Testimony of National Data Corporation

Administrative Simplification Subtitle

Health Insurance Portability and Accountability Act of 1996 (P.L. 104-191)

Meeting of the National Committee on Vital and Health Statistics (NCVHS), Subcommittee on Health Data Needs, Standards, and Security

Presented by Jeanne Schulte Scott, RN, JD, Government and Legal Affairs

On behalf of National Data Corporation, thank you for the opportunity to present to the members of the Subcommittee our views, perspectives, and concerns under the Administrative Simplification subtitle of the Health Insurance Portability and Accountability Act of 1996 (Pub.L. 104-191). My name is Jeanne Scott and I am director of government and legal affairs for CIS Technologies, Inc., a wholly owned subsidiary of National Data Corporation. In addition to my responsibilities with CIS and NDC, I am the immediate past national chair of the Association for Electronic Health Care Transactions (AFEHCT), the trade organization for the many vendors, suppliers, software developers and electronic transmission networks and clearinghouses that are taking the concept of Electronic Commerce (EDI) in health care from the drawing board to the operating room. Currently I am on the Board of Directors of the Workgroup for Electronic Data Interchange in Health Care (WEDI) and serve as its National Secretary. Both AFEHCT and WEDI have long supported the use of national standards for the transmission of health care data and the National Data Corporation is proud of its leadership role in this effort through these organizations.

National Data Corporation processes over 2.3 billion electronic transactions annually. We provide these services to a broad base of customers in both the health care and financial markets. Last year we processed 800 million real-time transactions through our health care network. When combined with our financial services business, we handled a record peak of 313 transactions per second. On average we process more than 3.5 million health care transactions every single day.

Our health care products and services in pharmacy provide an endpoint-toendpoint delivery of prescription claim and clinical information. In recent years, the Company has expanded its products and services to virtually every segment of the health care industry: pharmacies, physician practices, hospitals, clinics, dental practices, nursing homes, integrated delivery networks, and managed care organizations. Today we are the largest electronic claims processor of hospital claims (UB92) and second largest processor of physician claims (HCFA 1500). Some 90 percent of the nation?s pharmacies now use National Data?s 24-hour network for claims transaction processing.

We serve customers from the smallest independent pharmacy to the largest national chains, as well as long-term care facilities, hospital pharmacies and mail-order pharmacy operations. Our pharmacy practice management systems are in thousands of pharmacies across the United States and Canada.

The wide array of health care EDI products and services help our customers reduce overhead expenses, increase operational efficiency, and enhance their competitiveness. As more hospitals, pharmacy and physician practices merge to form broader patient delivery systems, health care networks play an important role in connecting critical financial and clinical information among all providers and payers.

With such a diverse base of health care customers, we recognize the importance and value of delivering information critical to improving decisions made at the point-ofcare and ultimately optimizing therapeutic outcomes and reducing health care costs.

Our testimony focuses on the four specific questions provided by the 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 (HIPAA)? In what ways will the outcome affect the members of your organization, both positively and negatively?

Simply stated, we see the objectives of HIPAA leading to increased ease of use, exchange, and interpretation of health care information across all health care market segments. Eventually integration of health care information will improve as standards are implemented.

Realistic timeframes and logical migration paths are needed to ensure we can answer the questions of What, When, Where, and how much will it costs? Interfaces to legacy systems are complex and should not be over simplified or understated. Just look at the issues, costs, and implications arising from the approaching year 2000.

As the largest health care transaction processor of real-time pharmacy claims, over 800,000,000 annually, substantial ongoing capital investments are made to ensure the performance, reliability, and integrity of our health care network. Moving approximately 4 billion bytes of information from endpoint-to-endpoint, seven days a week, 365 days a year, is less efficient where there is a lack of standardization.

To ensure performance, reliability, and integrity of the data and our network, we require our customers to pass a certification process. On average, certification requires 3 to 4 weeks of testing. Over the past 5 years we have certified over 275 U.S. Pharmacy System Vendors. This represents approximately 17 man years of work that NDC has expended. Each network, payer, provider, and other health care organizations sending and receiving pharmacy claims real-time have spent similar significant man years certifying to ensure the integrity of their data and networks.

The pharmacy market endorsed and implemented the National Council of Prescription Drug Programs (NCPDP) Telecommunication Standard for electronic, real-time prescription claims. The structure, data dictionary, and efficiency of this transaction is proven. Since 1990, billions of prescription claims have been processed using this Standard. In addition, databases, data warehouses and decision support systems have been structured around this Standard. With such a fully implemented, efficient and widely accepted Standard we see significant financial impact associated with conversion to any other Standard.

Pharmacy is the only market segment with full claims adjudication and clinical screening at the point-of-care. Each transaction typically averages less than 30 seconds to process, including dial up and response time. Computer usage and communication costs have been minimized based on the use of the NCPDP Telecommunication Standard. Changes to this highly tuned transaction can result in significant costs. A simple example is associated with communication costs. Any increase in communication time could result in anywhere from $0.005 to $0.01 in communication cost. At our current run rate of 800,000,000 transactions per year our costs are increased by $4,000,000 to $8,000,000. Also, any increase in communication time will impact pharmacists at the point-of-care where consumers expectations of quick service must be met.

For this reason in the area of Pharmacy EDI, we ask the Subcommittee recommendations:

To recognize and endorse the Standard (NCPDP Telecommunication Standard) already in place for the Pharmacy Market Sector,

To preserve the Pharmacy Sector's investment and focus on changes that are clearly tested and cost justified and finally,

To focus on developing plans that ensure standardization within market segments, leading to interoperability, ultimately leading to integration and exchange of information across all segments of health care.

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 improvement?

Private sector initiatives by numerous standards development organizations should be included in this process. Clearly, the efforts of the NCVHS subcommittee is to involve as many of these valuable resources as possible. We recommend the continuation of their involvement. At the same time, a reality check is needed with any recommendation to ensure it is implementable, supportable, and not cost prohibitive. This will require direct involvement and endorsement by those health care market that are affected.

3. What major problems are experience by 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 uses 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 the quality?

With regards to the Pharmacy market sector, we recognize through the wide acceptance of the NCPDP Telecommunication Standard, the most structured clinical and financial record available today. Information needed for Medicaid, Private, and Commercial health care plans is readily available. Integrity of clinical information allows for real-time online Prospective Drug Utilization reviews that decrease health care cost at the point-of-care. Intuitive systems have been designed and implemented based upon the NCPDP Telecommunication data dictionary and format allowing for sophisticated automated decision trees at the point-of-care. At this time we retain over 4 years of historical pharmacy encounters based upon this Standard.

In the hospital and physician sectors, the greatest development has been in the area of financial transactions -- claims for third-party payment, remittance advices and increasingly electronic funds transfer. Even without the HIPAA, the claims processing and clearinghouse industries have successfully developed systems that enable electronic commerce in health care to function rather well in these areas. But particularly with the growth of managed care, new administrative transaction opportunities have been added to the mix -- eligibility, authorization and certification transactions, referrals and second-opinions, pre-pricing and contractual allowance computations, among others. The lack of clear standards -- and perhaps most critically -- the lack of standard implementation in the initiation of transaction requirements and changes in such requirements once initiated -- have impeded the development of many EDI services and even today slow the acceptance and the utility of systems that are available to do the work.

The caution we can offer is that in looking at the HIPAA standardization mandate -- the Committee in making its recommendations to the Secretary and to the nation, must be careful not to needlessly undo or burden what is currently working most effectively and cost-efficiently, particularly in the pharmacy and hospital sectors, while breaking down the barriers currently inhibiting new transactions and the expansion of electronic commerce in the physician and hospital outpatient areas especially.

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

Administrative simplification can best be achieved by recognizing and focusing attention on those areas where standardization has been the most difficult to accomplish. Further in those areas, where standards are widely accepted and implemented continue to endorse and promote their utilization to ensure reinvestments are not required. Look to identify those Standards Development Organizations that are widely represented and who have successfully implemented those standards to ensure the successful outcome of this Subcommittee?s recommendations.

In Conclusion:

The task before all of us is formidable, but not unobtainable. We must clearly understand what is already in place and define what our objectives are. This is complicated by the dynamics of the various health care market segments. Once stated timelines can be established that will have the least impact upon current lines of business while minimizing development and implementation costs. In this way our mutual goal of exchanging information across all segments of health care will ensure maximum patient outcomes and the reduction of health care costs.

National Data Corporation 02/13/97