5010 X12 Rule - E9-740

Friday,
January 16, 2009
Part VI
Department of
Health and Human
Services
45 CFR Part 162
Health Insurance Reform; Modifications
to the Health Insurance Portability and
Accountability Act (HIPAA); Final Rules
sroberts on PROD1PC70 with RULES
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3296 Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations
DEPARTMENT OF HEALTH AND I. Background versions of the standards for electronic

HUMAN SERVICES HIPAA mandated the adoption of transactions. However, covered entities
standards for electronically conducting are not permitted to use those newer
Office of the Secretary certain health care administrative versions until the Secretary of Health
transactions between certain entities. and Human Services (HHS) adopts them
45 CFR Part 162 Through subtitle F of title II of HIPAA, by regulation for HIPAA transactions.
the Congress added to title XI of the In addition to technical issues and
[CMS–0009–F] Social Security Act (the Act) a new Part business developments necessitating
C, entitled ‘‘Administrative consideration of the new versions of the
RIN 0938–AM50 Simplification.’’ Part C of title XI of the standards, there remain a number of
Act now consists of sections 1171 unresolved policy issues that were
Health Insurance Reform; through 1180. These sections define identified by the industry early in the
Modifications to the Health Insurance various terms and impose several implementation period for the first set
Portability and Accountability Act requirements on HHS, health plans, of standards, and those issues were
(HIPAA) Electronic Transaction health care clearinghouses, and certain never addressed through regulation.
Standards health care providers concerning the This final rule addresses those
electronic transmission of health outstanding issues.
AGENCY: Office of the Secretary, HHS. We refer readers to review the
information. On August 17, 2000, we
ACTION: Final rule. published a final rule entitled, ‘‘Health following regulations for a more
Insurance Reform: Standards for detailed discussion of the changes to the
SUMMARY: This final rule adopts updated
Electronic Transactions’’ in the Federal standards for electronic transactions; the
versions of the standards for electronic Transactions and Code Sets rule; the
Register (65 FR 50312) (hereinafter
transactions originally adopted under Modifications to Electronic Data
referred to as the Transactions and Code
the Administrative Simplification Transaction Standards and Code Sets
Sets rule). That rule implemented some
subtitle of the Health Insurance rule (68 FR 8381), published in the
of the HIPAA Administrative
Portability and Accountability Act of Federal Register on February 20, 2003
Simplification requirements by adopting
1996 (HIPAA). This final rule also (hereinafter the Modifications rule);
standards for eight electronic
adopts a transaction standard for Standards for Privacy of Individually
transactions and for code sets to be used
Medicaid pharmacy subrogation. In Identifiable Health Information (65 FR
in those transactions. Those transactions
addition, this final rule adopts two 82462), published in the Federal
were: Health care claims or equivalent
standards for billing retail pharmacy Register on December 28, 2000;
encounter information; health care
supplies and professional services, and Standards for Privacy of Individually
payment and remittance advice;
clarifies who the ‘‘senders’’ and Identifiable Health Information; Final
coordination of benefits; eligibility for a
‘‘receivers’’ are in the descriptions of Rule (67 FR 53182) published in the
health plan; health care claim status;
certain transactions. Federal Register on August 14, 2002;
enrollment and disenrollment in a
DATES: Effective Dates: These health plan; referral certification and and the Modifications to the Health
regulations are effective March 17, 2009 authorization; and health plan premium Insurance Portability and
except for the provisions of 45 CFR part payments. We defined these Accountability Act (HIPAA) Electronic
162 Subpart S, which are effective transactions and specified the adopted Transaction Standards proposed rule
January 1, 2010. The incorporation by standards at 45 CFR part 162, subparts (73 FR 49796), published in the Federal
reference of certain publications listed I and K through R. Register on August 22, 2008 (hereinafter
in the regulations is approved by the Since the time of compliance with the the August 22, 2008 proposed rule) for
Director of the Federal Register as of first set of HIPAA standards, a number further information about electronic
March 17, 2009. of technical issues with the standards, data interchange, the statutory
Compliance Dates: Compliance with including issues resulting from new background and the regulatory history.
the provisions of §§ 162.1102(c), business needs, have been identified. In the August 22, 2008 proposed rule,
162.1202(c), 162.1302(c), 162.1402(c), Industry stakeholders submitted we included a table that shows the full
162.1502(c), 162.1602(c), 162.1702(c), hundreds of change requests to the set of HIPAA transaction standards
and 162.1802(c) is required on January standards maintenance organizations, adopted in the Transactions and Code
1, 2012. Compliance with the provisions with recommendations for Sets rule, as we proposed to modify
of § 162.1902 is required on January 1, improvements to the standards. These them in the August 22, 2008 proposed
2013. requests were considered, and many rule (73 FR 49744), and adopt in this
FOR FURTHER INFORMATION CONTACT: were accepted, resulting in the final rule. The list is reproduced here in
Lorraine Tunis Doo, (410) 786–6597. development and approval of newer Table 1:
TABLE 1—HIPAA STANDARD AND TRANSACTIONS

Standard Transaction
ASC X12 837 D ............................... Health care claims—Dental.

ASC X12 837 P ............................... Health care claims—Professional.
ASC X12 837 I ................................. Health care claims—Institutional.
NCPDP D.0 ...................................... Health care claims—Retail pharmacy drug.
ASC X12 837 P and NCPDP D.0 .... Health care claims—Retail pharmacy supplies and professional services.
NCPDP D.0 ...................................... Coordination of Benefits—Retail pharmacy drug.

ASC X12 837 D ............................... Coordination of Benefits—Dental.
ASC X12 837 P ............................... Coordination of Benefits—Professional.
ASC X12 837 I ................................. Coordination of Benefits—Institutional.
ASC X12 270/271 ............................ Eligibility for a health plan (request and response)—dental, professional and institutional.
Federal Register / Vol. 74, No. 11 / Friday, January 16, 2009 / Rules and Regulations 3297
TABLE 1—HIPAA STANDARD AND TRANSACTIONS—Continued

Standard Transaction
NCPDP D.0 ...................................... Eligibility for a health plan (request and response)—Retail pharmacy drugs.
ASC X12 276/277 ............................ Health care claim status (request and response).
ASC X12 834 ................................... Enrollment and disenrollment in a health plan.
ASC X12 835 ................................... Health care payment and remittance advice.
ASC X12 820 ................................... Health plan premium payment.
ASC X12 278 ................................... Referral certification and authorization (request and response).
NCPDP D.0 ...................................... Referral certification and authorization (request and response)—Retail pharmacy drugs.
NCPDP 5.1 and NCPDP D.0 ........... Retail pharmacy drug claims (telecommunication and batch standards).
NCPDP 3.0 ...................................... Medicaid pharmacy subrogation (batch standard).
II. Provisions of the Proposed for the subrogation of pharmacy claims covered entity conducts transactions
Regulations and Responses to paid by Medicaid. The transaction is the with another entity that is also required
Comments Medicaid pharmacy subrogation to comply with the transaction
On August 22, 2008 we proposed to transaction, defined at proposed standards.
adopt updated standards for the eight § 162.1901, and the new standard is the In response to the August 22, 2008
adopted electronic transactions NCPDP Batch Standard Medicaid proposed rule, we received 192 timely
standards. We proposed to revise Subrogation Implementation Guide, public comments from all segments of
§ 162.1102, § 162.1202, § 162.1302, Version 3, Release 0 (Version 3.0), July the health care industry, including
§ 162.1402, § 162.1502, § 162.1602, 2007 (hereinafter referred to as Version providers, physician practices,
§ 162.1702, and § 162.1802 to adopt the 3.0) at proposed § 162.1902. The hospitals, pharmacies, other health care
ASC X12 Technical Reports Type 3 standard would be applicable to professionals, health plans,
(TR3), Version 005010 (hereinafter Medicaid agencies in their role as health clearinghouses, vendors, standards
referred to as Version 5010) as a plans, as well as to other health plans development organizations, professional
modification of the current X12 Version that are covered entities under HIPAA, associations, consultants, and State and
4010 standards (hereinafter referred to but not to providers because this Federal government agencies. We
as Version 4010/4010A) for the HIPAA transaction is not utilized by them. For reviewed each submission, and grouped
transactions. In some cases, the a complete discussion of the Medicaid similar or related comments together to
Technical Reports Type 3 have been pharmacy subrogation transaction and address in this final rule, which also
modified by Type 1 Errata, and these the proposed adoption of Version 3.0, enabled us to identify the areas of the
Errata were also included in our see the August 22, 2008 proposed rule proposed rule that required review in
proposal. The full discussion of our (73 FR 49751–49752). terms of policy, consistency or clarity.
proposal to revise each of the above- We proposed to revise § 162.1102 to In the following sections, we present
referenced provisions can be found in adopt both Version D.0 and the 837 comments and responses generally in
the August 22, 2008 proposed rule (73 Health Care Claim: Professional ASC the order in which the topics were
FR 49745–49750). X12 Technical Report Type 3 for billing presented in the August 22, 2008
We proposed to revise § 162.1102, retail pharmacy supplies and proposed rule. There were a number of
§ 162.1202, § 162.1302, and § 162.1802 professional services. We proposed that comments on topics that were not
by adding new paragraphs (c)(1) to each the use of either standard would be addressed in the proposed rule, and our
of those sections to adopt the NCPDP determined by trading partner responses to those comments are
Telecommunication Standard agreements. The full discussion of the provided at the end of this section.
Implementation Guide, Version D, proposed change can be found in the Some comments we considered out of
Release 0 (Version D.0) and equivalent August 22, 2008 proposed rule (73 FR scope of the August 22, 2008 proposed
NCPDP Batch Standard Implementation 49752–49754). rule, and we list several of them at the
Guide, Version 1, Release 2 (Version We proposed to revise the end of this section as well.
1.2) (hereinafter collectively referred to descriptions of the transactions at
§ 162.1301, § 162.1401, and § 162.1501 A. Adoption of X12 Version 5010
as Version D.0) in place of the NCPDP
to more clearly specify the senders and Technical Reports Type 3 for HIPAA
Telecommunication Standard
receivers of those transactions. See the Transactions
Implementation Guide, Version 5,
Release 1 and equivalent NCPDP Batch August 22, 2008 proposed rule for a full In the August 22, 2008 proposed rule,
Standard Implementation Guide, discussion of this proposal (73 FR we proposed to revise § 162.1102,
Version 1, Release 1 (hereinafter 49754). For Versions 5010 and D.0, we § 162.1202, § 162.1302, § 162.1402,
collectively referred to as Version 5.1), proposed a compliance date of April 1, § 162.1502, § 162.1602, § 162.1702, and
for the following retail pharmacy drug 2010 for all covered entities. For § 162.1802 to adopt Version 5010. In
transactions: Health care claims or Version 3.0, we proposed a compliance some cases, the version was modified by
equivalent encounter information; date 24 months after the effective date Type 1 Errata, and these Errata were
eligibility for a health plan; referral of the final rule, except for small health also proposed for adoption. In general,
certification and authorization; and plans, which would have to be in deficiencies inherent in the current
coordination of benefits. The full compliance 36 months after the effective standards continue to cause industry-
discussion of our proposal to revise date of the final rule. Finally, we wide difficulties to such a degree that
each of the above-referenced provisions proposed to revise § 162.923 to resolve much of the industry rely on
can be found in the August 22, 2008 the problem of different compliance ‘‘companion guides’’ and proprietary
proposed rule (73 FR 49751). dates for different entities, such that the ‘‘work-arounds.’’ The four types of
We proposed to add a new subpart S requirement for covered entities to use changes in Version 5010 are structural,
to 45 CFR part 162 to adopt a standard the standards applies only when the front matter, technical improvements
and data content changes. The complete Admission’’ (POA) indicator to the would address them in the course of
discussion of this proposal can be found diagnoses. developing later versions of the
in the August 22, 2008 proposed rule Response: We appreciate the standards.
(73 FR 49745–49749). overwhelming support of commenters After publication of the final rule, all
for the adoption of Version 5010. of the technical comments reviewed by
Comment: Commenters Comment: We received a few the X12 workgroup, with the
overwhelmingly supported our proposal comments urging X12 to publish an all- dispositions, will be posted on the CMS
to adopt Version 5010 because of the inclusive list of changes made to the Web site at http://www.cms.hhs.gov, in
technical and business improvements standards. Commenters said that a the Regulations and Guidance section,
made to the standards. With respect to change log is issued after each year’s as well as on the X12 portal at http://
the specific changes made to Version changes are approved. Since Version www.x12.org. Where education and/or
5010, commenters expressed their 5010 incorporates multiple years of additional communication are needed
appreciation for the tightened, clear changes, users would be required to about the functionality of the
situational rules which will reduce consolidate multiple change logs. A transactions, X12 will provide that in
analysis time for everyone, and cumulative change log that includes future programs, in collaboration with
minimize the need for companion changes from each interim year should appropriate industry groups. These
guides. Commenters said that the be provided so that all of the changes Standards Development Organizations
improved eligibility responses and are contained in one document. (SDO)-sponsored efforts will specifically
better search options will improve Response: We agree that it would be address the third category of comments
efficiency for providers and reduce helpful to have a comprehensive list of in which the committee stated that the
phone calls for both providers and the changes made to a current version functionality exists elsewhere in the
health plans. Commenters also said that of the standards, and that it would make TR3s, or the fourth category of
the detailed clarifications of commonly it easier for covered entities to identify comments where the commenter
misunderstood areas such as corrections all of the changes that have occurred specifically requested additional
and reversals, refund processing, and since the last version of the standard interpretation guidance.
recoupments should result in a was adopted. We have made this During the comment review process,
consistent implementation of the X12 recommendation to the X12 work group X12 provided input to HHS, and we
835 (remittance advice), which is not as well as the Designated Standards selected several comments to include in
the case today. They noted that Maintenance Organizations (DSMO). this final rule as examples of the types
incorrect implementations of the X12 Many commenters submitted of technical issues that were submitted
835 have prevented providers from technical comments relating to Version during the public comment period. In
implementing electronic posting, or 5010. The comments included highly general, suggested corrections,
technical issues and suggested clarifications, and definitional changes
automating the data entry of
structural changes to the standards, to Version 5010 transaction standards
reimbursement information, as widely
definitional issues requiring will be reserved for future versions of
as they might otherwise. Correct
clarification, and interpretational issues the standards. Any suggested changes to
implementation of the X12 835 will
regarding routine usage of the standards. the structure of the standard will need
reduce phone calls to health plans,
In total, there were over 470 technical to be evaluated through the standards
reduce appeals due to incomplete comments. We provided all of the
information, eliminate unnecessary development process and considered for
technical comments to X12, which had future versions of the standard. All
customer support, and reduce the cost convened a committee of subject matter comments submitted during the
of sending and processing paper experts to review the technical comment period for the August 22, 2008
remittance advices. Commenters also comments and provide us with proposed rule will automatically be
noted that the greatly improved X12 278 technical input. The workgroup included in the X12 process for
for referrals and authorizations could reviewed each comment and categorized considering change requests. Submitters
encourage wider implementation and them into several groups as follows: (1) will not need to re-submit those
save labor costs. Commenters noted that The committee agrees with the comment comments.
the new claims transaction standard and the change will be made in the next Comment: We received a few
contained in Version 5010 significantly version of the TR3s (212 comments); (2) comments requesting clarification of a
improves the reporting of clinical data, the committee does not agree with the statement in the August 22, 2008
enabling the reporting of ICD–10–CM comment and believes that a change is proposed rule regarding the field size
diagnosis codes and ICD–10–PCS not appropriate (156 comments); (3) the issue in Version 4010/4010A to
procedure codes, and distinguishes functionality already exists elsewhere in accommodate ICD–10. In the August 22,
between principal diagnosis, admitting the TR3s; commenter requires 2008 proposed rule, we said that
diagnosis, external cause of injury and explanation and references (5 Version 4010/4010A does not provide a
patient reason for visit codes. comments); and (4) the comment is a means for identifying ICD–10 procedure
Commenters noted that these request for interpretation and/or or diagnosis codes on an institutional
distinctions will improve the training, and not a request for a change claim, and that Version 5010 anticipates
understanding of clinical data and in the TR3s (43 comments). There were the eventual use of ICD–10 procedure
enable better monitoring of mortality 29 comments that were not requests for and diagnosis codes by adding a
rates for certain illnesses, outcomes for action, but rather statements of opinion qualifier as well as the space needed to
specific treatment options, and hospital about Version 5010. Of the 212 report the number of characters that
length of stay for certain conditions, as comments falling into the first category, would permit reporting of ICD–10
well as the clinical reasons for why the most were clarifications that would procedure and diagnosis codes on
patient sought hospital care. improve usability of the TR3s, but institutional health care claims.
Commenters also noted that another would not adversely affect business Commenters pointed out that the more
improvement in the updated claims processes. Therefore, we will not accurate explanation for why Version
standard is the ability to handle request that X12 accommodate these 4010/4010A cannot accommodate ICD–
identification of the ‘‘Present on changes in Version 5010, but rather 10 is because of the lack of a qualifier
or indicator for the code set name rather anesthesia care, and requested that units claims from oral surgeons and other
than the size of the field for the codes. continue to be permitted, or practitioners, a permanent data element
Response: We note the correction. alternatively, that additional time be is needed. The second issue pertains to
Comment: One commenter allowed to implement this change the use of either a national or
recommended a correction to Version because of its impact on business international tooth numbering system.
5010, specific to the claims transactions, processes and contracts. These commenters stated that both
to enable it to support the creation of a Response: Due to the nature of this numbering systems should be
proposed National Joint Replacement comment, which addresses potential accommodated in the X12 837 Dental
Registry. efficiencies resulting from a technical and Professional Guides. Currently, only
Response: Because of the technical provision in the Version 5010 the Universal National Tooth
nature of this comment, we consulted implementation guide, we consulted Designation System is accommodated in
with the X12 work group to better with the X12 workgroup. Based on our Version 5010.
understand the context of the comment discussion with the X12 workgroup, we Response: Once again, we believe
and the stated concern. Based on our think that the appropriate course for the these comments pertain more directly to
current understanding of the comment, commenter to follow would be to the technical provisions of the relevant
we agreed with the X12 workgroup on submit a change request to the implementation guides. We therefore
this recommendation for the next workgroup because the X12 consulted with the X12 expert
version of its TR3s, once the registry is development cycle is ongoing, and committee, which agreed with the first
finalized. This means that Version 5010 change requests will continue to be issue regarding the ability of dental
will not have changes made to it for this accepted and reviewed for consideration providers to report tooth number
purpose at this time, but that the next for the next version of the standards. beyond oral surgery, and committed to
version of the standards will likely have Given the change in this final rule in the allowing this level of reporting in future
addressed and resolved this issue. compliance date for Version 5010, we versions of the X12 standards.
Comment: We received several believe the commenter’s request for Regarding the issue of which tooth
comments regarding the external code more time to implement the data numbering system should be
sets used in the standards, such as requirement is addressed. accommodated in Version 5010, the X12
claims adjustment reason codes. Several Comment: Several commenters committee encourages the commenters
commenters wrote about the X12 835 suggested changes to the situational rule to initiate the discussion through the
remittance advice code mapping for the health care diagnosis codes DSMO process with additional business
requirements, stating that providers segment on the X12 837D for dental justification for future consideration.
continue to struggle with claims. The situational rule requires The X12 portal has several HIPAA
implementation of the X12 835 as many inclusion of diagnosis codes only under Implementation Guide Requests (HIRs)
health plans struggle to provide quality circumstances involving oral surgery or available which explain how to use the
mapping from proprietary to standard anesthesia. Commenters suggested that claims transaction for dental services in
codes in the health care payment and today’s dental health plans are offering the interim (http://www.X12.org).
remittance advice transaction. benefit plans that provide additional Overall, the technical comments
Commenters requested that guidelines coverage for dental services when received on Version 5010 did not
for mapping be provided. certain medical conditions exist. The represent issues that would prevent this
Response: During our consideration of commenter suggested that the version of the standard from being
these comments, which we believe situational rule be expanded to allow for adopted as currently proposed.
apply to the technical standards dental providers to include diagnosis However, enhancements will either be
maintenance process, and which we feel codes in cases where specific dental implemented in future versions or
are outside of the scope of this rule, we procedures may minimize the risks further vetted for inclusion in future
consulted with the WEDI 835 special associated with the connection between versions.
work group (SWG) to confirm that the the patient’s oral and systemic health
stated concerns were being addressed in B. Adoption of NCPDP
conditions.
its standards revision process. The Response: We do not feel that these Telecommunication Standard
WEDI 835 SWG indicated that it is comments are within the scope of the Implementation Guide Version D
developing a recommended set of proposed rule, but instead pertain to Release 0 (D.0) and Equivalent Batch
mapping instructions and information certain technical aspects of the X12 Standard Implementation Guide,
for the industry. In addition, the WEDI Technical Reports. As such, we shared Version 1, Release 2 (1.2) for Retail
835 SWG has adopted recommendations the comments with the X12 expert Pharmacy Transactions
that will assist in facilitating a more committee, which agreed with this We proposed to revise § 162.1102,
standard implementation of the X12 recommendation and committed to § 162.1202, § 162.1302, and § 162.1802
835. incorporating this change into future by adding new paragraphs (c)(1) to each
Comment: We received a comment versions of X12 Technical Reports Type of those sections to adopt the NCPDP
from a large specialty association 3. As stated earlier, X12 will provide Telecommunication Standard
representing anesthesiology. This group guidance on how to accommodate the Implementation Guide, Version D,
responded to a discussion in the August functionality in Version 5010. Release 0 (Version D.0) and equivalent
22, 2008 proposed rule in which we Comment: A few comments focused NCPDP Batch Standard Implementation
indicate that efficiencies are gained by on the ability of dental providers to Guide, Version 1, Release 2 (Version
allowing only the reporting of minutes report tooth numbers on the X12 837P 1.2) in place of the NCPDP
for anesthesia time in Version 5010, claim. According to commenters, there Telecommunication Standard
whereas Version 4010/4010A allows for is a need for all dental providers to be Implementation Guide, Version 5,
reporting of anesthesia time in either able to report tooth numbers on medical Release 1 (Version 5.1) and equivalent
units or minutes. The commenter stated claims. There were two specific issues NCPDP Batch Standard Implementation
that this change to Version 5010 will not raised in this regard. First, even though Guide, Version 1, Release 1 (Version
add efficiency and/or cost savings to the a field for the tooth number has been 1.1), for the following retail pharmacy
submission and processing of claims for designated temporarily, to accommodate drug transactions: health care claims or
equivalent encounter information; claims. The commenters pointed out However, Medicaid agencies will still be
eligibility for a health plan; referral that the ASC X12 837 claim standards required to have the capacity to transmit
certification and authorization; and used for processing institutional, and receive the Medicaid pharmacy
coordination of benefits. professional and dental claims already subrogation transaction electronically,
Since the time that Version 5.1 was include the ability to perform Medicaid in standard format, which the Medicaid
adopted as a transaction standard in the subrogation and that these standards agency could choose to do through its
Transactions and Code Sets rule, the have also gone through the DSMO own system or through a health care
industry has submitted requests for approval process. clearinghouse.
modifications to Version 5.1 to NCPDP. Response: We appreciate the Comment: We received a comment
Some of these modification requests suggestion that we adopt standards for from a pharmacy that supports the
were necessary for reasons similar to conducting Medicaid subrogation for adoption of Version 3.0. The pharmacy
those for the X12 standards—changing both pharmacy and medical claims. requested that HHS enforce the use of
business needs—many of which were However, since we did not propose the the standard and eliminate the practice
necessitated by the requirements of the adoption of Version 5010 for Medicaid used by some States of recouping money
Medicare Prescription Drug, subrogation of non-pharmacy claims, we from the pharmacy instead of the third
Improvement and Modernization Act of cannot adopt it in this final rule. HHS party, which puts additional burden on
2003 (MMA). The complete discussion will consider whether to adopt the X12 the pharmacy to bill the third party and
of our proposal and reasons for the standard for non-pharmacy Medicaid in some instances re-bill Medicaid.
proposal can be found in the August 22, subrogation transactions. If we pursue Response: It is not in the purview of
2008 proposed rule (73 FR 49751). that option, we would propose it in an this regulation to eliminate the practice
Comment: Commenters unanimously NPRM and take industry comments into of recoupment from providers. The
supported the adoption of Version D.0, consideration before we would adopt a adoption of the Medicaid pharmacy
agreeing that Version D.0 is needed so standard. subrogation standard will not restrict
that transactions for the Medicare Part D We note that, although we are not States that choose to recoup from
pharmacy benefit can be conducted. We adopting a standard for Medicaid providers in lieu of seeking
did not receive any technical comments subrogation for non-pharmacy related reimbursement from the third party
on Version D.0. claims in this rule, those standards are directly. Once a claim is paid to a
Response: We agree that Version D.0 available for use. Covered entities are pharmacy, the State has the option to
is needed to enhance retail pharmacy not prohibited from using Version 5010 seek recovery directly from liable third
transactions, as well as to better support for non-pharmacy Medicaid subrogation party payers, or to seek recovery as an
Medicare Part D requirements. We are transactions between willing trading overpayment from the provider. We
adopting Version D.0 as proposed. partners. Some Medicaid agencies have believe that the adoption of the
already been successfully using this Medicaid pharmacy subrogation
C. Adoption of a Standard for Medicaid approach with commercial health plans. standard will greatly improve the
Pharmacy Subrogation: NCPDP Comment: We received comments efficiency and effectiveness of the
Medicaid Subrogation Implementation recommending that HHS clarify that health care system which should result
Guide, Version 3.0 for Pharmacy Claims State Medicaid agencies would not be in more direct billing of third parties in
We proposed adding a new subpart S prohibited from continuing to bill using States that routinely recoup from
to 45 CFR part 162 to adopt a standard paper claims when necessary. providers.
for the subrogation of pharmacy claims Response: We recognize that there
may be situations where it is not cost- D. Adoption of the NCPDP
paid by Medicaid. We proposed that the
effective for State Medicaid agencies Telecommunication Standard
transaction would be the Medicaid
and certain plans to use an electronic Implementation Guide Version D
pharmacy subrogation transaction,
format for pharmacy claims. For Release 0 (D.0) and the Health Care
defined at proposed § 162.1901, and that
example, while a particular plan may Claim: Professional ASC X12 Technical
the standard for that transaction would
process a large volume of claims, the Report Type 3 for Billing Retail
be the NCPDP Batch Standard Medicaid
same plan may have only a small Pharmacy Supplies and Services
Subrogation Implementation Guide,
Version 3, Release 0 (Version 3.0), July number of Medicaid pharmacy We proposed to revise § 162.1102 to
2007 (hereinafter referred to as Version subrogation claims. In addition, States adopt both Version D.0 and the 837
3.0) at proposed § 162.1902. The continue to make advancements in Health Care Claim: Professional ASC
complete discussion of our proposal and identifying other liable payers. This X12 Technical Report Type 3 for billing
reasons for the proposal can be found in enables States to avoid payment by retail pharmacy supplies and
the August 22, 2008 proposed rule (73 returning claims to providers and professional services. The use of either
FR 49751–49752). instructing them to bill the other payers. standard would be determined by
Comment: Commenters unanimously This will result in a decrease in the trading partner agreements. The
supported the adoption of Version 3.0 volume of subrogation claims for complete discussion of our proposal and
for Medicaid pharmacy subrogation, and Medicaid. Health plans do not always the reasons for the proposal can be
we did not receive any comments in have to conduct electronic transactions found in the August 22, 2008 proposed
opposition. We also did not receive any for which a standard has been adopted, rule (73 FR 49752–49754).
technical comments on Version 3.0. but if they do, the standard must be Comment: We received several
Response: We are adopting Version used. Section 162.923, however, places comments in support of the proposal to
3.0 as the HIPAA standard at additional requirements on health plans allow the use of either standard for this
§ 162.1902, for the Medicaid pharmacy so that if a covered entity wanted to purpose. Commenters agreed that the
subrogation transaction, as described at conduct the transaction electronically NCPDP Telecommunication and Batch
§ 162.1901. with the Medicaid agency, the agency Standard supports the billing of the
Comment: Several commenters could not refuse to do so. Medicaid various code sets needed to bill retail
requested that standards for Medicaid agencies could continue to bill on paper pharmacy supplies and professional
subrogation also be adopted for other as long as both parties to the transaction services (for example, Medication
claims types in addition to pharmacy agree to conduct the paper transaction. Therapy Management (MTM), vaccine
administration), and that they can use standards apply to Medication Therapy whereas § 162.1402 clearly identifies the
this NCPDP standard for most of their Management (MTM) services. The standard that is adopted for the function
transactions. The commenters said that commenter stated that MTM is a service described in § 162.1401.
workflow will be less disrupted when designed to ensure that Part D drugs Comment: We received a comment
pharmacies can bill for services and prescribed to targeted beneficiaries are requesting a technical clarification to
supplies using the same NCPDP appropriately used to optimize the enrollment and disenrollment in a
standard as that used for pharmacy drug therapeutic outcomes through improved health plan transaction (§ 162.1501).
claims. Commenters said that the ability medication. The commenter stated that there has
to use the NCPDP standard will improve Response: In the August 22, 2008 always been a concern as to when the
customer service and lower proposed rule, we address MTM enrollment/disenrollment (834)
administrative costs. These commenters services, noting that the MMA provides transaction was required. This
said that in some cases the X12 standard coverage for MTM, which is a distinct commenter believed that the definition
was appropriate, and that they preferred set of services that encompasses a broad of a group health plan could be applied
to have the option of using it on a case- range of professional activities and to the plan sponsor role of a self-funded
by-case basis. responsibilities. We noted that some employer group, which would require
Response: We are adopting our pharmacies believe it is appropriate to the plan sponsor to use the enrollment
proposal to allow the use of either use the NCPDP standard for MTM transaction. The commenter
Version D.0 or Version 5010 for billing services because the services are part of recommended that the final rule include
retail pharmacy supplies and the prescription. Other industry wording to further clarify this
professional services. segments, however, believe it is requirement, by adding to § 162.1501
Comment: A few commenters noted appropriate to use the X12 standard for the following: For the purpose of
their support of the proposal, billing MTM services because they enrollment and disenrollment in their
particularly as it relates to improving interpret ‘‘professional services’’ to health plan, the term sponsor shall
interoperability of claims processing require the use of a professional claim include self-funded employer groups
and adjudication, and suggested that we (837P) (73 FR 49753). We agree with the that transmit electronic information to
clarify how our proposal would be commenter and affirm that MTM is their Third Party Administrator (TPA) to
implemented with respect to trading included as a service to which both establish or terminate insurance
partner agreements. Another commenter standards apply. coverage for their member.
was cautiously supportive, and said that Response: We proposed to describe
it agreed with the use of either standard, E. Modifications to the Descriptions of this transaction as being ‘‘the
but that we should emphasize the Transactions transmission of subscriber enrollment
requirement that trading partner We proposed to revise the information from the sponsor of the
agreements be voluntary, and that a descriptions of the transactions at insurance coverage, benefits, or policy,
health plan could not create a mandate § 162.1301, § 162.1401, and § 162.1501 to a health plan to establish or terminate
to use one standard over the other. to clearly specify the senders and insurance coverage.’’ We provided in
Response: We reiterate that, by receivers of those transactions. We the August 22, 2008 proposed rule that
adopting both standards for the one proposed to revise the descriptions for a sponsor is an employer that provides
transaction, we are supporting current the following transactions: (1) benefits to its employees, members, or
industry practices with respect to the Enrollment and Disenrollment in a beneficiaries through contracted
use of these standards for billing Health Plan; (2) Referral Certification services. We further noted that
supplies and services that are and Authorization; and (3) Health Care numerous entity types act as sponsors in
commonly dispensed or conducted via Claim Status. providing benefits, including, for
the retail pharmacy channel. With the Comment: The majority of example, unions, government agencies,
exception of the requirements set forth commenters expressed their support for and associations (73 FR 49754). We do
in § 162.915, regarding certain the revised transaction descriptions. not think it is appropriate to further
particulars that may not be included in Response: We are adopting the revise the definition of the enrollment
trading partner agreements, we do not revisions to the regulation text as and disenrollment in a health plan
dictate the terms of trading partner proposed. transaction to specify that a sponsor
agreements but expect that health plans Comment: Several pharmacies and a includes any one particular type of
and providers will continue to national pharmacy chain noted that entity, as the commenter suggests. We
collaborate on the processes for these real-time pharmacy claim transaction reiterate here that it is not mandatory for
claim types. statuses are given using the NCPDP a sponsor that is not otherwise a
In addition to revising the regulation standard in real time, whereas Version covered entity to use the transaction
text at § 162.1102 to allow for the use of 4010/4010A is a batch standard. A standard because, as a non-covered
either the X12 or the NCPDP standard commenter requested that our definition entity, HIPAA does not apply to it.
for billing retail pharmacy supplies and of the health care claim status
professional services, we are also transaction specify that Version 5010 F. Compliance and Effective Dates
making a conforming change to the (ASC X12 276/277) is used to provide Versions 5010 and D.0: We proposed
definition of ‘‘standard transaction’’ at status on X12 transactions for medical to adopt a date of April 1, 2010 for all
§ 162.103. We indicate that a standard claims only, because the commenter covered entities to be in compliance
transaction means a transaction that wanted clear differentiation between with Versions 5010 and D.0. In the
complies with ‘‘an’’ applicable standard pharmacy and non-pharmacy claims. August 22, 2008 proposed rule, we
adopted under this part, rather than Response: We are not making a discussed our reasons for proposing the
‘‘the’’ applicable standard adopted change in our regulation text because compliance timeframe we did. We
under this part. we do not think it is appropriate. In justified the proposed date based on
Comment: One commenter said that if § 162.1401, the description of the health assumptions that the industry had
we are adopting standards for retail care claim status transaction only sufficient expertise in using the X12 and
pharmacy supplies and services, that we describes the actions and specifies the NCPDP standards, and that the system
should clearly state that both adopted senders and receivers of the transaction, and business changes could therefore be
efficiently coordinated, requiring less fact, some commenters suggested that compliance that we believe will be very
time than the original standards for the impact of ICD–10 is so significant, effective for these purposes. Therefore,
implementation. We also discussed at that there might not be sufficient we describe below the NCVHS
length an alternative we considered, but industry resources to address Versions recommendation and the schedule to
did not propose—a staggered 5010 and D.0 because of competing which we expect covered entities to
compliance timeframe for Versions 5010 resource needs. A number of health adhere during the compliance period.
and D.0 (72 FR 49754–49757). We plans stated that, based on their own A letter from the NCVHS to Secretary
received more than 100 comments on impact assessments, not only would of HHS Michael Leavitt dated
compliance dates, with virtually all record layouts and mapping changes be September 26, 2007 (http://
indicating that the proposed compliance required, but also changes to edits, www.ncvhs.hhs.gov) summarized the
date was not feasible given the extensive business procedures and system Committee’s Standards and Security
changes in Versions 5010 and D.0 from capabilities. They stated that there are Subcommittee’s HIPAA transaction
the current standards, and the need for nearly 850 changes between Version hearings of July 2007, noting that ‘‘the
a coordinated implementation and 4010/4010A and Version 5010 to be timing of standards implementation is
testing schedule. As stated at the analyzed and potentially implemented. critical to success.’’ The NCVHS
beginning of the preamble, this rule is One example is the X12 270/271 weighed the industry testimony
effective March 17, 2009. We note that eligibility transaction, which will presented at that hearing and noted that
the effective date is the date that the require a more detailed response with HHS should consider establishing two
policies set forth in this final rule take less information supplied. Plans will different levels of compliance for the
effect, and new policies are considered have to determine where the data can be implementation of Version 5010. Level
to be officially adopted. The compliance accessed and whether it exists within 1 compliance, as interpreted by the
dates, which are different than the the current software; in many cases, it NCVHS, means that the HIPAA covered
effective dates, are the dates on which will not be a case of moving a few extra entity could demonstrate that it could
entities are required to have fields, and databases may have to be create and receive Version 5010
implemented the policies adopted in modified or created. These commenters compliant transactions. Level 2
this rule. The compliance dates we now said the complexity of the Technical compliance was interpreted by the
adopt for this regulation are as follows: Reports Type 3 requires in-depth NCVHS to mean that HIPAA covered
• Versions 5010 and D.0—January 1, analysis, which will have to be entities had completed end-to-end
2012. conducted through formal procedures testing with all of their partners and
• Version 3.0 for all covered entities (impact analysis, requirements were ready to move into full production
except small health plans—January 1, definition) before design, build, and with the new version. The NCVHS letter
2012. testing can take place. Similar stated that: ‘‘it is critical that the
• Version 3.0 for small health plans— comments were received regarding the industry is afforded the opportunity to
January 1, 2013. compliance date for Version D.0. test and verify Version 5010 up to two
Comment: The majority of All entities that submitted comments years prior to the adoption of Version
commenters opposed the proposed agreed with the proposed adoption of 5010.’’ The letter’s Recommendation 2.2
compliance date for Versions 5010 and that standard, but did not think enough states that ‘‘HHS should take under
D.0 and requested additional time for time was given for implementation. consideration testifier feedback
implementation. Most commenters Commenters stated that the transition indicating that for Version 5010, two
stated that the proposed date did not from Version 5.1 to Version D.0 has years will be needed to achieve Level 1
provide sufficient time to adequately functional complexity that will require compliance.’’
execute a gap analysis for all of the standardization of practices, new fields, Accordingly, our expectations are as
transactions, build programs, train staff, new situational rules for each data follows. The Level 1 testing period is
and conduct outreach and testing with element, as well as education, testing the period during which covered
trading partners. These commenters and training. These commenters pointed entities perform all of their internal
stressed the need to avoid compliance out that, although there have been 22 readiness activities in preparation for
extensions or contingency periods version releases of the NCPDP standard testing the new versions of the
because they complicate since Version 5.1, the majority of the standards with their trading partners.
implementations and increase costs. industry was reluctant to develop When we refer to compliance with Level
Health plans and providers expressed software for any version that was not 1, we mean that a covered entity can
concern that the proposed compliance adopted under HIPAA. These demonstrably create and receive
date was unrealistic because large commenters suggested a 36-month compliant transactions, resulting from
segments of the industry have not been implementation schedule for Version the completion of all design/build
able to meet any of the deadlines for the D.0. activities and internal testing. When a
HIPAA standards to date, including Response: Based on the comments covered entity has attained Level 1
Medicare and many State Medicaid and our analysis of those comments, we compliance, it has completed all
agencies. are adopting a compliance date later internal readiness activities and is fully
The majority of commenters who than the date we proposed for all prepared to initiate testing of the new
opposed the April 2010 compliance date covered entities for Version 5010 and versions in a test or production
suggested a thirty-six month compliance Version D.0. We are requiring that all environment, pursuant to its standard
period instead. These commenters said covered entities be in compliance with protocols for testing and implementing
that this amount of time is needed for Versions 5010 and D.0 on January 1, new software or data exchanges. The
full implementation because the same 2012. Level 2 testing period is the period
programmers, developers and We believe that it is crucial for during which covered entities are
operations staff who must re-design covered entities to meet certain preparing to reach full production
technical and business infrastructure milestones during the compliance readiness with all trading partners.
activities to accommodate Versions period in order to ensure full, When a covered entity is in compliance
5010 and D.0 will also be needed to do successful, and timely compliance. The with Level 2, it has completed end-to-
similar work to implement ICD–10. In NCVHS recommended a framework for end testing with each of its trading
partners, and is able to operate in refer readers to the HIPAA Enforcement 3.0 later than the effective date for the
production mode with the new versions Final Rule (71 FR 8390), published in other parts of this rule. We are making
of the standards by the end of that the Federal Register on February 16, the effective date for the portion of the
period. By ‘‘production mode,’’ we 2006, for our regulations implementing rule concerning the adoption of Version
mean that covered entities can that HIPAA authority. 3.0 January 1, 2010, which means that
successfully exchange (accept and/or covered entities, except small health
Compliance Date for Version 3.0
send) standard transactions and as plans, must be in compliance with
appropriate, be able to process them For implementation of Version 3.0 for Version 3.0 no later than January 1,
successfully. the Medicaid pharmacy subrogation 2012. Small health plans must be in
During the Level 1 and Level 2 testing transaction, we proposed to revise compliance no later than January 1,
periods, either version of the standards § 162.900 to adopt a compliance date of 2013. This gives States and health plans
may be used in production mode— 24 months after the effective date of the a two-year planning, implementation
Version 4010/4010A and/or Version final rule for all covered entities, except and testing window, in contrast to the
5010, as well as Version 5.1 and/or for small health plans, which would three years being provided for Versions
Version D.0—as agreed to by trading have 36 months. We also proposed to 5010 and D.0. States and plans are
partners. Covered entities should be revise § 162.923, entitled ‘‘Requirements encouraged to do as much planning in
prepared to meet Level 1 compliance by for covered entities’’ to make paragraph the year before the effective date
December 31, 2010, and Level 2 (a) applicable only to covered entities (calendar year 2009) as possible, to take
compliance by December 31, 2011. After that conduct transactions with other advantage of that window and the work
December 31, 2011, covered entities entities that are required to comply with already under way for Version D.0,
may not use Versions 4010/4010A and a transaction standard. We proposed since Versions D.0 and 3.0 are tied
5.1. On January 1, 2012, all covered this change in order to address the together. In other words, States may use
entities will have reached Level 2 situation where transactions require the calendar year 2009 to conduct a
compliance, and must be fully participation of two covered entities, preliminary analysis of Version 3.0
compliant in using Versions 5010 and where one entity is under a different set changes, in concert with their analysis
D.0 exclusively. of compliance requirements. We expect of Version D.0 changes. States should
The final compliance date provides an that the change we proposed to also prepare and submit their budget
implementation period of 36 months, or § 162.923 would resolve the problem of requests to secure funding for design,
three years, as requested by the majority a State Medicaid agency attempting to development and implementation in
of the commenters. Given this revised transmit a transaction using Version 3.0 2010 and 2011, which would leave time
implementation period that to a small health plan before the small to conduct testing with trading partners
accommodates NCVHS and industry health plan is required to be compliant between January 2011 and January 2012.
concerns, we expect that covered and could, therefore, reject the
entities will be able to meet the Comment: We received a number of
transaction on the basis that it is in the
compliance date. We anticipate that, comments from providers and health
standard format (73 FR 49754–49755).
since there was support for a phased-in Comment: We received one comment plans supporting the proposed revision
schedule, health plans and explaining that Version 3.0 had to be to § 162.923(a).
clearinghouses will make every effort to implemented either at the same time as Response: We are adopting the
be fully compliant on January 1, 2012. Version D.0, or after, because certain revision to § 162.923(a), as proposed in
Covered entities are urged to begin data elements present in D.0, but not in the August 22, 2008 proposed rule.
preparations now, to incorporate Version 5.1, were needed in order to use Timeline
effective planning, collaboration and Version 3.0. The commenter also
testing in their implementation believed that willing trading partners In the proposed rule, we provided a
strategies, and to identify and mitigate would be able to agree to use the timeline for implementation and
any barriers long before the deadline. Medicaid pharmacy subrogation compliance of ICD–10 and Versions
While we have authorized contingency standard voluntarily at any time after 5010 and D.0. We included the timeline
plans in the past, we do not intend to the effective date and before the to enable the industry to conduct
do so in this case, as such an action compliance date. preliminary planning (73 FR 49757),
would likely adversely impact ICD–10 Response: We agree that Versions D.0 and indicated that the proposed
implementation activities. HIPAA gives and 3.0 are tied together by certain data timeline represented our best estimate
us authority to invoke civil money elements necessitating their for industry implementation at the time.
penalties against covered entities who concomitant or sequential We also indicated that the timeline was
do not comply with the standards, and implementation respectively. To subject to revision as updated
we have been encouraged by industry to accommodate these technical needs, we information became available. We
use our authority on a wider scale. We are making the effective date of Version provide the revised timeline here.
TIMELINE FOR IMPLEMENTING VERSIONS 5010/D.0, VERSION 3.0 AND ICD–10

Version 5010/D.0 and Version 3.0 ICD–10
01/09: Publish final rule ............................................................................ 01/09: Publish Final Rule.

01/09: Begin Level 1 testing period activities (gap analysis, design, de-
velopment, internal testing) for Versions 5010 and D.0.
01/10: Begin internal testing for Versions 5010 and D.0.
12/10: Achieve Level 1 compliance (Covered entities have completed
internal testing and can send and receive compliant transactions) for
Versions 5010 and D.0.
01/11: Begin Level 2 testing period activities (external testing with trad- 01/11: Begin initial compliance activities (gap analysis, design, devel-
ing partners and move into production; dual processing mode) for opment, internal testing).
Versions 5010 and D.0.
TIMELINE FOR IMPLEMENTING VERSIONS 5010/D.0, VERSION 3.0 AND ICD–10—Continued

Version 5010/D.0 and Version 3.0 ICD–10
01/12: Achieve Level 2 compliance; Compliance date for all covered

entities. This is also the compliance date for Version 3.0 for all cov-
ered entities except small health plans *.
01/13: Compliance date for Version 3.0 for small health plans.
10/13: Compliance date for all covered entities (subject to the final
compliance date in any rule published for the adoption of ICD–10).
* Note: Level 1 and Level 2 compliance requirements only apply to Versions 5010 and D.0
Other Comments Pertaining to the rule (73 FR 49754–49757). Based on the clearinghouses would have to be in
Compliance Date Specific to Versions comments however, we acknowledge compliance 24 months after the effective
5010 and D.0 that many significant actions would date, and prepared to conduct testing
Comment: We received a few have to take place very quickly (for with trading partners over the next 12
comments from Medicaid agencies example, budget requests, hiring and months. We also received a few
explaining why the compliance dates recruitment of subject matter experts, comments that suggested a staggered
were problematic from a funding design work, schedule of programming implementation schedule by transaction
perspective. Commenters explained that installations, etc.) in order to meet an type. For example, the updated
the State budget environment requires April 2010 compliance date, and as standards for health care claims and
more lead time to obtain project stated above, have adopted a later date related transactions could be
authority and resources on the scale for both standards. implemented first, followed by updated
necessary to implement Versions 5010, Comment: The majority of standards for eligibility transactions,
D.0, and 3.0. One State said that it could commenters agreed that small health claims status transactions, etc. However,
not begin any substantial required plans should not have additional time the majority of commenters who had
documentation activities until there is a (for example, an additional year as in opinions about a staggered
final rule. Finally, a number of States past regulations) to become compliant implementation schedule based on
said that they are facing fairly with Versions 5010 and D.0 because transaction type believe that assigning
significant budget shortages. these entities are, or should be, already different compliance dates to different
Commenters said that, even with 90 using Version 4010/4010A and Version transactions would not have the
percent federal matching rates, resource 5.1 through clearinghouses or their own intended effect of ensuring compliance
requests based on a proposed rule systems. Small health plans should be at by the deadline, nor would it facilitate
would be unlikely to receive approval the same stage of implementation as any the testing process. These commenters
from legislatures. other covered entity, meaning that their explained that the use of certain
Response: The comments from the organizations, business associates and transactions, particularly auxiliary
States were compelling with respect to trading partners are now well-versed in transactions (for example,
funding and planning issues, and were the technology and requirements for authorizations and referrals), is so
helpful in our reconsideration of the using Version 4010/4010A and Version inconsistent across the industry, there
proposed compliance dates. We 5.1, and should not require additional would be no effective means by which
acknowledge the need to work with time to accommodate the new versions. to stagger their implementation. The use
States to coordinate their budget All covered entities are essentially at the of the auxiliary transactions is uneven—
requests and implementation activities same point with respect to having many entities do not use the claims
with legacy system replacement. implemented the standards, identified status transactions because they have
Comment: Another State agency and resolved business process issues, on-line access to their billing files; many
recommended that the final rule contain trained staff, and incorporated the use of do not use the eligibility transaction
a waiver provision to permit covered standards process into their existing because, historically, it has not provided
entities to seek a waiver for infrastructure. useful information. Thus, entities
implementation of Version 5010 in any Response: We agree with commenters actually have very little experience with
existing legacy system that is scheduled regarding the compliance dates for small these transactions, and may continue to
for replacement. health plans, and are requiring all use them minimally. They do not wish
Response: Waivers cannot be covered entities, including small health to expend limited resources on a
accommodated. Neither the statute nor plans, to be in compliance on the same transaction that will not have a return
the regulations provide for waivers for date. on investment in the early years.
meeting the standards set forth under Comment: We received several Response: We believe that different
HIPAA. comments supporting a different compliance dates for different types of
Comment: A few commenters favored schedule which involved staggering covered entities could significantly
the proposed compliance dates for compliance based on either covered complicate trading partner testing,
Versions 5010 and D.0, citing their entity type or transaction type over the particularly for those entities that
eagerness to begin benefiting from the course of 3 years. In the first scenario, function as both health plans and health
updated standards as soon as possible, all health plans and clearinghouses care providers, as well as for other
particularly because it has been so long would be required to be compliant one entity types that perform in multiple
between adoption of Versions 4010/ year before covered health care roles. It is likely that different
4010A1 and 5.1, and the updated providers in order to ensure that compliance dates for different entity
versions of those standards. providers could begin testing with all types could be confusing to the
Response: We believed the proposed trading partners the following year. For industry, and could actually delay some
compliance dates were reasonable for example, under a 36-month compliance implementations while entities waited
the reasons provided in the proposed scenario, health plans and for trading partner compliance. For
example, this approach presumes that maintain a dual submission strategy claims, but not on others. HHS will
providers and their software vendors which incurs significant additional ensure that appropriate agencies and
will be making system and operational costs to the providers. We received a departments work together to monitor
changes at the same time as the health number of comments expressing Medicaid implementation work plans,
plans and clearinghouses in order to be particular concern about Medicare testing and readiness on a regular basis
ready for testing. mandating full compliance prior to the throughout the implementation period.
Comment: We received a number of compliance date adopted by the final We are adopting a revision to
comments about our assumption in the rule. The commenters specifically § 162.925, by adding a new paragraph
August 22, 2008 proposed rule that referenced written communication they (a)(6), to specify that a health plan is not
staggered implementation dates for had received from Medicare stating that permitted to delay, reject, or attempt to
health plans and clearinghouses would it (Medicare) would have an early adversely affect the other entity or the
not be feasible because of robust trading compliance date for Version 5010 for transaction on the basis that the
partner tracking systems that might be the coordination of benefits transaction. transaction does not comply with
needed so that entities could know The commenters stated that, if Medicare another adopted standard during the
which providers were testing Versions requires covered entities to be ready to period from the effective date of the
5010 and/or D.0, which were using shift to dual processing several months final rule until the compliance date.
Versions 4010/4010A and/or 5.1, and before the adopted compliance date, With respect to coordination of benefits,
which had fully converted to Versions there will be significant implementation this means, for example, that Medicare
5010 and/or D.0. This would be very problems for many providers and other will not be able to require of trading
complicated to build and manage health plans. The commenters also partners that they be in full compliance
between the thousands of providers, stated that, if Medicare mandates use of with Version 5010 prior to January 1,
health plans, vendors and Version 5010 for coordination of 2012, unless willing trading partners
clearinghouses. Commenters also benefits, before any of the other agree to do so. Health plans that
expressed concern about the impact on transactions were mandated for use, participate in Medicare’s Coordination
coordination of benefits with secondary other health plans would have to run of Benefits program will be able to work
health plans, since each health plan separate processing systems for just the with Medicare to arrange a mutually
would be implementing Version 5010 at one transaction. Other commenters agreeable testing schedule in order to
different times. One commenter said stated that health plans do not maintain expedite this transaction, but they are
that the reality is that all covered separate processing systems for each not required to do so, and may revert to
entities would need robust trading additional health plan with which they receiving claims directly from providers
partner tracking systems for any conduct COB transactions. Commenters if they choose to do so.
implementation plan, and that stated that, if Medicare is allowed to
coordination of benefits would be Comment: Commenters said that a key
mandate early compliance, it would component of any implementation
disrupted with any implementation exacerbate an already difficult situation,
plan because not all covered entities schedule is testing, and a large number
and reiterated that no entity should be of commenters stressed the importance
would be ready on the same date to allowed to require their trading partners
send and receive the updated HIPAA of both internal testing as well as
to implement the standards in a external testing with trading partners.
standards. Commenters said that production environment, prior to the
covered entities would have to support Many commenters stated that testing
HHS compliance date, if the trading often occurs at or near the end of the
the dual use of Version 4010/4010A and
partner did not agree. These compliance period, and that such last-
Version 5010 until the compliance date
commenters feel that such a prohibition minute testing causes scheduling
in any scenario. They explained that all
would help ease the implementation as problems and creates uncertainty about
covered entities would need to test at
solutions are deployed across all whether changes were applied correctly.
different times during the
entities, over a defined period of time. Commenters said that, in many cases,
implementation process, and that a
complex scheduling process would Response: We agree that no covered hospitals and other providers must wait
need to exist between health plans, entity, including State Medicaid for vendors and health plans to
clearinghouses and providers testing agencies or Medicare, should be allowed schedule testing. Many commenters said
and migrating to the updated to require compliance earlier than the that health plans do not provide
transactions at different times. compliance date we are adopting in this sufficient advance communication
Response: We agree with the final rule. If entities were allowed to about their testing efforts or their
commenters’ points regarding the require earlier compliance, this would readiness to implement the standards,
complexity of programming, testing and cause undue financial and operational and providers have indicated that it is
coordinating all implementation efforts, burdens on other segments of the difficult to obtain the name of the
regardless of the timeline, if we were to industry. For example, one State chose individual or department within the
adopt a staggered implementation to implement the NPI before the health plan with whom they should
schedule by entity type or transaction compliance deadline, which caused coordinate. One commenter explained
type. significant difficulties and expenses for that testing is done in three parts:
Comment: Some commenters said that providers because, in some cases, they Testing of the standards themselves for
all health plans, including State were not ready to comply, and therefore workability; conformance testing of
Medicaid agencies, must be held to the had to revert to paper. In many cases, products and applications that send
same compliance dates, and that the State’s other trading partners, and/or receive the transactions; and
compliance with prior HIPAA namely other commercial health plans end-to-end testing to ensure
implementations varies between non- and the Federal Medicare program, were interoperability among trading partners.
government health plans and State not prepared to accept the NPI, which All three levels of testing are critical to
Medicaid agencies. Since Medicaid meant that providers (and their vendors the successful implementation of
agencies have lagged behind and not and clearinghouses) in that State had to Versions 5010, D.0 and 3.0, and efforts
met implementation deadlines, support a complex infrastructure in to execute all three levels of testing will
hospitals and providers have had to which the NPI was included on some minimize delays and avoid many of the
complications afflicting previous partners. By adopting a later compliance improvement in that version. We did
implementations. date, we hope to ensure that software not receive any technical comments
Response: We agree that testing is development vendors have sufficient specific to Version D.0.
absolutely crucial to resolving problems time to conduct the appropriate internal Comment: A few commenters stated
before the implementation date to and external testing such that the that greater industry involvement in the
ensure that there are no payment delays software they provide to their covered X12 standards development and
or service disruptions. In the August 22, entity clients is compliant with the balloting process would be helpful to
2008 proposed rule, we discussed and standards, capable of facilitating the their industry segment, e.g., health care
emphasized the importance of testing to transmission and receipt of the new providers, hospitals, health plans,
a successful and timely implementation versions of the standards. health care clearinghouses and vendors.
(73 FR 49755–49756). Based on the Response: We have suggested to the
industry’s experience in previous G. Miscellaneous/General Other
Comments X12 SDO that it consider the following:
implementations, it is clear to us that (1) Expanding the current outreach
testing is core to resolving issues early This section includes comments and efforts to industry to obtain more
and effectively. We have revised the responses to other issues raised during diverse representation from all covered
regulation text that identifies the the public comment period. entity types. This would take place
adopted standard for each transaction, during the development of new versions
Claims Attachments
in every instance, to enable testing to as well as during the balloting process;
occur during the period from the Comment: We received several
comments requesting that HHS not and (2) securing industry volunteers to
effective date of the final rule until the test the balloted standards before they
compliance date for Versions 5010 and adopt standards for electronic health
care claims attachments at this time are proposed to NCVHS. That way,
D.0. Our revised regulations permit the when the suggested modifications are
dual use of standards during that because implementation of Versions
5010, D.0, and 3.0, and ICD–10 would submitted to NCVHS for consideration,
timeframe, so that either Version 4010/ even greater industry support can be
41010A1 or Version 5010, and either make it impossible to also implement
standards for claims attachments. One expected.
Version 5.1 or Version D.0, may be used
commenter stressed that, since claims Comment: We received a few
for the period prior to the compliance
attachments included another new comments suggesting that HHS
date. We note that the adoption of two
standard—the HL7 Attachment streamline the standards adoption
standards for one transaction during the
period prior to compliance does not Specifications—the industry would not process. Commenters said that the
mean that covered entities must use be able to accommodate the additional marketplace is evolving at a rapid pace,
both standards, but, rather, that the use work needed to implement the claims creating new products, new
of either standard is permitted. attachment standard if Versions 5010, technologies and new methods of
Comment: Another commenter said D.0, and 3.0, and ICD–10 also had to be conducting business. They stressed that,
that the importance of vendor implemented in that same time period. even though X12 continues to improve
compliance cannot be underestimated, Response: We appreciate and will the standards each year, the industry
as practice management system vendors consider the commenters’ concerns for has not had the opportunity to benefit
are critical to provider compliance. Any not wanting to have to implement the from necessary and helpful changes
delays in vendor implementation of electronic health care claims attachment because too much time elapses between
compliant products will delay end-to- standards at the same time as Versions the adoption of versions. Others
end testing, so providing sufficient time 5010, D.0 and 3.0, and ICD–10. reiterated that there is a need for the
for the vendors to design, build and test, updated standards to be available for
Standards Adoption and Modifications use by the industry as they are tested
will only facilitate the process. A large
software vendor explained that, to In the August 22, 2008 proposed rule, and balloted. For example, one entity
enable compliance with Versions 5010 we provided an explanation of the found that the industry needs
and D.0, users must continue to use procedures for maintaining existing information about tax advantaged
their current software while testing new standards and for adopting new payment mechanisms (for example,
software updates to accommodate the standards and modifications to existing Medical Savings Accounts, Health
changes. The commenter explained that standards (73 FR 49744–49755). That Savings Accounts, Health
there are often several stages of software section of the proposed rule describes Reimbursement Accounts, etc.) that are
revisions, and this necessity may add how § 162.910 sets out the standards now commonly in place to support the
additional time to the development and maintenance process and defines the movement to consumer-directed health
implementation process. Finally, testing role of SDOs and the DSMOs. For care. Version 5010 does not contain the
and certification activities on each additional information about the DSMO information needed by patients or
version must take place to ensure process and procedures, refer to the providers to determine the financial
compatibility and stability of software. Web site at http://www.hipaa-dsmo.org/ impacts and flows. Commenters said
This process almost always takes longer Main.asp. We also described the process that the industry cannot wait another
than expected. for adopting modifications to standards eight years to be able to exchange this
Response: While we do not have the under § 162.910, which is discussed in type of crucial information for critical
authority to regulate vendors, as they detail in the Transactions and Code Sets market needs. They suggest that a more
are not covered entities, we agree about rule (65 FR 50312), and implemented at streamlined way to develop, implement
the critical importance of vendor § 162.910. and adopt updated standards must be
testing, and that, in particular, accurate, The proposed modifications and the found. Commenters suggested that HHS
quality software development and new transaction standards were work with industry stakeholders to
testing are critical to the successful developed through the process that identify and implement a way to
implementation of the updated versions. conforms with § 162.910. We received increase the predictability and
We also agree that appropriate time is many technical comments specific to timeliness of adopting updated
necessary for installation, user training the Version 5010 standards, indicating standards, including a means by which
and coordination of testing with trading that there are still opportunities for the rulemaking process might not be
necessary to allow the industry to use Outreach, Education and Training we anticipate that the industry will
updated versions of the standards. In the proposed rule, at 73 FR 49756, continue to offer the more in-depth
Response: HHS has considered we stated that HHS would begin materials that specific stakeholder
similar concerns in the past, and preparations for, and execution of, groups may need. HHS already
continues to assess potential outreach and education activities, and dedicates a section of its Web site to the
alternatives within the context of the engagement of industry leaders and HIPAA regulations, including guidance
HIPAA and the Administrative stakeholder organizations to provide a papers, FAQs, and links to external Web
Procedures Act (APA). HHS will variety of educational and sites and to other useful resources. The
continue to work with industry to communication programs for various Web site is http://www.cms.hhs.gov.
identify a means by which updated Comment: We received a number of
constituencies.
standards can be used on a timelier comments suggesting that HHS ensure
Comment: Many commenters advised
basis, consistent with the law. better coordination of the
HHS to establish a network of training
Comment: One commenter communication of, by, and between,
and outreach partners to work
recommended that HHS adopt the X12 Medicare and Medicaid.
collaboratively to educate the industry, Response: We agree that all segments
standard transaction formats in the final and outlined the education and
rule, but not the specific versions of the of the industry should collaborate and
outreach strategies that will be needed. communicate on implementation to
X12 standards or Technical Reports Commenters stated there were needs for: avoid misunderstanding and to
Type 3 (TR3s). The commenter stated National associations to collaborate on coordinate testing schedules. We will
that it has been eight years since education efforts; a consistent set of work with State Medicaid agencies to
publication of the Transactions and messages and/or materials from support their development of
Code Sets rule adopting the Version authoritative sources; recognition that communication and outreach initiatives
4010/4010A implementation guides. different audiences may need different as we develop the overarching
The long passage of time since the levels of training; and in-person training implementation strategy for education.
initial adoption has resulted in to supplement Internet training and We will also help to ensure that there
widespread workarounds in the printed documents. Several commenters are regular opportunities for Medicare
industry to address Version 4010/ recommended that HHS develop a and Medicaid to collaborate on
4010A’s deficiencies. The commenter consistent standard set of training implementation strategies.
suggests that HHS could designate the materials for distribution to industry
DSMO coordinating committee to groups as soon as possible. The Companion Guides
biannually determine whether a change commenter suggested that key In the August 22, 2008 proposed rule,
makes sense for the industry, and which professional associations should be the we discussed the deficiencies in Version
updated TR3s would be implemented. source for common educational 4010/4010A and Version 5.1, and the
The DSMO committee would still materials. One commenter suggested fact that the industry has come to rely
provide open public access to the that HHS collaborate with other upon health plan-specific companion
standards development process, but this organizations to publish a ‘‘lessons guides to address the ambiguities in the
approach would eliminate the time- learned’’ guidance document. A number implementation guides for each of the
consuming NPRM steps and enable of commenters recommended that HHS standards (73 FR 49746). It is possible
smaller iterative version updates to take begin outreach activities as quickly as that the reliance on companion guides
place. The commenter noted that the possible, and to clearly differentiate has minimized some of the potential
ongoing maintenance of the adopted between HHS Policy guidance (for the benefits offered by the standards. Based
code sets is already handled outside of industry at large) and Medicare on testimony from the standards
the NPRM process. Under this guidance (specifically for Medicare organizations and other industry
recommendation, new standards, as providers). Other commenters agreed, representatives to NCVHS, the
opposed to updates or modifications to indicating that this was important improvements to Version 5010 should
the standards, would continue to be because Medicare policies do not often minimize dependence on companion
adopted by HHS utilizing the regulatory apply to other covered entities’ policies, guides. Some of those improvements
process. and information is confusing to include clarifications of the standard
Response: HHS has evaluated options providers when it is not clearly requirements, and consistency in
for streamlining the process of adopting differentiated. Another commenter requirements across all of the
new versions of the standards, and provided a summarized list of requested transactions. In the August 22, 2008
agrees with commenters that alternate, technical assistance which included proposed rule, we said that companion
more expedient methods are necessary, migration tools that automatically guides could potentially be eliminated if
consistent with HIPAA and the APA. translate Version 4010/4010A to Version the updated versions of the standards
We are committed to working with 5010, and Version 5010 to Version were adopted.
industry and the standards 4010/4010A. Comment: We received a number of
organizations to develop a process that Response: We agree that it is comments from the industry on this
can be proposed in the near future, important that consistent and accurate subject, offering support for the
consistent with the law. With respect to messages and/or materials be developed elimination of companion guides
the commenter’s reference to the by authoritative sources, and will work because of the complexities they create
ongoing maintenance of the adopted closely with industry to put together a in implementing the standards. Health
code sets, HHS notes that there is comprehensive, diverse plan that plans were less supportive of a complete
specific statutory authority in HIPAA addresses Medicare-specific policies, as elimination of companion guides, but
which permits the routine maintenance, well as industry-wide policies and did, in general, comment that the use of
testing, enhancement and expansion of implementation issues. companion guides could be reduced,
code sets outside of the rulemaking We agree that different audiences may and that their content could be less
process; modifications to adopted code need different levels of training. Our complex. A few commenters requested
sets, however, are adopted by means of current plan is to develop and that HHS prohibit the use of companion
the rulemaking process. disseminate high-level materials, and guides. They justified this
recommendation based on the use of been working on standard content for should be ignored by the receiver, and
these guides continuing to undermine the eligibility standard, so that the the transaction not rejected.
the potential of standards. A few of the transaction provides more robust and Response: The definitions in the TR3
clearinghouse commenters suggested useful information above and beyond reports are not specific to the
that companion guides be limited to what is currently a ‘‘yes/no’’ compliance of the transaction with the
providing supplemental information requirement in response to a request for HIPAA rules, so the way ‘‘compliance’’
and instruction, but that they could not information about an individual’s is defined by the TR3 reports does not
be used to mandate the use of certain eligibility for health plan benefits. One apply to compliance under HIPAA. We
situational fields. Other commenters felt commenter requested that HHS support believe our regulations sufficiently
that the next version of the standard the CAQH certification process for the address the requirements for
should do away with nearly all use of the eligibility transaction, in compliance. Our regulations at
situational data elements, and only which organizations voluntarily agree to § 162.923 address the requirements for a
leave a bare minimum of fields eligible have their programming reviewed and covered entity to conduct a standard
to be situational, thus further reducing approved by CAQH, and those transaction when it conducts a HIPAA
the need for companion guides. A few organizations agree to use all of the transaction using electronic media, and
of the commenters who supported the same data elements as others who are we define ‘‘standard transaction,’’ as
use of companion guides said that these participating in the certification revised in this rule, as ‘‘a transaction
would always be necessary because program. that complies with an applicable
health plans would always have unique Response: We do support the work of standard adopted under this part.’’
business rules, and that sometimes these individuals and organizations in efforts Regarding the commenter’s suggestion
rules or practices were to the advantage to make the standard transactions more of an ‘‘ignore, don’t reject’’ policy, we
of the provider. useful to the industry as a whole. While point out that § 162.925(a)(3) provides
Response: We acknowledge the issues HHS cannot mandate participation in that a health plan may not reject a
presented by companion guides, but any certification programs, we do
standard transaction on the basis that it
note that we do not have the authority contains data elements not needed or
support any efforts towards improved
to expressly prohibit the use of these used by the health plan. Finally, we do
compliance with the standards, as well
guides. However, based on our review of have an enforcement program through
as efforts towards maximizing the
many such documents, and the ongoing which covered entities may file
usefulness and usability of the
efforts of the industry to collaborate, we complaints, and we continue to
standards. We also reiterate that we
strongly discourage health plans from encourage the industry to utilize this
have published FAQs clarifying how a
having companion guides unless they program when faced with conflicts
covered entity may file a complaint
are focused significantly on the basics about the compliance of a transaction.
against another entity who it believes
for connectivity, trading partner
may not be in compliance with the Pilots
arrangements, and use of situational
data elements. We encourage X12 to implementation guides. Comment: We received a number of
evaluate, and address as appropriate, Definition of Compliance comments suggesting that standards
industry comments specific to should be pilot tested before adoption.
situational data elements, so that the Comment: We received a few These commenters said that pilot testing
minimum number of fields remain comments suggesting that we adopt a the standards is needed long before a
situational. This will enhance definition of the term ‘‘compliance,’’ standard is proposed for adoption
standardization and further reduce the using the text from the TR3 guides, because such testing identifies potential
need for companion guides. We also which provides that compliance pit-falls and could identify and correct
note that we have already published indicates the receiver of a standard unanticipated issues with a particular
FAQs clarifying that, if companion transaction does not have to reject a standard before it is officially adopted.
guides contradict the implementation transaction that is not in compliance A few commenters noted the lack of a
guides, the transaction will not be with all of the rules within the standard. pilot testing process and suggested that
compliant. Covered entities may use the According to commenters, the TR3 HHS, with industry input, define a pilot
existing enforcement process to submit guides have a definition of compliance testing process for future standards.
official complaints to HHS. Once an that states a covered entity is out of Another commenter recommended that
investigation is opened, HHS will compliance if it receives and accepts a pilot testing proceed in a certain
review the companion guide at issue transaction that is a non-standard sequence, beginning with internal unit
and a determination will be made as to transaction. These commenters believe testing, and followed by system testing
its compliance with the standard(s). this statement conflicts with an HHS and integration testing, and ultimately
FAQ which states that a receiver may ending with trading partner testing. One
Standardization of Data Content not accept a non-compliant transaction. commenter stated that, without
Comment: We received a few The commenter suggests that the sender workability testing, the government,
comments requesting that HHS support of the transactions is responsible for the X12 and the industry would be
the work of some industry groups, such compliance of the transaction, and HHS repeating implementation mistakes that
as the Coalition for Affordable and should not consider the receiver to be were made with Version 4010/4010A.
Quality Healthcare (CAQH), that are out of compliance if it accepts a non- That same commenter recommended
attempting to standardize the use of data compliant transaction. Another that the provisions for permitting
content to maximize the benefits of commenter said that HHS should exceptions from the requirements to
transaction standards—in other words, encourage an ‘‘ignore, don’t reject’’ comply with the standards in order to
some industry representatives are trying approach to implementation, which test proposed modifications (§ 162.940)
to build consensus on the data elements would mean that, if a transaction is be suspended until the current version
that everyone will request and provide, submitted conforming to the standard, of a standard was no longer in use, in
to make implementation more but it contains more information than is other words, that some date certain
consistent throughout the industry. A necessary for an entity to process that would be set to ‘‘retire’’ or sunset a
few commenters said that one group has transaction, the additional information particular version of a standard. The
commenter said that such a suspension Response: Before we would adopt an with NCPDP, so the industry has always
would represent cost and administrative acknowledgement transaction standard, paid for guides for those standards.
savings to all parties because it would such standard would have to have been Comment: A few commenters
simplify the process of accommodating vetted through the standards adoption suggested that HHS should pay for the
new versions of the standards. We also process that includes approval of a industry to access copies of Version
received a comment suggesting that DSMO change request, recommendation 5010. These commenters stated that
HHS fund pilot testing and allow an by the DSMOs to the NCVHS, and small providers could not afford to buy
additional twelve months for the testing recommendation by the NCVHS to the the set of guides, which currently cost
before the compliance date of a final Secretary. Even though the chair of the approximately $800 for the set, or $175
rule, implying future final rules. No X12 standards workgroup testified to for each guide. Several other
commenters suggested that Version the NCVHS in July 2007, and commenters expressed concern about
5010 be tested prior to adoption; rather, recommended adoption of an the cost of the X12 TR3s and a new
recommendations were for the future acknowledgement transaction standard requirement that covered entities
review and adoption of new versions of for inclusion with NCVHS’ purchase these guides. Commenters
the standards. recommendation for the adoption of noted that HHS underwrote the Version
Response: We recognize the value of Version 5010, NCVHS did not include 4010/4010A guides on behalf of covered
pilot testing and its importance in the an acknowledgement transaction entities through that implementation
standards implementation process, and standard in its recommendations. effort and believe that it is the most
intend to work with the industry to Nonetheless, the fact that we have not beneficial way for covered entities to
define parameters for pilot testing in the adopted an acknowledgement standard access and implement new versions.
future. We also encourage industry does not preclude the industry from Response: It is not uncommon for
stakeholders and the standards using Version 5010 to conduct the standards organizations to charge a fee
organizations to take the lead for transaction between willing trading for copies of their standards. NCPDP
initiating pilot tests and monitoring the partners. We will consider the adoption charges such a fee for their standards,
success of such tests. of a standard for the acknowledgement which HHS has never covered for the
transaction at the time we receive a industry. We do not agree that the price
Acknowledgements for the guides will negatively impact
recommendation from NCVHS.
Version 5010 accommodates the small providers because we think it is
acknowledgement transaction, for the Real-Time Eligibility unlikely that small providers will find
data receiver to communicate any errors them useful in implementing Version
or transmission problems back to the Comment: A few commenters stated
5010. We understand that small
sender. Many health plans and that there was a business need for a real-
providers usually rely on software
clearinghouses use acknowledgement time eligibility transaction standard for
vendors to make their systems
transactions, and they are free to do so all participants in healthcare delivery.
compliant, and that it is the vendors
using the standards they choose for that They stated that, without a national
who will require the guides for
transaction. We did not propose to standard, varying approaches to real-
programming. We expect that, as in the
adopt a standard for the time eligibility will be detrimental to
past, vendors and professional
acknowledgement transaction in the providers and plans that do business on associations will provide necessary
proposed rule, so we will not adopt one a national basis. The commenters education and training for the provider
here. identified a number of organizations staff on the system changes that will
Comment: We received several such as WEDI, CAQH and Blue Cross require operational changes. Software
comments on this subject, with most Blue Shield of North Carolina that vendors typically have multiple clients,
commenters indicating that support real-time eligibility and we expect that they will only need
acknowledgements improve the process transactions. to purchase one, or at most, just a few
of receiving and correcting an error and Response: Similar to a standard for sets of the standards to program for all
resubmitting the correction back to the the acknowledgement transaction, of their clients. Such multiple usages
receiver. These commenters suggested adopting a standard for real-time should defray the modest expense.
that HHS adopt Version 5010 for the eligibility transactions would have to be
acknowledgement transaction. vetted through the standards adoption HIPAA Enforcement
Commenters said that migration to process described above. NCVHS did At present, most formal compliance
standard acknowledgement transactions not include a real-time eligibility and enforcement activities for HIPAA
would offer significant business benefits transaction standard in its are complaint-driven and complaint-
by ensuring that transactions are recommendations, and we are unable to based. Enforcement efforts are focused
received and front-end errors reported adopt one at this time. on investigating complaints to
on a timely and consistent basis. In spite determine if a covered entity is in
HHS Funding the Purchase of TR3
of the support for adopting an compliance.
Reports
acknowledgement transaction standard, Comment: We received a few
commenters also mentioned that they When the Transactions and Code Sets comments recommending that HHS
did not wish in any way to delay overall rule was published, HHS negotiated a increase its enforcement efforts related
implementation of Version 5010 by contract with the publisher of the to HIPAA transactions to ensure that
waiting until an acknowledgement Version 4010/4010A implementation health plans are adhering to the
transaction standard is proposed and guide to enable the industry to requirements of the X12 transactions.
adopted. In other words, if the choice download the guides at no cost. This We received another comment
was to wait to adopt Version 5010 until practice ended in 2006. At that time, suggesting stronger enforcement of the
the NCVHS advises the Secretary to also very few downloads or copies were adoption of all of the standard
adopt Version 5010 as the standard for being ordered, and we had no transactions by all covered entities. One
the acknowledgement transaction, the complaints about individual providers, commenter said that, to date, only a
commenters did not want to see their plans or clearinghouses paying the fee. subset of HIPAA-mandated transaction
suggestion go forward. HHS did not have a similar arrangement standards that facilitate EDI have been
implemented as required, which that are bound by both HIPAA and final rule for the Medicaid pharmacy
significantly decreases the benefits of FERPA, and suggested that clarification subrogation standard (Version 3.0) with
standardization to the industry. is needed for situations where there are an additional 12 months for small
Response: Our complaint-driven inconsistencies between the two laws. health plans. In this final rule, we
enforcement process has been • One commenter stated that HHS indicate an effective date of January 1,
successful in obtaining compliance on a should agree to accept and utilize all 2010 for the provisions of 45 CFR
case-by-case basis, and we encourage diagnosis codes associated with an Subpart S. This means that covered
covered entities to utilize the process. admission or an encounter, not just entities other than small health plans
We understand that some of the those accommodated within the limits must be in compliance on January 1,
standards have not been implemented first set by paper forms. The current 2012, while small health plans, which
because of their limited usefulness, or practice of truncating numbers for have an additional 12 months, must be
because of issues with implementation. diagnoses and procedures so that they in compliance on January 1, 2013.
We believe that, because the standards are equal to what a paper claim supports In § 162.925, we add paragraph (a)(6)
have been significantly improved, the causes problems for providers when that precludes health plans from
standards we adopt here are more they are trying to meet the ‘‘Present on requiring an earlier compliance date
useful, and therefore will result in Admission’’ (POA) requirement of than those adopted. Use of Versions
greater industry implementation. We providing adequate information about a 5010 and D.0 in advance of the
have the authority to conduct patient’s condition. mandatory compliance date is
compliance reviews at our discretion to • One commenter recommended that permissible, based upon mutual
evaluate compliance with any of the HHS add a definition for real-time agreement by trading partners.
HIPAA requirements, and have done so adjudication with regard to the 837 We adopt revisions to § 162.1102,
already with respect to the security claim, 835 remittance advice and the § 162.1202, § 162.1302, § 162.1402,
standards. We plan to expand our 277 health care claim status transactions § 162.1502, § 162.1602, § 162.1702, and
compliance review program in the in this final rule. The commenter § 162.1802 to enable covered entities to
future to include random reviews of referenced the collaborative efforts engage in Level 2 testing by allowing for
compliance with the transaction between WEDI and X12 to provide a the use of both the old standard and the
standards as well. standard way to conduct real-time updated standard.
adjudication. We allow covered entities to use
Certification • One commenter requested that we either Version 4010/4010A, 5010, 5.1 or
Comment: We received several address expectations related to D.0 for billing retail pharmacy supplies
comments suggesting that HHS consider § 162.925 regarding health plan and services, and reflect that policy in
petitioning the Certification incentives to health care providers for revisions to § 162.1102. We also revise
Commission for Healthcare Information using direct data entry (DDE) the definition of ‘‘standard transaction’’
Technology (CCHIT) to include Versions transactions. The commenter said there in accordance with our policy to allow
5010 or D.0 in all products that would are instances where health plans offer for the dual use of standards, by
be expected to carry the upgraded more information about eligibility and replacing ‘‘the applicable standard’’
standards in order to facilitate benefit information on Web sites than with ‘‘an applicable standard’’ at
compliance with the final rule. they do through the standard X12 270/ § 162.103
Commenters believe this will be 271 transactions, which the commenter We proposed to clarify the
especially important for small covered believes is an incentive for a provider to descriptions for three standards:
entities in the process of purchasing conduct a transaction using some means Enrollment and disenrollment, referral
software until the compliance date. other than the standard transaction. The certification and authorization, and
They believe that, if purchasers are commenter requested clarification health care claims status and request. In
aware of the need to buy products that regarding the offer of more information the final rule we do so, by specifying the
are certified to meet the incoming through a non-standard transaction than senders and receivers of those
HIPAA requirements, conversion might in the standard transaction, even though transactions in § 162.1301, § 162.1401
be smoother and less expensive. the standard transaction contains the and § 162.1501.
Response: Generally, CCHIT does not required amount of information. Since In the proposed rule, at § 162.900, we
certify products for administrative we did not address this issue in the stated that ASC X12N implementation
transactions, and therefore we will not proposed rule, we do not respond here, specifications and the ASCX12 Standard
pursue this suggestion. Furthermore, but may provide additional direction in for Electronic Data interchange
HHS does not recognize certification of a future Frequently Asked Question on Technical Report Type 3 were available
any systems or software for purposes of the CMS Web site. from the Washington Publishing
HIPAA compliance. Company. In the final rule, we provide
III. Provisions of the Final Rule the correct address and Web site for
H. Comments Considered Out of Scope This final rule incorporates the obtaining the Version 5010 guides, from
We received a number of comments provisions of the proposed rule, with X12. Version 4010/4010A specifications
on subjects that were outside the scope the following exceptions and changes: may still be obtained from the
of the proposed rule. We do not directly We proposed to adopt a compliance Washington Publishing Company.
respond to those types of comments date for Versions 5010 and D.0 of April
because we consider them to be outside 1, 2010 for all covered entities. In this IV. Collection of Information
the scope of this rule, but we wish to final rule, we adopt a compliance date Requirements
acknowledge them. We have of January 1, 2012 for Versions 5010 and Under the Paperwork Reduction Act
summarized them in the following list: D.0 for all covered entities. We revise of 1995, we are required to provide 30-
• One commenter stated the final rule § 162.1102, § 162.1202, § 162.1302, day notice in the Federal Register and
should clarify the relationship between § 162.1402, § 162.1502, § 162.1602, solicit public comment before a
HIPAA and the Family Educational § 162.1702, and § 162.1802 accordingly. collection of information requirement is
Rights and Privacy Act (FERPA). The We proposed a compliance date of 24 submitted to the Office of Management
commenter stated that there are entities months after the effective date of the and Budget (OMB) for review and
approval. In order to fairly evaluate Regulatory Flexibility Act (RFA) In our analysis, we combined
whether an information collection (September 19, 1980, Pub. L. 96–354), Versions 5010 and D.0 because these
should be approved by OMB, section section 1102(b) of the Social Security two standards will be implemented at
350(c)(2)(A) of the Paperwork Reduction Act, the Unfunded Mandates Reform the same time, and in some cases are
Act of 1995 requires that we solicit Act of 1995 (Pub. L. 104–4), Executive dependent on each other. We provided
comment on the following issues: Order 13132 on Federalism, and the examples in the August 22, 2008
• The need for the information Congressional Review Act (5 U.S.C. proposed rule (73 FR 49758).
collection and its usefulness in carrying 804(2)). The summary table in this final rule
out the proper functions of our agency. Executive Order 12866 (as further includes the final cost estimates for
• The accuracy of our estimate of the amended) directs agencies to assess all Versions 5010, D.0 and 3.0 on all
information collection burden. costs and benefits of available regulatory entities we anticipated would be
• The quality, utility, and clarity of alternatives and, if regulation is affected by the rule. The data in that
the information to be collected. necessary, to select regulatory table were used in this analysis to
• Recommendations to minimize the approaches that maximize net benefits provide cost information.
information collection burden on the (including potential economic, Because most health care providers
affected public, including automated environmental, public health and safety are either nonprofit or meet the Small
collection techniques. effects, distributive impacts, and Business Administration’s (SBA) size
In this rule, we are finalizing the equity). A regulatory impact analysis standard for small business, we treated
revisions to the information collection (RIA) must be prepared for major rules all health care providers as small
requirements that were announced in with economically significant effects entities. For providers, we predicted
the proposed rule that was published on ($100 million or more in any 1 year). that the changes would be minimal
August 22, 2008 (73 FR 49742). Because we estimate that this rule will involving software upgrades for practice
Specifically, we are revising the have economically significant effects, management and billing systems. We
currently approved information we prepared an RIA. We anticipate that included pharmacies in the analysis,
collection requirements contained in the adoption of the new versions of the and considered some of them to be
§ 162.1102, § 162.1202, § 162.1301, standards and the adoption of Version small businesses. We considered some
§ 162.1302, § 162.1401, § 162.1402, 3.0 would result in benefits that will health plans small businesses, but were
§ 162.1501, § 162.1502, § 162.1602, outweigh the costs. Accordingly, we unable to identify data for these entities,
§ 162.1702, and § 162.1802 of this prepared a Regulatory Impact Analysis nor was any information submitted in
document. We believe that the revisions in the August 22, 2008 proposed rule response to our solicitation. We
will have an impact on the burden (both that, to the best of our ability, presented addressed clearinghouses and Pharmacy
hour burden and cost burden) the costs and benefits of the proposals. Benefit Managers (PBMs) in our
associated with the aforementioned We did not receive any comments on discussion, though we did not believe
affected sections that are currently the Regulatory Flexibility Analysis, and that there were a significant number of
approved under OCN 0938–0866 with therefore provide a summary here. For clearinghouses that would be
an expiration date of 7/31/2011. In details, we refer readers to the August considered small entities. This was
addition to announcing the revisions in 22, 2008 proposed rule at 73 FR 49757. confirmed by a number of associations,
the proposed rule, we published a 60- including the Maryland Commission for
day Federal Register notice on October B. Regulatory Flexibility Analysis Health Care. PBMs were excluded from
10, 2008 (73 FR 60296) that solicited The Regulatory Flexibility Act (RFA) the analysis because we had no data to
public comments on the proposed of 1980, Public Law 96–354, requires indicate that they would qualify as a
revisions. No comments were received. agencies to describe and analyze the small entity. State Medicaid agencies
Accordingly, we have submitted a impact of the rule on small entities were excluded from the analysis
revised information collection request to unless the Secretary can certify that the because States are not considered small
OMB for its review and approval of the regulation will not have a significant entities in any Regulatory Flexibility
revised information collection impact on a substantial number of small Analysis.
requirements. These requirements are entities. In the health care sector, a
not effective until approved by OMB. Final Regulatory Flexibility Analysis
small entity is one with between $6.5 (FRFA)
If you wish to comment on these million and $31.5 million in annual
information collection and revenues or is a nonprofit organization. 1. Number of Small Entities
recordkeeping requirements, please fax For the purposes of this analysis In total, we estimated that there are
your comments to 202–395–6974 or (pursuant to the RFA), nonprofit more than 300,000 health care
email your comments to organizations are considered small organizations that may be considered
oira_submission@omb.eop.gov. Please entities; however, individuals and small entities either because of their
mark comments to the attention of the States are not included in the definition nonprofit status or because of their
desk officer for CMS and indicate that of a small entity. We attempted to revenues. The Business Census data
they are in relation to OMB control estimate the number of small entities shows that there are 4,786 firms
number 0938–0866. and provided a general discussion of the considered as health plans and/or
V. Regulatory Impact Analysis effects of the proposed regulation, and payers (NAICS code 5415) responsible
where we had difficulty, or were unable for conducting transactions with health
A. Overall Impact to find information, we solicited care providers. In the proposed rule’s
We have examined the impacts of this industry comment. We stated our belief impact analysis, we used a smaller
rule as required by Executive Order that the conversion to Versions 5010 figure based on a report from AHIP. But
12866 (September 1993, Regulatory and D.0 would have an impact on for purposes of the RFA, we did not
Planning and Review), as amended by virtually every health care entity. We identify a subset of small plans, and
Executive Order 13258 (February 26, did not receive any comments in instead solicited industry comment as to
2002) and further amended by Executive response to our solicitation for the percentage of plans that would be
Order 13422 (January 18, 2007), the comments. considered small entities. We identified
the top 78 clearinghouses/vendors in www.hhs.gov/execsec/ as the Maryland Commission for Health

the Faulkner and Gray health data smallbus.pdf.pdf). Care, and determined that the number of
directory from 2000—the last year this clearinghouses that would be
2. Costs for Small Entities
document was produced. Health care considered small entities was negligible.
clearinghouses provide transaction To determine the impact on health We identified the top 78 clearinghouses,
processing and translation services to care providers we used Business Census and determined that they are typically
both providers and health plans. data on the number of establishments part of large electronic health networks,
We identified nearly 60,000 for hospitals and firms for the classes of such as Siemens, RxHub, Availity, GE
pharmacies, using the National providers and revenue data reported in Healthcare etc., none of which fit into
Association of Chain Drug Stores the Survey of Annual Services for each the category of small entity. As
Industry Profile (2007) (http:// NAICS code. For other providers, we referenced earlier, in a report by
assumed that the costs to implement Faulkner and Gray in 2000, the top 51
www.nacds.org), and for the purposes of
Version 5010 would be accounted for at entities were listed, and the range of
the initial regulatory flexibility analysis
the level of firms rather than at the monthly transactions was 2,500 to 4
we are treating all independent
individual establishments. Since we million, with transaction fees of $0.25
pharmacies reported in the Industry
treated all health care providers as small per transaction to $2.50 per transaction.
Profile as ‘‘small entities.’’ The number
entities for the purpose of the initial We determined that even based on these
of independent pharmacies reported for
regulatory flexibility analysis, we data, few of the entities would fall into
2006 is approximately 17,000 entities.
allocated 100 percent of the the small entity category, and we did
We specifically invited comments on
implementation costs reported in the not count them in the analysis.
the number of small pharmacies, but
impact analysis for provider type. Table
received none. With respect to Version 3.0, we point
2 shows the impact of the Version 5010
Based on Figure 2 of the Industry out that, while we do not know how
implementation costs as a percent of the
Profile, independent pharmacy many health plans/payers will exchange
provider revenues. For example,
prescription drug sales accounted for the pharmacy subrogation standard with
dentists, with reported 2005 revenues of
17.4 percent of total pharmacy drug Medicaid agencies, those entities would
$87.4 billion and costs ranging from
sales of $249 billion sales for 2006. be counted in the health plan category
$299 million to $598 million have the
Allocating the Versions 5010 and D.0 and addressed under the analysis for
largest impact on their revenues of
costs based on the share of prescription between 0.11 percent and 0.21 percent. Versions 5010 and D.0. We did not
drug revenues to independent We solicited comments specifically on provide a separate analysis in this
pharmacies (the small businesses), the number of providers affected by the section.
implementation costs are expected to proposed rule, but received none. In sum, we assumed that the financial
range between $6.4 million and $13 We did not include an analysis of the burden would be equal to or less than
million or 0.02 and 0.03 percent of impact on small health plans, because three percent of revenues. Based on the
revenues. These figures indicate that we were not able to determine the results of this analysis, we remain
there is minimal impact, and the effect number of plans that meet the SBA size reasonably confident that the rule will
falls well below the HHS threshold of 3 standard of $6.5 million in annual not have a significant impact on a
to 5 percent specified in the HHS receipts. substantial number of small entities. As
guidance on treatment of small entities In evaluating whether there were any stated throughout this section, in spite
(see: ‘‘Guidance on Proper clearinghouses that could be considered of our request for comments on this
Consideration of Small Entities in small entities, we consulted with three analysis, we received none.
Rulemakings of the U.S. Department of national associations (EHNAC, HIMSS Table 2 below summarizes the impact
Health and Human Services’’ http:// and the Cooperative Exchange), as well of the rule on the health care industry.
TABLE 2—ANALYSIS OF IMPLEMENTATION OF THE BURDEN OF VERSIONS 5010, D.0 AND 3.0 ON SMALL COVERED
ENTITIES
Small en- % Imple-
% Small Version tity share mentation
Revenue entity re- 5010/D.0 of version cost rev-
Total no. Small en- or re-
NAICS Entities ceipts of annual 5010/D.0 enue-re-
of entities tities ceipts ($ total re- costs (in costs (in ceipts
millions) ceipts millions) millions (costs/re-
$) ceipts)
6221 ................................ General Acute Care Hospitals (establishments) ..... 5,386 5,386 612,245 100 292–583 ................ .05–.10
6211 ................................ Physicians (firms) .................................................... 189,562 189,562 330,889 100 136–272 ................ .04–.08
6212 ................................ Dentists (firms) ........................................................ 118,163 118,163 87,405 100 94–187 ................ .11–.21
44611 .............................. Pharmacies (includes 5010 and D.0) ...................... 56,946 17,482 249,000 17.4 37–75 6.4–13 .02–.03
(42,330
@ 17%)
In column 1 we display the NAICS available. All health care providers were profile. In the case of health plans and
code for class of entity. Column 3 shows assumed to be small. We assumed that third party administrators, we used the
the number of entities that are reported all independent pharmacies reported in consumer payments reported for private
in the Business Census for 2006 or Table 2 of the Industry profile are small health insurance in 2006 in the National
‘‘Chain Pharmacy Industry Profile.’’ entities. Health Expenditure accounts.
Column 4 shows the number of small Column 5 shows revenues that were Column 6 shows the percent of small
entities that were computed based on reported for 2005 in the Survey of entity revenues.
the Business Census and Survey of Annual Services, or in the case of Column 7 shows the implementation
Annual Service when the data was pharmacies, in Figure 2 of the Industry costs for Versions 5010, D.0 and 3.0
taken from Table 14a of the impact Section 1102(b) of the Act requires us governments, could preempt State law,
analysis and annualized. to prepare a regulatory impact analysis or otherwise have a Federalism
Column 8 shows the costs allocated to if a rule would have a significant impact implication because, even though State
the small entities based on the percent on the operations of a substantial Medicaid agencies will be converting to
of small entity revenues to total number of small rural hospitals. This a modified version of an existing
revenues. analysis must conform to the provisions standard (Version 4010/4010A to
Column 9 presents the percent of the of section 603 of the RFA. For purposes Version 5010 and NCPCP 5.1 to NCPDP
small entity share of implementation of section 1102(b) of the Act, we define D.0) with which they are familiar, there
costs as a percent of the small entity a small rural hospital as a hospital that are expenses for implementation and
revenues. As stated in the guidance is located outside of a metropolitan widescale testing. State Medicaid
cited earlier in this section, HHS has statistical area and has fewer than 100 agencies are currently required to
established a baseline threshold of 3 beds. This final rule will affect the conduct pharmacy subrogation, and in
percent of revenues that would be operations of a substantial number of accordance with this final rule, will be
considered a significant economic small rural hospitals because they are able either to use the new Medicaid
impact on affected entities. None of the considered covered entities under pharmacy subrogation transaction
entities exceeded or came close to this HIPAA, however, we do not believe the standard or contract with trading
threshold. rule will have a significant impact on partners and/or contractors who
We note that the impact in our those entities, for the reasons stated specialize in this field to fulfill its
scenarios is consistently under the above in reference to small entities. subrogation requirement. With respect
estimated impact of 3 percent for all of Therefore, the Secretary has determined to subrogation for pharmacy claims, we
the entities listed above, which is below that this final rule will not have a note that this final rule does not add a
significant impact on the operations of new business requirement for States, but
the threshold the Department considers
a substantial number of small rural rather mandates a standard to use for
as a significant economic impact. As
hospitals. this purpose which will be used
expressed in the Department guidance Section 202 of the Unfunded
on conducting regulatory flexibility consistently by all States. There will
Mandates Reform Act of 1995 (UMRA) also be expenditures for States as they
analyses, the threshold for an economic also requires that agencies assess
impact to be considered significant is 3 convert from Version 5.1 to D.0 for other
anticipated costs and benefits before pharmacy transactions, and this
percent to 5 percent of either receipts or issuing any rule whose mandates would
costs. As is clear from the analysis, the transition will have implementation and
require spending, in any 1 year, $100 testing costs as well, meaning there will
impact does not come close to the million in 1995 dollars, updated
threshold. Thus, based on the foregoing be additional fiscal impacts on States
annually for inflation. In 2008, that based on this rule.
analysis, we conclude that some health threshold is approximately $130
care providers may encounter million. This final rule contains C. Anticipated Effects
significant burdens in the course of mandates that will impose spending
converting to the modified Versions The objective of this regulatory
costs on State, local, or tribal impact analysis was to summarize the
5010 and D.0. However, we are of the governments in the aggregate, or by the
opinion that, for most providers, health costs and benefits of the following
private sector, in excess of the current proposals:
plans, and clearinghouses the costs will threshold. The impact analysis in the • Migrating from Version 4010/4010A
not be significant. proposed rule addressed those impacts to Version 5010 in the context of the
3. Alternatives Considered both qualitatively and quantitatively. In current health care environment;
general, each State Medicaid Agency • Migrating from Version 5.1 to
As stated in the August 22, 2008 and other government entity that is Version D.0; and
proposed rule, we considered various considered a covered entity will be • Adopting a new standard for the
policy alternatives to adopting Versions required to invest in software, testing Medicaid subrogation transaction.
5010, D.0 and 3.0, including not and training to accommodate the The following are the key issues that
adopting the modifications, using adoption of the updated versions of the we believe necessitate the adoption of
staggered implementation schedules, standards, and Version 3.0. UMRA does these modified standards and of a
allowing implementation delays for not address the total cost of a rule. standard for Medicaid pharmacy
small entities, and waiting to adopt a Rather, it focuses on certain categories subrogation:
later version of the X12 and/or NCPDP of cost, mainly those ‘‘Federal mandate’’ • The current X12 and NCPDP
standards. We rejected all of these costs resulting from (A) imposing standards were adopted in 2000 and do
alternatives, resulting in the adoption of enforceable duties on State, local, or not reflect the numerous business
the standards, as proposed, with an tribal governments, or on the private changes that have emerged during that
alternate compliance date. sector, or (B) increasing the stringency time.
4. Conclusion of conditions in, or decreasing the • The current standards do not
funding of, State, local, or tribal accommodate the use of ICD–10 codes.
As stated in the HHS guidance cited governments under entitlement • The standard for Medicaid
earlier in this section, HHS uses a programs. pharmacy subrogation will significantly
baseline threshold of 3 percent of Executive Order 13132 establishes improve the efficiency of this process.
revenues to determine if a rule would certain requirements that an agency The remainder of this section
have a significant economic impact on must meet when it promulgates a provides details supporting the cost
affected entities. None of the entities proposed rule (and subsequent final benefit analysis for each of the three
exceeded or came close to this rule) that imposes substantial direct above-referenced proposals.
threshold. Based on the foregoing requirement costs on State and local In the August 22, 2008 proposed rule
analysis, the Secretary certifies that this governments, preempts State law, or (73 FR 49761), we described the
final rule will not have a significant otherwise has Federalism implications. research conducted for us by Gartner,
economic impact on a substantial This final rule will have a substantial Incorporated (Gartner) to assess the
number of small entities. direct effect on State or local costs and benefits associated with the
adoption of Version 5010. Details about in accordance with the new timeline. assumptions about the increased use of
Gartner’s methodology were provided in We assumed transition costs would auxiliary transactions. They stated that
the August 22, 2008 proposed rule, and occur in the fourth year of there will not be an automatic increase
a summary of the calculations and implementation (monitoring, in the usage/volume of the auxiliary
methodology is available on the CMS maintaining, and adjusting the upgraded transactions, because the industry is
Web site at: http://www.cms.hhs.gov/ systems and related processes) and still establishing a clear business need
TransactionCodeSetsStands/Downloads continue until all parties reach a for these less widely used transactions
/5010RegulatoryImpactAnalysis ‘‘steady state.’’ (which are required for plans, but
Supplement.pdf. While significant efforts were taken to voluntary for providers). Auxiliary
In this section of the final rule, we ensure that the cost and benefits transactions are those that supplement
summarize the key assumptions from captured for this rule were accurate, or support claims information,
the August 22, 2008 proposed rule, and there are a few key uncertainty factors including eligibility, enrollment and
discuss those with which commenters that should be considered in reviewing disenrollment, referral requests and
did not agree. In cases where we agreed the regulatory impact analysis: authorizations and premium payments.
with commenters, and changed our • As detailed in the next section Commenters also stated that, because
assumptions, we provide both the (Assumptions for Version 5010 Impact these transactions were not useful in
original and revised amounts, Analysis), the primary driver for all of Version 4010/4010A, there is still some
unadjusted for present value. The last the cost estimates was the expected hesitancy to use Version 5010 until the
section of the impact analysis contains range of costs for all covered entities transactions can be evaluated. Because
the summary detailed tables with all of relative to those same costs for efforts will be focused on implementing
the costs and benefits recalculated to implementation and transition to the claims and eligibility transactions
reflect the changes to the estimates for Version 4010. for Version 5010, commenters stated
each of the standards and adjusted for • As detailed in the next section that it may take industry longer to
present value. The analysis contained (Assumptions for Version 5010 Impact schedule testing for the auxiliary
herein is presented at a high level. For Analysis), one of the key drivers for all transactions.
a complete description of the analysis, of the benefit estimates was increased Response: Gartner conducted
see the Economic Impact Analysis in the use in electronic transactions. In all additional discussions with industry
docket of this final rule. cases, HHS evaluated the industry experts regarding the original
Additionally, although many feedback and used the conservative assumptions in the August 22, 2008
commenters mentioned that we estimates for expected uptake in the proposed rule. These experts
underestimated the costs, or electronic transactions so as to not acknowledged that providers that do not
overestimated the benefits of inflate the benefits. now use these transactions will be
transitioning to the new versions, no • As explained in the section on focusing all their initial efforts on
substantive data or additional Version D.0, there is uncertainty as to implementing the key claims
information was provided to counter the complexity and the number of
our analysis, and therefore, though some transactions—claims and remittance
systems that will be affected, and advice—and that they would likely
changes have been made, they are not industry experts made their best
substantial, particularly for the benefits focus on implementing the auxiliary
estimates on the possible impacts to transactions later. Accordingly, we
that are detailed in this final rule. their constituents.
However, based on the information we changed the benefits realization
did receive, there are three items that Assumptions for Version 5010 Impact assumption for auxiliary transactions to
changed, which affected some of the Analysis start in year 2013 instead of 2012. We
figures in the impact analysis: (1) The In calculating the costs and benefits, do not agree with the few commenters
cost estimate was increased from Gartner made a number of assumptions, who stated there would be no increase
between 20 percent and 40 percent of based on interview data and secondary in the use of auxiliary transactions. In
the Version 4010/4010A costs to research. We outlined the key fact, the Gartner interviewees did not
between 25 percent and 50 percent; (2) assumptions used to support Version veer from their original statements that
the salary for provider billing specialist 5010 impact analysis in the August 22, the auxiliary transactions would be used
was reduced from $60 thousand per 2008 proposed rule (73 FR 49762). by more providers, albeit after initial
year to $50 thousand per year; (3) the Gartner projected the annual increase implementation of the core transactions
timing for adoption of the auxiliary in the number of claims at four percent, for claims and remittance advice. An
standards was changed to begin in and used these figures to calculate the association for physicians, in its
calendar year 2013 instead of calendar provider benefits. We outlined annual comments, stated that these transactions
year 2012; These three items represent claim volume projections in the August would be increasingly used because of
cost and benefit changes that are 22, 2008 proposed rule (73 FR 49762), the improvements in the standards
reflected in this revised impact analysis, and did not receive any comments on themselves and increased streamlining
and we have updated the tables for each those figures. of various administrative processes.
industry sector accordingly. One of the Gartner estimated the current The total benefits (low) across the
benefit categories, Cost savings or adoption rate for each of the HIPAA industry declined from $18,635 million
savings due to new users of claims standards, and the projected rate of to $15,896 million.
standards, is not impacted by the adoption for each of the modified Comment: We received a comment
aforementioned items. We do not repeat versions of the standards over the from a government health program
this entire explanation in each section, planning horizon. We outlined those stating that it did not agree with our
but rather refer the reader back to this rates in the August 22, 2008 proposed savings/benefits assumption of reduced
introduction. rule (73 FR 49763). These figures were phone calls. The commenter explained
As noted in the preamble, the used to calculate the benefits for that the salary savings/benefit has
compliance date for Version 5010 has healthcare industry. historically been found to be false
been changed to January 1, 2012, and Comment: We received a few savings unless personnel positions were
the cost allocations have been updated comments disagreeing with our actually eliminated.
Response: We disagree with the total cost of employee should be taken Version 4010/4010A and Version 5010
comment. Although personnel positions into consideration. was one of the key bases for the original
may not be eliminated, these personnel Other commenters supported our estimates that we obtained when
can be assigned to other tasks; in this assumptions regarding costs of surveying industry segments in
case, the benefit is cost avoidance. Our operating dual systems through both preparing the August 22, 2008 proposed
estimates are based on cost avoidance, testing and implementation phases. rule.
not personnel reductions. These commenters explained that there With regard to the comments
may be additional hardware costs to regarding dual hardware, many
General Assumptions for the Cost-
upgrade existing equipment to manage transaction mapping products are
Benefit Analysis for Providers and
the dual use period, or enhanced capable of supporting more than one
Health Plans
functionality necessary when upgrading variant of the transaction format using
We outlined the key assumptions to new versions of software ready to the same hardware and communications
used to develop the cost benefit analysis handle the new versions. Another channels. Although some additional
for each of the provider segments— commenter disagreed with our transaction volume will be required for
hospitals, physicians, pharmacies, and statement that little or no transmission testing and parallel operations, HHS has
dentists as well as the health plans in costs would be required to comply with concluded that there will be an
the August 22, 2008 proposed rule (73 the new regulation. The commenter said incremental need for added hardware
FR 49763). that new transmission costs will be and communications capacity to
Explanation of Cost Calculations created with new trading partners and support submitting all transactions in
new or increased number of both formats during the conversion
To determine the costs for each transactions. Another commenter stated period.
subsegment (that is, providers and that, while there would be a number of With regard to the comment regarding
health plans), we established an one-time costs to implement Version additional salary cost assumptions, all
estimate for what the total approximate 5010 (for business flow changes, cost estimates provided in the analysis
Version 4010/4010A costs were for an software procurement or customized presented in the proposed rule (73 FR
individual entity within that software development, etc.), they did 49762) included the full set of overhead
subsegment (based on the interviews not agree that the system testing costs and added personnel costs including
and other data available through would account for 60 to 70 percent of real estate, utilities, phone, computer
research—see 73 FR 49761) and then all costs, but did not provide any systems, infrastructure, etc. These items
applied an estimated range of 20 to 40 additional detail for their dissension. In are considered to be part of the fully
percent of those costs to come up with sum, while we received a variety of loaded costs to implement and maintain
estimated low and high costs for comments, none provided specific cost the Version 5010 transactions and
Version 5010. Additional information or implementation data to support their would also be considered to be costs
about the cost calculations and Gartner statements. avoided in the benefit period once all
methodology are available in our Response: We agree that the industry parties have implemented the new
supplemental document on the CMS will need to operate dual systems to version.
Web site at: http://www.cms.hhs.gov/ process both versions of the standards, While most commenters did not
TransactionCodeSetsStands/Downloads and that transmission costs will provide specific data regarding
/5010RegulatoryImpact increase. The implementation of additional costs, we nonetheless
AnalysisSupplement.pdf. Version 4010/4010A required extensive acknowledge that commenters generally
Comment: As stated above, a number remediation of applications; believed our estimates to be too low,
of commenters disagreed with our development of external support and did note specific areas of concern.
assumptions concerning the level of capability to deal with expanded code Accounting for all of the new cost
effort necessary to migrate to Version lengths; different handling of considerations, we have adjusted our
5010, in comparison with the initial coordination of benefits; and a variety of assumption to a range of 25 to 50
implementation costs for Version 4010/ other business changes. It further percent of the Version 4010/4010A
4010A, and believed the costs to be involved the first implementation of implementation costs to move to
significantly higher than our X12 transaction formats for many Version 5010. The total costs (low
projections. Although no commenters providers, health plans and estimate) incurred by the whole
actually provided a cost figure, a small clearinghouses. In addition, many industry increased from $5,656 million
number of commenters wrote that it providers switched from paper to to $7,717 million, unadjusted for
would take 50 to 75 percent of the electronic transmission concurrent with present value.
initial implementation effort to migrate this change. The changes going from In the August 22, 2008 proposed rule
to the new versions. The rationale Version 4010/4010A to Version 5010 are (73 FR 49764), we show Gartner’s
provided was that: far less extensive on the whole, even estimates of the percent of the total costs
(1) Organizations will have to operate though there are a host of content and allocated to each cost category (for
dual systems through both testing and format changes. While we acknowledge example, testing and training) for the
implementation phases as different the need to support both formats, the provider and plan segments. As
trading partners migrate at different time spent dealing with errors and discussed above, we used industry
times. reworking business flows should not be comments to revise the estimates for
(2) Additional considerations in the nearly as great as the experience of hardware and transmission costs. Table
salary cost assumptions such as real implementing Version 4010/4010A. 3 reflects the new allocations of the
estate, utilities, phone, computer This difference in the scope of the percent of the total costs to each cost
systems, infrastructure, etc., to represent changes between implementation of category.
TABLE 3—PERCENTAGE AND TOTAL AMOUNTS FOR COST ITEMS USED FOR VERSION 5010 CALCULATIONS—PROVIDERS
AND HEALTH PLANS
Percent of total costs

Cost item Providers Health plans
(percent) (percent)
Hardware Procurement .................................................................................................................................................... 10 10

Software Costs ................................................................................................................................................................ 10 7.5
Transmission Costs ......................................................................................................................................................... 2.5 2.5
New Data Collection ........................................................................................................................................................ 0 0
Customized software development ................................................................................................................................. 5 2.5
Testing Cost ..................................................................................................................................................................... 60 65
Training Costs .................................................................................................................................................................. 2.5 2.5
Transition Costs ............................................................................................................................................................... 10 10
Totals ........................................................................................................................................................................ 100 100

Original source: Gartner interviews and secondary research.
Explanation of Benefits and Savings the three benefit categories are impacted Hospitals
Calculations by the revised assumptions. In the August 22, 2008 proposed rule,
Comment: We received one comment we calculated that the total cost for all
In our analysis, we assumed that
disagreeing with our assumption that hospitals to implement Version 5010
benefits would accrue in three
provider billing specialist yearly costs would be within a range of $932 million
categories which were described and
are $60,000. The commenter stated that to $1,864 million (73 FR 49767). Based
explained in detail in the August 22,
the billing specialist yearly cost, on on the revised cost assumptions
2008 proposed rule (73 FR 49764). For
average across the country, is not higher outlined earlier (increased rate of 25 to
ease of reference, they were labeled: (1)
than $50,000. 50 percent), the new estimate of total
Better standards or savings due to Response: We agree with the
improved claims standards; (2) Cost costs for all hospitals to implement
comment after performing additional Version 5010 will be within a range of
savings or savings due to new users of research regarding this assumption, and
claims standards; and (3) Operational $1,165 million to $2,331 million,
as a result, have changed our estimate unadjusted for present value.
savings or savings due to increased regarding yearly costs for a provider
auxiliary standards usage. Hospitals would realize savings and
billing specialist from $60,000 to benefits in the same three categories we
For ease of reference, we repeat the $50,000. Based on this change, the total
explanation of the three savings identified in the August 22, 2008
benefits (low estimate) across the proposed rule (73 FR 49766). In the
categories: industry declined from $18,635 million proposed rule, we calculated that the
(1) Better standards or savings due to to $15,896 million, unadjusted for savings due to better standards were
improved claims standards: The present value. estimated to be a low of $403 million.
improvements in Version 5010 that The benefits category, ‘‘Cost savings, Cost savings due to an increase in use
would reduce manual intervention to or savings due to new users of claims of the electronic claims transactions
resolve issues related to the claim or standards,’’ does not change as a result (837 and 835) were estimated at a low
remittance advice, due to ambiguity in of our revised calculations. The revised of $66 million. Operational savings due
the standards; provider billing specialist salary to an increase in the use of auxiliary
(2) Cost savings or savings due to new assumption only affects the benefit transactions were estimated at $1,314
users of claims standards: Increased use calculations for benefit category, ‘‘Better million.
of electronic transactions for claims and standards or savings due to improved Based on the revised benefit
remittance advice that would accrue to claims standards’’ and the revised assumptions outlined earlier, the new
parties who had previously avoided the benefits realization assumption for estimate for minimum savings due to
electronic transactions because of their auxiliary transactions only changes the better standards is $348 million and
deficits and shortcomings; and benefit calculation for benefits category, operational savings due to increase in
(3) Operational savings or savings due ‘‘Operational savings or savings due to the use of auxiliary claim transactions
to increased auxiliary standards usage: increased auxiliary standards usage’’. are $1,132 million, unadjusted for
Increase use of auxiliary transactions However, the entire benefit projection present value. The cost savings benefit
through EDI that would result from a changes because of the revised category is not impacted by the revised
decrease in manual intervention to compliance date. benefit assumptions.
resolve issues with the data (handled
through phone calls or correspondence). 1. Health Care Providers Physicians and Other Providers
The August 22, 2008 proposed rule In the August 22, 2008 proposed rule We outlined the key assumptions
(73 FR 49765) details the business (73 FR 49765), we reiterated that used to develop the cost benefit analysis
activities, such as manual interventions providers are not required by HIPAA to for physicians and other providers
and phone calls, that make up the conduct HIPAA transactions segment in the August 22, 2008
calculations for two of the categories of electronically, but if they do, they must proposed rule (73 FR 49767), and
projected savings: Better standards or use the standards adopted by the calculated that the total cost for all
savings due to improved claims Secretary. Providers that conduct these physicians and other providers segment
standards and Operational savings or transactions electronically would be to implement Version 5010 would be
savings due to increased auxiliary required to implement Version 5010 of within a range of $435 million to $870
standards usage. As stated, only two of those transactions. million. Based on the revised cost
assumption outlined earlier, the new dentist based on input provided by the provided representative costs incurred
estimate of total cost for physicians and industry, which reflected office costs, in by a typical retail pharmacy in this
other providers segment to implement keeping with the other portions of the segment. This commenter said that the
Version 5010 is between $544 million to analysis. cost of implementation of both the
$1,088 million, unadjusted for present Comment: We received one comment standards (Versions D.0 and 5010)
value. clarifying another data point—in Table would be approximately $250,000, with
In the proposed rule, we calculated 19 in the supplement document posted 90 percent of the cost associated with
that the savings due to better standards on the CMS Web site in October 2008. the upgrade from Version 4010/4010A
was estimated to be a low of $1,612 The clarification is that the size of most to Version 5010.
million. Cost savings due to an increase dental practices is less than 5. In Table Response: Although the commenter
in use of the electronic claims 19, the practice size categories were too had identified representative costs, it
transactions (837 and 835) were large (‘‘50–100 physicians’’ and ‘‘100 + did not provide additional information
estimated at a low of $270 million. physicians,’’) for dentistry, and should regarding the number of retail chains
Operational savings due to an increase have reflected a smaller number at the that fall in this segment. We were,
in the use of auxiliary transactions were lower end. therefore, not able to re-model the
estimated at $5,251 million. Response: We agree with the impact analysis based on the additional
Based on the revised benefit clarification, and have updated the table information provided by the
assumptions outlined earlier (change in to represent the data collected from the commenter. Furthermore, the impact
salary and later adoption of auxiliary industry. However, the calculation of analysis for pharmacies is handled in
transactions), the new estimate for the costs and benefits are not affected by the section for Version D.0 and we
physician savings due to better this comment. believe those figures are representative
standards is $1,392 million and In the August 22, 2008 proposed rule of the segment overall.
operational savings due to increase in (73 FR 49768), we calculated that the
the use of auxiliary claim transactions total cost for dentists to implement Health Plans
are $4,443 million, unadjusted for Version 5010 would be within a range In the August 22, 2008 proposed rule
present value. As mentioned earlier, the of $299 million to $598 million. Based (73 FR 49769), we outlined the key
benefit category cost savings is not on revised cost assumption outlined assumptions used to develop the cost
impacted by the revised benefit earlier, the new revised estimate of total benefit analysis for the health plans
assumptions. costs for the dentist segment to segment. We calculated that the total
implement Version 5010 is within a cost for health plans to implement
Dentists
range of $373 million to $747 million, Version 5010 would be within a range
In the August 22, 2008 proposed rule, unadjusted for present value. of $3,604 million to $7,209 million.
we acknowledged that the dental Based on the revised benefit Based on the revised cost assumption
community has not yet widely adopted assumptions outlined earlier, the new outlined earlier, the new estimate of
the HIPAA standards, in large part estimate for savings due to better total cost for health plans to implement
because the standards did not meet their standards is $236 million and Version 5010 is to be within a range of
practical business needs, particularly for operational savings due to increase in $4,505 million to $9,011 million,
claims and remittance advice. We the use of auxiliary claim transactions unadjusted for present value.
assumed that the costs for implementing are $753 million, unadjusted for present In the August 22, 2008 proposed rule
Version 5010 would largely fall on value. As mentioned earlier, the benefit (73 FR 49769), we calculated that the
vendors as a cost of doing business, as category cost savings is not impacted by savings due to better standards were
they support the majority of dentists. the revised benefit assumptions. estimated at a low of $1,283 million.
We outlined the key assumptions used Cost savings due to an increase in use
to develop the cost benefit analysis for Pharmacies
of the electronic claims transactions
dentists segment in the August 22, 2008 Pharmacies will transition to greater (837 and 835) were estimated at a low
proposed rule (73 FR 49768). We use of Version 5010 when the final rule of $111 million. Operational savings
received a few general comments from becomes effective, specifically for the due to an increase in the use of auxiliary
the dental community regarding our 835 transaction (remittance advice). For transactions were estimated at $4,386
estimates of the dental profession. We retail pharmacy claims, pharmacies million. We outlined the Version 5010
did not receive any actual cost data from primarily use the NCPDP standard, cost benefit summary for health plans
any organization or practitioner. Version 5.1. Since we are replacing segment (73 FR 49769).
Comment: We received one comment Version 5.1 with Version D.0 in this Based on the revised benefit
clarifying a figure in Table 18 in the regulation, and many of the system assumptions outlined earlier, the new
supplement document posted on the changes, costs and benefits for estimate for savings due to better
CMS Web site in October 2008. The implementing both Version 5010 and standards is $1,093 million, and
clarification is that the number of Version D.0 will result from related operational savings due to increase in
dentist practices (outlined in Table 18) efforts, we combined the impact the use of auxiliary claim transactions
does not include a one-to-one analysis for Version 5010 and Version are $3,711 million, unadjusted for
relationship between dentists and their D.0. That analysis is detailed later in present value. As mentioned earlier, the
office, so the calculation assumes too this analysis. benefit category cost savings is not
large a number. The commenter did not Comment: We received a comment impacted by the revised benefit
provide a figure however. from a pharmacy chain that identified a assumptions.
Response: We agree with the pharmacy segment that was not
clarification and distinction, and have considered in the regulatory impact Government Plans
updated the table in the supplement to analysis. The commenter stated that We outlined the key assumptions
indicate the numbers were for there are retail pharmacies that are not used to develop the cost benefit analysis
individual dentists. However, in HHS’s considered a chain store, and would not for government plans segment in the
opinion, the current cost estimates are fall under the category of independent August 22, 2008 proposed rule (73 FR
not overstated. We derived the cost per pharmacies. In addition, the commenter 49770), and calculated that the total
costs for government plans segment to therefore, created a range of costs for the CBA have a high potential for
implement Version 5010 would be implementation and transition to overlap. In addition, participants are
within a range of $252 million to $481 Version 5010 based on this variable. different for each survey. For example:
million. Based on the revised cost Using this analysis, we increased our 837 survey participants include four
assumption outlined earlier, the new estimates and came up with an average long term care health plans while 835
estimate of total costs for the implementation cost for each survey participants did not include any
government plans segment to clearinghouse of $1 million (low) and health plans.
implement Version 5010 is within a $1.21 million (high) (up from a range of • The survey results were not from a
range of $314 million to $601 million, $0.23 million to $0.28 million). The controlled sample. The depth of the
unadjusted for present value. total costs (low) for the clearinghouse survey respondent’s understanding of
In the August 22, 2008 proposed rule, segment increased from $37 million to the impact of Version 5010 was unclear.
we estimated that savings due to better $160 million. The lack of attribution and ability to
standards would be a low of $279 Based on the comments, we revised contextualize survey responses makes it
million. Cost savings due to an increase our estimate of the total costs for the difficult to use the WEDI CBA directly;
in use of the electronic claims clearinghouse segment to implement the utility of the data is extremely
transactions (837 and 835) were Version 5010 to be within a range of limited because of the small number of
estimated to be a low of $24 million. $160 million to $196 million, respondents, the uncertainty of the
Operational savings due to an increase unadjusted for present value. responses (over 1⁄3 of the payer, provider
in the use of auxiliary transactions were In the August 22, 2008 proposed rule and vendor responders answered ‘‘not
estimated at $953 million. We outlined (73 FR 49771), we stated our sure’’ when asked to estimate the costs
the Version 5010 cost benefit summary assumption that there would be no for new software, upgrading of existing
for government plans segment (73 FR benefits for clearinghouses. We did not software, and custom solutions), and the
49770). receive any comments on this lack of consistency of respondents
Based on the revised benefit assumption, but feedback from industry across surveys.
assumptions outlined earlier, the new interviews supports our belief that other As a result of these factors, this final
estimate for savings due to better than business stability, there are no rule is informed by the qualitative input
standards is $238 million and other benefits for clearinghouses. from the WEDI CBA, but relies on the
operational savings due to increase in
Other Comments Pertaining to Cost specific cost benefit study performed by
the use of auxiliary claim transactions
Estimates Gartner to prepare the regulatory impact
are $807 million, unadjusted for present
Comment: We received a few analysis for the August 22, 2008
value. As mentioned earlier, the benefit
comments requesting that HHS review proposed rule to adopt Version 5010.
category cost savings is not impacted by
the WEDI Cost Benefit Analysis (CBA) Comment: One commenter stated that
the revised benefit assumptions.
documents prepared in CY2007 and costs estimated to implement Version
Clearinghouses and Vendors consider the industry projections of 5010 were 150 percent of the costs
We outlined the key assumptions Version 5010 implementation costs from incurred during NPI implementation.
used to develop the cost benefit analysis that analysis. Response: We understand the context
for clearinghouses and vendors segment Response: We reviewed all of the CBA of the comment, although the
in the August 22, 2008 proposed rule documents forwarded by WEDI. We commenter did not provide any data on
(73 FR 49770), and calculated that the were able to make some qualitative which we could conduct any analysis or
total costs for clearinghouses to inferences based on the CBA survey comparison. Since the commenter did
implement Version 5010 would be responses and used those to solicit not provide baseline data, a specific
within a range of $37 million to $45 additional feedback from industry analysis could not be done to help us
million. leaders regarding the CBA findings and consider revising our cost estimates
Comment: We received a comment to better augment the regulatory impact further.
from a large clearinghouse stating that analysis. The input from this analysis Comment: We received a few
our cost assumptions were significantly helped inform the changes we have comments requesting that HHS use the
understated, and that their costs to outlined in the final rule. However, we actual Version 4010/4010A
implement Version 5010 would be at did not take the CBA estimates in their implementation costs incurred by
least $3.5 million, and would be current form because: Medicare and Medicaid to estimate the
affected specifically by the amount of • The CBA does not capture a truer costs to implement Version 5010.
testing that would be required with breakdown of costs by healthcare sub Response: We acknowledge the
trading partners—both providers and segment but rather at the aggregate. comment, but do not provide a specific
health plans. Although the CBA summarizes the number for the Version 4010/4010A
Response: We agree with the survey responses, it does not include implementation costs incurred by
comment based on several additional analysis based on the survey responses. Medicare and Medicaid. The budgetary
interviews with large and medium For example, the CBA captures the process used by Medicare and Medicaid
clearinghouse representatives. In survey responses regarding participant allocates funds for all approved Health
preparing the final rule, we did some details and the cost details. It does not Information Technology initiatives, and
additional analysis on a larger sample of tie the cost by survey participant as to those estimates were used in our
the 162 clearinghouses that we included establish a clear basis for comparison analysis, as was other data obtained
in our estimate. In this analysis we across organizations of similar size and from the industry at large. With respect
found that the cost per clearinghouse type. to Medicare expenditures specifically,
would be driven primarily by the • It is difficult to develop Version funds are allocated to the contractors for
number of trading partners with whom 5010 costs based on the WEDI CBA purposes of all updates and releases
the clearinghouses would need to test because each analysis was conducted by each year. Medicaid agencies do not
Version 5010 transactions. The number transaction. For example, there are three report on a specific implementation, but
varied greatly between the smaller analyses, one for each transaction: 835, rather track all system changes for
clearinghouses and the larger ones and, 837 and 276/277. The costs outlined in purposes of federal cost sharing.
Comment: We received one comment pharmacy chain estimated that it spent from any of their associations; therefore
requesting that HHS examine the costs approximately $10 million when it we stand by our original assumptions.
for providers who must submit converted to Version 5.1. In comparison, We have modified the dates for those
electronic information to HIPAA- this chain estimated that corporate-wide costs, in accordance with the revised
exempt payers such as auto insurance, costs for the conversion to Version D.0, compliance schedule.
workers’ compensation, property and including programming, system testing
c. Health Plans and PBMs
casualty insurers who are not required and personnel training, would be
to accept the HIPAA standard around $2 million per chain. Another In the August 22, 2008 proposed rule
transactions. These providers must large national pharmacy chain estimated (73 FR 49773), we stated that health
operate separate systems to support the its migration costs from Version 5.1 to plans should see minimal changes in
requirements of covered and non- Version D.0 would be $1.5 million. We their operations and workflows between
covered entities. solicited industry input in preparation Version 5.1 and Version D.0. We
Response: This is consistent with for the proposed impact analysis, and estimated the cost for large PBMs to
current practice. These referenced the overall initial industry input for migrate to Version D.0 to be
entities have never been covered under conversion to D.0 ranged from $100,000 approximately $1 million to $1.5
HIPAA; there are already processes and for a small pharmacy chain to $1 million per large national PBM, and
systems being used to submit claims to million for large national pharmacy approximately $100,000 for specialty
different payer types. The commenter chains. Based on this information, we PBMs. Our total estimated costs for
did not submit any data with respect to estimated implementation costs to be health plans and PBMs ranged between
claims volumes or costs to help support $20 million for large national pharmacy $3.6 and $10.6 million per plan based
the statement that these costs are unique chains, and $18 million for small on the size of the PBM.
and need to be examined. chains, for a total of $38 million. Comment: We received a few
Comment: We received a few comments suggesting that we
Version D.0 (and Version 5010 for comments disagreeing with our original understated the cost for health plans
pharmacies) cost estimates. One large chain and PBMs to transition to Version D.0.
In this section of the impact analysis, estimated their cost at $4.9 million over While commenters agreed with our
we summarize the key assumptions two years but did not provide specifics. assessment of the consolidation of the
from the August 22, 2008 proposed rule, Another commenter estimated PBM industry nationwide, they claimed
and discuss those with which the implementation costs of $2 million for that we did not account for the effect on
commenters disagreed. In cases where small chains with costs increasing based a large PBM. Commenters explained
we agreed with the commenters and on the size of the chain, but indicated that maintenance of multiple platforms
changed our estimates, revised tables that this estimate included both Version results in increased complexities of
are provided. In cases where we did not D.0 and Version 5010 costs. operations and upgrades. One
change our assumptions or estimates, Response: The few comments we commenter estimated that costs for their
the table from the August 22, 2008 received on this topic did not provide upgrades would be $11 million, and,
proposed rule is not repeated. The last enough detail to permit us to assess unlike the upgrades to the retail
section of the impact analysis contains them, and in one case the estimate did systems, they stated that few if any
the summary detailed tables with all of not distinguish between Version D.0 benefits will result from the costs.
and Version 5010 costs. We retain our Another commenter expanded on the
the costs and benefits recalculated to
original estimates of $100,000 per small cost issues, stating that the business
reflect the changes. In general,
pharmacy chain and $1 million per requirements for commercial and
pharmacy chains, health plans and
large pharmacy chain company, Medicare Part D clients have required
PBMs believed that our cost estimates
unadjusted for present value. We significant changes to the claim
were too low, and provided modest
estimate that these costs would be standard. They stated that the
justification for their position, but no
spread over the first two years of requirements affect all of the logic
entity provided actual data that could be
implementation of Version D.0. associated with the new fields which
used to adjust our estimates with
must be accommodated. They explained
precision. Based on the comments, we b. Independent Pharmacies that even the customer service screens
made some changes to our original In the August 22, 2008 proposed rule, will require revision and that the
assumptions and estimates for the cost we stated that independent pharmacies representatives will require training on
of implementing Versions D.0 for would incur costs resulting from the new fields and the benefit changes
pharmacy benefit managers. software upgrades to accommodate so that they can answer beneficiaries’
As stated in the preamble, there was
Version D.0. We stated that we believed questions correctly. They estimate their
consensus that we should adopt Version
that maintenance fees would increase total cost to be in excess of $10 million
D.0 to replace Version 5.1. No
slightly, as vendors pass along their cost dollars.
commenters disagreed with our
of the upgrade to the pharmacy. Based Another commenter challenged our
estimates of the number of organizations
on industry input, we estimated that the assumption that health plans and PBMs
and professionals affected by this rule,
average monthly maintenance contract should see minimal changes in their
and there was also no disagreement
between a pharmacy and a vendor operations and workflows between
about the estimate of more than 2.3
amounts to a range of $400 to $800 per Version 5.1 and Version D.0., stating
billion prescriptions annually.
month per pharmacy with an additional that Version D.0 requires additional data
Costs percent for maintenance fee increases reporting related to the eligibility or
attributable to the conversion to Version subrogation/secondary plan aspects of
a. Chain Pharmacies
D.0. Our original estimate per pharmacy the transaction, and that this represents
The retail pharmacy industry would was a range of $540,000 to $1,080,000 a significant workload.
be the most impacted by the transition based on 18,000 independent Response: When we prepared our
from Version 5.1. to Version D.0. In the pharmacies. original cost estimates, we treated the
August 22, 2008 proposed rule, we We did not receive any comments large PBMs the same as a large chain
reported that one large national from any independent pharmacist or pharmacy. We did not completely
account for the complexity that the following complete implementation of commenter did not provide us with any
systems changes would present to large Version D.0, they are concerned that other data to refute what we originally
PBMs. At the time, we allowed for HHS has overstated those savings. The proposed. Since most commenters did
changes to be made on only one commenter recognized that the use of not dispute our assumptions, we do not
operating platform, while commenters Version D.0 will decrease audit risks, make changes in the final rule.
pointed out that as many as seven however the savings assumption by
Version 3.0 (Medicaid Pharmacy
platforms might need to be updated. We HHS failed to recognize other gaps that
Subrogation)
agree with commenters that large PBMs will continue to exist in the outpatient
have complex systems that often health care system, specifically relative As stated in the impact analysis for
include more than one platform, and to the coordination of benefits. Version 5010 and Version D.0 above, in
that such comprehensive system Another commenter said that some of this section, we summarize the cost and
upgrades can be more costly. Based on the savings numbers are so small (for benefit assumptions from the August 22,
the comments, we have revised our cost example, the 1.1 percent of time of a 2008 proposed rule, and discuss those
projections. We amend our estimates pharmacist being spent on benefit with which the commenters disagreed.
from $2 million to $10.5 million for issues), that they become hard to In cases where we agreed with the
each large PBM company. Since we did validate. Commenters did not provide commenters and changed our estimates,
not receive any comments from the any alternative data to show what the revised tables are provided. The last
smaller specialty PBMs, we leave our benefits to the pharmacies would be in section of the impact analysis contains
original assumption as stated in the their view. the summary detailed tables with all of
August 22, 2008 proposed rule. Thus, Response: As we stated in the August the costs and benefits recalculated to
our cost estimates have increased to $42 22, 2008 proposed rule (73 FR 79744), reflect the changes.
million for the large PBMs, and $3.6 we based our assumptions on a study There was consensus that we should
million for the remaining small chains, funded by the National Association of adopt Version 3.0, and we received no
for a total of $45.6 million, unadjusted Chain Drug Stores (NACDS), ‘‘Pharmacy comments opposing our cost or benefit
for present value. We estimate that these Activity Cost and Productivity Study’’ assumptions or estimates. However, to
costs would be incurred during the first (http://www.nacds.org/user-assets/ accommodate the change in effective
two years of implementation. PDF_files/ arthur_andersen.PDF ). In and compliance dates for Version 3.0,
projecting the growth in the number of we have made modifications to each of
d. Vendors pharmacies over the next 9 years, we the tables presented in the proposed
In the August 22, 2008 proposed rule used data from the NACDS, rule, and re-published them below.
(73 FR 49772), we solicited industry and ‘‘Community Retail Pharmacy Outlets In the August 22, 2008 proposed rule
stakeholder comment on the by Type of Store, 1996–2006’’ (http:// (73 FR 49779), we said that
assumptions that vendor costs will be www.nacds.org/userseets/pdfs/ approximately 37 States were already
passed on to the customer over time, facts_resources/2006/ billing a major portion of their Medicaid
and solicited feedback on actual costs Retail_Outlets2006.pdf ). Since we did pharmacy subrogation claims
for vendor software upgrades and not get any new data on the benefits, we electronically. Of those 37 States, 33 of
impact on covered entities, including stand by our assumptions and make no them were using a contingency fee
the conversion of historical data. We changes to the benefit data. contractor to bill their (electronic)
received no comments from vendors claims. The other four (out of 37) States
Health Plans and PBMs
related to their costs to upgrade to were billing electronically without the
Version D.0 and therefore make no We assumed that if pharmacists and use of a contractor. The remaining 14
changes to this section. The figures from technicians realize productivity savings States were still billing most of their
the proposed rule will be included in as a result of the use of Version D.0, Medicaid pharmacy subrogation claims
the summary table at the end of the then conversely, health plans and PBMs on paper.
impact analysis. would realize commensurate savings A detailed analysis of the impact on
though a reduction in pharmacist and Medicaid agencies and health plans can
Benefits technician calls to customer service be found in the proposed rule (73 FR
In the August 22, 2008 proposed rule representatives at health care plans and 49779–49781).
(73 FR 49742), we assumed that the PBMs. For a more detailed discussion of In the August 22, 2008 proposed rule
benefits of converting to Version D.0 these savings through reductions in (73 FR 49779), we said that the costs for
would accrue over several years, pharmacist and technician calls to States that currently bill electronically
beginning in 2012. For a full overview customer service representatives at to upgrade their systems to Version 3.0,
of the benefit assumptions, refer to the health plans and PBMs, please refer to and to transition from paper Medicaid
discussion in the August 22, 2008 the August 22, 2008 proposed rule (73 subrogation claims to using Version 3.0,
proposed rule at 73 FR 49773–49778. FR 49778). would be outweighed by the benefits.
Comment: One commenter stated that We did not receive any comments on
a. Pharmacies they felt that there are few if any this conclusion.
In the August 22, 2008 proposed rule benefits that will result from the cost of
(73 FR 49742), we said pharmacies need upgrading their system to Version D.0, 1. Impact on States That Use a
Version D.0 to process Medicare Part D however they did not expand on this Contingency Fee Contractor
claims more efficiently, and with fewer statement or offer any alternative In the August 22, 2008 proposed rule
workarounds, particularly with respect information. (73 FR 49779), we said that, for the 33
to processing coordination of benefits Response: When estimating the States that contract out their Medicaid
claims. benefits accrued to dispensers, we pharmacy subrogation billing processes,
Comment: We received a few solicited industry and stakeholder there would be no direct costs, and that
comments on our benefit assumptions. comments on our assumptions. reimbursement to States would increase
One large pharmacy chain commented Although we received one comment proportionally to a projected increase in
that, while they do not disagree that stating that there were few, if any the volume of electronic claims. The
there will be benefits and savings benefits to upgrading to Version D.0, the contractors supporting these States
would recover their cost on the back- percent of their administrative costs. We the needs of different payers, States
end, as they would be recouping did not receive any comments on this sometimes recoup the subrogation
additional contingency fees based on section of the analysis. monies from pharmacy providers. We
the volumes. We received no comments do not believe this practice is
3. Impact on States That Bill
on this assumption. Electronically (Without a Contractor) widespread and, therefore, did not
2. Impact on States Converting From account for it in the impact analysis. We
a. Cost of Development did not receive any comments on this
Paper
In the August 22, 2008 proposed rule section of the analysis.
a. Cost of Development (73 FR 49780), we said that changes for
In the August 22, 2008 proposed rule States that bill electronically would be Impact on Third Party Payers (Includes
(73 FR 49780), we described the costs minimal and the cost impact would be Plan Sponsors, Pharmacy Benefit
that would be incurred by the 14 States much less than for the States that Managers (PBMs), Prescription Drug
converting from a paper process to an currently bill paper to convert to Plans (PDPs) and Claims Processors)
electronic process, using Version 3.0, Version 3.0. We did not receive any 1. Impact on Plan Sponsors That Use a
including the cost of development for comments on this section of the PBM or Claim Processor
gap analysis, requirements analysis.
documentation, training, translator b. Costs of Adopting and Implementing In the August 22, 2008 proposed rule
mapping, legacy system changes, Trading Partner Agreements With Third (73 FR 49781), we stated that the four
acceptance testing and external, end-to- Party Payers large PBMs handle about 75 percent of
end testing. We said that infrastructure all prescription orders dispensed
In the August 22, 2008 proposed rule
costs would be relatively small, in the annually in the United States, and that
(73 FR 49780), we suggested that the
range of $50,000 to $150,000 per State, many of these organizations already
cost to execute and implement trading
unadjusted for present value. The State accept Version 2.0 subrogation
partner agreements would be
would be responsible for 10 percent of transactions. We said that, for the
approximately $5,000 to $15,000 per
those sums, and the Federal government majority of plan sponsors that contract
agreement, and that four States would
would reimburse the State 90 percent of out their claims adjudication, the costs
establish trading partner agreements
the design, development, and of implementing Version 3.0 and
with an additional 12 health plans/
installation costs related to changes in establishing trading partner agreements
payers, for a total cost ranging from
their Medicaid Management Information would be minimal. We received no
$20,000 to $60,000, unadjusted for
Systems (MMIS). We projected that present value. We did not receive any comments on this portion of the
seven States would incur development comments on this section of the analysis.
costs in order to conduct their own analysis.
billing and the other seven would hire 2. Impact on Plan Sponsors That Do Not
a contingency fee contractor to conduct Medicaid Savings Use a PBM or Claim Processor
their billing. We received no comments In the August 22, 2008 proposed rule,
on these estimates or assumptions. We did not estimate any costs for this
73 FR 49780, we stated that the accrued
savings to States would outweigh the sector, as we believe there are few large
b. Costs of Adopting and Implementing payers that administer their own claims
Trading Partner Agreements (TPAs) costs because Medicaid agencies would
no longer have to keep track of and use adjudication. We continue to assume
With Third Party Payers that these payers have already made the
various electronic formats for different
In the proposed rule, (73 FR 49780), payers. We estimated the total number necessary investments in developing
we said that States would enter into of paper Medicaid pharmacy electronic capabilities to meet HIPAA
Trading Partner Agreements with other subrogation claims to be between 2.5 mandates, and that they will be
payers in order to conduct subrogation and 3.4 million annually. We cited a upgrading their systems in order to
electronically. We projected that study by Milliman in 2006, which was accommodate Version D.0, to meet the
approximately forty (40) third party also referenced by the American requirements of this final rule. Since
payers, primarily PBMs and claims Medical Association (AMA), which Version 3.0 utilizes a number of the data
processors, as well as a few large health stated that electronic claims can save an elements found in Version D.0, we
plans that process claims in-house, average of $3.73 per clean claim. Based expect additional infrastructure costs to
would participate. We stated that on this study, we estimated that the be small. We did not receive any
trading partner agreements would cost Medicaid program could save an comments on this assumption.
approximately $14,000 to $20,000— estimated $12.7 million annually
with a range of $5,000 to $15,000 for unadjusted for present value, once a. Cost of Development
each agreement. We assumed that each Version 3.0 is fully implemented. We
State would enter into a trading partner In the August 22, 2008 proposed rule
said that the savings represents both (73 FR 49781), we estimated the
agreement with an average of 15 payers, State agencies and the Federal
and that the anticipated costs per State development costs to individual health
government, as the Federal government
would range from $75,000 to $225,000. plans that would need to implement
would share 50 percent of any
As stated in the previous section, we Version 3.0 to be similar to the cost for
administrative savings. We did not
projected that half of the 14 States receive any comments on this section of State Medicaid programs, or
would hire a contractor, and half would the analysis. approximately $50,000 to $150,000. We
adopt trading partner agreements. estimate that there are about 20 payers
Therefore, the agreements with 15 plans Impact on Medicaid Pharmacy that do not contract with a PBM and
Providers
would range from $525,000 to $1.6 that they would need to upgrade their
million, unadjusted for present value. In situations where Medicaid has systems for a total cost of
The State would be responsible for 50 been unable to successfully bill third $1 to $3 million, unadjusted for present
percent of the cost since the Federal parties, due to the current challenges of value. We solicited comments on this
government reimburses States 50 having to use various formats to meet subject but received none.
b. Costs of Adopting and Implementing manual review, and that the savings of effective and compliance dates, we have
Trading Partner Agreements With States converting 3.4 million paper claims to revised the tables to coincide with the
In the proposed rule (73 FR 49781), electronic transmission would be $3.3 new dates.
we estimated the plan sponsor’s costs of million, unadjusted for present value.
We did not receive any comments in the Summary of Costs and Benefits for This
adopting and implementing trading Final Rule
partner agreements with States would section on savings.
be similar to the cost estimated for State In summary, we did not receive any The final tables, 4a and 4b, which
Medicaid programs, which would range public comments on the impact analysis
replace tables 14a and 14b from the
from $5,000 to $15,000 per agreement. for Version 3.0. However, we did
proposed rule, are the compilation of
We also anticipated that approximately receive comments, as described earlier,
the total low and high costs and benefits
40 States would utilize a contingency requesting additional time to implement
the standards and expressing the need for all of the standards being adopted in
fee contractor, setting up trading partner this final rule. In the proposed rule, we
agreements. We estimated the cost per to implement Version 3.0 either at the
same time as, or after, implementation did not adjust for present value. In order
plan sponsor to range from $60,000 to
of Version D.0 because of the to assure readers a valid comparison, we
$180,000, unadjusted for present value,
interdependency of the two standards. also did not adjust for present value in
and received no comments on this
assumption. The compliance date has been changed the final rule in the main text of the
to allow for additional implementation document. However, for the reader’s
3. Savings Impact time, and to ensure that the Version 3.0 edification, in Tables 4a and 4b, we
We assumed that 50 percent of all transactions can be used in concert with show the costs and benefits discounted
subrogation claims currently require Version D.0. Based on the adopted by 7% and 3% to reflect present value.
TABLE 4A—ESTIMATED LOW AND HIGH COSTS—IN MILLIONS*—FOR YEARS 2009 THROUGH 2019 FOR IMPLEMENTATION
OF VERSIONS 5010, D.0 AND 3.0
Unadjusted @ 3% @ 7%
Cost type Industry for present Discount Discount
value
5010—Imp costs ................................................... Hospitals—low ...................................................... $792 $762 $727

Hospitals—high .................................................... 1,584 1,525 1,453
Physicians—low ................................................... 370 356 339
Physicians—high .................................................. 740 712 679
Dentists—low ....................................................... 254 245 233
Dentists—high ...................................................... 508 489 466
pharmacy—low ..................................................... 57 55 52
pharmacy—high ................................................... 114 110 105
private hp—low .................................................... 3,063 2,949 2,810
private hp—high ................................................... 6,127 5,898 5,621
govt hp—low ........................................................ 213 205 195
govt hp—high ....................................................... 410 395 376
CH—low ............................................................... 137 132 126
CH—high .............................................................. 167 161 153
5010 Transition costs ............................................ Hospitals—low ...................................................... 373 338 298
Hospitals—high .................................................... 746 677 597
Physicians—low ................................................... 174 158 139
Physicians—high .................................................. 348 316 279
Dentists—low ....................................................... 120 109 96
Dentists—high ...................................................... 239 217 191
pharmacy—low ..................................................... 27 24 22
pharmacy—high ................................................... 54 49 43
private hp—low .................................................... 1,442 1,308 1,154
private hp—high ................................................... 2,883 2,615 2,307
govt hp—low ........................................................ 100 91 80
govt hp—high ....................................................... 193 175 154
CH—low ............................................................... 24 22 19
CH—high .............................................................. 30 27 24
Medicaid subrogation development ...................... federal—low ......................................................... .32 .29 .27
federal—high ........................................................ .94 .87 .79
state—low ............................................................. .040 .037 .034
state—high ........................................................... .1 .093 .084
payers—low .......................................................... 1 .93 .844
payers—high ........................................................ 3 2.78 2.53
Medicaid subrogation—Trading Partner agree- federal—low ......................................................... .38 .35 .32
ments.
federal—high ........................................................ 1.16 1.07 .98
state—low ............................................................. .38 .35 .32
state—high ........................................................... 1.16 1.07 .98
payers—low .......................................................... 2.4 2.2 2
payers—high ........................................................ 7 7 6
D.0—pharmacy chain systems implementation ... pharmacy—low ..................................................... 18 17 16
pharmacy—high ................................................... 38 36 34
Independent pharmacy maintenance fees ........... pharmacy—low ..................................................... .54 .51 .48
pharmacy—high ................................................... 1.08 1.03 .97
TABLE 4A—ESTIMATED LOW AND HIGH COSTS—IN MILLIONS*—FOR YEARS 2009 THROUGH 2019 FOR IMPLEMENTATION
OF VERSIONS 5010, D.0 AND 3.0—Continued
Cost type Industry for present Discount Discount
value
PBM programming ................................................ PBM—low ............................................................. 8 8 7

PBM—high ........................................................... 10 9.5 9
Total Costs ..................................................... LOW ..................................................................... 7,177 6,783 6,319
Total Costs ..................................................... HIGH .................................................................... 14,206 13,425 12,505
TABLE 4B—ESTIMATED LOW AND HIGH BENEFITS—IN MILLIONS*—FOR YEARS 2009 THROUGH 2019 FOR
IMPLEMENTATION OF VERSIONS 5010, D.0 AND 3.0
Savings type Industry for present Discount Discount
value
5010 operational savings ...................................... Hospitals—low ...................................................... $348 $286 $224

Hospitals—high .................................................... 952 783 612
Physicians—low ................................................... 1,392 1,144 895
Physicians—high .................................................. 3,802 3,126 2,445
Dentists—low ....................................................... 237 195 153
Dentists—high ...................................................... 605 497 389
pharmacy—low ..................................................... 16 13 10
pharmacy—high ................................................... 23 19 15
private and govt hp—low ..................................... 1,330 1,093 855
private and govt hp—high .................................... 3,577 2,941 2,300
CH—low ............................................................... 0 0 0
CH—high .............................................................. 0 0 0
5010 cost savings increase in transactions .......... Hospitals—low ...................................................... 66 53 40
Hospitals—high .................................................... 219 176 133
Physicians—low ................................................... 270 217 164
Physicians—high .................................................. 874 702 532
Dentists—low ....................................................... 45 36 27
Dentists—high ...................................................... 56 45 34
pharmacy—low ..................................................... 0 0 0
pharmacy—high ................................................... 0 0 0
private and govt hp—low ..................................... 135 110 86
private and govt hp—high .................................... 338 276 214
CH—low ............................................................... 0 0 0
CH—high .............................................................. 0 0 0
5010 operational savings—increase in auxiliary Hospitals—low ...................................................... 1,131 897 669
claim transaction.
Hospitals—high .................................................... 2,890 2,288 1,700
Physicians—low ................................................... 4,442 3,517 2,612
Physicians—high .................................................. 11,553 9,147 6,795
Dentists—low ....................................................... 752 595 442
Dentists—high ...................................................... 1,839 1,456 1,082
pharmacy—low ..................................................... 0 0 0
pharmacy—high ................................................... 0 0 0
private and govt hp—low ..................................... 4,519 3,578 2,658
private and govt hp—high .................................... 11,749 9,302 6,910
CH—low ............................................................... 0 0 0
CH—high .............................................................. 0 0 0
Medicaid subrogation ............................................ fed—low ............................................................... 13 11 10
fed—high .............................................................. 18 16 13
state—low ............................................................. 13 11 10
state—high ........................................................... 18 16 13
payer—low ........................................................... 7 6 5
payer—high .......................................................... 9 8 7
Version D.0 ........................................................... Pharmacist productivity—low ............................... 951 779 607
Pharmacist productivity—high .............................. 1,921 1,574 1,225
Version D.0 ........................................................... Pharmacy technician productivity—low ............... 77 63 49
Pharmacy technician productivity—high .............. 160 132 103
Version D.0 ........................................................... Avoided audits—low ............................................. 152 126 99
Avoided audits—high ........................................... 304 251 198
Total Benefits ................................................. LOW ..................................................................... 15,896 12,732 9,615
Total Benefits ................................................. HIGH .................................................................... 40,906 32,753 24,719
Accounting Statement and Table Accounting Statement. This statement final rule. Monetary annualized Benefits
must state that we have prepared an and non-budgetary costs are presented
Whenever a rule is considered a accounting statement showing the as discounted flows using three percent
significant rule under Executive Order classification of the expenditures and seven percent factors.
12866, we are required to develop an associated with the provisions of this
TABLE 5—ACCOUNTING STATEMENT

[Accounting statement: classification of estimated expenditures, from FY2009 to FY2019 (in millions)]
Source
Minimum Maximum citation
Primary estimate
Category estimate estimate (RIA, pre-
(millions) (millions) (millions) amble,
etc.)
BENEFITS:
Annualized Monetized benefits:
7% Discount ................................................... 2,142.4 ................................................................. 1,203.7 3,081.1 RIA
3% Discount ................................................... 2,389.5 ................................................................. 1,314.8 3,437.2 RIA
Qualitative (un-quantified) benefits ....................... Wider adoption of standards due to decrease in
use of companion guides; increased produc-
tivity due to decrease in manual intervention
requirements.
Benefits generated from plans to providers and pharmacies, providers to plans and pharmacies, and pharmacies to beneficiaries.
COSTS:
Annualized Monetized costs:
7% Discount ................................................... 1,144.0 ................................................................. 787.5 1,500.5 RIA
3% Discount ................................................... 1,034.8 ................................................................. 711.7 1,357.8 RIA
Qualitative (un-quantified) costs ........................... None ..................................................................... None None
Cost will be paid by health plans to contractors, programming consultants, IT staff and other outsourced entities; providers will pay costs to soft-
ware vendors, trainers and other consultants. Clearinghouses will pay costs to IT staff/contractors and software developers; pharmacies will
pay costs to contractors, software vendors and trainers, and government plans will pay costs to consultants, vendors and staff.
TRANSFERS:
Annualized monetized transfers: ‘‘on budget’’ ...... N/A ....................................................................... N/A N/A
From whom to whom? .......................................... N/A ....................................................................... N/A N/A
Annualized monetized transfers: ‘‘off-budget’’ ...... N/A ....................................................................... N/A N/A
From whom to whom? .......................................... N/A ....................................................................... N/A N/A
In accordance with the provisions of Subpart A—General Provisions § 162.920 Availability of implementation
Executive Order 12866, as amended, specifications.
this regulation was reviewed by the ■ 2. Amend § 162.103 by revising the A person or an organization may
Office of Management and Budget. definition of ‘‘standard transaction’’ to directly request copies of the
read as follows: implementation specifications and the
List of Subjects in 45 CFR Part 162 Technical Reports Type 3 described in
§ 162.103 Definitions. subparts I through S of this part from
Administrative practice and
procedure, Electronic transactions, * * * * * the publishers listed in this section. The
Health facilities, Health insurance, Standard transaction means a Director of the Federal Register
Hospitals, Incorporation by reference, transaction that complies with an approves the implementation
Medicare, Medicaid, Reporting and applicable standard adopted under this specifications, which include the
recordkeeping requirements. part. Technical Reports Type 3 described in
this section, for incorporation by
■ For the reasons set forth in the Subpart I—General Provisions for reference in subparts I through S of this
preamble, the Department of Health and Transactions part in accordance with 5 U.S.C. 552(a)
Human Services amends 45 CFR Part and 1 CFR part 51. The implementation
162 as set forth below: § 162.900 [Removed and Reserved]
specifications and Technical Reports
■ 3. Remove and reserve § 162.900. Type 3 described in this section are also
PART 162—ADMINISTRATIVE ■ 4. Amend § 162.920 as follows: available for inspection by the public at
REQUIREMENTS ■ A. Revise introductory text and the Centers for Medicare & Medicaid
paragraph (a) introductory text. Services (CMS), 7500 Security
■ 1. The authority citation for part 162
■ B. Add paragraphs (a)(10) through Boulevard, Baltimore, Maryland 21244.
is revised to read as follows:
(a)(18). For more information on the availability
Authority: Secs. 1171 through 1180 of the ■ C. Revise paragraph (b) introductory on the materials at CMS, call (410) 786–
Social Security Act (42 U.S.C.1320d–1320d–
text. 6597. The implementation

9), as added by sec. 262 of Pub. L. 104–191,
110 Stat. 2021–2031, and sec. 105 of Public ■ D. Add paragraphs (b)(4) through specifications and Technical Reports
Law 110–233, 122 Stat. 881–922, and sec. (b)(6). Type 3 are also available at the National
264 of Pub. L. 104–191, 110 Stat. 2033–2034 The revisions and additions read as Archives and Records Administration
(42 U.S.C. 1320d–2 (note)). follows: (NARA). For information on the
availability of this material at NARA, X12N/005010X220, as referenced in Release 2 (Version 1.2), January 2006,
call (202) 714–6030, or go to: http:// § 162.1502. National Council for Prescription Drug
www.archives.gov/federal_register/ (15) The ASC X12 Standards for Programs, as referenced in § 162.1102,
code_of_federal_regulations/ Electronic Data Interchange Technical § 162.1202, § 162.1302, and § 162.1802.
ibr_locations.html. Implementation Report Type 3—Payroll Deducted and (6) The Batch Standard Medicaid
specifications are available for the Other Group Premium Payment for Subrogation Implementation Guide,
following transactions. Insurance Products (820), February Version 3, Release 0 (Version 3.0), July
(a) ASC X12N specifications and the 2007, ASC X12N/005010X218, as 2007, National Council for Prescription
ASC X12 Standards for Electronic Data referenced in § 162.1702. Drug Programs, as referenced in
Interchange Technical Report Type 3. (16) The ASC X12 Standards for § 162.1902.
The implementation specifications for Electronic Data Interchange Technical ■ 5. Revise § 162.923 paragraph (a) to
the ASC X12N and the ASC X12 Report Type 3—Health Care Services read as follows:
Standards for Electronic Data Review—Request for Review and
Interchange Technical Report Type 3 Response (278), May 2006, ASC X12N/ § 162.923 Requirements for covered
entities.
(and accompanying Errata or Type 1 005010X217, and Errata to Health Care
Errata) may be obtained from the ASC Services Review—Request for Review (a) General rule. Except as otherwise
X12, 7600 Leesburg Pike, Suite 430, and Response (278), ASC X12 Standards provided in this part, if a covered entity
Falls Church, VA 22043; Telephone for Electronic Data Interchange conducts, with another covered entity
(703) 970–4480; and FAX (703) 970– Technical Report Type 3, April 2008, that is required to comply with a
4488. They are also available through ASC X12N/005010X217E1, as transaction standard adopted under this
the internet at http://www.X12.org. A referenced in § 162.1302. part (or within the same covered entity),
fee is charged for all implementation (17) The ASC X12 Standards for using electronic media, a transaction for
specifications, including Technical Electronic Data Interchange Technical which the Secretary has adopted a
Reports Type 3. Charging for such Report Type 3—Health Care Claim standard under this part, the covered
publications is consistent with the Status Request and Response (276/277), entity must conduct the transaction as a
policies of other publishers of August 2006, ASC X12N/005010X212, standard transaction.
standards. The transaction and Errata to Health Care Claim Status * * * * *
implementation specifications are as Request and Response (276/277), ASC ■ 6. Section 162.925 is amended by
follows: X12 Standards for Electronic Data adding a new paragraph (a)(6) to read as
* * * * * Interchange Technical Report Type 3, follows:
(10) The ASC X12 Standards for April 2008, ASC X12N/005010X212E1,
§ 162.925 Additional requirements for
Electronic Data Interchange Technical as referenced in § 162.1402. health plans.
Report Type 3—Health Care Claim: (18) The ASC X12 Standards for
(a) * * *
Dental (837), May 2006, ASC X12N/ Electronic Data Interchange Technical
(6) During the period from March 17,
005010X224, and Type 1 Errata to Report Type 3—Health Care Eligibility
2009 through December 31, 2011, a
Health Care Claim Dental (837), ASC Benefit Inquiry and Response (270/271),
health plan may not delay or reject a
X12 Standards for Electronic Data April 2008, ASC X12N/005010X279, as
standard transaction, or attempt to
Interchange Technical Report Type 3, referenced in § 162.1202.
adversely affect the other entity or the
October 2007, ASC X12N/ (b) Retail pharmacy specifications
transaction, on the basis that it does not
005010X224A1, as referenced in and Medicaid subrogation
comply with another adopted standard
§ 162.1102 and § 162.1802. implementation guides. The
for the same period.
(11) The ASC X12 Standards for implementation specifications for the
retail pharmacy standards and the * * * * *
Electronic Data Interchange Technical
Report Type 3—Health Care Claim: implementation specifications for the Subpart K—Health Care Claims or
Professional (837), May 2006, ASC X12, batch standard for the Medicaid Equivalent Encounter Information
005010X222, as referenced in pharmacy subrogation transaction may
§ 162.1102 and § 162.1802. be obtained from the National Council ■ 7. Amend § 162.1102 by—
(12) The ASC X12 Standards for for Prescription Drug Programs, 9240 ■ A. Removing paragraph (a).
Electronic Data Interchange Technical East Raintree Drive, Scottsdale, AZ ■ B. Redesignating existing paragraph
Report Type 3—Health Care Claim: 85260. Telephone (480) 477–1000; FAX (b) as paragraph (a).
Institutional (837), May 2006, ASC X12/ (480) 767–1042. They are also available ■ C. Revising the introductory text of
N005010X223, and Type 1 Errata to through the Internet at http:// newly redesignated paragraph (a).
www.ncpdp.org. A fee is charged for all ■ D. Adding new paragraphs (b) and (c).
Health Care Claim: Institutional (837),
ASC X12 Standards for Electronic Data NCPDP Implementation Guides. The revisions and additions read as
Interchange Technical Report Type 3, Charging for such publications is follows:
October 2007, ASC X12N/ consistent with the policies of other § 162.1102 Standards for health care
005010X223A1, as referenced in publishers of standards. The transaction claims or equivalent encounter information
§ 162.1102 and § 162.1802. implementation specifications are as transaction.
(13) The ASC X12 Standards for follows: * * * * *
Electronic Data Interchange Technical * * * * * (a) For the period from October 16,
Report Type 3—Health Care Claim (4) The Telecommunication Standard 2003 through March 16, 2009:
Payment/Advice (835), April 2006, ASC Implementation Guide, Version D, * * * * *
X12N/005010X221, as referenced in Release 0 (Version D.0), August 2007, (b) For the period from March 17,
§ 162.1602. National Council for Prescription Drug 2009 through December 31, 2011, both:
(14) The ASC X12 Standards for Programs, as referenced in § 162.1102, (1)(i) The standards identified in
Electronic Data Interchange Technical § 162.1202, § 162.1302, and § 162.1802. paragraph (a) of this section; and
Report Type 3—Benefit Enrollment and (5) The Batch Standard (ii) For retail pharmacy supplies and
Maintenance (834), August 2006, ASC Implementation Guide, Version 1, professional services claims, the
following: The ASC X12N 837—Health except the standard identified in ■ 10. Section 162.1302 is amended by—
Care Claim: Professional, Volumes 1 and paragraph (b)(2)(v)(A) of this section. ■ A. Removing paragraph (a).
2, Version 4010, May 2000, Washington ■ B. Redesignating existing paragraph
Publishing Company, 004010X096, Subpart L—Eligibility for a Health Plan (b) as paragraph (a).
October 2002 (Incorporated by reference ■ C. Revising the introductory text of
in § 162.920); and ■ 8. Section 162.1202 is amended by— newly redesignated paragraph (a).
(2)(i) Retail pharmacy drug claims. ■ A. Removing paragraph (a). ■ D. Adding new paragraphs (b) and (c).
The Telecommunication Standard ■ B. Redesignating existing paragraph The revisions and additions read as
Implementation Guide, Version D, (b) as paragraph (a). follows:
■ C. Revising the introductory text of
Release 0 (Version D.0), August 2007 § 162.1302 Standards for referral
and equivalent Batch Standard newly redesignated paragraph (a).
certification and authorization transaction.
■ D. Adding new paragraphs (b) and (c).
Implementation Guide, Version 1, * * * * *
Release 2 (Version 1.2), National The revisions and additions read as
follows: (a) For the period from October 16,
Council for Prescription Drug Programs. 2003 through March 16, 2009:
(Incorporated by reference in § 162.920.) § 162.1202 Standards for eligibility for a
(ii) Dental health care claims. The * * * * *
health plan transaction. (b) For the period from March 17,
ASC X12 Standards for Electronic Data * * * * * 2009 through December 31, 2011 both—
Interchange Technical Report Type 3— (a) For the period from October 16, (1) The standards identified in
Health Care Claim: Dental (837), May 2003 through March 16, 2009: paragraph (a) of this section; and
2006, ASC X12N/005010X224, and (2)(i) Retail pharmacy drugs. The
Type 1 Errata to Health Care Claim: * * * * *
(b) For the period from March 17, Telecommunication Standard
Dental (837) ASC X12 Standards for Implementation Guide Version D,
Electronic Date Interchange Technical 2009 through December 31, 2011 both:
(1) The standards identified in Release 0 (Version D.0), August 2007,
Report Type 3, October 2007, ASC and equivalent Batch Standard
X12N/005010X224A1. (Incorporated by paragraph (a) of this section; and
(2) (i) Retail pharmacy drugs. The Implementation Guide, Version 1,
reference in § 162.920.) Release 2 (Version 1.2), National
(iii) Professional health care claims. Telecommunication Standard
Implementation Guide Version D, Council for Prescription Drug Programs.
The ASC X12 Standards for Electronic (Incorporated by reference in § 162.920.)
Data Interchange Technical Report Type Release 0 (Version D.0), August 2007,
and equivalent Batch Standard (ii) Dental, professional, and
3—Health Care Claim: Professional institutional request for review and
(837), May 2006, ASC X12N/ Implementation Guide, Version 1,
Release 2 (Version 1.2), National response. The ASC X12 Standards for
005010X222. (Incorporated by reference Electronic Data Interchange Technical
in § 162.920.) Council for Prescription Drug Programs.
(Incorporated by reference in § 162.920.) Report Type 3—Health Care Services
(iv) Institutional health care claims. Review—Request for Review and
The ASC X12 Standards for Electronic (ii) Dental, professional, and
institutional health care eligibility Response (278), May 2006, ASC X12N/
Data Interchange Technical Report Type 005010X217, and Errata to Health Care
3—Health Care Claim: Institutional benefit inquiry and response. The ASC
X12 Standards for Electronic Data Services Review-—Request for Review
(837), May 2006, ASC X12N/ and Response (278), ASC X12 Standards
005010X223, and Type 1 Errata to Interchange Technical Report Type 3—
Health Care Eligibility Benefit Inquiry for Electronic Data Interchange
Health Care Claim: Institutional (837) Technical Report Type 3, April 2008,
ASC X12 Standards for Electronic Data and Response (270/271), April 2008,
ASC X12N/005010X279. (Incorporated ASC X12N/005010X217E1.
Interchange Technical Report Type 3, (Incorporated by reference in § 162.920.)
October 2007, ASC X12N/ by reference in § 162.920.)
(c) For the period on and after January
005010X223A1. (Incorporated by (c) For the period on and after January
1, 2012, the standards identified in
reference in § 162.920.) 1, 2012, the standards identified in
paragraph (b)(2) of this section.
(v) Retail pharmacy supplies and paragraph (b)(2) of this section.
professional services claims. (A) The Subpart N—Health Care Claim Status
Telecommunication Standard, Subpart M—Referral Certification and
Implementation Guide Version 5, Authorization ■ 11. Revise § 162.1401 to read as
Release 1, September 1999. ■ 9. Revise § 162.1301 to read as follows:
(Incorporated by reference in § 162.920.) follows: § 162.1401 Health care claim status
(B) The Telecommunication Standard transaction.
Implementation Guide, Version D, § 162.1301 Referral certification and
authorization transaction. The health care claim status
Release 0 (Version D.0), August 2007, transaction is the transmission of either
and equivalent Batch Standard The referral certification and
of the following:
Implementation Guide, Version 1, authorization transaction is any of the (a) An inquiry from a health care
Release 2 (Version 1.2), National following transmissions: provider to a health plan to determine
Council for Prescription Drug Programs (a) A request from a health care the status of a health care claim.
(Incorporated by reference in § 162.920); provider to a health plan for the review (b) A response from a health plan to
and of health care to obtain an authorization a health care provider about the status
(C) The ASC X12 Standards for for the health care. of a health care claim.
Electronic Data Interchange Technical (b) A request from a health care ■ 12. Section 162.1402 is revised to read
Report Type 3—Health Care Claim: provider to a health plan to obtain as follows:
Professional (837), May 2006, ASC authorization for referring an individual
X12N/005010X222. (Incorporated by to another health care provider. § 162.1402 Standards for health care claim
reference in § 162.920.) (c) A response from a health plan to status transaction.
(c) For the period on and after the a health care provider to a request The Secretary adopts the following
January 1, 2012, the standards identified described in paragraph (a) or paragraph standards for the health care claim
in paragraph (b)(2) of this section, (b) of this section. status transaction:
(a) For the period from October 16, Report Type 3—Benefit Enrollment and (1) The standard identified in
2003 through March 16, 2009: The ASC Maintenance (834), August 2006, ASC paragraph (a) of this section, and
X12N–276/277 Health Care Claim Status X12N/005010X220 (Incorporated by (2) The ASC X12 Standards for
Request and Response, Version 4010, reference in § 162.920) Electronic Data Interchange Technical
May 2000, Washington Publishing (c) For the period on and after January Report Type 3—Payroll Deducted and
Company, 004010X093 and Addenda to 1, 2012, the standard identified in Other Group Premium Payment for
Health Care Claim Status Request and paragraph (b)(2) of this section. Insurance Products (820), February
Response, Version 4010, October 2002, 2007, ASC X12N/005010X218.
Washington Publishing Company, Subpart P—Health Care Payment and (Incorporated by reference in § 162.920.)
004010X093A1. (Incorporated by Remittance Advice (c) For the period on and after January
reference in § 162.920.) 1, 2012, the standard identified in
(b) For the period from March 17, ■ 15. Section 162.1602 is revised to read paragraph (b)(2) of this section.
2009 through December 31, 2011, both: as follows:
(1) The standard identified in § 162.1602 Standards for health care Subpart R—Coordination of Benefits
paragraph (a) of this section; and payment and remittance advice transaction:
(2) The ASC X12 Standards for ■ 17. Section 162.1802 is amended by—
The Secretary adopts the following ■ A. Removing paragraph (a).
Electronic Data Interchange Technical standards for the health care payment
Report Type 3—Health Care Claim ■ B. Redesignating existing paragraph
and remittance advice transaction: (b) as paragraph (a).
Status Request and Response (276/277), (a) For the period from October 16,
August 2006, ASC X12N/005010X212, ■ C. Revising the introductory text of
2003 through March 16, 2009: Health newly redesignated paragraph (a).
and Errata to Health Care Claim Status care claims and remittance advice. The
Request and Response (276/277), ASC ■ D. Adding new paragraphs (b) and (c).
ASC X12N 835—Health Care Claim The additions and revisions read as
X12 Standards for Electronic Data Payment/Advice, Version 4010, May
Interchange Technical Report Type 3, follows:
2000, Washington Publishing Company,
April 2008, ASC X12N/005010X212E1. 004010X091, and Addenda to Health § 162.1802 Standards for coordination of
(Incorporated by reference in § 162.920.) Care Claim Payment/Advice, Version benefits information transaction.
(c) For the period on and after January 4010, October 2002, Washington * * * * *
1, 2012, the standard identified in Publishing Company, 004010X091A1. (a) For the period from October 16,
paragraph (b)(2) of this section. (Incorporated by reference in § 162.920.) 2003 through March 16, 2009:
Subpart O—Enrollment and (b) For the period from March 17, * * * * *
Disenrollment in a Health Plan 2009 through December 31, 2011, both: (b) For the period from March 17,
(1) The standard identified in 2009 through December 31, 2011, both:
13. Revise § 162.1501 to read as paragraph (a) of this section; and (1) The standards identified in
follows: (2) The ASC X12 Standards for paragraph (a) of this section; and
Electronic Data Interchange Technical (2)(i) Retail pharmacy drug claims.
§ 162.1501 Enrollment and disenrollment Report Type 3—Health Care Claim
in a health plan transaction. The Telecommunication Standard
Payment/Advice (835), April 2006, ASC Implementation Guide, Version D,
The enrollment and disenrollment in X12N/005010X221. (Incorporated by
a health plan transaction is the Release 0 (Version D.0), August 2007,
reference in § 162.920.) and equivalent Batch Standard
transmission of subscriber enrollment (c) For the period on and after January
information from the sponsor of the Implementation Guide, Version 1,
1, 2012, the standard identified in Release 2 (Version 1.2), National
insurance coverage, benefits, or policy, paragraph (b)(2) of this section.
to a health plan to establish or terminate Council for Prescription Drug Programs.
insurance coverage. (Incorporated by reference in § 162.920.)
Subpart Q—Health Plan Premium (ii) The ASC X12 Standards for
■ 14. Section 162.1502 is revised to read Payments Electronic Data Interchange Technical
as follows: Report Type 3—Health Care Claim:
■ 16. Section 162.1702 is revised to read
§ 162.1502 Standards for enrollment and as follows: Dental (837), May 2006, ASC X12N/
disenrollment in a health plan transaction. 005010X224, and Type 1 Errata to
The Secretary adopts the following § 162.1702 Standards for health plan Health Care Claim: Dental (837), ASC
standards for enrollment and premium payments transaction. X12 Standards for Electronic Date
disenrollment in a health plan The Secretary adopts the following Interchange Technical Report Type 3,
transaction. standards for the health plan premium October 2007, ASC X12N/
(a) For the period from October 16, payments transaction: 005010X224A1. (Incorporated by
2003 through March 16, 2009: ASC (a) For the period from October 16, reference in § 162.920.)
X12N 834—Benefit Enrollment and 2003 through March 16, 2009: The ASC (iii) The ASC X12 Standards for
Maintenance, Version 4010, May 2000, X12N 820—Payroll Deducted and Other Electronic Data Interchange Technical
Washington Publishing Company, Group Premium Payment for Insurance Report Type 3—Health Care Claim:
004010X095 and Addenda to Benefit Products, Version 4010, May 2000, Professional (837), May 2006, ASC
Enrollment and Maintenance, Version Washington Publishing Company, X12N/005010X222. (Incorporated by
4010, October 2002, Washington 004010X061, and Addenda to Payroll reference in § 162.920.)
Publishing Company, 004010X095A1. Deducted and Other Group Premium (iv) The ASC X12 Standards for
(Incorporated by reference in § 162.920.) Payment for Insurance Products, Electronic Data Interchange Technical
(b) For the period from March 17, Version 4010, October 2002, Report Type 3—Health Care Claim:
2009 through December 31, 2011, both: Washington Publishing Company, Institutional (837), May 2006, ASC
(1) The standard identified in 004010X061A1. (Incorporated by X12N/005010X223, and Type 1 Errata to
paragraph (a) of this section; and reference in § 162.920.) Health Care Claim: Institutional (837),
(2) The ASC X12 Standards for (b) For the period from March 17, ASC X12 Standards for Electronic Data
Electronic Data Interchange Technical 2009 through December 31, 2011, both: Interchange Technical Report Type 3,
October 2007, ASC X12N/ DEPARTMENT OF HEALTH AND different than the effective date, is the
005010X223A1. (Incorporated by HUMAN SERVICES date on which entities are required to
reference in § 162.920.) have implemented the policies adopted
Office of the Secretary in this rule. The compliance date for
(c) For the period on and after January
1, 2012, the standards identified in this regulation is October 1, 2013.
45 CFR Part 162 FOR FURTHER INFORMATION CONTACT:
paragraph (b)(2) of this section.
[CMS–0013–F] Denise M. Buenning, (410) 786–6711 or
■ 18. Add a new Subpart S to read as Shannon L. Metzler, (410) 786–3267.
follows: RIN 0958–AN25
I. Background
Subpart S—Medicaid Pharmacy HIPAA Administrative Simplification:
A. Statutory Background
Subrogation Modifications to Medical Data Code Set
Standards To Adopt ICD–10–CM and The Congress addressed the need for
Sec. ICD–10–PCS a consistent framework for electronic
162.1901 Medicaid pharmacy subrogation transactions and other administrative
AGENCY: Office of the Secretary, HHS. simplification issues in the Health
transaction.
162.1902 Standard for Medicaid pharmacy ACTION: Final rule. Insurance Portability and
subrogation transaction. Accountability Act of 1996 (HIPAA),
SUMMARY: This final rule adopts
Public Law 104–191, enacted on August
§ 162.1901 Medicaid pharmacy modifications to two of the code set 21, 1996. HIPAA has helped to improve
subrogation transaction. standards adopted in the Transactions the Medicare and Medicaid programs,
and Code Sets final rule published in and the efficiency and effectiveness of
The Medicaid pharmacy subrogation the Federal Register pursuant to certain
transaction is the transmission of a the health care system in general, by
provisions of the Administrative encouraging the development of
claim from a Medicaid agency to a payer Simplification subtitle of the Health
for the purpose of seeking standards and requirements to facilitate
Insurance Portability and the electronic transmission of certain
reimbursement from the responsible Accountability Act of 1996 (HIPAA). health information.
health plan for a pharmacy claim the Specifically, this final rule modifies the Through subtitle F of title II of that
State has paid on behalf of a Medicaid standard medical data code sets statute, the Congress added to title XI of
recipient. (hereinafter ‘‘code sets’’) for coding the Social Security Act (the Act) a new
diagnoses and inpatient hospital Part C, titled ‘‘Administrative
§ 162.1902 Standard for Medicaid procedures by concurrently adopting
pharmacy subrogation transaction. Simplification.’’ Part C of title XI of the
the International Classification of Act now consists of sections 1171
The Secretary adopts the Batch Diseases, 10th Revision, Clinical through 1180. Section 1172 of the Act
Standard Medicaid Subrogation Modification (ICD–10–CM) for diagnosis and the implementing regulations make
Implementation Guide, Version 3, coding, including the Official ICD–10– any standard adopted under Part C
Release 0 (Version 3.0), July 2007, CM Guidelines for Coding and applicable to: (1) Health plans; (2)
National Council for Prescription Drug Reporting, as maintained and health care clearinghouses; and (3)
Programs, as referenced in § 162.1902 distributed by the U.S. Department of health care providers who transmit any
(Incorporated by reference at § 162.920): Health and Human Services (HHS), health information in electronic form in
hereinafter referred to as ICD–10–CM, connection with a transaction for which
(a) For the period on and after January and the International Classification of
1, 2012, for covered entities that are not the Secretary has adopted a standard.
Diseases, 10th Revision, Procedure Section 1172(c)(1) of the Act requires
small health plans; Coding System (ICD–10–PCS) for any standard adopted by the Secretary
(b) For the period on and after January inpatient hospital procedure coding, of the Department of Health and Human
1, 2013 for small health plans. including the Official ICD–10–PCS Services (HHS) to be developed,
Guidelines for Coding and Reporting, as adopted, or modified by a standard
(Catalog of Federal Domestic Assistance
maintained and distributed by the HHS, setting organization (SSO), except in the
Program No. 93.778, Medical Assistance
Program) (Catalog of Federal Domestic
hereinafter referred to as ICD–10–PCS. cases identified under section 1172(c)(2)
Assistance Program No. 93.773, Medicare—
These new codes replace the of the Act. Under section 1172(c)(2)(A)
Hospital Insurance; and Program No. 93.774,
International Classification of Diseases, of the Act, the Secretary may adopt a
Medicare—Supplementary Medical 9th Revision, Clinical Modification, standard that is different from any
Insurance Program) Volumes 1 and 2, including the Official standard developed by an SSO if it will
ICD–9–CM Guidelines for Coding and substantially reduce administrative
Approved: December 11, 2008. Reporting, hereinafter referred to as costs to health care providers and health
Michael O. Leavitt, ICD–9–CM Volumes 1 and 2, and the plans compared to the alternatives, and
Secretary. International Classification of Diseases, the standard is promulgated in
[FR Doc. E9–740 Filed 1–15–09; 8:45 am] 9th Revision, Clinical Modification, accordance with the rulemaking
BILLING CODE 4150–28–P
Volume 3, including the Official ICD–9– procedures of subchapter III of chapter
CM Guidelines for Coding and 5 of Title 5 of the United States Code.
Reporting, hereinafter referred to as Under section 1172(c)(2)(B) of the Act,
ICD–9–CM Volume 3, for diagnosis and if no SSO has developed, adopted, or
procedure codes, respectively. modified any standard relating to a
DATES: The effective date of this standard that the Secretary is authorized
regulation is March 17, 2009. The or required to adopt, section 1172(c)(1)

effective date is the date that the does not apply.
policies herein take effect, and new Section 1172 of the Act also sets forth
policies are considered to be officially consultation requirements that must be
adopted. The compliance date, which is met before the Secretary may adopt

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Friday,

January 16, 2009

DEPARTMENT OF HEALTH AND I. Background versions of the standards for electronic

TABLE 1—HIPAA STANDARD AND TRANSACTIONS

ASC X12 837 D ............................... Health care claims—Dental.

NCPDP D.0 ...................................... Coordination of Benefits—Retail pharmacy drug.

TABLE 1—HIPAA STANDARD AND TRANSACTIONS—Continued

TIMELINE FOR IMPLEMENTING VERSIONS 5010/D.0, VERSION 3.0 AND ICD–10

01/09: Publish final rule ............................................................................ 01/09: Publish Final Rule.

TIMELINE FOR IMPLEMENTING VERSIONS 5010/D.0, VERSION 3.0 AND ICD–10—Continued

01/12: Achieve Level 2 compliance; Compliance date for all covered

the top 78 clearinghouses/vendors in www.hhs.gov/execsec/ as the Maryland Commission for Health

systems, infrastructure, etc., to represent changes between implementation of category.

Percent of total costs

Hardware Procurement .................................................................................................................................................... 10 10

Totals ........................................................................................................................................................................ 100 100

5010—Imp costs ................................................... Hospitals—low ...................................................... $792 $762 $727

PBM programming ................................................ PBM—low ............................................................. 8 8 7

Total Costs ..................................................... LOW ..................................................................... 7,177 6,783 6,319

Total Costs ..................................................... HIGH .................................................................... 14,206 13,425 12,505

5010 operational savings ...................................... Hospitals—low ...................................................... $348 $286 $224

Avoided audits—high ........................................... 304 251 198

Total Benefits ................................................. LOW ..................................................................... 15,896 12,732 9,615

Total Benefits ................................................. HIGH .................................................................... 40,906 32,753 24,719

TABLE 5—ACCOUNTING STATEMENT

text. 6597. The implementation

regulation is March 17, 2009. The or required to adopt, section 1172(c)(1)

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