address the coding, clinical editing, fee management and regulatory compliance challenges facing the healthcare industry. Our firm's products range from coding and clinical editing software programs designed to increase the likelihood that claims information submitted by providers is accurate and compensable, to Workers' Compensation bill review software designed to help payers and third party administrators ensure that claims are paid according to state regulations. Context's 10,000 clients represent a broad spectrum of the healthcare industry, from solo physician practices to the largest payers.
Context is actively involved in the Association For Electronic Healthcare Transactions and the International Billing Association, the latter for which I am a Special Advisor to the Board of Directors.
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? Of all the features to be addressed by administrative simplification, which ones are of highest priority to your organization? What problems do they currently pose that make them important to address?
We anticipate that the impact of the standards requirements will be positive for our firm, for many other software vendors in the health information systems (HIS) industry, and believe that in the long term, significant reductions in the costs associated with administering healthcare will be achieved. Specific positive outcomes we envision include:
By contrast, we believe there will be less favorable short- and mid-term impacts. They include:
This last issue we consider to be the highest priority for both our firm and our clients.
2. Does your organization have any concerns about the process being undertaken by the Department of Health and Human Services to carry our the Administrative Simplification requirements of this law? If so, what are those concerns and what specific suggestions do you have for improvements?
We are pleased that HHS is actively soliciting the input of industry stakeholders.
3. What major problems are experienced by the members of your organization with the current transactions specified under the HIPAA? For generators of the data, how readily available is the information that you need to provide for the transactions and how meaningful is that information from a clinical perspective? 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 perspective of its quality?
With the occasional exception of first report of injury, our Workers' Compensation clients have elected not to implement transactions specified under the HIPAA, including those which our product is logistically situated to handle. Such transactions include health claims, eligibility, attachments, claims status, and referral certification and authorization. Also, we are not aware of initiatives currently underway by other vendors in this market segment to implement these transactions. I will discuss why we believe there has been a general lack of interest in these capabilities in the Workers' Compensation market when I address the next question.
Regarding the availability of data required to perform transactions, we have concerns related to the impact of the restrictive license terms and fees being imposed by the American Medical Association (AMA) on the healthcare industry for use of CPT codes. HIS firms developing products which include CPT are being required to enter into lengthy and complex contracts with the AMA. These contractual requirements make it difficult for firms which incorporate CPT in their products to enter into normal and reasonable business agreements with their resellers, vendors and clients. These terms not only impede the application of technology designed to lower healthcare administrative costs and improve the quality of procedural data for use in clinical studies, they increase costs to the industry.
To illustrate how development is being impeded, vendors are currently prohibited by the AMA from creating and marketing Internet software applications that contain CPT. Development is further impeded and product costs further increased by the fact that vendors must shift valuable resources away from the design and development of products which better meet healthcare industry requirements, to ensuring that all of its contracts and agreements fulfill the AMA's extensive CPT license terms. Finally, there is another adverse consequence: CPT license fees may be imposed multiple times on the same end user. As an example, a physician practice could potentially pay separate license fees for use of CPT in its computerized patient record system, in its coding software, in its clinical editing software, in its practice management system, in its fee management programs, through how-to books it purchases to assist with coding and fees and through its purchase of one or more of the AMA's CPT books.
4. How can the goal of administrative simplification best be achieved while meeting the business needs of all stakeholders? Are there any constraints that you feel should be heeded in the process of addressing simplification, and what are they?
In addition to the concerns I have already expressed, there are two factors we believe may further constrain implementation.
First, the Workers' Compensation industry's EDI initiatives have been focused almost exclusively on first report or injury and meeting various state mandated EDI requirements. Why? The first report of injury transaction provides firms with timely information that is needed to initiate the case management process. The earlier the intervention of case management, the greater the savings; thus the market's recognition of the value of this transaction. As to state EDI transactions, which typically involve sending either on tape, diskette or via modem, copies of the insurance claim or explanation of reimbursement, these functions are performed only because they are mandated. Firms handling Workers' Compensation bills must also manage complex state fee schedule rules, strict reporting guidelines and various state-specific managed care initiatives. Since these bill review firms are basically service companies and compensated on a per-bill or per-line basis, there is little incentive, or resources remaining after meeting all the state mandated requirements, to implement the other electronic transactions. Only the larger, more resource rich firms that perform Workers' Compensation bill review functions, are likely to implement these electronic transactions. Widespread implementation in this market is unlikely to take place as long as state-specific EDI requirements differ from those defined under the HIPAA, or until new technologies make such transactions cost effective.
Second, implementation of the Administrative Simplification standards requirements will coincide with system conversions and software reengineering activities dealing with what is often referred to as the year 2000 problem: that is, the inability of a computer program to properly interpret the year 2000. Estimates of world wide costs associated with reengineering software to eliminate this problem have been as high as one trillion dollars and estimates of costs to United States firms as low as a few hundred million dollars. Although we are not aware of any HIS-specific studies that address this issue, and that it is unlikely that a firm having difficulties in this area would want to broadcast such information to the industry, we believe its impact has the potential to be substantial: affected firms will divert resources away from other system implementation activities, such as Administrative Simplification standardization requirements, and apply them to addressing this complex problem which directly effects their ability to operate.
I would like to again thank you Mr. Chairman and Members of the Committee for being allowed to make this presentation. I look forward to answering your questions.
Gary M. Knaus
President and Chief Operating Officer
Context Software Systems, Inc.
241 S. Frontage Road
Burr Ridge, Illinois 60521
630-654-8800