[Federal Register Volume 67, Number 72 (Monday, April 15, 2002)]
[Notices]
[Pages 18216-18227]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-9197]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

[CMS-0007-N]


Health Insurance Reform: Standards for Electronic Transactions; 
Announcement of the Availability of a Model Compliance Plan

AGENCY: Centers for Medicare & Medicaid Services, HHS.

ACTION: Notice.

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SUMMARY: This notice announces the availability of instructions for, 
and a model of, a compliance plan that covered entities may use to 
request an extension to the compliance deadline for standards for 
electronic transactions and code sets that covered entities must use 
for those transactions.

FOR FURTHER INFORMATION CONTACT: Elizabeth Holland, (410) 786-1309.

SUPPLEMENTARY INFORMATION:

I. Background

    On August 21, 1996 the Congress enacted the Health Insurance 
Portability and Accountability Act of 1996 (HIPAA), Pub. L. 104-191, 
which included provisions to address the need for standards for 
electronic health care transactions and other administrative 
simplification issues. Through subtitle F of this law, the Congress 
added to title IX of the Social Security Act (the Act) a new part C 
(consisting of sections 1171 through 1179 of the Act), entitled 
``Administrative Simplification.'' The purpose of this part is to 
improve the Medicare program, the Medicaid program, and the efficiency 
and effectiveness of the health care system, by encouraging the 
development of a health information system through the establishment of 
standards and requirements to enable the electronic exchange of certain 
health information.
    Section 1172 of the Act makes any standard adopted under part C of 
the Act applicable to the following entities as defined in section 1171 
of the Act:
     All health plans.
     All health care clearinghouses.
     Any health care provider who transmits any health 
information in electronic form in connection with transactions referred 
to in section 1173(a)(1) of the Act.
    Section 1175(a)(3) of the Act establishes that each person to whom 
a standard or implementation specification applies is required to 
comply with the standard no later than 24 months (or 36 months for 
small health plans) following its adoption. With respect to 
modifications to standards or implementation specifications made after 
initial adoption, compliance must be accomplished by a date designated 
by the Secretary. This date may not be earlier than 180 days after the 
Secretary adopts the modification.
    In the August 17, 2000 Federal Register (65 FR 50312), we published 
a final rule entitled ``Health Insurance Reform: Standards for 
Electronic Transactions'' that implemented the provisions of sections 
1171 through 1179 of the Act. These provisions established new national 
standards with which all covered entities must comply. The effective 
date of these standards for all covered entities, with the exception of 
small health plans is October 16, 2002, and the effective date for 
compliance by small health plans is October 16, 2003. In addition, the 
August 17, 2000 final rule established a definitions section at 45 CFR 
160.103 that includes definitions for the following terms-- (1) Covered 
entities; (2) health plans; (3) small health plans; (4) health care 
clearinghouses; and (5) health care providers.
    However, on December 27, 2001, the Administrative Simplification 
Compliance Act (ASCA) (Pub. L. 107-105) provided for a 1-year extension 
of the deadline for compliance with the electronic health care 
transactions standards and code sets for all covered entities, with the 
exception of small health plans, that request an extension on or before 
October 15, 2002. Covered entities that submit a request by the 
deadline will have until October 16, 2003 to come into compliance with 
the standards.
    In addition, Pub. L. 107-105 required the Secretary to develop a 
model compliance plan by no later than March 31, 2002. In developing 
this model compliance plan, the Secretary consulted with organizations 
described in sections 1172(c)(3)(B) and (f) of the Act as organizations 
to be consulted in developing national electronic health care 
standards. One of these organizations, the Workgroup for Electronic 
Data Interchange (WEDI), developed a series of recommendations for the 
model plan. On February 7, 2002, these recommendations were discussed 
at a public hearing of the National Committee on Vital and Health 
Statistics (NCVHS).

II. Provisions of the Notice

    This notice provides information to covered entities, with the 
exception of small health plans, that will not be compliant with the 
electronic health care transactions and code sets standards by October 
16, 2002. As required by Pub. L. 107-105, we are providing a model 
compliance plan that covered entities may use to submit to request an 
extension. These entities may use one of the following options to file 
for a 1-year extension (that is, until October 16, 2003):
     Submit the on-line compliance plan, which is available on 
our website at www.cms.hhs.gov/hipaa.
     Submit a paper copy of the on-line compliance plan via 
mail.
     Submit their own version of a compliance plan that 
provides equivalent information.

The model compliance plan and instructions for its completion and 
submission are available via the Internet

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on our website. Completion and timely submission of the model 
compliance plan by covered entities satisfies the ASCA requirement for 
requesting an extension.

A. Electronic Submissions of the Model Compliance Plan

    Covered entities can submit this model compliance plan 
electronically via the Internet at www.cms.hhs.gov/hipaa. In order to 
obtain an extension, electronic submissions must be completed on or 
before October 15, 2002. Covered entities that complete their 
compliance plan electronically will receive an electronic confirmation 
number as their response. The confirmation number serves as the covered 
entity's approval notice. For additional information regarding 
electronic compliance plan submissions, see Appendix A of this notice. 
To view a copy of the electronic form, see Appendix B of this notice.

B. Paper and Alternative Submissions of a Compliance Plan

    Covered entities also have the option of submitting a paper copy of 
the model plan. This paper submission can be a duplicate of the form in 
Appendix B of this notice or a printed copy of the electronic form 
available on our website.
    In addition, a covered entity has the option to submit its own 
version of a compliance plan (paper copy), that must include the 
following:
     An analysis of the reasons for noncompliance.
     A budget for achieving compliance.
     A work plan and implementation strategy for achieving 
compliance.
     A decision regarding whether a contractor or vendor may be 
used to help achieve compliance.
     A testing timeframe that begins on or before April 16, 
2003.
    All paper and alternative submissions must be postmarked by October 
15, 2002 and sent to the following address:
    Attention: Model Compliance Plans, Centers for Medicare & Medicaid 
Services, PO Box 8040, Baltimore, Maryland 21244-8040.
We will not acknowledge receipt of these submissions. Therefore, we 
suggest that covered entities submitting their plans via mail use a 
method that provides proof of delivery. For additional information on 
paper or alternative submissions, see Appendix A of this notice.

III. Collection of Information Requirements

    In accordance with section 1175(b)(1)(A) of the Act as amended by 
section 2 of Pub. L. 107-105, the form included as Appendix B of this 
notice is exempted from the requirements of the Paperwork Reduction Act 
of 1995. Consequently, neither the form nor the notice need to be 
reviewed by the Office of Management and Budget under the authority of 
the Paperwork Reduction Act of 1995 (44 U.S.C. 35).

IV. Regulatory Impact Statement

    We have examined the impacts of this notice as required by 
Executive Order 12866 (September 1993, Regulatory Planning and Review), 
the Regulatory Flexibility Act (RFA) (September 19, 1980 Pub. L. 96-
354), section 1102 (b) of the Social Security Act, the Unfunded 
Mandates Reform Act of 1995 (Pub. L. 104-4), and Executive Order 13132.
    Executive Order 12866 directs agencies to assess all costs and 
benefits of available regulatory alternatives and, if regulation is 
necessary, to select regulatory approaches that maximize net benefits 
(including potential economic, environmental, public health and safety 
effects, distributive impacts, and equity). A regulatory impact 
analysis (RIA) must be prepared for major rules with economically 
significant effects ($100 million or more in any given year). We have 
determined that this notice is not a major rule because it does not 
impose an economically significant impact on covered entities or the 
Medicare program.
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and government agencies. For 
purposes of the RFA, most covered entities (that is, health plans, 
health care clearinghouses, and health care providers) are considered 
to be small entities, either by nonprofit status or by having revenues 
of $5 to $25 million or less annually. (For details, see the Small 
Business Administration's regulation that set forth size standards for 
health care industries (65 FR 69432).) Individuals and States are not 
included in the definition of a small entity. Covered entities will be 
able to assess their own progress toward HIPAA compliance and determine 
whether or not to request an extension. Covered entities that obtain 
the extension will have the added flexibility to schedule the 
activities needed to implement the standards and they will have 
additional time to conduct thorough testing with their trading 
partners. We are unable to quantify the impact of the 1-year extension, 
but we will be able to analyze the data that we receive from covered 
entities that submit compliance extension plans.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area and has fewer than 100 beds. Currently we are unable 
to quantify the impact of the provisions of this notice on small rural 
hospitals, but we believe that we will be better able to assess the 
impact of the 1-year extension through the analysis of the data 
submitted by covered entities requesting the extension.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule that may result in expenditure in any 1 year by State, 
local, or tribal governments, in the aggregate, or by the private 
sector, of $110 million. This notice will not mandate any requirements 
for State, local or tribal governments.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. We have reviewed this notice under these requirements and 
have determined that it will not impose substantial direct requirement 
costs on State or local governments. We also note that the option to 
obtain a 1-year extension will give States or local governments more 
flexibility in several areas which may include--(1) Additional time to 
conduct testing; (2) additional time for implementation; and (3) 
additional time to consult with vendors. In accordance with Executive 
Order 12866, this notice was not reviewed by the Office of Management 
and Budget.

    Authority: Section 1175 of the Social Security Act (42 U.S.C. 
1320d-4)

    Dated: April 8, 2002.
Thomas A. Scully,
Administrator, Centers for Medicare & Medicaid Services.
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[FR Doc. 02-9197 Filed 4-12-02; 8:45 am]
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