Perspective on Implementation of Administrative Simplification Provisions of P.L.104-191
Monday, February 10, 1997
Room 503-A, Hubert H. Humphrey Building
Washington, DC
Pat H. Hamby, FHFMA
Corporate Director, Regulatory
Affairs and Standards
Charles C. Meyer
Informatics Standards Liaison
HBO
and Company
Mr. Chairman, Members of the Committee --- I am Pat H. Hamby, Corporate Director, Regulatory Affairs and Standards for HBO & Company (HBOC). With me is Chuck Meyer, HBOC's Informatics Standards Liaison . We appreciate your invitation to address the subcommittee on the issues surrounding the implementation of the Administrative Simplification provisions of the Health Insurance Portability and Accountability Act (HIPAA) of 1996, P.L.104-191.
HBO & Company (HBOC) serves the financial and clinical information system needs of the healthcare enterprise world wide; inclusive of integrated health systems, managed care organizations, physician enterprises, home health agencies, long term care facilities, and hospitals.
HBOC, representing the large software vendor, has long been an active participant in several standards development organizations (SDO). We are proud of our part in helping evolve today's healthcare data interchange standards.
I hope our responses to the questions posed in the invitation letter will serve to further the goals and objectives of the committee. The underlying theme of uniformity -- data, interpretation and implementation, is evident in each of our responses.
Do not hesitate to contact us for clarification of any of the following points.
1. What are your organization's expectations for the results of the Administrative Simplification standards requirements in the Health Insurance Portability and Accountability Act (HIPAA) 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?
HBO & Company is optimistic the legislation will ultimately produce a consistent structure, data set, and process model for the transaction set defined in the administrative simplification sub-title. This will allow system vendors to concentrate their scarce technical resources on the process of creating easily implemented, highly functional, user friendly patient billing/accounts receivable (PBAR) systems. Both providers and payers will more readily accept and participate in electronic claims submission given the availability of a definitive standard. Once the standard is in place, payers, who traditionally develop their own systems, will be able to focus on improving their adjudication process and response systems. The result should be improvements in the reimbursement cycle, days outstanding in accounts receivable and cash flow.
Positive Affects
It is expected that implementation of the Act's Administrative Simplification provisions will result in significant savings in administrative costs. Any amount saved to administer healthcare could be turned back to patient care. A study commissioned by the Healthcare Financial Management Association (HFMA) to project the administrative cost savings potential of the proposed Healthcare Simplification and Uniformity Act of 1993 indicated that annual net savings could range from $2.6 to $5.2 billion.
The premise of this proposal was that every healthcare entity would adopt electronic processes for common administrative procedures. Although HIPAA mandates a standard for those providers and payer who opt to process claims electronically, such substantial savings provide a strong incentive for conversion to the electronic process. The same study projects annual implementation costs of approximately $800 million. A cursory analysis indicates that the return on investment (ROI) easily justifies the expenditure necessary to implement the electronic processes defined in the Act.
The claim and payment transactions share a large portion of the needed voluminous data used in health care today. Many of the data elements necessary for a uniform data set can be found in the claim and payment transaction sets. Additionally, the claim and payment transactions are the bases by which any healthcare provider does business in healthcare today. These transaction sets are critical for the providers financial survival.
Standardization of these two key transaction sets would reduce costly programming fees. Today the industry continues to use hundreds of versions of the UB-92, the HCFA 1500, and even the X12-837 and 835, thereby negating any benefits of uniformity. This loss of uniformity is costly to the industry and quite counterproductive. Completion of uniform claim and payment transaction set will provide information necessary for a solid foundation of a standard data set.
From a vendor's perspective, the initial focus of the Act should be the process of healthcare claims submission, processing, adjudication, and remittance. While sufficient flexibility is necessary for innovation in the future, and I'll speak to this later,
we must not allow room for "backsliding". Once adopt through the consensus process, adherence to these standards must be stringently applied.
The rapid growth of managed care organizations provides the impetus for adopting a standard for plan enrollment, eligibility verification, and referral certification and authorization. These transactions are critical in establishing the population being serviced by the healthcare enterprise. The remaining transactions can take a somewhat lower position on the list of requirements, albeit still important to the process. The key to success for administrative simplification is uniform interpretation and definitively stated standardization across all payers in the industry.
As healthcare providers converge into multi-entity/multi-site providers, the demand for integrated, "enterprise-wide" automation solutions is growing. The majority of healthcare organizations have implemented fragmented islands of automation with limited connectivity, redundant databases and data entry, and minimal data communications among disparate systems. Due to the lack of a standard data definition, it is common for multiple versions of redundant patient information to be stored in each of the systems (e.g. admission, discharge, and transfer data). In addition, external data requirements differ greatly from third parties with whom the healthcare facility must interact, hence additional programming efforts for the software vendor.
The Administrative Simplification requirements of the legislation are clearly focused on the areas of administrative and financial data interchange inherent in the interaction between providers and payers. This application area has traditionally been one of the most difficult for system development organizations to address. The reason is because of the lack of uniformity encountered in the administrative and financial environment. Generally, the only constant in developing and implementing patient billing/accounts receivable (PBAR) systems is the lack of consistent requirements among the various payers. Financial systems are frequently designed to support customization. This is done because they often must be tailored to meet specific payer and/or state billing requirements at implementation. In some instances, state billing requirements are so divergent special billing systems are created just to accommodate them - Michigan, New York, and New Jersey come to mind.
Special attention is necessary in the area of the implementation process of these standards. Assurances that everyone understands the instructions for implementation in the same way in critical. In addition to the lack of uniformity in data requirement among the various payers, software vendors are required to handle the different interpretation of instructions between payers. For instance, today instructions for HCFA are the same across intermediaries and carriers; however, there are several different interpretations of these instructions. This generally means additional programming for the vendor and, often times, additional expense to the provider.
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 Simplifications requirements of this law? If so, what are those concerns and what suggestions do you have for improvements?
Soliciting input from a cross section of the industry affected by the passage of this legislation is an excellent first step. In our testimonies given, hopefully, we have all adequately expressed the concerns we have on assuring implementation of the Act will be done in the most effective manner. Input from the industry should provide you a glimpse into the world of consumers, providers, standards development organizations, payers, software vendors, and the like; thus, providing you with a better understanding of the impact this legislation will have on our working environment. This will not be an easy piece of legislation to put into place.
Although NCVHS is attempting to consult with group representatives of the full spectrum of the healthcare environment, we don't see this activity within other agencies. It must be fully recognized that those of us who provide software solutions to healthcare providers should maintain ongoing dialogue as you and other agencies proceed to digest each aspect of this legislation. After all, we are the ones many healthcare providers will turn to for complying with this legislation.
There is also some concern that the tenets of the administrative simplification provisions of the Act may be prematurely extended into the areas of clinical transactions and computer-based patient records. It is imperative these critical areas be accorded the same consideration as is being allocated to administrative and financial data. In our opinion, the standards for these areas are even more complex than those defined for administrative and financial data.
One component of credibility for a standard is determined by its proliferation within the industry. Even though a significant number of the transactions addressed by the Act have been defined by ASC X12, this should not be construed to mean that X12 is the definitive standard for all administrative and financial data. For instance, today few organizations either send or accept the ASC X12 837 format for claims submission. The vast majority of electronic claims are currently processed via flat files in the EMC 4.1a (version 4) format or, in the case of professional fees, via NSF. These are proven, widely accepted formats which increases the probability of the Secretary adopting a hybrid standard inclusion of X12 and other standards. This certainly is not meant to imply the 837 should never be considered for claims submission. We believe that as improved standards and processes become available they should be adopted.
HBOC supports the creation of a definitive standard data set. However, we do not necessarily support the concept that the data set represents the data elements which must be sent in order to be in compliance with the standard. In other words, not every element within the data set should have to be sent with each transaction allowing the payer to ignore those not necessary for processing. The concept that some SDOs (HL-7, etc.) have developed to accommodate a comprehensive data set, or model, should be considered. Under this concept, the data set is coupled to an interaction model and a hierarchial message description to create messages in a variety of formats. This approach to developing a standard shows technological innovation and incorporates the principles of object oriented technology. We believe this functionality is deserving of extensive analysis and evaluation as the national standard expands into the clinical arena.
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 perception of its quality?
Our customers are plagued by the lack of uniformity within the uniform billing process. For example , although the UB-92 form itself represents a standard, there is little or no continuity in the usage of the data, the definition of required fields, or acceptable code values. There is considerable variance from payer to payer. Those hospitals that, due to location, consistently treat and, subsequently bill, patients from surrounding states often times must maintain multiple billing applications. Each of these applications are tailored to a specific state/intermediary configuration. There are also instances of significant variances between intermediaries within the same state.
The proliferation of versions and release levels of a given standard is cause for consternation. Subsequent versions of existing standard transactions are often materially different from the original. Further, there are rarely guidelines for conversion from one release to the next. Without compatibility within release levels, vendors must maintain multiple application releases to support each of the releases.
Given the number of claims submitted and processed under current system constraints, it seems there sufficient data is readily available to meet the requirements of the payer. However, often times, achieving this level of compatibility has been the result of a number of lengthy analysis and coordination sessions followed by labor intensive iterative testing of the transactions.
It should be noted that regardless of how comprehensive a standard is, it will not affect the quality or perception of quality of the data being exchanged. A standard neither adds to nor detracts from the meaningfulness of clinical information. However, standards will lessen administrative burden and reduce costs in healthcare delivery. Standards also help establish the basis for comparative data for better direct medical care, research, and quality improvements.
4. How can the goal of administrative simplification best be achieved while meeting the needs of all stakeholders? Are there any constraints that you feel should be heeded in the process of addressing simplification, and what are they?
The process by which American National Standard Institute (ANSI) has employed which allows a standard to be in draft form, Draft Standard For Trial Use (DSTU), before being adopted industry wide is an excellent way of achieving administrative simplification for all stakeholders. This process allows standards work to continue; however, it allows for testing and maturing of the standard before final adoption.
Currently, most of the major SDOs (X12, HL7, NCPDP et) are ANSI accredited and utilize this process for standards development.
The goal of administrative simplification will best be achieved by the use of uniformity and standardization. This will require a consensus process among all players. And, there needs to be "feed-back" loop from the industry to the Secretary to monitor how the implementation is proceeding. You are dealing with the "how" administration simplification should be implemented through the public hearings and testimonies. Once the standard(s) are adopted and implementation begin, a process will need to be put in place to monitor "how it's working".
Specific constraints which must be considered include: 1) the allowance for flexibility, 2) timeliness for implementation, and 3) openness for technological innovation.
Allowance for flexibility should be considered due to the rapidly changing environment that the healthcare industry finds itself in today. Acquisitions, mergers, new laws, new technology, etc. are creating changes to the healthcare marketplace at an alarming pace. What may make sense for healthcare today may be obsolete in five years.
Timeliness will be needed for implementation. Some type of mechanism should be put into place to respond to future system requirements. Providers and payers, as well as vendors, need to have ample lead time for programming changes, education and training.
Technological innovation is critical. It would seem counter-productive to mandate a standard that stifles technological innovation. The standard should be as comfortable in an object oriented environment on the desktop as it is in a complex networking environment like a CHIN. The modeling efforts underway in several of the SDO's are moving in the right direction, if we are to derive a standard that will graciously move into the future as technology continues to raise the bar within the healthcare enterprise.
As I mentioned at the beginning of our testimony, the theme of uniformity -- data, interpretation and implementation -- underlies each of our responses to the questions you have presented.
We appreciate the opportunity to appear before the committee and would be pleased to address questions you might have.