Memo

Following are our expectations for the results of the Administrative Simplification standards requirements in the Health Insurance Portability and Accountability Act of 1996:

Health Identifiers - Health identifiers for providers, health plans, and individuals are something that we have desperately needed for quite some time. We have already made strategic changes in our file structure to accommodate these identifiers. The implementation of these identifiers will reduce our expenses in that it will reduce our training and support costs. We have high expectations that these will become a reality within the proposed time line. We fully expect all payers to be able to use these identifiers in the next few years, although our system will still be able to accommodate the non-compliant payers. We whole- heartedly supports this initiative and is very anxiously awaiting the day when it becomes a reality.

Transactions - This is a different story. It is our understanding that HIPAA is supposed to standardize not only the transactions to be used, but also the interpretation, or the implementation of those transactions. However, we fear that even with the transaction standards that HIPAA implements, payers will still demand their little idiosyncracies. Even HCFA, with its standards, has been unable to prevent the individual Medicare intermediaries from altering the HCFA standard to meet their own purposes. This is a critical area. If HIPAA fails in the goal of standardizing the transaction and the interpretation of that standard among all payers, providers, and clearinghouses, the future of EDI in the medical industry will be severely limited.

We believe that the ANSI 837 transaction is the only transaction that should be considered for the submission of insurance claims and encounters. Other transactions fall short not only in the type of data able to be conveyed, but also in the efficiency of conveying the data.

We have no concerns about the process being undertaken by the Department of Health and Human Services to carry out the Administrative Simplification requirements of this law.

We hope to have no major problems with the current transactions specified under the HIPAA. As a vendor of practice management systems, we do not care about the data within the transaction so much as we care about the standard transaction, the payers' interpretation of that standard, and our ability to rely on that standard to exchange medical data with payers.

Enough with the formalities. I wish to describe some of the frustrations MegaWest Systems has gone through in being a pioneer in medical EDI.

We realized quite some time ago that the ANSI 837 would eventually become the standard transaction for the interchange of electronic medical claims. Consequently, we decided to use the 837 wherever the payer would accept it. We assumed that because HCFA was requiring its use by all Medicare contractors that we should certainly be able to use it to send claims to Medicare without too much difficulty.

We were wrong. We began with Aetna because of the many Medicare contracts they held. We found that in our "testing" of our 837 with Aetna, we were spending most of our time helping them debug their translator and helping them learn how the 837 worked. After several weeks and even months of this, we finally abandoned this effort with Aetna and reverted back to the National Standard Format. We tried to tell ourselves that this was just one payer and that we would have better luck with the next payer. Wrong again. We next worked with Cigna to use the 837 for North Carolina Medicare. We experienced the same time-consuming frustrations with Cigna as we had with Aetna. Even though their people were good to work with, they simply had no knowledge or understanding of the 837. Their translator was also plagued with "bugs". We spent a lot of time with them and their translator's vendor correcting problems with it. Needless to say, we ended up reverting back to the National Standard Format with them as well, after tying up millions of dollars in insurance claims with the provider. We worked with Pennsylvania Blue Shield with the same results. After several weeks of a similar ordeal, we were finally able to get to a production status with Transamerica for Medicare claims in California. However, they recently took it upon themselves to go against the HCFA "standard" implementation guide for 837 and made changes to suite their own needs. We finally changed our policy and decided to not attempt any more 837s until the HIPAA standards are in force.

To summarize, we have realized by sad experience that it is going to be a tough road to get payers to understand and effectively implement the 837 or other ANSI transactions to receive medical claim data. However, having said that, MegaWest Systems firmly believes that the ANSI 837 is the only transaction that can be considered for the standard transaction for the exchange of medical claim data. All other transactions fall short not only in the type of data able to be conveyed, but also in the efficiency of conveying the data. We just acknowledge that it may be difficult to get there.

HIPAA's standardizing of the transaction, implementation of that format, and identifiers for providers, payers, and patients will go a long way toward removing the obstacles we experienced in our pioneering of the 837. We have high hopes that these standards will materialize. We hope that there will be an avenue for formally submitting complaints against payers who are not following the standards. We look forward to the future of EDI fully believing that HIPAA will pave this rocky road toward truly efficient electronic medical data interchange.

[Additional Statement made on February 11, 1997]

Mr. chairman and members of the subcommittee, I wish to make a statement clarifying my testimony given on Monday, February 10, 1997. MegaWest Systems wishes to make very clear the following:

1) We are 100% in support of the ASC X12 837 transaction as the only transaction that should be considered for the submission of non-pharmacy claims.

2) There needs to be provision for enforcing compliance with this standard. There needs to be a process for vendors (such as ourselves) to request investigation of payers who are not in compliance with the standard.

3) The communications process for exchanging these transactions sets needs to be standardized. Nobody has addressed this and it's a huge problem!