[Federal Register Volume 67, Number 105 (Friday, May 31, 2002)]
[Proposed Rules]
[Pages 38044-38050]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-13614]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of the Secretary

45 CFR Part 162

[CMS-0003-P]
RIN 0938-AK64


Health Insurance Reform: Modifications to Standards for 
Electronic Transactions and Code Sets

AGENCY: Office of the Secretary, HHS.

ACTION: Proposed rule.

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SUMMARY: This rule proposes to adopt modifications to certain standards 
for retail pharmacy transactions adopted in our regulations entitled 
``Health Insurance Reform: Standards for Electronic Transactions'' 
published in the Federal Register on August 17, 2000 (65 FR 50312), 
which implemented some of the requirements of the Administrative 
Simplification subtitle of the Health Insurance Portability and 
Accountability Act of 1996. This rule proposes to adopt the National 
Council for Prescription Drug Programs (NCPDP) Batch Standard Batch 
Implementation Guide, Version 1, Release 1 (Version 1.1), January 2000, 
supporting Telecommunication Version 5.1 for the NCPDP Data Record in 
the Detail Data Record, in place of NCPDP Batch Standard Batch 
Implementation Guide, Version 1, Release 0 (Version 1.0), February 
1996, for the following standards for retail pharmacy transactions: 
health care claims or equivalent encounter information; eligibility for 
a health plan; and coordination of benefits.
    Additionally, we propose to modify the standard for the health care 
payment and remittance advice transaction as the standard for retail 
pharmacy transactions by adopting, in place of the current standard, 
the ASC X12N 835--health care claim payment/advice. We also propose to 
adopt the NCPDP Batch Standard Batch Implementation Guide, Version 1, 
Release 1 (Version 1.1), January 2000, supporting Telecommunication 
Version 5.1 for the NCPDP Data Record in the Detail Data Record, as the 
referral certification and authorization transaction standard, to 
replace the current standard, ASC X12N 278, for retail pharmacy 
transactions only.
    This rule also proposes to repeal the adoption of National Drug 
Codes as the standard medical data code set for reporting drugs and 
biologics in all standard transactions, except those for retail 
pharmacy transactions, for which standards have been adopted.

DATES: Comments will be considered if we receive them at the 
appropriate address, as provided below, no later than 5 p.m. on July 1, 
2002.

ADDRESSES: In commenting, please refer to file code CMS-0003-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission. Mail written comments (one original and 
three copies) to the following address ONLY: Centers for Medicare & 
Medicaid Services, Department of Health and Human Services, Attention: 
CMS-0003-P, P.O. Box 8010, Baltimore, MD 21244-8010.
    Please allow sufficient time for mailed comments to be timely 
received in the event of delivery delays.
    If you prefer, you may deliver (by hand or courier) your written 
comments (one original and three copies) to one of the following 
addresses: Room 445-G, Hubert H. Humphrey Building, 200 Independence 
Avenue, SW., Washington, DC 20201, or Room C5-14-03, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.

[[Page 38045]]

    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and could be considered late.
    Comments may also be submitted electronically to the following e-
mail address: [email protected]. For e-mail procedures, see the 
beginning of the SUPPLEMENTARY INFORMATION section.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Marilyn Abramovitz, (410) 786-5939 and 
Gladys Wheeler, (410) 786-0273.

SUPPLEMENTARY INFORMATION:
    Public Comments: Normally, we provide a 60-day public comment 
period for a proposed rule; for this rule, however, there is a 30-day 
comment period. After publication of the Standards for Electronic 
Transactions final rule (65 FR 50312), we received an overwhelming 
response from the affected industry and industry representatives 
requesting that we make the changes proposed in this rule. Because this 
proposed rule is in direct response to those industry requests, we 
believe it is unnecessary to provide more than a 30-day comment period 
for this rule.
    Inspection of Public Comments: Comments received timely will be 
available for public inspection as they are received, generally 
beginning approximately 3 weeks after publication of a document, in 
Room C5-12-17, at the headquarters Centers for Medicare & Medicaid 
Services, 7500 Security Boulevard, Baltimore, MD, on Monday through 
Friday of each week from 8:30 a.m. to 4 p.m. To make an appointment to 
view the public comments, please call telephone number (410) 786-9994.
    Electronic Comments: We will consider all electronic comments that 
include the full name, postal address, and affiliation (if applicable) 
of the sender and are submitted to the electronic address identified in 
the ADDRESSES section of this preamble. All comments must be 
incorporated in the e-mail message because we may not be able to access 
attachments. Electronically submitted comments will be available for 
public inspection at 7500 Security Boulevard, Baltimore, MD 21244.
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I. Background

    On August 17, 2000, we published the Standards for Electronic 
Transactions final rule in the Federal Register (65 FR 50312). That 
regulation implemented some of the requirements of the Administrative 
Simplification subtitle of the Health Insurance Portability and 
Accountability Act of 1996 (HIPAA). It adopted standards, in 45 CFR 
part 162, for eight electronic transactions and for code sets to be 
used in those transactions. It also contained requirements concerning 
the use of these standards by health plans, health care clearinghouses, 
and certain health care providers. (Please refer to that rule for a 
detailed discussion of electronic data interchange, the statutory 
background, and an analysis of the public comments received during the 
promulgation of the rule.) The compliance dates set forth in the rule 
are October 16, 2002 for all covered entities, with the exception of 
small health plans, for which the compliance date is October 16, 2003.

A. The Standards for Retail Pharmacy

    The Standards for Electronic Transactions final rule (65 FR 50312), 
published on August 17, 2000, adopted transaction standards for eight 
different transactions, some of which are transactions for retail 
pharmacy. In this section of the proposed rule, we address only those 
retail pharmacy transaction standards that would be affected by the 
modifications proposed herein. The standards adopted in the final rule 
for retail pharmacy transactions for health care claim status, 
enrollment and disenrollment in a health plan, and health plan premium 
payments, would not be affected by the changes proposed in this rule. 
The August 17, 2000 final rule adopted the National Council for 
Prescription Drug Programs (NCPDP) Telecommunication Standard 
Implementation Guide, Version 5, Release 1 (Version 5.1), September 
1999, and equivalent NCPDP Batch Standard Batch Implementation Guide, 
Version 1, Release 0 (Version 1.0), February 1, 1996, as the standards 
for the retail pharmacy sector for the following transactions: health 
care claims or equivalent encounter information, eligibility for a 
health plan, health care payment and remittance advice, and 
coordination of benefits. The rule also adopted the ASC X12 N278 
Request for Review and Response as the standard for the referral 
certification and authorization transaction to be used for retail 
pharmacy transactions.

B. The Standard Medical Data Code Set for Drugs and Biologics

    In the Standards for Electronic Transactions proposed rule (65 FR 
25285), we proposed the adoption of National Drug Codes (NDC), as 
maintained and distributed by HHS in collaboration with drug 
manufacturers for reporting drugs and biologics, as the standard 
medical data code set for reporting drugs and biologics in standard 
transactions. We addressed comments on that proposal in the August 17, 
2000 final rule. See 65 FR 50328 for a detailed discussion of the 
comments and responses. Generally, NDC were favored by commenters as 
the most appropriate and efficient coding system available for 
identifying drugs. In the final rule, we adopted NDC as the medical 
data code set for reporting drugs and biologics in standard 
transactions. The decision to adopt NDC, rather than another code set 
such as HCPCS drug codes as the standard medical data code set for 
reporting drugs and biologics was based upon the following factors:
     NDC have several significant advantages over other formats 
we considered. The NDC is a unique number that is capable of 
identifying each drug or biological product. The Food and Drug 
Administration (FDA) and drug manufacturers assign NDC to approved 
drugs. The NDC format is an 11-digit number that specifies detailed 
information about each drug. The first grouping of five numbers 
represents a labeler code that identifies a drug manufacturer and is 
assigned by the FDA. The second grouping of four numbers is the product 
code, which identifies drug strength, dosage form, and formulation, and 
is assigned by the drug manufacturer. The third grouping of two numbers 
represents package size and uniquely identifies the package by the 
quantity of contents and type of package, and is assigned by the drug 
manufacturer.

[[Page 38046]]

     NDC are an existing code set already in moderate use for 
reporting drugs and biologics by some entities, and in widespread use 
by retail pharmacies.
     The adoption of NDC as the standard coding system for 
reporting drugs and biologics on standard transactions would reduce the 
need for local codes since NDC are assigned on a continuous basis.

II. Provisions of the Proposed Regulations

A. Modification of Standards for Retail Pharmacies

1. Retail Pharmacy Batch Transactions
    We propose to adopt modifications to the standards for retail 
pharmacy batch transactions in Secs. 162.1102, 162.1202, and 162.1802. 
The modifications would be the adoption of the NCPDP Batch Standard 
Batch Implementation Guide, Version 1, Release 1 (Version 1.1), January 
2000, supporting Telecommunication Version 5.1 for the NCPDP Data 
Record in the Detail Data Record, to replace the NCPDP Batch Standard 
Implementation Guide, Version 1, Release 0, (Version 1.0), February 
1996.
    We propose to adopt these modifications because the current 
standard version of the NCPDP Batch Standard Batch Implementation Guide 
(Version 1, Release 0, February 1, 1996) does not coordinate with the 
current standard version of the NCPDP Telecommunication Standard 
Implementation Guide (Version 5, Release 1, September 1999 (version 
5.1)). As a practical matter, it was our intent to adopt the batch 
standard that is the equivalent companion to the telecommunication 
standard. However, the NCPDP has confirmed with us that Batch Standard 
Version 1.0 is only compatible with Telecommunication Standard Version 
3, Release 2 (Version 3.2). As currently written, our regulations do 
not permit batched transactions. If the regulations in 45 CFR part 162 
were to remain unchanged as of October 16, 2002 (the compliance date 
for most covered entities), in order to be in compliance with our rules 
at 45 CFR part 162, as they are currently written, covered entities 
conducting retail pharmacy transactions would technically not be able 
to batch transactions but would have to conduct all transactions 
individually. Therefore, we are proposing to modify our regulations and 
adopt Batch Standard Version 1, Release 1 (Version 1.1), as the Batch 
Standard Batch Implementation Guide in place of the NCPDP Batch 
Standard Batch Implementation Guide Version 1, Release 0 (Version 1.0.)
2. Referral Certification and Authorization Transaction
    For retail pharmacy transactions only, we propose to modify the 
standard for the referral certification and authorization transaction 
by adopting the NCPDP Telecommunication Guide, Version 5 Release 1, 
September 1999 as the standard in place of the ASC X12N 278--Health 
Care Services Review-Request for Review and Response as the standard 
for the Referral Certification and Authorization transaction. It has 
come to our attention that, in fact, the ASC X12N 278 is not 
appropriate for retail pharmacy prior authorization transactions. We 
have consulted with the NCPDP and the National Association of Chain 
Drug Stores and have concluded that the ASC X12N 278 implementation 
specification does not support data critical to retail pharmacy prior 
authorization transactions. The implementation specification could not 
be changed to support the transaction before we issued the final 
regulation because the X12 standards development process for modifying 
standards could not be completed in time. Because the NCPDP standard 
adequately supports this transaction for retail pharmacy, and is 
currently in widespread industry use, we propose to modify the referral 
certification and authorization standard by adopting the NCPDP Batch 
Standard Batch Implementation Guide, Version 1, Release 1 (Version 
1.1), supporting Telecommunication Version 5.1 for the NCPDP Data 
Record in the Detail Data Record, in place of the ASC X12N 278. This 
modification will not affect the standards for dental, professional, 
and institutional referral certification and authorization 
transactions.
    In the proposed rule titled CMS-0005-P, published elsewhere in this 
Federal Register, we are proposing to amend the same section by 
redesignating the existing text as paragraph (b), revising paragraph 
(b), and adding introductory text.
3. Health Care Payment and Remittance Advice Transaction
    In the August 17, 2000 final rule, we adopted the ASC X12N 835 as 
the standard for dental, professional, and institutional transactions 
for the health care payment and remittance advice transaction. We 
adopted the NCPDP Telecommunications Standard Implementation Guide, 
Version 5 Release 1, September 1999 as the standard for retail pharmacy 
drug claims and remittance advice transactions. However, since 
publication of the final rule, we have concluded that the NCPDP 
Telecommunications Standard and batch equivalent do not sufficiently 
support the remittance advice data for this transaction. Consequently, 
it would not be possible for covered entities to comply with the NCPDP 
standards for retail pharmacy drug claims and remittance advice 
transactions. Therefore, we propose to modify the standard for the 
health care payment and remittance advice transaction for retail 
pharmacy transactions by adopting the ASC X12N 835 in place of the 
NCPDP standard. With the implementation of this proposal, the ASC X12N 
835 would be the only standard for health care payment and remittance 
advice transactions. All covered entities, including retail pharmacies 
(Sec. 162.1602), would be required to use ASC X12N 835 when conducting 
a health care payment and remittance advice transaction.

B. Medical Data Code Set for Drugs and Biologics

    We propose to repeal the adoption of NDC as the standard medical 
data code set for reporting drugs and biologics in all standard 
transactions, except for retail pharmacy transactions, for which 
standards have been adopted in Sec. 162.1002(c). We would make a 
conforming change to Sec. 162.1002(f) to specify that the Healthcare 
Common Procedure Coding System (HCPCS), as maintained and distributed 
by HHS, would not be required for reporting drugs and biologics. The 
result of this repeal would be no standard medical data code set in 
place for reporting drugs and biologics on standard transactions that 
are not retail pharmacy (hereafter, referred to as nonretail pharmacy 
transactions).
    The absence of a code set standard would not preclude the use of 
NDC for reporting drugs and biologics by covered entities on standard 
transactions. Covered entities could continue to report drugs and 
biologics as they preferred, for example, according to trading partner 
agreements or as reported before the adoption.
1. Reasons for Proposed Repeal
    Since publication of the final rule, numerous health care industry 
concerns about the use of NDC have been reported. Although the intent 
of the final rule was to standardize the reporting of drugs and 
biologics by using one coding system, the industry has indicated that 
this may not be practical within the industry at this time. The 
magnitude and scope of issues concerning the implementation of NDC

[[Page 38047]]

for reporting drugs and biologics in standard transactions, and the 
relevance of those issues to industry goals of administrative 
simplification and HIPAA compliance, prompted HHS to re-examine the 
adoption of NDC.
    The following concerns reported by the industry since publication 
of the final rule illustrate the industry's view of the escalating cost 
burden for institutional and professional health care providers who are 
unfamiliar with the use of NDC.
    a. Compliance with the NDC standard for electronic transactions by 
health care providers on professional claims would require the 
expansion of data field sizes in nearly all modules of physician 
practice management systems in order to store and display the thousands 
of available NDC. Some financial estimates for health care providers 
suggest complete systems re-engineering and replacements or both would 
be necessary. The industry has reported that the costs of changing from 
using HCPCS to NDC for reporting drugs and biologics on institutional 
claims could exceed an institution's costs for adopting all other 
combined HIPAA standard transactions.
    b. The National Uniform Billing Committee (NUBC) outlined its 
concerns with the requirement to use NDC on institutional claims, 
particularly hospital claims, in a letter to former Secretary Donna 
Shalala, dated September 22, 2000. The following issues were raised by 
the NUBC in that letter:
     Reporting specific drugs on institutional claims 
introduces a systems technology requirement that is inconsistent with 
inpatient claims submission and institutional provider reimbursement, 
which commonly are based on a Diagnosis-Related Group or per diem 
payment methodology.
     NDC formats indicate how a drug was acquired but provide 
no information related to actual dosages administered. Although the NDC 
second grouping of four numbers identifies drug strength, dosage form, 
and formulation of the product, it does not reflect the administered 
dose. An NDC for multiple billing increments is not formulated.
     Operational issues of systems incompatibility among 
institutional pharmacies, inpatient medical records, and inpatient 
accounting systems compound expensive system retooling with major 
training initiatives. Physicians typically order drugs for patients 
through the hospital pharmacy department by name, unit, and dosage 
frequency. The pharmacy department does not reference the NDC to pull 
the drug or initiate a charge transaction. Typically, an NDC is not 
recorded in a patient's medical record. There is little or no 
electronic linkage and communication among institutional drug 
inventory, patient billing, and medical records computer systems.
     Typical institutional patient accounting systems and 
professional health care provider practice management systems do not 
accommodate the 11 digits inherent to NDC assignment.
     The lack of sufficiently defined benefits for health care 
providers for required system upgrade costs to accommodate NDC risks 
the alternative of providers submitting paper claims to avoid the costs 
of reporting NDC. Attempts by industry experts to develop a complete 
1:1 crosswalk from the currently used HCPCS codes to NDC have been 
unsuccessful. Different NDC may be assigned to the same drug to 
identify the various manufacturers of that drug. In contrast, because 
the HCPCS code is more generic and does not reference the manufacturer, 
only one code applies to the drug.
    The NUBC believes that the NDC coding system is suited more for 
inventory control and is not appropriate for institutional provider 
billing, and that the reporting of NDC pertains to retail pharmacy 
claims only and should not be applicable to institutional claims.
    c. HHS posted an e-mail address on its Administrative 
Simplification web site in October 2000 (http://www.aspe.hhs.gov/admnsimp/index.htm). HHS directed inquiries about the August 17, 2000 
final rule on standards for electronic transactions to this e-mail 
address. HHS responses to these inquiries are posted to a ``Frequently 
Asked Questions'' location on the web site. HHS received and posted 
numerous separate inquiries reiterating concerns similar to those 
expressed by the NUBC in its September 22, 2000 letter to former 
Secretary Shalala referenced above under section II.B of this proposed 
rule.
    d. After publication of the final rule, the Workgroup for 
Electronic Data Interchange (WEDI) (which is named in the Social 
Security Act (the Act) as one of the organizations with which the 
Secretary must consult in adopting HIPAA Administrative Simplification 
standards) established a Strategic National Implementation Process 
(SNIP) for consistent industry implementation of the HIPAA 
Administrative Simplification standards. SNIP workgroups have 
reiterated some of the concerns expressed by the NUBC about NDC.
    e. The NUBC submitted a formal request through the Designated 
Standards Maintenance Organization (DSMO) process on November 28, 2000 
to change the Institutional Implementation Guide to make NDC ``Not 
Used'' for inpatient claims.
    f. A large provider workgroup for implementing HIPAA standards 
suggested that NDC not be required for reporting drugs and biologics on 
professional or institutional claims. The workgroup submitted this 
request through the DSMO process on January 31, 2001 and recommended 
paper and electronic claim transaction consistency in reporting codes 
for drugs and biologics. The workgroup stated that neither the 
institutional nor the professional paper claim can accommodate the 11-
digit NDC in the space where a 5-position HCPCS code currently is 
reported and that HCPCS drug codes should be used to report drugs and 
biologics on paper and electronic claims for institutional and 
professional health care providers.
    g. The Subcommittee on Standards and Security of the National 
Committee on Vital and Health Statistics (NCVHS) held public hearings 
on HIPAA implementation issues on February 1, 2001. Health care 
industry representatives presented testimony on concerns relating to 
use of NDC. Those who testified and other attendees are members of 
health care industry workgroups that support HIPAA and are involved in 
HIPAA implementation activities. Concerns expressed in the testimony 
include:
     NDC use by hospitals is limited to the purchase of drugs 
and maintaining inventory control. The fact that NDC are not (1) used 
within hospitals for order entry from pharmacies, (2) written in 
patients' medical records, or (3) accommodated in patient accounting 
systems, means that extensive system conversions and enhancements are 
required for institutions to achieve HIPAA compliance.
    Additional ancillary staff training on the use of NDC also would be 
required. Potential for medication errors increases when new system 
interfaces for drug dispensing systems are created. Routine repackaging 
of drugs in convenient quantities and brand substitutions by hospitals 
complicate NDC reporting because many NDC can represent a single drug. 
The complicated problems with calculating and capturing drug dose 
information when partial or fractional units are administered makes 
reporting burdensome and subject to errors.
     While costs could vary with facility size, hospitals 
estimate a minimum cost

[[Page 38048]]

of $200,000 per hospital facility, or a total of $1,296,000,000 for 
approximately 6480 affected hospital entities, to transition from HCPCS 
to NDC for reporting drugs and biologics. The expense to expand fields, 
accommodate thousands of NDC, and upgrade physicians' practice 
management systems for HIPAA compliance could exceed 10 percent of the 
total practice management system cost, increasing the financial burden 
for professional health care providers. Institutional health care 
providers do not report any accrued benefits from using NDC, despite 
the high costs for conversion, because drugs are rarely reported on 
claims. Hospital inpatient claims are paid prospectively based on 
Diagnosis-Related Groups or per diem basis. Only procedures and 
diagnoses are recorded. Most drugs are not individually submitted for 
line-item payment.
     Some industry representatives identified perceived 
deficiencies in the NDC maintenance process that could potentially 
result in the re-use of an NDC and the possibility that an NDC for a 
particular drug could change over time.
    h. In a letter to the Secretary, dated February 22, 2001, the NCVHS 
described the problems with the requirement to use NDC to report drugs 
and biologics on the standard institutional and professional claims, 
and the impact of those problems on the health care industry for 
meeting HIPAA compliance dates. The NCVHS recommended that the 
Secretary retract the adoption of NDC as the standard medical data code 
set for reporting drugs and biologics in standard transactions other 
than retail pharmacy transactions, and that HCPCS codes as well as NDC 
continue to be used in the standard institutional and professional 
claim transactions. The NCVHS further stated that it believes that no 
drug coding system in existence today meets all the needs of the health 
care industry, and that future needs of the health care industry are 
for a drug coding system that can be used efficiently for drug 
inventory, pharmacy transactions, patient care, billing arenas, and 
ensuring patient safety.
    The Office of the Secretary recognizes the need to develop specific 
criteria for evaluating drug coding systems, and it is initiating steps 
for coordinating efforts with other agencies and representatives from 
the health care industry in the evaluation and development of any 
future proposed drug coding systems.
2. Alternative Under Consideration: Comment Solicited
    An advantage to not adopting a replacement standard code set for 
NDC for reporting drugs and biologics in nonretail pharmacy standard 
transactions at this time is that the industry and HHS would have time 
to fully evaluate the alternatives available and explore the 
possibility of the development of a new drug coding system that could 
meet the current and future needs of the health care industry. However, 
we recognize that the industry may prefer the certainty of an 
established standard at this time. We also are considering, as an 
alternative to not adopting any standard in place of the NDC, the 
adoption of HCPCS as the code set for reporting drugs and biologics for 
nonretail pharmacy transactions. As discussed above, the HCPCS code set 
is in widespread use today by many health care providers that are not 
retail pharmacies. Were we to adopt HCPCS, we would amend 
Sec. 162.1002(c) to reflect the adoption of NDC as the standard medical 
data code set for reporting drugs and biologics in standard 
transactions for retail pharmacy transactions. We would also amend 
Sec. 162.1002(f) to reflect the adoption of the HCPCS coding system as 
the standard medical data code set for reporting drugs and biologics in 
nonretail pharmacy transactions. We are particularly interested in 
whether commenters believe the adoption of HCPCS for reporting drugs 
and biologics on nonretail pharmacy transactions would present 
operational problems, and what particular operational problems 
commenters believe would be presented.

C. Compliance Dates

    Under the Act, as reflected in Sec. 160.104, the Secretary 
establishes the compliance date for modifications to standards. The 
compliance date must not be earlier than 180 days after the adoption 
date of the modification. We expect the compliance dates for this 
proposed rule would be 180 days after the effective date of the 
subsequent final rule.
    Additionally, the Administrative Simplification Compliance Act 
(Pub. L. 107-105) was enacted on December 27, 2001. This law provides 
an extension to the compliance dates adopted in the Standards for 
Electronic Transactions final rule of August 17, 2000 (65 FR 50368), in 
which covered entities, with the exception of small health plans, may 
submit a plan to the Secretary of Health and Human Services indicating 
how the entity will come into compliance by October 16, 2003. Since 
this proposed rule is modifying transactions adopted in the Standards 
for Electronic Transactions final rule of August 17, 2000 (65 FR 
50368), The Administrative Simplification Compliance Act will apply to 
this proposed rule. In order to obtain an extension, covered entities 
must submit the plan to the Secretary before October 16, 2002.

D. Implementation Specifications and Incorporation by Reference

    This rule would not change the availability of the NCPDPs 
Telecommunication Standard Implementation Guide or the Batch Standard 
Batch Implementation Guide.

III. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 (PRA) requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    The collection of information requirements associated with the 
transaction regulation are currently approved by OMB under OMB approval 
number 0938-0866. We are soliciting public comments on each of the 
above issues for the information collection requirements (ICRs) 
contained in the sections covered by this proposed rule.
    If you comment on these information collection and recordkeeping 
requirements, please mail copies directly to the following:

Centers for Medicare & Medicaid Services, Office of Information 
Services, DCES, SSG, Attn: John Burke, Room N2-14-26, 7500 Security 
Boulevard, Baltimore, MD 21244-1850; ATTN: CMS-0003-P

      and

Office of Information and Regulatory Affairs, Office of Management and

[[Page 38049]]

Budget, Room 10235, New Executive Office Building, Washington, DC 
20503, Attn: Brenda Aguilar, CMS Desk Officer.

IV. Response to Comments

    Because of the large number of items of correspondence we normally 
receive on Federal Register documents published for comment, we are not 
able to acknowledge or respond to them individually. We will consider 
all comments we receive by the date and time specified in the DATES 
section of this preamble, and, if we proceed with a subsequent 
document, we will respond to the major comments in the preamble to that 
document.

V. Regulatory Impact Analysis

    We have examined the impacts of this rule as required by Executive 
Order 12866 (September 1993, Regulatory Planning and Review) and the 
Regulatory Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354). 
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 annually).
    The proposed repeal of the NDC for nonretail pharmacy transactions 
would result in minimal costs or savings since the industry would 
continue to use the formats that are currently being used in the health 
care marketplace. This is due to the fact that most covered entities 
have not begun to implement NDC because they are aware that this 
regulation is in process. In the absence of this regulation, health 
plans and providers would incur a significant future cost for 
implementing the NDC, including:
     Training provider clinical staff to learn to report NDCs.
     Conversion of plan and provider legacy systems to 
accommodate the larger size of the NDC.
     Modification of provider clinical systems to interface 
with pharmacy systems to capture the NDC.
     Modification of plan reimbursement systems to crosswalk 
NDCs to J codes. Publication of this regulation would permit covered 
entities to avoid these costs. Industry recognizes the benefit of this 
change, and has demonstrated wide-spread support for it.
    The alternative of adopting HCPCS drug codes as a standard for 
reporting drugs and biologics for covered entity transactions 
referenced above under section II. B. 2 would also have minimal costs 
or savings due to its already current widespread use in the health care 
industry.
    The modifications to the standards for retail pharmacy transactions 
would also neither increase nor decrease the industry costs or savings. 
Those modifications to the standards are ones that would simply 
implement changes that reflect the way the particular segment of the 
affected industry already operates. Therefore, this is not a major rule 
because it does not have an economically significant effect of $100 
million or more.
    The RFA requires agencies to determine whether a rule will have a 
significant economic impact on a substantial number of small entities. 
On November 17, 2000, the Small Business Administration (SBA) published 
a final rule (65 FR 69432) changing the small business size standards 
for the health care industry. This SBA final rule became effective 
December 18, 2000. The size standards that the SBA now uses are those 
defined by the North American Industry Classification System. Before 
that, the SBA used size standards as defined by the Standard Industrial 
Codes. The size standard is no longer a uniform $5 million in annual 
revenues for all components in the health care sector. Rather, the size 
standard now ranges from $5 million to $25 million. The regulatory 
flexibility analysis for this proposed rule is linked to the aggregate 
regulatory flexibility analysis for all the Administrative 
Simplification standards that appeared in the final rule on Standards 
for Electronic Transactions (65 FR 50312), published on August 17, 
2000, which predated the SBA change. It is appropriate, for purposes of 
this proposed rule, to continue to use the $5 million small business 
size standard that was in effect at the time of publication of the 
final rule on Standards for Electronic Transactions. Nonprofit 
organizations are considered small entities. Small government 
jurisdictions with a population of less than 50,000 are considered 
small entities. Individuals and States are not considered small 
entities. Most hospitals and most other providers and suppliers are 
small entities, either by nonprofit status or by having revenues of $5 
million or less annually. For purposes of the RFA, all retail 
pharmacies are considered to be small entities. We have determined that 
this proposed rule would not have a significant economic impact on a 
substantial number of small entities.
    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 603 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. We do not need to prepare 
analyses under section 1102(b) of the Act because we have determined, 
and we certify, that this rule would not have a significant impact on 
the operations of a substantial number of small rural hospitals.
    Section 202 of the Unfunded Mandate Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule that may result in an expenditure in any one year by 
State, local, or tribal governments, in the aggregate, or by the 
private sector, of $110 million. The rule as proposed would have little 
effect, if any, on annual expenditures incurred by State, local, or 
tribal governments because it would result in the reestablishment of 
the current status for professional and institutional providers.
    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 determined that this proposed rule would not 
significantly affect the rights, roles, and responsibilities of States.
    This proposed rule would not affect the final impact analysis of 
the Standards for Electronic Transactions final rule of August 17, 2000 
(65 FR 50350). This rule also would not affect the Regulatory 
Flexibility Analysis (65 FR 50359) or the Federalism implications of 
that rule (65 FR 50364).
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Subjects in 45 CFR Part 162

    Administrative practice and procedure, Electronic transactions, 
Health facilities, Health insurance, Hospitals, Incorporation by 
reference, Medicare, Medicaid, Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble, the Department of Health 
and Human Services would amend 45 CFR

[[Page 38050]]

subtitle A, subchapter C, part 162 as follows:

PART 162--ADMINISTRATIVE REQUIREMENTS

    1.The authority citation for part 162 continues to read as follows:

    Authority: Secs. 1171 through 1179 of the Social Security Act 
(42 U.S.C. 1320d--1320d-8), as added by sec. 262 of Pub. L. 104-191, 
110 Stat. 2021-2031, and sec. 264 of Pub. L. 104-191, 110 Stat. 
2033-2034 (42 U.S.C. 1320d-2 (note)).

    2. Revise Sec. 162.920(a)(2)(i) and (ii) to read as follows:


Sec. 162.920  Availability of implementation specifications.

    (a) * * *
    (2) * * *
    (i) The Telecommunication Standard Implementation Guide, Version 5, 
Release 1, September 1999, National Council for Prescription Drug 
Programs, as referenced in Secs. 162.1102, 162.1202, 162.1302, and 
162.1802.
    (ii) The Batch Standard Batch Implementation Guide, Version 1, 
Release 1 (Version 1.1), January 2000, supporting Telecommunication 
Version 5.1 for the NCPDP Data Record in the Detail Data Record, 
National Council for Prescription Drug Programs, as referenced in 
Secs. 162.1102, 162.1202, 162.1302, and 162.1802.
* * * * *
    3. In Sec. 162.1002, republish the introductory text, and revise 
paragraphs (c) and (f) to read as follows:


Sec. 162.1002  Medical data code sets.

    The Secretary adopts the following code set maintaining 
organization's code sets as the standard medical data code sets:
* * * * *
    (c) National Drug Codes (NDC), as maintained and distributed by 
HHS, in collaboration with drug manufacturers, for reporting the 
following in retail pharmacy transactions for which standards have been 
adopted:
    (1) Drugs.
    (2) Biologics.
* * * * *
    (f) The Healthcare Common Procedure Coding System (HCPCS), as 
maintained and distributed by HHS, for all other substances, equipment, 
supplies, or other items used in health care services except drugs and 
biologics. These items include, but are not limited to, the following:
    (1) Medical supplies.
    (2) Orthotic and prosthetic devices.
    (3) Durable medical equipment.
    4. In Sec. 162.1102, republish the introductory text, and revise 
paragraph (a) to read as follows:


Sec. 162.1102  Standards for health care claims or equivalent encounter 
information.

    The Secretary adopts the following standards for the health care 
claims or equivalent encounter information transaction:
    (a) Retail pharmacy drug claims. The National Council for 
Prescription Drug Programs (NCPDP) Telecommunication Standard 
Implementation Guide, Version 5, Release 1, September 1999, and 
equivalent NCPDP Batch Standard Batch Implementation Guide, Version 1, 
Release 1 (Version 1.1), January 2000, supporting Telecommunication 
Version 5.1 for the NCPDP Data Record in the Detail Data Record. The 
implementation specifications are available at the addresses specified 
in Sec. 162.920(a)(2).
* * * * *
    5. In Sec. 162.1202, republish the introductory text, and revise 
paragraph (a) to read as follows:


Sec. 162.1202  Standards for eligibility for a health plan.

    The Secretary adopts the following standards for the eligibility 
for a health plan transaction:
    (a) Retail pharmacy drugs. The NCPDP Telecommunication Standard 
Implementation Guide, Version 5, Release 1 (Version 5.1), September 
1999, and equivalent NCPDP Batch Standard Batch Implementation Guide, 
Version 1, Release 1 (Version 1.1), January 2000, supporting 
Telecommunication Version 5.1 for the NCPDP Data Record in the Detail 
Data Record. The implementation specifications are available at the 
addresses specified in Sec. 162.920(a)(2).
* * * * *
    6. In Sec. 162.1302, add paragraph (a) to read as follows:


Sec. 162.1302  Standard for referral certification and authorization.

* * * * *
    (a) Retail pharmacy referral certification and authorization. The 
NCPDP Telecommunication Standard Implementation Guide, Version 5, 
Release 1 (Version 5.1), September 1999, and equivalent NCPDP Batch 
Standard Batch Implementation Guide, Version 1, Release 1 (Version 
1.1), January 2000, supporting Telecommunication Version 5.1 for the 
NCPDP Data Record in the Detail Data Record. The implementation 
specifications are available at the addresses specified in 
Sec. 162.920(a)(2).
    (b) [Reserved]
    7. Revise Sec. 162.1602 to read as follows:


Sec. 162.1602  Standard for health care payment and remittance advice.

    Dental, professional, and institutional health care claims and 
remittance advice. The Secretary adopts the ASC X12N 835--Health Care 
Claim Payment/Advice, Version 4010, May 2000, Washington Publishing 
Company, 004010X091 as the standard for the health care payment and 
remittance advice transaction. The implementation specification is 
available at the addresses specified in Sec. 162.920(a)(1).
    (b) [Reserved]
    8. In Sec. 162.1802, republish the introductory text and revise 
paragraph (a) to read as follows:


Sec. 162.1802  Standards for coordination of benefits.

    The Secretary adopts the following standards for the coordination 
of benefits information transaction:
    (a) Retail pharmacy drug claims. The NCPDP Telecommunication 
Standard Implementation Guide, Version 5, Release 1 (Version 5.1), 
September 1999, and equivalent NCPDP Batch Standard Batch 
Implementation Guide, Version 1, Release 1 (Version 1.1), January 2000, 
supporting Telecommunication Version 5.1 for the NCPDP Data Record in 
the Detail Data Record. The implementation specifications are available 
at the addresses specified in Sec. 162.920(a)(2).
* * * * *
CMS-0003-P
    DBB  02/22/2002 4:10 PM

    (Catalog of Federal Domestic Assistance Program No. 93.774, 
Medicare--Supplementary Medical Insurance Program)

    Dated: March 20, 2002.
Tommy G. Thompson,
Secretary.
[FR Doc. 02-13614 Filed 5-24-02; 4:51 pm]
BILLING CODE 4120-01-P