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Wednesday, January 16th 2002

The Honorable Tommy Thompson
Secretary of Health and Human Services
Department of Health and Human Services
Hubert H. Humphrey Building
200 Independence Avenue, SW
Washington, DC 20201

On behalf of the American Hospital Association's (AHA) nearly 5,000 member hospitals, health systems, networks, and other providers of care, I am writing to raise two sets of issues regarding the implementation of the administrative simplification provisions of the Health Insurance Portability and Accountability Act of 1996 (HIPAA).

The first is a concern over delays in issuing the remaining regulations for electronic transactions standards and the problems this creates in meeting a compliance deadline. Closely related to these concerns are other unresolved implementation issues that also need to be addressed to facilitate timely compliance. The second is an opportunity for the Department of Health and Human Services (HHS) to take certain steps to assist health care providers in realizing the full savings and efficiencies potential implicit in the enactment of HIPAA through rulemaking or guidance to facilitate the prompt and accurate payment of claims.

We would like the opportunity to meet with members of your staff to discuss these concerns and opportunities and to explore ways in which we can work more closely with HHS, now and in the future, to achieve our mutual objective of ensuring that HIPAA's administrative simplification provisions achieve their hoped-for potential and thereby benefit America's hospitals.

Delays in Issuance of Regulations and Other Unresolved Implementation Issues

Claims Attachments and Health Plan Identifiers

In the final rule on electronic health care transactions standards, the Centers for Medicare & Medicaid Services (CMS) -- formerly HCFA -- estimated 10-year net savings of $16.7 billion for the health care field resulting from administrative simplification. Indeed, the AHA's longstanding support for administrative simplification -- transactions standards, standard code sets, claims attachments standards, and the national identifiers -- was premised on the belief that standardization of common health care transactions would eventually lead to significant efficiencies and savings to hospitals and health care systems.

However, the numerous and ongoing delays that have occurred in issuing these additional transactions standards regulations and finalizing certain other critical decisions are cause for great concern. That is because these regulations and decisions are expected to contribute significantly to enhanced efficiency, especially the rules for claims attachments and health plan identifiers; yet, to date, the rules have not been issued even in proposed form and there appears to be little or no forward movement on other critical decisions. The administrative efficiencies and cost savings anticipated from standardization will not be fully realized until these tasks are completed. Therefore, the AHA urges you to expedite them.

In addition to urging expedited release of the claim attachments proposed rule, we have a number of recommendations for issues that should be addressed either in the regulations or in related business rules because they are a critical adjunct to this standard:

  1. Payer requests for additional information (in claims attachments) beyond that contained in the standard health care claim transaction should be permissible only under extraordinary circumstances. And, providers must be fully apprised of the extraordinary circumstances that might require the reporting of additional information so that when these events present themselves providers know in advance what information they need to collect and report. Without a clear articulation of these circumstances, the claims attachment transactions standard will likely be another means to delay processing of claims.
  2. Since payers should only be permitted to request claims attachments in extraordinary circumstances, the standards maintenance organizations should consider recommending that, if certain data elements are needed on a frequent basis in order to pay claims, such data elements be added to the 837 health care claim transaction as "situational" data elements to be provided when a certain course of events occurs.
  3. Payers should not be permitted to request additional information as a claims attachment if that data is already included on the claim or can be derived from information contained in the claim. An example would be a payer request for a diagnosis related group (DRG) assignment, which can be derived from diagnosis and procedure codes already included in the claim.

Clinical Code Sets

While the final electronic transactions standards rule specifies the use of certain clinical code sets and the requirement to follow coding guidelines, the regulations do not address the frequency with which these code sets may be updated. To reduce the administrative cost of updating hospital information systems, the AHA recommends that ICD-9-CM codes and all other codes be updated no more often than annually, and that all covered entities update their code sets on the same date, preferably October 1 for ICD-9-CM and January 1 for HCPCS, both of which would follow current Medicare practice. Although current practice generally calls for annual updates of code sets, we are concerned that ongoing efforts by certain technology organizations to increase the frequency of code set updates will result in increased costs to hospitals, thus undermining the efficiencies expected from administrative simplification.

Further, to prevent confusion and unnecessary delays in claims processing, providers and payers should utilize the same version of a particular clinical code set release. The AHA recommends that HHS clarify in regulation the specific version of the code sets that have been adopted for use. HHS should also develop transition rules for switching to the newer versions of the code sets. Such transition rules should require that covered entities maintain and work with the older version for claims that relate to service provided before the new version was released.

External Codes

The implementation guides for each of the standard electronic health care transactions include references to codes that are maintained by external organizations. These include, for example, Value Codes, Condition Codes, Revenue Codes, and Occurrence Codes that are created and maintained by the National Uniform Billing Committee (NUBC). These external codes are widely used and frequently convey information that otherwise would be requested as an attachment. Although explicitly referenced in the implementation guides, these external codes sets, unlike the CPT-4 and ICD-9-CM code sets, have not been specifically adopted as standard code sets in the final rule. This creates some confusion among covered entities about their obligation to follow and use these external codes in complying with HIPAA requirements. The AHA recommends that HHS adopt these external code sets as standards for use within the institutional claim transaction.

Compliance and Testing Certification

Covered entity compliance with the transaction standards is integral to the successful implementation of the electronic transaction standards. However, the implementation guides associated with the transaction standards are lengthy and complex. As each covered entity attempts to implement the transaction standards, there will be variations in how it interprets the instructions in the implementation guide. Further, some payers may attempt to inappropriately delay processing and payment of claims by asserting that claims are not HIPAA-compliant.

Therefore, the AHA supports the development and use of software to periodically test and certify compliance with the transaction standards. We also recommend that HHS develop the capability to review and certify, in some manner, compliant software. Such software would enable covered entities to demonstrate an appropriate level of interpretation of the transaction standards. Those covered entities that periodically subject their transaction standards to certification testing and pass could be deemed compliant with the standards. HHS should consult with the covered entities about developing testing criteria along with determining the type and frequency of such testing. The certification and testing of software should only be a tool to help identify areas that need correction, not a way to detect noncompliance for purposes of imposing sanctions under HIPAA This would allow the entity that submitted the transaction to correct any mistakes before transmission of the transaction. It would also reduce conflicts between the parties to the transaction over whether the entity submits HIPAA-Acompliant claims, ensuring that all parties continue to meet their obligations to abide by the HIPAAstandards.

Coordination of Benefits

The AHA supports the identification of a standard transaction for the coordination of benefits (COB), as set out in the final transaction standards rule. However, we are concerned that this transaction standard alone will not yield the kinds of efficiencies and savings expected absent the development of certain business rules to direct its implementation.

The existing process for determining primary and secondary payer responsibility for a claim is complex, burdensome, and often a source of frustration for health care providers and patients. Complicating the process is a myriad of state laws for determining primary and secondary payer responsibility. In order to better understand this process and begin to develop an improved and uniform approach, the AHA recommends that HHS convene a workgroup to examine existing variations in state laws and business practices around COB. The workgroup's findings should be shared with an industry consensus group in order to encourage the development of uniform recommendations on primary and secondary payer obligations around COB.

As part of such a consensus building exercise, the AHA recommends that HHS develop national guidelines for employer and payer maintenance of enrollment and eligibility files. The guidelines should incorporate business practices regarding the maintenance of, access to, and inquiries into insurance benefit coverage information. Guidelines should be developed to define and standardize the information to be contained on insurance enrollment cards, including a way for providers to directly link to the eligibility verification files of covered individuals at the point of care.

National Provider Identifiers and National Provider System

The May 7, 1998 proposed rule on the national provider identifier (NPI) contained a number of important unresolved issues. The proposed rule outlined only the maintenance process for the NPI. It did not specify which entity would be responsible for NPI enumeration or provide details about how the maintenance process would function. Further, the proposal did not state whether the entity responsible for NPI maintenance would be permitted to assess a fee for the use of or inquiry into a mandated number.

Given the time that has passed since the issuance of the proposed rule and its lack of specificity on these important components, the AHA recommends that the next issuance from HHS related to NPI be an interim final rule with a comment period. This approach would allow the health care community to respond based on decisions made subsequent to the issuance of the proposed rule.

The AHA further recommends that:

  1. Hospitals be held harmless for any erroneous information contained in the national provider system (NPS) database because, as we understand it, initially hospitals will not be involved in the enumeration process.
  2. Communications to providers that make it clear their responsibility to notify the maintainer of the NPI and its associated NPS database of any changes to their licensure, or other changes such as provider tax status.
  3. Explicit policies on access and use of the information contained in the NPS database be developed to prevent misuse.
  4. The database items contained in the NPS not be reported on the standard claim transaction, since the use of the NPI can provide health plans with the ability to find this additional information within the NPS.
  5. Because the NPI will be a mandated number, there should be no charge for enumeration or access.

Business Rules to Enhance Administrative Efficiencies

Unless the health care community agrees to a set of "business rules" around the implementation of the standard transactions, expected administrative efficiencies and cost savings may not be fully realized. We believe that these business rules can be adopted by HHS as regulation or guidance, within the authority granted under HIPAA. These business rules and other recommendations should help to clarify ambiguities and remove barriers that would otherwise undermine the intent of administrative simplification, as well as the hoped-for administrative efficiencies and savings.

Prompt Payment of Claims

In drafting the administrative simplification provisions of HIPAA, Congress mandated that, "[a]ny standard adopted under this part shall be consistent with the objective of reducing the administrative costs of providing and paying for health care." One of the major administrative costs facing hospitals, and one of their greatest sources of frustration, is frequent and extended delays and hassles in the payment of claims. In fact, Medicare regulations and many state laws have been implemented to try to address this issue and ensure the prompt payment of claims. However, these prompt pay rules are often violated or otherwise ignored, particularly by private payers.

The AHA's support for HIPAA administrative simplification was founded on the premise that greater standardization and uniformity of administrative processes will lead to efficiencies and improvements in the timeliness of claims payment, and thus to the fulfillment of the promise of reducing administrative costs of health care. Hospitals' confidence in this potential, however, is being eroded by statements made by health plans indicating that these savings are a myth and that providers should not expect to see faster or smoother claims payment as a result of standardization. In fact, hospitals' past experience with many payers, which includes late payment, incomplete payment, lost claims, etc., contributes to a general concern that unless clear business rules around the transactions standards are developed, expected savings could fail to materialize.

In order to restore provider confidence in the promise of administrative simplification, the AHA urges HHS to clarify, through the development of guidance and regulation, as appropriate, that standardization has a direct connection to prompt payment of claims. Three important components must be part of any business rules involving prompt payment: defining a "clean claim;" timeliness of the process; and the enforcement of the regulations. The AHA has several recommendations for HHS to consider in each of these categories.

Defining a "Clean Claim"

The definition of a "clean claim" is the starting point or trigger for the clock on prompt payment. Currently, no single national standard defines a clean claim. Some states have adopted prompt pay legislation that includes a clean claim definition, with most defining a clean claim as a properly completed claim. With implementation of the HIPAA electronic health care transaction standards set to begin October 16, 2003, it seems appropriate for HHS to develop a similar reference to a properly completed claim when health care providers are in compliance with the electronic transaction standards and code sets as identified in the final regulation. The AHA is working on a guidance document that more clearly explains the role of the trading partner agreement in ensuring that the field's expenditures to adopt the formats and code sets actually achieves Congress' objectives for improving the operation of the health care system and reducing administrative costs.

The final rule establishes the ANSI X12N 837 as the national standard for electronic submission of claims. The rules state that health plans will not be permitted to require additional data elements nor are they permitted to require standard data elements in a format different from that specified in the standard. They also may not refuse to accept standard transactions. It seems clear then that a HIPAA--compliant claim is a properly completed claim that should be considered, according to HHS policy and state law, as a "clean claim." HHS should clarify in guidance or regulation that health plans must accept a HIPAA-compliant claim as a "clean claim" for purposes of contractual provisions with other covered entities under HIPAA, and for state and federal prompt pay requirements.

Further, because hospitals are concerned about the likelihood that payers will inappropriately challenge hospitals as to whether the claims they submit are "HIPAA-compliant," the AHA would like to engage HHS in discussions about potential strategies for the independent validation that claims are compliant with the electronic transaction standards. This could occur in a number of ways. For example, as discussed above, HHS could certify software for this purpose.


The prompt payment clock also requires that a clean claim be transmitted to the appropriate third-party payer or to its clearinghouse, which is responsible for receiving the claims. Hospitals tell us that batched claims sent to payers using an electronic format are frequently "lost" by the payer. To avoid disputes about whether claims have been properly transmitted and received, the AHA believes that HHS should formalize the process for acknowledging receipt of electronic transmission of claims. Therefore, the AHA recommends that HHS adopt the Functional Acknowledgment (ANSI ASC X12N's 997 transaction standard) along with the Claim Status Inquiry (ANSI ASC X12N's 278) as standards for providing a record of successful transmission and receipt of HIPAA standard transactions.

Further, timeliness requires a reasonable timeframe for processing the claim. The AHA would like to discuss with HHS convening an industry consensus development group to establish business rules regarding prompt payment timeframes and processes. Some examples of desirable rules are:

  1. Establishing a certain number of days by which a payer must contact a provider to request all missing or incorrect information on the provider's claim. This would reset the prompt pay clock. However, the payer would only be able to request "missing" information that is considered to be part of a HIPAA-compliant claim. A request for other information should not be permitted, as it would be a violation of the HIPAA standards.
  2. Clarifying that medical review of claims should not derail prompt payment timeframes. Although there are legitimate reasons for third-party payers to perform medical reviews of claims, initiation of medical reviews should never be used as a way to delay payments. The AHA believes that these reviews should comply with recommendations on payment issued as part of the 1993 National Billing Audit Guidelines. These are voluntary guidelines developed and agreed to by provider and insurer organizations. They indicate that payment of claims subjected to a medical review audit should be based on a historical log of the outcomes of previous medical reviews or, in the absence of a historical log, 90 percent of the contractual obligation of the billed amount should be paid, with settlement occurring after completion of the medical review.
  3. Establishing reasonable interest charges for claims not paid on a timely basis.


The AHA is aware of and supports HHS' plans to issue an enforcement regulation in the future. Enforcement ensures that the covered entities to the process act responsibly toward the timely resolution of claims adjudication. We believe that, in the interest of prompt payment, it is critical that payers and providers alike have access to the enforcement process at a local level. The AHA believes that a reasonable process for enforcement must allow covered entities to file grievances about inappropriate actions through an oversight body that has local review capability. Such an oversight body must be able to investigate issues of non-compliance and, if necessary, levy sufficient monetary sanctions against habitual violators of the regulations in order to deter unethical practices. In the development of such a process, HHS should consider utilizing existing processes within the states, such as insurance commissioners or other state agencies responsible for overseeing insurance practices.

Thank you for your serious consideration of these issues. We look forward to discussing these issues further with you as the implementation of the HIPAA administrative simplification rules progresses. If you have any questions or need additional information, please feel free to contact Melinda Reid Hatton, vice president and chief Washington counsel at (202) 638-1100, George Arges, senior director, health data management group at (312) 422-3398 or Lawrence Hughes, director, member relations at (312) 422-3328.


Rick Pollack
Executive Vice President


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