[Federal Register Volume 68, Number 34 (Thursday, February 20, 2003)]
[Rules and Regulations]
[Pages 8381-8399]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-3876]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of the Secretary

45 CFR Part 162

[CMS-0003-F and CMS-0005-F]
RINs 0938-AK64 and 0938-AK76


Health Insurance Reform: Modifications to Electronic Data 
Transaction Standards and Code Sets

AGENCY: Office of the Secretary, HHS.

ACTION: Final rule.

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SUMMARY: In this final rule, we respond to public comments received and 
finalize provisions applicable to electronic data transaction standards 
from two related proposed rules published in the May 31, 2002, Federal 
Register. We are also adopting proposed modifications to implementation 
specifications for health care entities and others. In addition, we are 
adopting modifications to implementation specifications for several 
electronic transaction standards that were omitted from the May 31, 
2002, proposed rules.

EFFECTIVE DATES: These regulations are effective on March 24, 2003. The 
incorporation by reference of certain publications listed in this final 
rule is approved by the Director of the Federal Register as of March 
24, 2003.

FOR FURTHER INFORMATION CONTACT: Gladys Wheeler, (410) 786-0273.

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I. Background

A. Electronic Data Interchange

    Electronic data interchange (EDI) refers to the electronic transfer 
of information in a standard format between trading partners. When 
compared with paper submissions, EDI can substantially lessen the time 
and costs associated with receiving, processing, and storing documents. 
The use of EDI can also eliminate inefficiencies and streamline 
processing tasks, which can in turn result in less administrative 
burden, lower operating costs, and improved overall data quality.
    The health care industry recognizes the benefits of EDI, and many 
entities in the industry have developed proprietary EDI formats. 
However, with the increasing use of health care EDI standards, the lack 
of common, industry-wide standards has emerged as a major obstacle to 
realizing potential efficiency and savings.

B. Statutory and Regulatory Background

1. Statutory Background
    The Congress included provisions to address the need for developing 
a consistent framework for electronic transactions and other 
administrative simplification issues in the Health Insurance 
Portability and Accountability Act of 1996 (HIPAA), Pub. L. 104-191, 
which became law on August 21, 1996. Through subtitle F of title II of 
that statute, the Congress added to title XI of the Social Security Act 
(the Act) a new part C, titled ``Administrative Simplification.'' The 
purpose of this part is to improve the Medicare and Medicaid programs 
in particular and the efficiency and effectiveness of the health care 
system in general, by encouraging the development of standards and 
requirements to enable the electronic exchange of certain health 
information.
    Part C of title XI consists of sections 1171 through 1179 of the 
Act. Section 1172 of the Act and the implementing regulations make any 
standard adopted under part C applicable to: (1) Health plans; (2) 
health care clearinghouses; and (3) health care providers who transmit 
any health information in electronic form in connection with a 
transaction covered by 45 CFR part 162.
    In general, section 1172 of the Act requires any standard adopted 
by the Secretary of Health and Human Services (the Secretary) under 
this part to be a standard that has been developed, adopted, or 
modified by a standard setting organization (SSO). The Secretary may 
adopt a different standard if the standard will substantially reduce 
administrative costs to providers and health plans compared to the 
alternatives, and the standard is promulgated in accordance with the 
rulemaking procedures of subchapter III of chapter 5 of title 5, U.S.C.
    Section 1172 of the Act also sets forth consultation requirements 
that must be met before the Secretary may adopt standards. In the case 
of a standard that is developed, adopted, or modified by an SSO, the 
SSO must consult with the following Data Content Committees (DCCs) in 
the course of the development, adoption, or modification of the 
standard: The National Uniform Billing Committee (NUBC), the National 
Uniform Claim Committee (NUCC), the Workgroup for Electronic Data 
Interchange (WEDI), and the American Dental Association (ADA). In the 
case of any other standard, the Secretary is required to consult with 
each of the above-named groups before adopting the standard and must 
also comply with the provisions of section 1172(f) of the Act regarding 
consultation with the National Committee on Vital and Health Statistics 
(NCVHS).
    Section 1173 of the Act requires the Secretary to adopt standards 
for transactions, and data elements for such transactions, to enable 
the electronic exchange of health information. Section

[[Page 8382]]

1173 lists the transactions and sets out requirements for the specific 
standards the Secretary is to adopt: Unique health identifiers, code 
sets, security standards, electronic signatures, and transfer of 
information among health plans.
    Section 1174 of the Act permits the Secretary to make modifications 
to any established standard after the first year, but not more 
frequently than once every 12 months. It permits the Secretary to 
modify an initial standard at any time during the first year of 
adoption, if he determines that the modification is necessary to permit 
compliance with the standard.
    Section 1175 of the Act requires that covered entities comply with 
modifications to standards or implementation specifications made after 
initial adoption by stating that the Secretary will designate a 
compliance date that may not be earlier than 180 days after the 
modification is adopted.
    We discussed HIPAA-specific legislation in greater detail in the 
Transactions Rule (65 FR 50312) and the December 28, 2000, final rule, 
Standards for Privacy of Individually Identifiable Health Information'' 
(65 FR 82462) (the Privacy Rule). Rather than repeating the discussion 
in its entirety here, we refer the reader to those documents for 
further information about EDI and the statutory background.
2. Regulatory Background
    On May 7, 1998 (63 FR 25272), the Secretary proposed Standards for 
Electronic Transactions and Code Sets. On August 17, 2000, the final 
rule on Standards for Electronic Transactions and Code Sets was 
published in the Federal Register (65 FR 50312). In the August 17, 
2000, final rule, (the Transactions Rule), the Secretary adopted 
standards for eight electronic transactions and six code sets. The 
transactions are:
    [sbull] Health Care Claims or Equivalent Encounter Information;
    [sbull] Eligibility for a Health Plan;
    [sbull] Referral Certification and Authorization;
    [sbull] Health Care Claim Status;
    [sbull] Enrollment and Disenrollment in a Health Plan;
    [sbull] Health Care Payment and Remittance Advice;
    [sbull] Health Plan Premium Payments; and
    [sbull] Coordination of Benefits.
    The code sets are: International Classification of Diseases, 9th 
Edition, Clinical Modification, Volumes 1 and 2;
    [sbull] International Classification of Diseases, 9th Edition, 
Clinical Modification, Volume 3 Procedures;
    [sbull] National Drug Codes;
    [sbull] Code on Dental Procedures and Nomenclature;
    [sbull] Health Care Financing Administration Common Procedure 
Coding System; and
    [sbull] Current Procedural Terminology, 4th Edition.
    This final rule adopts modifications to the August 17, 2000 
transaction and code set standards.
3. Statutory Requirements and Implementation Instructions for EDI 
Standards
    Section 1172(d) of the Act requires the Secretary to establish 
specifications for implementing each adopted standard. However, because 
the implementation instructions are voluminous, they were incorporated 
by reference in the Transactions Rule. This approach, to incorporate by 
reference, is commonly used by the Federal Register when external 
organizations are tasked with developing standards that are 
subsequently adopted as national standards. We are using this approach 
in this final rule to adopt modifications to the specified standards 
that were proposed in the May 31, 2002 proposed rules, CMS-0003-P (67 
FR 38044) and CMS-0005-P (67 FR 38050).

C. Designated Standard Maintenance Organization (DSMO) Process

    In our May 31, 2002, proposed rule, CMS-0005-P (67 FR 38050), we 
described in detail the process used by the Designated Standard 
Maintenance Organization (DSMO) Memorandum of Understanding (MOU) for 
receiving, managing and processing requested changes to the adopted 
standards. CMS-0005-P identified the six DSMOs and explained that we 
had used the process specified in the MOU to develop the proposed 
modifications to standards adopted in regulations. For ease of 
reference, we have included the DSMO names and respective websites 
below. Both of the SSOs (Accredited Standards Committee ASC X12N and 
the National Council for Prescription Drug Programs (NCPDP)) that 
develop standards adopted by the Secretary are DSMOs.

DSMO Names and Web site Addresses

    [sbull] Accredited Standards Committee X12N (ASC X12N) (http://www.x12.org).
    [sbull] Health Level Seven, Inc. (HL 7) (http://www.hl7.org).
    [sbull] National Council for Prescription Drug Programs (NCPDP) 
(http://www.ncpdp.org).
    [sbull] National Uniform Billing Committee (NUBC) (http://www.nubc.org).
    [sbull] National Uniform Claim Committee (NUCC) (http://www.nucc.org).
    [sbull] Dental Content Committee of the American Dental Association 
(http://www.ada.org).
    For additional information regarding the DSMO change request 
process, see the MOU document, which is available at: www.hipaa-dsmo.org/mou.pdf.
    As we stated in CMS-0005-P (67 FR 38050), a significant number of 
change requests were submitted through the DSMO process after the 
initial EDI transaction standards were adopted in the regulations. Many 
of those change requests were for changes that were considered by the 
submitters to be essential to permit initial implementation of the 
standards throughout the entire healthcare industry. Those change 
requests addressed specific details or elements within the 
implementation specifications.
    Changes considered essential for implementation of the adopted 
standards were reviewed by the DSMOs and assigned ``fast track'' status 
for development within the authority of the DSMO process. (Other 
changes that were not considered essential are going through the 
general change request management process set forth in the MOU.) As 
specified in the MOU, the DSMOs then presented those changes deemed 
essential for initial implementation to the NCVHS. The NCVHS held 
public hearings on those proposed changes (transcripts of those 
hearings are available at http://www.ncvhs.hhs.gov). The NCVHS 
recommended that the Secretary adopt all of the changes proposed by the 
DSMOs as modifications to the national standards. Those changes are 
reflected in the modifications to standards that are adopted by this 
final rule.

II. Provisions of the May 31, 2002, Proposed Rules

    In the May 31, 2002, Federal Register, we published two proposed 
rules, CMS-0003-P (67 FR 38044) and CMS-0005-P (67 FR 38050). The two 
proposed rules proposed to adopt as regulations certain modifications 
to adopted standards.
    The first proposed rule is entitled ``Modifications to Standards 
for Electronic Transactions and Code Sets'' (67 FR 38044). Hereafter, 
for the purposes of this final rule, we refer to this proposed rule as 
CMS-0003-P. CMS-0003-P contained several proposed modifications that 
pertained exclusively to revisions to certain electronic data 
interchange (EDI) standards currently in effect for retail pharmacy 
transactions and a repeal of the designation of National Drug Codes 
(NDC) as the standard medical data code

[[Page 8383]]

set for reporting drugs and biologics on non-retail pharmacy standard 
transactions.
    The second proposed rule is entitled ``Modifications to 
Transactions and Code Set Standards for Electronic Transactions'' (67 
FR 38050). Hereafter, for the purposes of this final rule, we refer to 
this proposed rule as CMS-0005-P. CMS-0005-P addressed proposals to 
adopt limited technical changes to implementation specifications for 
the transaction standards that were deemed necessary to implement 
industry-wide EDI standards.
    Because both of these proposed rules proposed modifications or 
technical changes to standards that the Secretary of Health and Human 
Services (the Secretary) adopted in the August 17, 2000, final rule 
entitled ``Health Insurance Reform: Standards for Electronic 
Transactions'' (65 FR 50312), we are combining them in this final rule. 
Hereafter, for the purposes of this final rule, we refer to the August 
17, 2000, final rule as the ``Transactions Rule.''
    Specifically, in CMS-0003-P, we proposed to adopt the following:
    [sbull] The National Council for Prescription Drug Programs (NCPDP) 
Batch Standard Batch Implementation Guide, Version 1, Release 1 
(Version 1.1), January 2000, for retail pharmacy drug claims, 
eligibility, and coordination of benefits transactions, to replace the 
earlier version (Version 1.0) that we had previously adopted in error. 
In this final rule, we refer to this proposed standard as the ``NCPDP 
Batch Implementation Guide Version 1.1.''
    [sbull] The National Council for Prescription Drug Programs (NCPDP) 
Batch Standard Batch Implementation Guide, Version 1, Release 1 
(Version 1.1), January 2000, and the National Council for Prescription 
Drug Programs (NCPDP) Telecommunication Standard Implementation Guide, 
Version 5, Release 1 (Version 5.1), September 1999, for the referral 
certification and authorization transaction, to replace the ASC X12N 
278--Health Care Services Review standard. In this final rule, we refer 
to these two proposed standards as the ``NCPDP Batch Implementation 
Guide Version 1.1'' and the ``NCPDP Telecommunication Guide Version 
5.1,'' respectively.
    [sbull] ASC X12N 835--Health Care Claim Payment/Advice for the 
retail pharmacy health care payment and remittance advice transaction, 
to replace the NCPDP Batch Standard Batch Implementation Guide Version 
1.0 and the NCPDP Telecommunication Guide Version 5.1.
    [sbull] We also proposed to repeal the adoption of the National 
Drug Code (NDC) as the standard for reporting drugs and biologics on 
all transactions except retail pharmacy transactions, also termed 
``non-retail pharmacy'' transactions below. This repeal would result in 
there being no standard in place for reporting drugs and biologics on 
non-retail pharmacy transactions.

III. Analysis of, and Responses to, Comments on the Proposed Rules

    In response to the May 31, 2002, publication of the two proposed 
rules, we received over 300 timely public comments. The comments came 
from a variety of sources, including health care associations and 
societies, entities named in the HIPAA legislation, health plans, 
DSMOs, health care providers, Federal health plans, and private 
individuals.
    Our process of reviewing and associating like comments identified 
areas of the proposed rules that required additional review in terms of 
their effect on policy, consistency, or clarity of the modifications to 
the standards, and areas that were technical and specifically related 
to the implementation specifications. We consulted with the DSMOs on 
technical comments that related specifically to the implementation 
specifications.
    We present comments and responses generally in the order in which 
the proposals appeared in the May 31, 2002 proposed rules. We begin 
with comments and responses about the compliance dates, and continue 
with comments and responses on the proposals in CMS-0003-P (67 FR 
38044), and those in CMS-0005-P (67 FR 38050).

A. Compliance Date

    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 effective 
date of the adoption of the modification. We had not proposed a 
compliance date in the proposed rules.
    The Administrative Simplification Compliance Act (ASCA) (Pub. L. 
107-105) was enacted on December 27, 2001. This law provided an 
extension to the compliance date adopted in the Transactions Rule (65 
FR 50312) for covered entities that submitted, by October 15, 2002, 
plans to the Secretary indicating how they will come into compliance by 
October 16, 2003. Small health plans were not provided with an 
extension opportunity, but also have a compliance date of October 16, 
2003. Because this final rule is modifying standards that are currently 
in effect and with which compliance is otherwise required, ASCA is 
relevant. ASCA did not address its effect on those covered entities 
otherwise required to come into compliance by October 16, 2002, or how 
modifications to standards were to be implemented.
    Comment: Numerous commenters expressed support for the adoption of 
the modifications and stressed the urgency for implementing the 
modifications to meet compliance by October 16, 2003. We received some 
comments requesting clarification for the processing of non-compliant 
claims submitted before the compliance date of October 16, 2003, but 
processed after October 16, 2003. A few commenters recommended 
extensions of up to 90 days after October 16, 2003, to allow for an 
orderly migration to the adopted modifications. The modifications to 
the transactions are referred to collectively in this final rule as the 
``Addenda.'' One commenter suggested that the Department of Health and 
Human Services (HHS) establish a transition period as a precedent for 
implementation of future transaction standard versions, such as ASC 
X12N 4050. One commenter asked for clarification as to whether the ASCA 
extension was for 1 year after the 180-day adoption period for the 
Addenda. We received a few comments concerning the impact that 
publication of this rule would have on the April 2003 ASCA HIPAA 
testing requirements. One commenter suggested that HHS adopt the ASC 
X12N 4050 Version implementation specifications, instead of the ASC 
X12N 4010 Addenda.
    Response: The effective date for this final rule is 30 days after 
the date of publication in the Federal Register. Standards are adopted 
and implementation specifications are established as of the effective 
date of this final rule. Trading partner agreements should determine 
the processing requirements for non-compliant claims submitted by 
covered entities that have requested a compliance extension for the 
period between October 16, 2002, and October 16, 2003.
    To avoid confusion over the interaction between the compliance 
dates for the original rule, the compliance dates for these 
modifications, and the ASCA extension dates, we have revised the 
regulations text at 45 CFR 162.900. Covered entities, other than small 
health plans, that have timely submitted a compliance plan will be 
required to come into compliance with the Transactions Rule as amended

[[Page 8384]]

by these modifications no later than October 16, 2003. ASCA, however, 
complicates the compliance picture greatly.
    Hundreds of thousands of entities, including numerous large health 
plans, have obtained 1-year extensions under ASCA. Consequently, those 
entities, as well as small health plans, are not required to conduct 
covered transactions in standard form until October 16, 2003, as 
clarified at section 162.900. Section 162.923 (a) provides that covered 
entities must conduct transactions as standard transactions, except as 
otherwise provided in part 162. Thus, we interpret Sec.  162.923(a), 
when read with section 162.900, to mean that if both sides to a 
transaction are not required to conduct it in standard form (that is, 
if one side is required to conduct the transaction in standard form but 
the other side is not), neither side is required to conduct it in 
standard form, provided that the requirements to Sec.  162.925 do not 
apply. Thus, for example, even where a covered health care provider 
failed to submit a compliance plan, it would not be required to comply 
with the Transactions Rule with respect to the covered transactions 
which it actually conducts during the period of October 16, 2002, 
through October 15, 2003, insofar as the transactions are with a health 
plan that is not required to comply during this period because it (1) 
has obtained a 1-year extension under ASCA, or (2) is a small health 
plan. Similarly, a health plan that is subject to the October 16, 2002, 
compliance date would not be required to conduct coordination of 
benefits in standard form with another health plan, if the latter plan 
was not conducting the transaction in standard form because it (1) has 
obtained a 1-year extension under ASCA, or (2) is a small health plan.
    Further, even where compliance is required (that is, the October 
16, 2002, compliance date applies to both sides to the covered 
transaction and neither covered entity submitted a compliance plan), we 
recognize that the modifications adopted as a result of CMS-0003-P and 
CMS-0005-P are necessary to permit the transactions covered by these 
proposed rules to be conducted in standard form, and that such 
transactions could not feasibly be required before the compliance date 
for the modifications in this final rule, October 16, 2003. We will not 
invoke our authority to penalize noncompliance with standards that our 
own delay in issuing this final rule has made infeasible.
    With respect to the remaining universe of transactions with which 
compliance would otherwise be required, as between covered entities 
that did not submit compliance plans, we recognize that covered 
entities may find it difficult to determine which of their trading 
partners must also comply in this interim year, and may in good faith 
mistakenly assume that the other side to a transaction is exempted from 
the compliance requirement. We also note that the failure to issue the 
modifications below earlier has made testing of the standards between 
trading partners difficult, if not infeasible. Also, complying with the 
unmodified standards would result in implementation problems and divert 
resources from complying with the modified standards, which will become 
the industry standard in October 2003.
    In light of these considerations, we have come to two decisions. 
First, we are affording those covered entities that have a present 
compliance obligation the opportunity to comply with either the 
unmodified transaction standards or the modified transaction standards 
in this interim 1-year period. This policy is reflected in Sec.  
162.900(c)(1) below. Second, we intend to take into account the 
numerous obstacles to compliance that exist and will work with covered 
entities to bring them into compliance during this interim period, 
through among other things, corrective action plans. We will reserve 
our authority to penalize noncompliance for those cases of 
noncompliance where such voluntary efforts fail or where covered 
entities fail to make reasonable efforts to come into compliance.
    The modifications proposed in the two proposed rules published on 
May 31, 2002, and promulgated in this final rule were expressly 
designed and adopted to assist compliance with the standards. These 
modifications will, no doubt, greatly facilitate the process of 
becoming compliant.
    We accordingly believe that publication of this final rule and the 
adopted revisions in the Addenda permit sufficient time to meet the 
ASCA testing requirements for April 2003, and the October 16, 2003, 
compliance date. Trading partner agreements should determine the 
processing requirements for non-compliant claims submitted by covered 
entities that have requested a compliance extension until October 16, 
2003.
    ASCA provided the option to obtain a 1-year extension to covered 
entities, excluding small health plans. We have no statutory authority 
to extend the compliance dates beyond this 1-year extension period. We 
also believe that extending the compliance dates further, were we 
permitted to do so, would place additional and unacceptable burdens on 
covered entities that are compliant on schedule.
    With regard to adopting the 4050 Version of the Implementation 
Guides, it is our understanding that the healthcare industry is in the 
midst of implementing the 4010 Version of the Implementation Guides. 
Adopting a new version of the guides would unfairly burden those who 
are completing the testing and implementation of the 4010 Version. 
Also, when covered entities are fully functional with the 4010 Version 
and its Addenda, they will have a better opportunity to assess 
improvements for future versions of the Implementation Guides.

B. Responses to Comments on CMS-0003-P (67 FR 38044)

1. Retail Pharmacy Batch Transactions
    In CMS-0003-P, we proposed that the Secretary adopt the NCPDP Batch 
Implementation Guide Version 1.1, supporting NCPDP Telecommunication 
Guide Version 5.1 for the NCPDP Data Record in the Detail Data Record. 
Adopting this standard would enable covered entities conducting retail 
pharmacy drug claims or equivalent encounter information, eligibility 
for a health plan, and coordination of benefits transactions to be able 
to submit transactions in batches.
    We had intended to adopt the NCPDP Batch Implementation Guide 
Version 1.1 in the Transactions Rule. However, an oversight resulted in 
the adoption of a batch version that was not the equivalent companion 
to the telecommunication standard that we adopted. The oversight, if 
not corrected, would mean that retail pharmacy transactions could not 
be batched. They would instead have to be submitted individually.
    Comment: One commenter observed that the NCPDP Telecommunication 
Guide Version 5.1 did not contain all the data elements required for 
their health plan to process the claim.
    Response: The NCPDP, which is the SSO that developed the NCPDP 
Telecommunication Guide Version 5.1, has certified for us that the 
standard does allow the reporting of information necessary to process 
retail pharmacy drug claims. Because of the widespread support for this 
transaction standard as expressed in the public comments received and 
because of the assurance that essential data elements are present in 
the NCPDP Telecommunication Guide Version 5.1, the Secretary is

[[Page 8385]]

adopting that standard in this final rule. That standard and the NCPDP 
Batch Implementation Guide Version 1.1 are adopted for retail pharmacy 
drug claims or equivalent encounter information (Sec.  162.1102), 
eligibility for a health plan (Sec.  162.1202), and coordination of 
benefits (Sec.  162.1802).
2. Referral Certification and Authorization Transaction
    We proposed to adopt the NCPDP Batch Implementation Guide Version 
1.1, supporting the NCPDP Telecommunication Guide Version 5.1, for the 
NCPDP Data Record in the Detail Data Record, as the standard for the 
referral certification and authorization transaction. Adopting this 
standard would enable the reporting of all the data that are critical 
to retail pharmacy prior authorization transactions. This standard 
would replace the ASC X12N 278--Request for Review and Response 
Transaction, which, according to information we received from the 
retail pharmacy industry, does not support data that are critical to 
retail pharmacy prior authorization transactions. The ASC X12N 
standards development process for modifying standards could not be 
completed in time to change the standard to make it useable for retail 
pharmacy prior authorization transactions before the October 16, 2002, 
compliance date for the Transactions Rule. The NCPDP standard 
adequately supports this transaction for retail pharmacy, is currently 
in widespread industry use, and the revised 278 would not present 
significant advantages over it. We expect the NCPDP will continue to be 
the standard in the future. This modification would not affect the 
standard for dental, professional, and institutional referral 
certification and authorization transactions, which is the ASC X12N 278 
standard transaction.
    Comment: One commenter asked if the standard would apply only to 
retail pharmacy drug referral certifications and authorizations. The 
commenter believed it should apply to all retail pharmacy referral 
certifications and authorizations, including supplies.
    Response: The standard would only apply to retail pharmacy drug 
referral certification and authorization transactions.
    All of the commenters supported this proposal. We are adopting in 
this final rule the NCPDP Batch Implementation Guide Version 1.1 that 
supports the NCPDP Telecommunication Version 5.1, as the referral 
certification and authorization transaction standard for all retail 
pharmacy drug claim certification and authorization transactions (Sec.  
162.1302).
3. Health Care Claim Payment and Remittance Advice Transaction
    In the May 31, 2002, proposed rule, we proposed to adopt the ASC 
X12N 835--Health Care Claim Payment/Advice, Version 4010, May 2000, and 
any adopted modifications to it, for retail pharmacy transactions. 
Adopting this standard would enable health plans to generate HIPAA-
compliant remittance advice transactions for pharmacies. The NCPDP 
standard format adopted by the Transactions Rule would not have the 
capability of generating a per claim remittance advice transaction.
    Comment: Several commenters pointed out that the proposed 
provisions in Sec.  162.1602 list ``dental, professional, and 
institutional health care claims and remittance advice'' and 
recommended adding ``retail pharmacy'' to that list, or removing the 
list entirely.
    Response: We agree with these comments and note that the ASC X12N 
835 is currently the standard for health care claims payment and 
remittance advice for dental, professional, and institutional claims. 
Adopting the ASC X12N 835 for retail pharmacy health care claims 
payment and remittance advice would mean that it would be the standard 
for all types of health care claims. Therefore, there would be no need 
to include a list that specifies the applicable claims transactions. In 
this final rule, we are removing the list at Sec.  162.1602.
    Comment: A commenter suggested that pharmacies should not have to 
implement both ASC X12N and NCPDP standards at this time, and that at 
some point after the compliance date, future harmonization may be 
practical.
    Response: Many entities today use the formats of more than one 
Standards Development Organization (SDO) for the electronic 
transactions they conduct. In addition, many entities are preparing to 
do so to comply with regulations. In this situation, however, the NCPDP 
format does not adequately support the health care payment and 
remittance advice transaction.
    The majority of commenters who submitted comments on this proposal 
supported the adoption of the ASC X12N 835 for this standard, including 
three major pharmacy organizations. Therefore, in this final rule, we 
are adopting the ASC X12N 835--Health Care Claim Payment/Advice as the 
standard for retail pharmacy health care payment and remittance advice 
(Sec.  162.1602).
4. National Drug Codes (NDC) Code Set
    In CMS-0003-P, we proposed to repeal the National Drug Codes (NDC) 
as the standard medical data code set for reporting drugs and biologics 
in institutional, professional, and dental claims (that is, in non-
retail pharmacy drug claims). (Drugs are not reported in the adopted 
standard dental claim transaction.) This repeal would leave no standard 
in place for use in reporting drugs and biologics on those claims. A 
health plan could require a provider to use any one of the applicable 
code sets permitted by the Implementation Guides for that purpose.
    The NDC code set is maintained by the Food and Drug Administration
    (FDA) within HHS. It is required for use on the NCPDP claim format, 
which is the standard for retail pharmacy drug claims. Retail 
pharmacies have traditionally used the NDC. However, currently in the 
professional and institutional health care sectors, the NDC is used 
much less often. The primary code set used for reporting drugs and 
biologics in those sectors is the Healthcare Common Procedure Coding 
System (HCPCS) \1\. In the Transactions Rule, the Secretary adopted the 
NDC as the standard for reporting drugs and biologics on all claims. 
The Secretary adopted HCPCS codes as the standard for reporting 
supplies and orthotic and prosthetic devices and durable medical 
equipment, and, in combination with the Current Procedure Terminology, 
Fourth Edition, for reporting physician and numerous other health care 
services, on all claims.
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    \1\ When the name of the Health Care Financing Administration 
was changed to the Centers for Medicare & Medicaid Services in 2001, 
the name of this coding system was changed from the ``Health Care 
Financing Administration Procedure Coding System'' to the 
``Healthcare Common Procedure Coding System.''
---------------------------------------------------------------------------

    HCPCS codes are grouped in ``series.'' Each series begins with an 
alpha character, and similar items are usually grouped under the same 
single or multiple series. The ``J series'' is comprised of drugs, 
primarily generic drugs, and traditionally these drugs have been 
limited to drugs that are payable under the Medicare program. Several 
drug codes, however, are present in other HCPCS series for reasons that 
are not relevant to this discussion. The NDC, on the other hand, is 
currently assigned to drugs subject to listing requirements under 
section 510 of the Federal Food, Drug, and Cosmetic Act. The NDC is 
assigned to generic as well as brand name drugs. HCPCS codes are five 
positions in length, whereas the NDC adopted by the Transactions Rule, 
was originally developed as a 10-digit

[[Page 8386]]

identifier and, when used in computer systems, may yield an 11-digit 
number.
    With the adoption of the NDC as the standard, the HCPCS codes would 
not be permitted to be used in a HIPAA-compliant transaction, because 
the NDC would be the adopted standard for reporting drugs and 
biologics.
    There have been many discussions about the use of the NDC in 
professional and institutional claims since publication of the 
Transactions Rule. Many members of the professional and institutional 
sectors did not believe that the NDC should be used on their claims. 
The NCVHS held hearings and heard the testimony of members of the 
health care industry on this issue. Information provided in that 
testimony led us to develop the proposal to repeal the NDC as the 
standard for reporting drugs and biologics on all but retail pharmacy 
drug claims. In CMS-0003-P (67 FR 38044), we explained why the 
Secretary adopted the NDC and why the Secretary was proposing the 
repeal.
    CMS-0003-P (67 FR 38044) also solicited comments on an alternative 
proposal to adopt an alternative standard--in place of the NDC, to be 
used to report drugs and biologics on non-retail pharmacy transactions. 
We proposed that the HCPCS code set be the alternative standard. Below 
we discuss comments on the proposal to repeal the NDC and the proposal 
to adopt an alternative standard for non-retail pharmacy transactions.
    We received approximately 200 comments on this issue. The comments 
fell into three major categories: (1) Repeal the NDC as the standard 
medical data code set for professional, institutional, and dental 
claims and have no standard code set; (2) repeal the NDC, but adopt 
HCPCS as the standard code set; and (3) retain the NDC as the sole 
standard code set for claims from all sectors.
    Comment: A number of commenters supported our proposal to repeal 
the NDC and adopt no standard in its place. These commenters, many of 
which were major health care industry organizations, indicated the 
following: (1) The current Implementation Guide usage of the NDC should 
remain constant and the Implementation Guide should define when the NDC 
would be used; (2) if no code set was selected, the Implementation 
Guides should not permit payers to require providers to use local code 
sets for drugs and biologics; (3) the cost of converting to the NDC was 
very high and would not justify the benefits, if any; and (4) not 
naming a standard would give the industry time to fully evaluate 
current practices and identify preferred alternatives.
    Conversely, the proposed repeal was not favored by some Medicaid 
State agencies, as they are required to use the NDC to report drugs and 
biologics to receive drug rebates.
    Response: We agree that repealing the NDC and having no standard 
would be responsive to the needs of health plans and health care 
providers who want to evaluate further the use of NDC. The absence of a 
standard would permit the use of any codes as long as that use is 
supported by the Implementation Guide for the transaction. Repealing 
the NDC and having no standard would also address the concerns of many 
health care providers who cited the high cost and low benefit of 
conversion; they could continue to use HCPCS codes. Having no standard 
would allow many health care entities to continue their current coding 
practices, reducing the implementation burden, and would accommodate 
State agencies' requirement to report NDCs for drug rebate programs. 
Additionally, if there were no standard, the selection of the code set 
to be used would likely be specified by health plans via trading 
partner agreements, as long as the Implementation Guides permitted that 
selection.
    Comment: The majority of commenters supported the repeal of the NDC 
and the adoption of HCPCS as the sole standard for reporting drugs and 
biologics on non-retail pharmacy transactions. Many of these commenters 
were institutional providers. They indicated that drug information, 
which is often not reported on institutional claims, is rarely used to 
compute payment because claims are usually paid under prospective 
payment systems. Since drugs are rarely reported on institutional 
claims, institutional healthcare providers would derive no benefit from 
the expensive transition from HCPCS codes to the NDC.
    Response: Repealing NDC and adopting HCPCS as the standard would 
allay the concerns of some health care providers that more health plans 
might decide to implement the NDC at some point in the future. However, 
adopting HCPCS as the sole standard would not respond to the needs of 
health plans and health care providers where the specificity of the NDC 
is needed to compute payment or collect drug rebates.
    Comment: Other commenters supported retaining the NDC as the 
standard for reporting drugs and biologics on non-retail pharmacy drug 
claims. Much of the support for retaining the NDC came on behalf of 
State Medicaid agencies, which must use the NDC in order to receive 
drug rebates.
    Response: As we have indicated, the NDC retains certain advantages 
over HCPCS, such as in the area of computing payments and collecting 
drug rebates. Additionally, the NDC enables health care providers and 
health plans to track effectively the utilization of drugs and access 
certain manufacturer information regarding the drugs. We also 
acknowledge that State Medicaid agencies have strongly encouraged 
retaining the NDC for reporting drugs and biologics on non-retail 
pharmacy drug claims. Retaining the NDC, therefore, as the standard 
would respond to the needs of health plans and health care providers 
who need specificity in computing payments and collecting drug rebates. 
It would also foster consistent drug coding for claims and among health 
care providers.
    Simply retaining the NDC as the sole standard, however, would not 
adequately respond to the express concerns of those health care 
providers who commented that the cost of conversion to NDC would be 
high while the benefits would be low or non-existent. Moreover, the 
majority of commenters did not support keeping the NDC as the sole 
standard for reporting drugs and biologics for non-retail pharmacy 
sectors. We concluded that adopting either the NDC or the HCPCS would 
fail to address many of the concerns raised.
    In our considerations, we recognized that both the NDC and HCPCS 
remain two of the most prevalent and useful code sets for reporting 
drugs and biologics in non-retail pharmacy transactions. The benefits 
of each code set complement the other's advantages very well.
    We therefore decided, as we had proposed in CMS-0003-P, to repeal 
the adoption of the NDC for institutional and professional claims, 
while allowing the NDC to remain the standard medical data code set for 
reporting drugs and biologics for retail pharmacy claims. We believe 
that this decision best addresses the majority of comments received, in 
that for institutional and professional claims, the choice of code set 
will continue to be governed by trading partner agreements. However, we 
wish to stress that the intent of this decision is to give covered 
entities the full range of choices in determining which code set to use 
with respect to these claims, including the HCPCS and NDC codes that 
have been adopted as standards for other uses. Covered entities that 
use HCPCS should utilize the established process for requesting new 
codes, rather

[[Page 8387]]

than supplementing the code sets with locally developed codes.
    The result of this repeal will be that there is no identified 
standard medical data code set in place for reporting drugs and 
biologics on non-retail pharmacy transactions. The absence of a code 
set 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 prefer and agree upon 
with their trading partners.
    Comments from the different parts of the industry demonstrated that 
no one code set is able to meet the different needs now addressed by 
the NDC and HCPCS. Adopting no standard at this point will allow for 
innovation, and permit development of new coding systems that meet the 
full range of business needs. Comments also indicated that the costs 
for a hospital or other institution to comply with the NDC for 
reporting drugs and biologics on institutional claims could exceed its 
costs for adopting all other HIPAA transaction standards. For many 
health care providers, entire claim systems would need to be replaced, 
re-engineered, or both.
    We also considered the concerns expressed by the NUBC regarding the 
use of the NDC on institutional claims, including hospital claims. NUBC 
has indicated that reporting specific drugs on institutional claims 
introduces a systems technology requirement that is inconsistent with 
inpatient claims submission and institutional provider reimbursement, 
which are typically based on a Diagnosis-Related Group or per diem 
payment methodology. The NUBC has also expressed its belief that the 
NDC coding system is more suited for inventory control and is not 
appropriate for institutional provider billing, and further that the 
NDC pertains to retail pharmacy claims only and should not be 
applicable to institutional claims.
    We are also aware that retaining the NDC as the sole standard for 
institutional claims would pose significant operational issues on 
institutional pharmacies because of systems incompatibility among the 
pharmacies, inpatient medical records, and inpatient accounting 
systems. Physicians generally order drugs for patients through the 
hospital pharmacy department by name, unit, and dosage frequency. The 
pharmacy department however does not reference the NDC to initiate the 
charge transaction. Additionally, the NDC formats do not provide 
information related to actual dosages administered, or provide a 
methodology for multiple billing increments. Attempts by the industry 
to develop a complete crosswalk from the current HCPCS codes to the NDC 
have been unsuccessful.
    Another important factor in our decision, as we mentioned in CMS-
0003-P, was the information we received from the Subcommittee on 
Standards and Security of the NCVHS as a result of the public hearings 
it held on February 1, 2001, regarding HIPAA implementation issues and 
the NDC. In addition to the problems we identified above, concerns 
expressed during that meeting included the burden of training 
additional ancillary staff to use the NDC and the potential for 
increases in medical errors when new system interfaces for drug 
dispensing systems are created.
    The NCVHS in a February 22, 2001, letter to the Secretary 
recommended that the Secretary repeal the adoption of the NDC as the 
standard medical data code set for reporting drugs and biologics in 
standard transactions other than retail pharmacy transactions. It also 
suggested that HCPCS codes as well as the NDC continue to be used in 
the standard institutional and professional claim transactions. 
Moreover, the NCVHS explained that it believes that no drug coding 
system in existence today meets all the needs of the health care 
industry. A future coding system that could be used effectively and 
efficiently for drug inventory, pharmacy transactions, patient care, 
billing arenas, and ensuring patient safety would be the best answer to 
this problem, according to the NCVHS.
    We note therefore that another significant advantage to repealing 
the adoption of the NDC for reporting drugs and biologics in non-retail 
pharmacy standard transactions and not adopting a replacement standard 
code set at this time is that the industry and HHS will have time to 
explore the development of a new drug coding system to meet current and 
future needs of this sector of the health care industry. We would note 
that the Implementation Guides for institutional and professional claim 
transactions currently recognize the use of only the NDC and HCPCS 
codes for drugs and biologics. See the discussion at section G.2 below. 
The developer of a new code set could request that it be included in 
the guides via the DSMO maintenance process.
    Thus, based on comments received and our own review of the 
available code sets, we believe that our decision to repeal the 
adoption of the NDC as the standard medical data code set for reporting 
drugs and biologics in all non-retail pharmacy transactions is the best 
and most appropriate decision at this time. Repealing the NDC as the 
standard medical code set for reporting drugs and biologics in non-
retail pharmacy transactions also raises opportunities for the 
development of a more robust drug coding system that overcomes the 
deficiencies inherent in the NDC and HCPCS codes for reporting drugs 
and biologics on standard transactions. For example, because of the 
inadequacy of existing codes for drug products, and the need for 
harmonization of medical terminology, the FDA has been working with the 
National Library of Medicine and the Department of Veterans Affairs to 
develop improved drug codes.
    In preparing this final rule, we consulted with the FDA and noted 
that the FDA is preparing two new regulations that relate to the use of 
the NDC number that will be proposed for public comment soon. Both 
proposed rules will propose changes related to coordinating the NDC 
with bar coding. It is expected that the proposed changes will make the 
NDC number more useful to those who choose to use the NDC.
5. Retail Pharmacy Drug Claims
    The Transactions Rule adopted the NCPDP transaction as the standard 
for retail pharmacy drug claims (Sec.  162.1102(a)), and the ASC X12N 
837--Professional Health Care Claim as the standard for professional 
services (Sec.  162.1102(c)). Neither of our May 31, 2002, proposed 
rules solicited comments on the formats to be used by retail pharmacies 
when submitting claims for drugs, supplies, durable medical equipment, 
prosthetics, orthotics, and professional services.
    The DSMOs are currently discussing this item in their consideration 
of two pending change requests that were introduced into the DSMO 
process within the past year. (These requests were not submitted in 
time to be considered under the ``fast track'' approach described in 
this final rule in section I. C., ``Designated Standard Maintenance 
Organization (DSMO) Process.'')
    In submitting comments on issues presented in our two May 31, 2002, 
proposed rules, some commenters included comments on the formats for 
retail pharmacy drug claims for items and services other than drugs. 
Such items included syringes, which are supplies that are usually 
purchased with drugs such as insulin. Services included consultations 
with patients and the administration of vaccines (such as the influenza 
vaccine) to individuals. The issue of the format on which retail 
pharmacy supply claims should be billed is tied closely to business

[[Page 8388]]

practices of retail pharmacies and the administration of pharmacy and 
medical benefits by health plans. The Transactions Rule adopted a 
standard for retail pharmacy drug claims, and adopted standards for 
professional, institutional, and dental claims. It did not state 
specifically, except with respect to retail pharmacies using the NCPDP 
claim format, the particular types of health care providers that would 
use the professional and institutional ASC X12N 837 standard claim 
formats. The Implementation Guides themselves do not specify the types 
of health care providers that are expected to use those standards.
    Commenters requested additional clarification of the formats (the 
implementation specifications) to be used by retail pharmacies in 
submitting claims for supplies and professional services. Below are 
specific comments and our responses.
    Comment: We received comments requesting that the Secretary adopt 
the NCPDP format for retail pharmacy supplies and services. We also 
received some comments requesting that the Secretary adopt both the 
NCPDP format and the ASC X12N 837 format for submitting claims for 
supplies and services furnished by retail pharmacies, and allow the 
type of benefit (pharmacy or medical) to determine which format would 
be used. Commenters stated that splitting claims by billing drugs using 
the NCPDP format and supplies using the ASC X12N 837 Professional 
format was burdensome, and that the real-time functionality achieved 
with the NCPDP format could not be used for billing the supplies that 
are furnished in conjunction with dispensing the drug. We received 
conflicting comments regarding the billing of professional pharmacy 
services using the NCPDP format. These commenters preferred using the 
ASC X12N 837 Professional claim for billing professional pharmacy 
services.
    Response: The commenters expressed differing business needs and 
concerns. Some commenters included supporting rationale and 
justifications, while others did not. It is apparent that much 
information still needs to be obtained and analyzed before we consider 
modifying the standards published in the Transactions Rule. We are 
aware that the comments do not represent a complete picture of the 
industry because we did not solicit comments specifically on this 
issue. Since formats for billing retail pharmacy supplies and 
professional services were not proposed in CMS-0005-P (67 FR 38050), or 
CMS-0003-P (67 FR 38044), many people who may have information 
pertinent to this issue did not comment on it.
    Comment: Approximately one-third of the commenters stated that the 
NCPDP format should not be used by retail pharmacies to submit claims 
for professional services; they did not provide supporting rationale.
    Response: The NCPDP format is not used extensively by retail 
pharmacies to bill for professional services. Many retail pharmacies 
currently use the CMS-1500 ``Health Insurance Claim'' (the professional 
paper claim) in submitting claims for professional services.
    Comment: Some commenters indicated that a more consistent and 
effective approach would be for retail pharmacies to use the NCPDP 
format for all claims, regardless of the type of service. Some 
commenters also elaborated on the benefits of NCPDP's real-time 
transaction.
    Response: This approach would benefit retail pharmacies, which 
currently use the NCPDP format. However, the Transactions Rule states 
that claims for drugs are to use the NCPDP claims transaction. This 
means that retail pharmacy claims that are not for drugs are to use the 
ASC X12N 837 Professional claims transaction.
    Comment: Other commenters believed that both the NCPDP and the ASC 
X12N formats should be used by retail pharmacies. Some of these 
commenters stated that drug claims and claims for supplies that are 
closely related should continue to be billed on the NCPDP format, and 
that claims for professional services and supplies that are not tied to 
drugs should be billed on the ASC X12N 837 Professional, which is the 
adopted standard for claims for supplies and professional services, and 
is the transaction standard that other health care providers will use 
for these types of claims. Several of these commenters indicated that 
the NCPDP format should be used for claims that fall under pharmacy 
benefits, and the ASC X12N 837 Professional format should be used for 
claims that fall under medical benefits. Some commenters expressed 
concern about the lack of clear industry guidelines for determining 
pharmacy benefits and medical benefits. Others stated that both formats 
should be adopted, and that health plans should determine the 
situations for the use of each.
    Response: The Transactions Rule adopts in Sec.  162.1102(a) the 
NCPDP format for retail pharmacy drug claims and the ASC X12N 837 
Professional claim format for claims for supplies and professional 
services. The Transactions Rule does not specify the items or services 
that would be billed on the ASC X12N 837 Professional claim. We will be 
providing additional guidance by other means on this issue.

C. Proposal to Adopt Modifications to the Standards Adopted in the 
Transactions Rule

    We proposed in CMS-0005-P (67 FR 38050) to adopt modifications to 
certain standards adopted in the Transactions Rule (65 FR 50312). The 
modifications we proposed were the result of the DSMO process to 
maintain standards adopted by the Secretary and to process requests for 
adopting new standards or modifying adopted standards. (The DSMO 
process is described in section I. C. of this rule.)
    The versions of the Addenda adopted in this final rule are 
referenced by the suffix ``A1'' and dated October 2002. It is important 
to note that these versions become final with publication of this final 
rule. Consequently, the October 2001 date is revised to October 2002 to 
reflect the final versions of the adopted Addenda.

D. Composition of the Addenda

    Addenda are defined as modifications to items in the implementation 
specifications that could be considered impediments to implementation. 
They are first published in draft form and go through the rulemaking 
process before becoming final.
    Two hundred thirty-one change requests were submitted to the DSMOs 
for consideration. Eighty-five were returned to submitters because the 
Implementation Guides already met the specific business need, or the 
need was not well substantiated; 21 were determined to be unnecessary 
for initial implementation and were, therefore, recommended for future 
changes; six were withdrawn by their submitters; and seven were 
referred to the Secretary as policy issues requiring resolution. The 
remaining 115 change requests were approved by the DSMOs and comprise 
the various Addenda.
    Forty-eight of the 115 change requests were maintenance items to 
correct minor errors, or provide clarifications in the standards. 
Maintenance changes are technical corrections made by DSMOs to correct 
typographical errors or other non-substantive changes. Maintenance 
changes exclude activities related to the adoption of a new standard or 
implementation specification or modification to an adopted standard or 
implementation specification. Maintenance changes are typically changes 
that are obvious to readers of the Implementation Guides, are not 
controversial, and are essential to

[[Page 8389]]

implementation. These maintenance items are the result of DSMO change 
requests that were approved and recommended for adoption via the DSMO 
process. Therefore, we are not including a discussion of them in this 
final rule.
    The remaining 67 of the 115 change requests were for substantive 
modifications to the standards, and they are detailed below.

E. Proposed Modifications to the Standards

    [sbull] Changing usage of data elements from required to 
situational (about 20 percent of total requested changes).
    Required usage of data elements means that particular data elements 
must be used every time the transaction is conducted. Situational usage 
of data elements means that, when certain specified situations or 
conditions exist, particular data elements must be used when the 
transaction is conducted. Those who submitted DSMO change requests 
pointed out several data elements for which the adopted standards 
required usage in all cases, but that was only needed in certain 
situations. Usage of these data elements was made situational in the 
Addenda, with the situations explicitly defined. Examples follow:
    1. Many health plans store Healthcare Provider Taxonomy Codes when 
health care providers enroll in the health plan, so there is no need to 
send this information on every claim. Healthcare Provider Taxonomy 
Codes are data elements that identify the type, classification, and 
specialization of providers furnishing health care. The NUCC maintains 
these codes. The Washington Publishing Company makes the Healthcare 
Provider Taxonomy Codes available on its Web site (http://www.wpc-edi.com). The Healthcare Provider Taxonomy Codes now will be reported 
only when claim adjudication is known to be impacted by the presence of 
the code.
    2. In another case, ``date last seen by physician'' (used for 
certain physical therapy claims) is needed only by Medicare, so usage 
was changed from required on all claims, to required ``when known to 
impact the payer's adjudication process.''
    [sbull] Removal of certain data elements (about 20 percent of 
changes).
    Several data elements were removed because they do not appear to be 
needed by any covered entity.
    [sbull] Allowing certain information to be reported via external 
code sets rather than via data elements defined in the transaction 
(about 20 percent of changes).
    ZIP codes, maintained by the U.S. Postal Service, are an example of 
an external code set. Revisions and updates for transaction data 
elements adopted by the Transactions Rule must go through the DSMO 
change request process, while revisions to external code sets require 
requesters to submit requests to the organizations that maintain the 
code sets and are not subject to the DSMO review process.
    There were several instances where external code sets could be used 
to indicate certain data elements. The replacement of data elements 
with external code sets will allow the maintainers of those external 
code sets to update the codes more easily, as opposed to having the 
DSMOs make changes to the standards themselves. Two external code sets 
adopted by the Addenda are special program indicator codes and newborn 
birth weights.
    [sbull] Adding additional functionality to some transactions (about 
40 percent of changes).
    Requesters suggested several additional data elements, codes, or 
loops to enable them to perform certain business functions in the 
transactions.
    These included cross-referencing two subscriber IDs (surviving 
spouse and dependents) and sending a patient's primary care physician 
number.

F. Comments on the Modifications Included in the Addenda

    CMS-0005-P (67 FR 38050) established the scope for technical 
comments by limiting comments to only those items being added or 
changed by the Addenda.
    Numerous recommendations and suggestions submitted in the comments, 
which were not considered critical for implementation, will be 
considered for improvements or clarifications to future versions of the 
implementation specifications.
    Because the comments were technical in nature, relating to specific 
data elements and segments, and applied to implementation 
specifications that were developed and are maintained by external 
organizations, such as the ASC X12N and the NCPDP, the Secretary could 
not address all of them directly. Therefore, we analyzed the public 
comments received to determine which comments fell in this technical 
category. We consulted with representatives from each of the DSMOs on 
these technical comments. Some of the technical comments were referred 
to the external organizations that develop the standards, such as the 
ASC X12N transaction workgroups, for additional review and 
consultation.
    Comments that did not pertain specifically to the proposed Addenda 
were considered and determined to be more appropriately addressed 
through the DSMO Change Request process.
    The majority of comments we received generally supported adoption 
of the proposed Addenda. Most commenters agreed that adopting these 
proposed changes is necessary to permit successful initial 
implementation of the standards within the industry. The Workgroup for 
Electronic Data Interchange (WEDI), the American Hospital Association 
(AHA), the National Uniform Claim Committee (NUCC), a number of 
Medicaid State agencies, the Health Insurance Association of America 
(HIAA), the Blue Cross Blue Shield Association (BCBSA), and the 
American Medical Association (AMA) were among the numerous health care 
providers, health plans, and professional organizations that submitted 
comments expressing support for adoption of the proposed Addenda. Some 
commenters suggested that work on the implementation specifications 
continue in order to improve the clarity relating to specific 
situational data elements and to ensure clear, consistent 
interpretations and implementation by health plans.
    Commenters unanimously supported many specific Addenda items, for 
example:
    [sbull] The proposal to use existing UB-92 Condition Codes for 
reporting special program indicators, as well as UB-92 Value Codes to 
report newborn birth weights. These changes would eliminate differences 
in the way this information is handled for electronic and paper 
submission of claims. It is important wherever possible to follow the 
same data development paths for both paper and electronic submission in 
order to simplify the capturing and reporting of billing information.
    [sbull] The deletion of unneeded data segments and the 
clarification of ambiguous usage notes.
    We discuss other comments on specific modifications below. They are 
organized according to specific adopted transaction standards.
    The Addenda are not stand-alone documents. They are supplemental 
implementation specifications to the initial standards adopted in the 
Transactions Rule. In this final rule, we therefore adopt the Addenda 
as part of the standards to which they apply.

G. Transaction Standard for Health Care Claims or Equivalent Encounter 
Information

    In CMS-0005-P (67 FR 38050), we proposed to adopt the following:

[[Page 8390]]

    [sbull] Addenda to Health Care Claim: Dental, ASC X12N 837, Version 
4010, October 2002, Washington Publishing Company, 004010X097A1.
    [sbull] Addenda to Health Care Claim: Professional, Volumes 1 and 
2, ASC X12N 837, Version 4010, October 2002, Washington Publishing 
Company, 004010X098A1.
    [sbull] Addenda to Health Care Claim: Institutional, Volumes 1 and 
2, ASC X12N 837, Version 4010, October 2002, Washington Publishing 
Company, 004010X096A1 as the standard for health care claims or 
equivalent encounter information.
1. Transaction Standard for Health Care Claims or Equivalent Encounter
    Information: Institutional
    Comment: A number of commenters objected to the usage note in the 
Addenda that requires reporting of HCPCS codes for all outpatient 
claims, because some outpatient services do not have HCPCS codes 
established for them. Commonly used revenue codes submitted without 
HCPCS codes are 250 (pharmacy drugs), 270 (medical supplies), 370 
(anesthesia supplies), 710 (recovery room), and 762 (observation). 
HCPCS codes do not exist for many of these services. The commenters 
noted that the use of unlisted (miscellaneous) HCPCS codes in 
situations where a specific HCPCS code does not exist to describe the 
service or supply could result in the rejection of an entire claim 
because additional documentation is required for defining the unlisted 
code. An increase in the use of unlisted codes for these situations 
would cause significant claim processing delays and rework. Even though 
there is no additional line-item payment for these revenue codes, they 
must be submitted because Ambulatory Patient Classification (APC) 
reimbursement values are calculated by looking at all of the services 
submitted.
    Response: We agree with these commenters that the Addenda proposal 
to require the use of HCPCS codes on all outpatient claims did not 
account for those services that do not have assigned HCPCS codes. The 
usage note was modified by the ASC X12N to indicate that HCPCS codes 
are only required to be reported for services when a HCPCS code exists 
for that particular service.
    Comment: Several commenters objected to the Addenda's removal of 
the requirement for diagnosis information on ``Hospital Other'' bill 
types. ``Other'' is defined by the NUBC as diagnostic services, or home 
health services not under a plan of treatment. For example, a family 
physician may send blood work to a hospital-based laboratory. The 
hospital never sees the patient. Some health plans use this diagnosis 
information to pay or reject claims based on whether a service is 
medically necessary, experimental, or cosmetic. The adopted Addenda 
modify the requirement for this diagnosis information by making its use 
situational, with a note explaining that a diagnosis is not needed for 
``Religious Non-Medical'' claims and ``Hospital Other'' bill types.
    Response: The original transaction standards required this 
diagnosis information on all inpatient and outpatient claims. The DSMO 
change request for not requiring the diagnosis information on certain 
types of claims was strongly supported by the industry because 
principal diagnosis information is not needed for certain hospital bill 
types. For example, when a physician sends a patient's blood work to a 
hospital-based laboratory, the hospital will bill for those services 
using the ``Hospital Other'' bill type. The hospital never sees the 
patient and would have no record of the patient's principal diagnosis 
information. We support the Addenda change to delete the requirement 
for principal diagnosis information in all situations, since in many 
cases obtaining this information creates an administrative burden when 
it is not readily available and not used.
    Comment: We received numerous comments on the Addenda's 
institutional claim usage of Healthcare Provider Taxonomy Codes, which 
identify the specialty of a health care provider that provided medical 
services. In the implementation specification adopted in the 
Transactions Rule, Healthcare Provider Taxonomy Code information usage 
was required at the line level and the claim level for institutional 
claims. The Addenda modify the required use of the Healthcare Provider 
Taxonomy Code information at the line level and the claim level for 
institutional claims by making its use situational. The situation that 
would require its use is if the information is known to impact claim 
adjudication. Commenters stated that hospitals often have many 
caregivers involved in the delivery of a particular service, and that 
it is impractical or impossible in many instances to report a single 
Healthcare Provider Taxonomy Code or other associated provider 
identification at the line level. To require such reporting would 
impose a tremendous burden on hospitals to implement massive new system 
changes to track which caregivers were responsible for providing each 
individual service and to incur costs that would never be recouped 
through payment differentials payers would assign to the service. 
Commenters suggested that HHS follow the NUBC recommendation to delete 
all references to the use of Healthcare Provider Taxonomy Codes from 
the institutional claim Implementation Guides. However, other 
commenters cited examples and reasons why Medicaid State agencies 
require the taxonomy information, including determining appropriate 
reimbursement, editing and auditing claims, routing data for State and 
Federal reporting, and detecting fraud and abuse. Use of taxonomy 
information on the institutional claim would allow Medicaid programs to 
use the most up-to-date information available for claim pricing and 
payment methodology reports. These commenters indicated that removing 
taxonomy codes from institutional claims could impact health care 
provider reimbursement and would involve complex policy changes for 
Medicaid State agencies.
    Response: After extensive deliberation on this issue and evaluation 
of current business practices among institutional health care 
providers, ASC X12N has removed the required usage of Healthcare 
Provider Taxonomy Codes from most segments in the ASC X12N 837 
Institutional Implementation Guide. We attempted to find specific 
situations in the industry documenting the need for this particular 
Healthcare Provider Taxonomy Code use. Only one health plan identified 
a specific need for this information at the Billing/Pay To Provider 
level for the institutional claim. Usage at this level will remain 
situational to accommodate those business situations when Healthcare 
Provider Taxonomy Code information is needed.
    Comment: Numerous commenters requested that the requirement to 
report physician name and ID number at the line level be eliminated. 
The implementation specifications adopted by the Transactions Rule 
established this requirement. The Addenda changes recommended by the 
DSMOs modify the required usage to situational. The situation that 
would require its use is if the information is known to impact claim 
adjudication. According to current billing practices, an institutional 
claim form summarizes services and supplies provided by a hospital 
facility. The attending physician who has ultimate responsibility for 
coordinating hospital services is reported at the claim level. Line 
level reporting of each health care provider would be redundant since 
individual professional services are separately billed according to 
professional billing guidelines.

[[Page 8391]]

    Response: After considerable discussion and evaluation of current 
industry practices, we determined that this information is available, 
but not currently required, on institutional claims. The implementation 
specifications adopted by the Transactions Rule established the usage 
of line level provider information as required when the provider 
information at the line level was different from that at the claim 
level. The Addenda for the implementation specifications modify the 
usage of line level provider information from required to situational. 
The specific situation when this information would be required is when 
line level provider information is known to impact claim adjudication.
    Comment: A few commenters noted that a usage change instruction for 
Operating Physician Specialty Information points to an incorrect 
segment.
    Response: We agree with this comment. ASC X12N has made the 
appropriate corrections and added this modification to the Addenda 
adopted by this final rule.
    2. Transaction Standard for Health Care Claims or Equivalent 
Encounter Information: Professional
    Comment: Several commenters stated that the implementation 
specification requirement proposed for the use of the NDC conflicted 
with the proposed regulation text for CMS-0003-P (67 FR 38044). In our 
CMS-0003-P proposed rule, we proposed repealing the NDC for reporting 
drugs and biologics on non-retail pharmacy transactions and that no 
standard for reporting drugs and biologics on non-retail pharmacy 
transactions be adopted at this time. CMS-0005-P (67 FR 38050) proposed 
adoption of the Addenda that required usage of the NDC information when 
necessary to add definition to a particular product. One commenter 
suggested that this be clarified by adding a mutually defined ``ZZ'' 
qualifier to permit usage of any code sets based on trading partner 
agreements.
    Response: This final rule adopts the modified Addenda approved by 
ASC X12N in October 2002. The Addenda permit use of either the NDC or 
HCPCS to code drugs and biologics on non-retail pharmacy claims, but 
(with limited exceptions) do not permit other codes to be used for this 
purpose. However, this choice of either HCPCS or NDC codes is not 
consistent with our decision, reflected in Sec.  162.1002(c) below, to 
repeal the standard code set for drugs and biologics for non-retail 
pharmacy transactions and to permit the use of all code sets in order 
to encourage development of a single code set that will meet the needs 
of the entire health care industry. We expect that the choice of either 
the HCPCS or the NDC codes afforded by the Addenda will, in the usual 
case, result in covered entities in the non-retail pharmacy sectors of 
the industry continuing to code drugs and biologics as they do now, 
whether by NDC or by HCPCS. The Addenda will thus not create a 
disincentive for industry to develop, and migrate to, a single code set 
for use by the industry.
    Although we agree that in this respect the Addenda are not 
consistent with our underlying policy choice regarding the code sets 
for drugs and biologics for non-retail pharmacy transactions, the 
adopted Addenda contain many important changes to the Implementation 
Guides that are essential if industry is to be able to test and 
implement the transactions in question smoothly and on time. Because we 
cannot, under the statute, choose among provisions in an industry-
adopted standard guide without going through negotiated rule making, 
the critical need for the remainder of the changes in the Addenda has 
led us to adopt the Addenda in their present form. We intend, however, 
to work with industry to align the Addenda with the policy reflected at 
Sec.  162.1002(c) and adopt a further modification of the standards to 
effect this alignment in the next update. Should we not be able to 
reach agreement on the inconsistency between our policy decision and 
the policy reflected in the Implementation Guides, we intend to pursue 
our options under the statute that include negotiated rule making. We 
recognize that the existence of what is, in effect, two standards for 
coding drugs and biologics within the transactions in question may 
cause problems between health plans and health care providers and may 
in some cases result in noncompliance. It is unlikely that we would 
pursue any such instances of noncompliance, in light of the competing 
demands for enforcement resources and the inconsistency between our 
policy decision and the policy reflected in the Implementation Guide.
    With respect to the comment about ZZ codes, the adopted Addenda 
only permit use of ZZ qualifiers for certain situations. Thus, the 
problem discussed above likewise exists with respect to such codes, and 
we adopt the same approach thereto.
    Comment: One commenter listed three modifications that had been 
approved by the DSMOs but were not included in the Addenda 
specifications. These modifications related to Initial Treatment Date, 
Spinal Manipulation Certifications for Medicare Part B, and the Test 
Date for Dialysis Patients.
    Response: We verified that these modifications were adopted in the 
proposed Addenda but due to typographical errors were inadvertently not 
included in the proposed Addenda. ASC X12N has corrected these errors 
and added these modifications to the Addenda adopted by this final 
rule.
    Comment: We received many comments from anesthesiology providers 
requesting that we not adopt the proposed usage instruction that allows 
reporting anesthesia services in minutes only. Current business 
practices require that reimbursement for anesthesia services be based 
on total anesthesia time in minutes or units. Adopting this proposed 
usage instruction in the Addenda would impact reimbursement 
methodologies and payment amounts for anesthesia providers.
    A number of commenters requested HHS to adopt a standard definition 
for anesthesia time. A generally accepted definition for most payers, 
including Medicare, that is consistent with the American Society of 
Anesthesiologists' definition, defines anesthesia time as starting when 
the practitioner begins to prepare the patient for anesthesia services 
and ending when anesthesia services are no longer being provided and 
the patient is safely in postoperative care. However, a minority of 
payers account for anesthesia time differently, requiring multiple 
reporting for face-to-face start and stop times, if there are different 
clinical activities in a particular service. A commenter pointed out 
that the sporadic need to depart from a widely accepted methodology is 
burdensome and results in frequent reporting errors.
    Response: We agree with the comment to delete the usage instruction 
requiring the reporting of minutes only for anesthesia services. Based 
upon various payment systems for anesthesia services that depend upon 
reporting unit information on claims, and the various methods for 
calculating one unit of time, we determined that adopting a standard 
requiring that only minutes be reported would impact anesthesia 
providers' ability to report their services adequately. Regarding the 
request for a standard definition for anesthesia time, we believe that 
the applicable comments actually seek further clarification of health 
plans' reimbursement policies, which are not the subject of these 
transaction standards.
    Comment: Several commenters objected to a modification of the 
requirement for spinal and non-spinal manipulation service information. 
This

[[Page 8392]]

information was previously required on all spinal manipulation claims. 
The Addenda limit this requirement to Medicare Part B chiropractic 
claims. For some health plans, this information applies to contractual 
benefit exclusions and is used to adjudicate claims. Since osteopathic 
manipulation procedure codes can represent either spinal or non-spinal 
manipulations, the spinal manipulation service information segment is 
used by some health plans to distinguish between spinal and non-spinal 
services.
    Response: We agree with this comment. ASC X12N has added a usage 
note to the Addenda adopted by this final rule to require the spinal 
manipulation service information segment when needed for claim 
adjudication.
    Comment: Numerous commenters supported the Addenda modification 
that changed the usage for Healthcare Provider Taxonomy Codes from 
required to situational. However, one commenter suggested that usage of 
Healthcare Provider Taxonomy Codes be completely removed from the 
Professional claim Implementation Guide.
    Response: Commenters generally supported the Addenda modification 
for usage of the Healthcare Provider Taxonomy Codes from required to 
situational. After extensive review and discussion of this topic, we 
adopt the proposed Addenda's situational usage of Healthcare Provider 
Taxonomy Codes on the Professional claim.
    Comment: We received comments indicating that ``Date Last Seen'' 
information was required by a number of payers. The Addenda specified 
that only Medicare required this information.
    Response: We have confirmed that other health plans do need these 
data. The Secretary adopts the ASC X12N modification for situational 
usage of this date information when it impacts the health plan's claim 
adjudication process.
    Comment: One commenter requested that a description for the acronym 
``EPSDT'' be added to the Implementation Guide.
    Response: We believe that this information will clarify 
Implementation Guide requirements. Accordingly, the acronym for Early 
and Periodic Screening for Diagnosis and Treatment (``EPSDT'') and its 
definition will be adopted. ASC X12N revised the Addenda to include 
this clarification.
    Comment: A number of commenters referenced variations in the use of 
``performing provider'' and ``rendering provider'' information, and 
questioned the different terminology.
    Response: In the Addenda performing provider (PE) and rendering 
provider (PR) are separate and distinct data elements. ``PE'' and 
``PR'' have the same business meaning of identifying the provider who 
furnishes a service. However, these data are named differently because 
they are referenced in separate sections of the Implementation Guide. 
``PE'' is used to denote the Performing Provider in the PRVO1 section. 
``PR'' denotes the Rendering Provider at the Loop 2310 B segment.
3. Transaction Standard for Health Care Claims or Equivalent Encounter 
Information: Dental
    Comment: We received a number of comments requesting the use of 
HCPCS modifier codes for dental claims. The commenters stated that 
using HCPCS modifier codes improves the efficiency of processing 
electronic dental claims by providing necessary detail and allowing 
more accurate dental claim adjudication. Other commenters opposed the 
use of HCPCS modifier codes with the adopted Code on Dental Procedures 
and Nomenclature standard, stating that most dental billing systems do 
not support procedure code modifiers. Those commenters pointed out that 
the use of HCPCS modifier codes is likely to increase paper claims and 
would perpetuate the current lack of code standardization for payment 
purposes and undermine the goal of administrative simplification.
    Response: The Code on Dental Procedures and Nomenclature (The 
Code), as maintained and distributed by the American Dental Association 
(ADA), is the adopted standard code set for reporting dental services. 
Using HCPCS modifier codes for dental claims reporting would require 
the adoption of an entire additional code set for standard dental 
transactions, when only 20 to 30 modifiers are needed. We recognize 
that no single code set in use today meets all of the business 
requirements related to the full range of health care services and 
conditions that exist, and that adopting multiple standards may be a 
way to address code set inadequacies. Rather than adopt the HCPCS 
modifier codes in addition to The Code for dental transactions, we 
suggest working with The Code maintainers, the ADA, to develop and add 
modifiers that will meet the needs of the dental industry. Dental 
professionals and the public may submit requests at http://www.ada.org/prof/prac/manage/benefits/cdtform.html.
    Comment: We received one comment suggesting that the phrase ``for 
services provided or proposed'' be added after Dental Health Care 
Claims (Sec.  162.1102(b)). The ASC X12N 837 dental claim transaction 
was designed and is used to submit a request for pre-determination and 
pre-authorization of dental benefits. Since this function was not 
identified in the Transactions Rule or in the Addenda, the submission 
of an electronic inquiry for determining payment for proposed dental 
services is not an adopted transaction standard. This commenter also 
suggested that the word ``Dental'' be deleted from Sec.  162.1302(b), 
Standard for Referral Certification and Authorization, dental, 
professional, and institutional referral certification and 
authorization 004010X094A1 because the adopted implementation 
specification for ASC X12N 278 states that it is not intended for 
dental pre-determination pricing, and that instead the ASC X12N 837 
Dental transaction should be used for this purpose. The commenter also 
stated that there is no existing or anticipated need for referral 
certification and authorization using the ASC X12N 278 for dental 
services. Dental systems support the ASC X12N 837 Dental for pre-
approval of dental benefits. We received conflicting comments from 
Medicaid-identified commenters who expressed a need for using the ASC 
X12N 278 for dental referral certification and authorization, and that 
indicated that all dental systems do not completely support the ASC 
X12N 837 Dental for pre-approval of dental benefits.
    Response: We have determined that the ASC X12N 837 Dental claim is 
commonly used by the dental industry for pre-determination and pricing 
of dental services. This function does not meet the definition for the 
Referral Certification and Authorization Transaction in the 
Transactions Rule at Sec.  162.1301, and is not a transaction standard 
adopted by the Transaction Rule, or proposed in CMS-0005-P.
    Although not a HIPAA standard, pre-determination and pricing 
functionality are available for use with the ASC X12N Dental claim. 
However, ASC X12N has not adopted a standard response transaction for 
use with this function. ASC X12N will be developing and modeling the 
business use of the pre-determination and pricing transaction in 
coordination with the DSMOs for future consideration as a transaction 
standard and the subject of a later rule.
    Based upon comments received, we also have determined that there is 
an expressed business need for use of the ASC X12N 278 for dental 
referral

[[Page 8393]]

certification and authorization. The word ``dental'' will remain in 
Sec.  162.1302 so that use of ASC X12N 278 is available for referral 
certification and authorization of dental transactions.
    In summary, adding the phrase ``for Services Provided or Proposed'' 
to Sec.  162.1102(b) will not be adopted at this time. However, this 
does not preclude use of the ASC X12N 837 Dental claim pre-
determination and pricing functionality. The ASC X12N 278 will remain 
available for dental use of the Referral Certification and 
Authorization Transaction. The dental industry will have available use 
of the ASC X12N 278 adopted transaction standard for referral 
certification and authorization transactions and the ASC X12N 837 
Dental claim for pre-determination and pricing activities for which no 
standard has been adopted.
    Comment: A number of commenters disagreed with the Addenda 
modification that added ``Assistant Surgeon'' and ``Rendering 
Provider'' information to both the line level and the claim level for 
dental claims. Commenters stated that tracking and reporting this 
information would be an enormous burden for health care providers and 
not conducive to administrative simplification.
    Response: In order to reduce the administrative burden on health 
care providers and prevent the potential confusion that could result 
from sending or receiving a claim with both a ``Rendering Provider'' 
and an ``Assistant Surgeon'' at the same level, ASC X12N has added a 
note to the Addenda instructing the user not to report the ``Assistant 
Surgeon'' information when the ``Rendering Provider'' information is 
reported at the line level of the claim.
    Comment: We received a few comments supporting the Addenda 
modification that changed the usage from required to situational for 
Healthcare Provider Taxonomy Codes.
    Response: The Addenda modified the use of the Healthcare Provider 
Taxonomy Codes from required to situational on the dental claim.
    Comment: One commenter indicated support for the Addenda and 
specifically supported the addition of a new code set value in the 
Addenda, ``service provider number,'' which the commenter maintained 
was a necessary data element for managed care programs.
    Response: This comment supports one of the Addenda modifications 
adopted by this final rule that was required to permit initial 
implementation of the standards. Adding the ``service provider number'' 
code set value is an example of a technical addition that better 
defines the implementation specifications.

H. Transaction Standard for Eligibility for a Health Plan

    We proposed adoption of the Addenda to Health Care Eligibility 
Benefit Inquiry and Response, ASC X12N 270/271, Version 4010, October 
2002, Washington Publishing Company, 004010X092A1 as the standard for 
the dental, professional, and institutional health care eligibility 
benefit inquiry and response transaction.
    Comment: We received two comments that expressed support for 
adoption of the Addenda to the ASC X12N 270/271 transaction.
    Response: No additional comments or specific detailed requests were 
received for these Addenda.

I. Transaction Standard for Referral Certification and Authorization

    We proposed adoption of the Addenda to the Health Care Services 
Review--Request for Review and Response, ASC X12N 278, Version 4010, 
October 2002, Washington Publishing Company, 004010X094A1 for the 
dental, professional, and institutional referral certification and 
authorization transaction.
    Comment: We received a number of comments about use of the Logical 
Observation Identifier Names and Codes (LOINC TM). The 
comments stated that use of this code set was confusing and requested 
that the usage requirement be deleted or a clarifying note be added. 
The Addenda state that this code set is not allowed for use under HIPAA 
at this time. It is unclear why this code set would be included in the 
Addenda if the code set is not an adopted standard code set.
    Response: The LOINC TM code set was intended by the SSOs 
to increase functionality of the transaction. It has not been adopted 
as a national standard code set, but can be used in implementing this 
transaction. The Addenda add the use of the LOINC TM code 
set as an EDI option for responding to requests for additional 
information when conducting the standard Referral Certification and 
Authorization Transaction.
    Comment: We received a number of comments suggesting that the 
Addenda usage notes that allow attachment of electronic documentation 
to this transaction were confusing because they appeared to conflict 
with the Claims Attachment Transaction, mandated by HIPAA but not 
adopted by the Secretary at this time.
    Response: The Claims Attachment Transaction standard mandated by 
HIPAA, but not adopted by the Secretary, is available for voluntary EDI 
use from the Washington Publishing Company at the following Web site: 
www.wpc-edi.com. The functionality of this transaction allows the 
electronic transmission of documentation associated with a claim. It 
can also function as a response for the Referral Certification and 
Authorization Transaction, when additional information is requested. 
The use of the electronic attachment with the Referral Certification 
and Authorization Transaction is considered a two-way transaction: an 
EDI request and its associated EDI response. Use with the claim 
transaction can be either a one-way (required attachment is sent with 
the claim and not as a response to a request), or a two-way 
transaction. The Addenda do not require the provider to respond to this 
request for additional information by using the Claims Attachment 
Transaction. However, if the provider wants to respond using an EDI 
transaction, the preferred method is the Claims Attachment Transaction.
    We agree that further clarification on the circumstances when these 
two transactions may be used is needed. ASC X12N has modified the 
standard for the referral certification and authorization 
implementation specification to illustrate the model use of these 
transactions for other applications.
    Comment: We received one comment that referenced the absence of a 
needed segment regarding Dependent Detail information. The Dependent 
Detail loop ID 2010DA for Dependent name 270 DTP date or time period is 
not referenced in the Addenda. This segment is needed to convey 
subscriber dependent information when the dependent is the patient.
    Response: We agree that this is an error. ASC X12N has corrected it 
in the adopted Addenda.
    Comment: There were approximately 20 highly technical comments 
relating to requests for clarification, missing elements, misspelling, 
minor revisions, and improvements to the Implementation Guides.
    Response: Because of their technical complexity, these comments 
that involved modifications to specific loops and data elements in the 
implementation specifications were referred to the ASC X12N Workgroup. 
The following is a summary of these comments:
    [sbull] Four commenters requested minor revisions, which included 
creating a response code to tell the provider that

[[Page 8394]]

additional medical information is needed, correcting a typographical 
error for repeating a data element, adding a qualifier to enable the 
provider to link a request with an attachment, and defining two 
segments that only support paper attachments. These requests have been 
reflected in the revised Addenda.
    [sbull] Fourteen of the commenters asked for additional 
clarification on the appropriate use of the standard for referral 
certification and authorization as a two-way transaction. The 
Implementation Guide is modified to illustrate the model use of this 
transaction to include a follow-up EDI or non-EDI response.
    [sbull] One commenter asked a question relating to whether a 
transaction should be rejected if there is no patient event tracking 
number (TRN) segment for the patient, when the patient is not the 
subscriber. ASC X12N clarified in the Addenda that the transaction 
should not be rejected. The TRN usage instruction was made specific 
about when the data are required.
    [sbull] One of the commenters requested that a new code be 
developed to replace the Assigned By Receiver (ABR) code rather than 
use an existing code to define an element for which it was not 
intended. A data maintenance request has been approved to have a code 
added, but it will not be in effect for the ASC X12N 4010 Version of 
the Implementation Guide.

J. Transaction Standard for Health Care Claim Status

    We proposed the adoption of the Addenda to Health Care Claim Status 
Request and Response, ASC X12N 276/277, Version 4010, October 2002, 
Washington Publishing Company, 004010X093A1 as the standard for the 
health care claim status transaction.
    We did not receive significant comments on this proposal.

K. Transaction Standard for Enrollment and Disenrollment in a Health 
Plan

    We proposed the adoption of the Addenda to Benefit Enrollment and 
Maintenance, ASC X12N 834 Benefit Enrollment and Maintenance, Version 
4010, October 2002, Washington Publishing Company, 004010X095A1 as the 
standard for enrollment and disenrollment in a health plan transaction.
    We did not receive significant comments on this proposal.

L. Transaction Standard for Health Care Claim Payment/Advice

    We proposed the adoption of the Addenda to Health Care Claim 
Payment/Advice, ASC X12N 835, Version 4010, October 2002, Washington 
Publishing Company, 004010X091A1 as the standard for dental, 
professional, institutional, and pharmacy health care payment and 
remittance advice transactions.
    We did not receive significant comments on this proposal.

M. Transaction Standard for Health Care Premium Payments

    Comment: A number of commenters pointed out that adoption of the 
ASC X12N 004010X061 and ASC X12N 004010X061A1 standards were not 
included in CMS-0005-P.
    Response: We received comments pointing out that the transaction 
standard for Health Care Premium Payments, the ASC X12N 820, 004010X061 
and Addenda, 004010X061A1, were omitted from CMS-0005-P. We did not 
specifically intend to exclude this transaction standard and its 
Addenda from the proposed rule. The modification for the Addenda to 
this Implementation Guide provides the same guidance as the Addenda for 
the other transaction standards; the modification provides guidance to 
the industry, in section A.1.3.1.2, in handling decimal points in 
monetary transactions. Nevertheless, we recognize that these 
Implementation Guide modifications were not expressly identified and 
separately listed in CMS-0005-P, and thus we are including them as 
follows in section IV below.

IV. Waiver of Proposed Rulemaking

    We ordinarily publish a notice of proposed rulemaking in the 
Federal Register and invite public comment on the proposed rule. The 
notice of proposed rulemaking includes a reference to the legal 
authority under which the rule is proposed, and the terms and substance 
of the proposed rule or a description of the subjects and issues 
involved. This procedure can be waived, however, if an agency finds 
good cause that a notice and public comment procedure is impracticable, 
unnecessary, or contrary to the public interest and incorporates a 
statement of the finding and its reasons in the rule issued.
    We find for good cause that it is unnecessary to undertake notice 
and comment rulemaking procedures for this final rule because the 
Addenda modifications for Sec.  162.1702 ``Standard for health care 
premium payments,'' Sec.  162.1802 ``Standards for coordination of 
benefits,'' and technical modifications approved by the DSMOs (relating 
to Initial Treatment Date, Spinal Manipulation Certifications for 
Medicare Part B, and the Test Date for Dialysis Patients) offer no 
substantive changes to the standard and Addenda and merely provide 
explanatory guidance.
    The Addenda for the Health Plan Premium Payments Transaction 
provides the same guidance to the industry as the Addenda for other 
adopted transactions that were proposed in the proposed rule at 67 FR 
38050.
    The Coordination of Benefits Transaction Standard is a variation of 
the health care claim transaction for institutional, dental, and 
professional providers that was proposed in CMS-0005-P.
    The three modifications approved by the DSMOs but not included in 
the Addenda specifications are merely technical corrections relating to 
Initial Treatment Date, Spinal Manipulation Certifications for Medicare 
Part B, and the Test Date for Dialysis Patients for a single 
transaction standard. These corrections in essence correct a 
typographical error in the draft Addenda and do not require any data 
elements to be changed.
    We received comments on the standard for the health care claim, and 
have responded to those in this final rule. Because each of the 
transaction standards adopted by the Transactions final rule has 
Addenda that were approved for use by the industry, we are adopting the 
Addenda for each of the proposed transactions so that implementation of 
the Addenda for each of the adopted standards will be consistent. 
Therefore, for good cause, we waive notice and public comment 
procedures under 5 U.S.C. 553(b)(B).

V. Collection of Information Requirements

    Under the Paperwork Reduction Act (PRA) 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 PRA of 1995 requires that 
we solicit comment on the following issues:
    [sbull] The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
    [sbull] The accuracy of our estimate of the information collection 
burden.
    [sbull] The quality, utility, and clarity of the information to be 
collected.
    [sbull] Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.

[[Page 8395]]

    Therefore, we are soliciting public comments on each of these 
issues for the information collection requirements discussed below.
    The information collection requirements and associated burdens in 
Sec. Sec.  162.1002, 162.1102, 162.1202, 162.1302, 162.1402, 162.1502, 
162.1602, 162.1702, and 162.1802 are subject to the PRA. The burden of 
these standards is addressed under OMB approval number 0938-0866.
    We are submitting a copy of these revisions to the regulation 
sections to OMB for its review of the information collection 
requirements. We will also submit the all of the revisions for review 
and reapproval under 0938-0866. These revisions are not effective until 
OMB has approved them. If you comment on any of these information 
collection and record keeping requirements, please mail copies directly 
to the following:

Office of Strategic Operations and Regulatory Affairs, Centers for 
Medicare and Medicaid Services, 7500 Security Boulevard, Attn: PRA 
Reports Clearance Officer, Baltimore, MD 21244, Attn: Julie Brown, CMS-
0003-F/0005-F; and
Office of Information and Regulatory Affairs, Office of Management and 
Budget, Room 10235, New Executive Office Building, Washington, DC 
20503, Attn: Brenda Aguilar, Desk Officer, CMS-0003-F/0005-F.

VI. Regulatory Impact Statement

    We have examined the impacts of this rule as required by Executive 
Order 12866 (September 1993, Regulatory Planning and Review), the 
Regulatory Flexibility Act (RFA) (September 16, 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 (as amended by Executive Order 13258 which 
merely reassigns responsibility of duties) 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. The 
analysis in the Transactions Rule assumed that the adopted standards 
will be able to be implemented successfully by the industry. The 
changes adopted in this final rule are a result of industry analyses 
that showed certain minor modifications to the adopted standards would 
be necessary to permit full industry compliance with the standards. 
These modifications make limited adjustments and corrections to the 
overall standards and would facilitate the congressional intent of 
implementation of national electronic standards. Thus, the impact 
analysis previously published, 65 FR 50350 through 50365, would reflect 
industry experience in implementing the changes adopted in this rule.
    In relation to the prior impact analysis, this final rule imposes 
no additional burdens and creates no additional costs. All of the 
modifications adopted in this final rule and proposed in CMS-0003-P (67 
FR 38044) and CMS-0005-P (67 FR 38050) are required to facilitate 
successful implementation of the standards. Their implementation will, 
in fact, avoid costs that were not anticipated in the impact analysis 
of the Transactions Rule.
    The 115 approved modifications to the standards included 48 
maintenance changes (minor error corrections or clarifications), and 67 
modifications to the standards. Details of these 67 modifications 
include--
    [sbull] Changing the usage of data elements from ``required'' to 
``situational'' (about 20 percent of changes);
    [sbull] Removal of certain data elements (about 20 percent of 
changes);
    [sbull] Allowing certain data elements to be reported via external 
code sets rather than data elements in the transaction (about 20 
percent of changes); and
    [sbull] Adding additional functionality to some transactions (about 
40 percent of changes).
    In particular, institutional and professional providers that have 
submitted ASCA compliance plans will not be required to retool systems 
and restructure current operations to accommodate the adopted NDC for 
reporting drugs and biologics on non-retail pharmacy standard 
transactions. Estimates reported to the NCVHS indicated that the cost 
of transitioning to NDCs on institutional claims could easily exceed an 
institution's cost for adopting all other transaction standards 
combined. While costs could vary depending on the size of the facility, 
hospitals estimate the minimum cost at $200,000 per facility to switch 
from HCPCS codes to NDCs. The industry also estimates that typical 
physician practices may spend $800 to as much as $100,000 for practice 
management systems.\2\ Although included for purposes of illustration, 
documentation to substantiate these estimates of the true costs for 
institutional providers of adopting the NDC as the code set standard 
for transactions involving drugs and biologics was not provided. 
Consequently, we do not consider these to be reliable estimates of the 
true costs for institutional providers of adopting the NDC as the code 
set standard for transactions involving drugs and biologics. This final 
rule retracts the adoption of the NDC and does not adopt any standard 
medical code set for reporting drugs and biologics on nonretail 
pharmacy transactions. Institutional and professional providers can 
continue their current practices for reporting drugs and biologics on 
institutional and professional standard transactions.
---------------------------------------------------------------------------

    \2\ Testimony from health care providers to the NCVHS on 
February 1, 2001.
---------------------------------------------------------------------------

    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 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 $6 million to $29 million. The RFA for this final rule is 
linked to the aggregate RFA for all the Administrative Simplification 
standards that appeared in the Transactions Rule, which predated the 
SBA change. It is appropriate, for purposes of this final rule, to 
continue to use the $5 million small business size standard that was in 
effect at the time of publication of the Transactions Rule. Maintaining 
this consistent definition for small business size minimizes confusion 
in the industry and does not adversely impact entities that were not 
considered small businesses according to the Transaction Rule 
definition. 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 in any one year. For purposes of the 
RFA, all retail pharmacies are considered to be small entities. We have 
determined that this final rule will not have a significant economic 
impact on a substantial number of small entities.

[[Page 8396]]

This final rule makes only minor modifications to the regulatory 
process already put in place by the Transactions Rule (65 FR 50350 
through 50365), which will generally reduce compliance burden on 
covered 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 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. We have determined that 
this final rule will not have an additional significant impact on a 
substantial number of small rural hospitals. This final rule makes only 
minor modifications to the regulatory process already put in place by 
the Transactions Rule (65 FR 50350 through 50365), which will generally 
reduce compliance burden, particularly on hospitals and other 
institutional providers, who will no longer be required to adopt the 
NDC for transactions involving drugs and biologics.
    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 an expenditure in any one year by 
State, local, or tribal governments, in the aggregate, or by the 
private sector, of $110 million. This final rule will have no mandated 
consequential effect on State, local, or tribal governments, or on the 
private sector when using the Regulatory Impact Analysis for the 
Transactions Rule (65 FR 50350 through 50365) as a baseline.
    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 final rule will not 
significantly affect the rights, roles, and responsibilities of States. 
This final rule makes only minor modifications to the regulatory 
process already put in place by the Transactions Rule (65 FR 50350 
through 50365), which will generally reduce compliance burden on 
covered entities.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget (OMB).

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 of this final rule, the 
Department of Health and Human Services amends 45 CFR subtitle A, 
subchapter C, part 162 as follows:

PART 16--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. Section 162.900 is revised to read as follows:


Sec.  162.900  Compliance dates for transaction standards and code 
sets.

    (a) Small health plans. All small health plans must comply with 
applicable requirements of subparts I through R of this part no later 
than October 16, 2003.
    (b) Covered entities that timely submitted a compliance plan. Any 
covered entity, other than a small health plan, that timely submitted a 
compliance plan with the Secretary under the provisions of section 2 of 
Pub. L. 107-105, 115 Stat. 1003 (ASCA) must comply with the applicable 
requirements of subparts I through R of this part no later than October 
16, 2003.
    (c) Covered entities that did not timely submit a compliance plan.
    Any covered entity, other than a small health plan, that did not 
timely submit a compliance plan under the provisions of section 2 of 
Pub. L. 107-105, 115 Stat. 1003 (ASCA) must comply with the applicable 
requirements of subparts I through R of this part--
    (1) Beginning on October 16, 2002, and ending on October 15, 2003--
    (i) For the corresponding time period; or
    (ii) For the time period beginning on October 16, 2003.
    (2) Beginning on and after October 16, 2003, for the corresponding 
time period.

    3. Section 162.920 is revised to read as follows:


Sec.  162.920  Availability of implementation specifications.

    A person or an organization may directly request copies of the 
implementation standards described in subparts I through R of this part 
from the publishers listed in this section. The Director of the Office 
of the Federal Register approves the implementation specifications 
described in this section for incorporation by reference in subparts I 
through R of this part in accordance with 5 U.S.C. 552(a) and 1 CFR 
part 51. The implementation specifications described in this paragraph 
are also available for inspection by the public at the Office of the 
Federal Register, 800 North Capitol Street, NW., Suite 700, Washington, 
DC; and the Centers for Medicare & Medicaid Services, 7500 Security 
Boulevard, Baltimore, Maryland 21244. Copy requests must be accompanied 
by the name of the standard, number, if applicable, and version number. 
Implementation specifications are available for the following 
transactions:
    (a) ASC X12N specifications. The implementation specifications for 
ASC X12N standards may be obtained from the Washington Publishing 
Company, PMB 161, 5284 Randolph Road, Rockville, MD, 20852-2116; 
Telephone (301) 949-9740; and FAX: (301) 949-9742. They are also 
available through the Washington Publishing Company on the Internet at 
http://www.wpc-edi.com/ com/. The transaction implementation specifications 
are as follows:
    (1) The ASC X12N 837--Health Care Claim: Dental, Version 4010, May 
2000, Washington Publishing Company, 004010X097 and Addenda to Health 
Care Claim: Dental, Version 4010, October 2002, Washington Publishing 
Company, 004010X097A1, as referenced in Sec.  162.1102 and Sec.  
162.1802.
    (2) The ASC X12N 837--Health Care Claim: Professional, Volumes 1 
and 2, Version 4010, May 2000, Washington Publishing Company, 
004010X098 and Addenda to Health Care Claim: Professional, Volumes 1 
and 2, Version 4010, October 2002, Washington Publishing Company, 
004010X098A1, as referenced in Sec.  162.1102 and Sec.  162.1802.
    (3) The ASC X12N 837--Health Care Claim: Institutional, Volumes 1 
and 2, Version 4010, May 2000, Washington Publishing Company, 
004010X096 and Addenda to Health Care Claim: Institutional, Volumes 1 
and 2, Version 4010, October 2002, Washington Publishing Company, 
004010X096A1 as referenced in Sec.  162.1102 and Sec.  162.1802.
    (4) The ASC X12N 835--Health Care Claim Payment/Advice, Version 
4010, May 2000, Washington Publishing Company, 004010X091, and Addenda 
to Health Care Claim Payment/Advice, Version 4010, October 2002, 
Washington Publishing Company,

[[Page 8397]]

004010X091A1 as referenced in Sec.  162.1602.
    (5) ASC X12N 834--Benefit Enrollment and Maintenance, Version 4010, 
May 2000, Washington Publishing Company, 004010X095 and Addenda to 
Benefit Enrollment and Maintenance, Version 4010, October 2002, 
Washington Publishing Company, 004010X095A1, as referenced in Sec.  
162.1502.
    (6) The ASC X12N 820--Payroll Deducted and Other Group Premium 
Payment for Insurance Products, Version 4010, May 2000, Washington 
Publishing Company, 004010X061, and Addenda to Payroll Deducted and 
Other Group Premium Payment for Insurance Products, Version 4010, 
October 2002, Washington Publishing Company, 004010X061A1, as 
referenced in Sec.  162.1702.
    (7) The ASC X12N 278--Health Care Services Review--Request for 
Review and Response, Version 4010, May 2000, Washington Publishing 
Company, 004010X094 and Addenda to Health Care Services Review--Request 
for Review and Response, Version 4010, October 2002, Washington 
Publishing Company, 004010X094A1, as referenced in Sec.  162.1302.
    (8) The ASC X12N-276/277 Health Care Claim Status Request and 
Response, Version 4010, May 2000, Washington Publishing Company, 
004010X093 and Addenda to Health Care Claim Status Request and 
Response, Version 4010, October 2002, Washington Publishing Company, 
004010X093A1, as referenced in Sec.  162.1402.
    (9) The ASC X12N 270/271--Health Care Eligibility Benefit Inquiry 
and Response, Version 4010, May 2000, Washington Publishing Company, 
004010X092 and Addenda to Health Care Eligibility Benefit Inquiry and 
Response, Version 4010, October 2002, Washington Publishing Company, 
004010X092A1, as referenced in Sec.  162.1202.
    (b) Retail pharmacy specifications. The implementation 
specifications for retail pharmacy standards may be obtained for a fee 
from the National Council for Prescription Drug Programs (NCPDP), 9240 
E. Raintree Drive, Scottsdale, AZ 85260; Telephone (480) 477-1000; and 
FAX (480) 767-1042. They may also be obtained through the Internet at 
http://www.ncpdp.org. The transaction implementation specifications are 
as follows:
    (1) The Telecommunication Standard Implementation Guide Version 5, 
Release 1 (Version 5.1), September 1999, National Council for 
Prescription Drug Programs, as referenced in Sec.  162.1102, Sec.  
162.1202, Sec.  162.1302, Sec.  162.1602, and Sec.  162.1802.
    (2) The Batch Standard Batch Implementation Guide, Version 1, 
Release 1 (Version 1.1), January 2000, supporting Telecommunication 
Standard Implementation Guide, Version 5, Release 1 (Version 5.1) for 
the NCPDP Data Record in the Detail Data Record, National Council for 
Prescription Drug Programs, as referenced in Sec.  162.1102, Sec.  
162.1202, Sec.  162.1302, and Sec.  162.1802.
    (3) The National Council for Prescription Drug Programs (NCPDP) 
equivalent NCPDP Batch Standard Batch Implementation Guide, Version 1, 
Release 0, February 1, 1996, as referenced in Sec.  162.1102, Sec.  
162.1202, Sec.  162.1602, and Sec.  162.1802.
    4. Section 162.1002 is amended by--
    A. Revising the introductory text to the section.
    B. Redesignating paragraphs (a) through (f) as paragraphs (a)(1) 
through (a)(6).
    C. In redesignated paragraph (a)(1), further redesignating 
paragraphs (1) through (5) as paragraphs (a)(1)(i) through (a)(1)(v).
    D. In redesignated paragraph (a)(2), further redesignating 
paragraphs (1) through (4) as paragraphs (a)(2)(i) through (a)(2)(iv).
    E. In redesignated paragraph (a)(3), further redesignating 
paragraphs (1) and (2) as paragraphs (a)(3)(i) and (a)(3)(ii).
    F. In redesignated paragraph (a)(5), further redesignating 
paragraphs (1) through (7) as paragraphs (a)(5)(i) through (a)(5)(vii).
    G. In redesignated paragraph (a)(6), further redesignating 
paragraphs (1) through (3) as paragraphs (a)(6)(i) through (a)(6)(iii).
    H. Adding new paragraph (a) introductory text and paragraph (b).
    The republication and additions read as follows:


Sec.  162.1002  Medical data code sets.

    The Secretary adopts the following maintaining organization's code 
sets as the standard medical data code sets:
    (a) For the period from October 16, 2002 through October 15, 2003:
* * * * *
    (b) For the period on and after October 16, 2003:
    (1) The code sets specified in paragraphs (a)(1), (a)(2),(a)(4), 
and (a)(5) of this section.
    (2) National Drug Codes (NDC), as maintained and distributed by 
HHS, for reporting the following by retail pharmacies:
    (i) Drugs.
    (ii) Biologics.
    (3) 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, with the 
exception of drugs and biologics. These items include, but are not 
limited to, the following:
    (i) Medical supplies.
    (ii) Orthotic and prosthetic devices.
    (iii) Durable medical equipment.

    5. Section 162.1102 is revised to read as follows:


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

    The Secretary adopts the following standards for the health care 
claims or equivalent encounter information transaction:
    (a) For the period from October 16, 2002 through October 15, 2003:
    (1) 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 0 February 1, 1996. (Incorporated by reference in Sec.  
162.920).
    (2) Dental health care claims. The ASC X12N 837--Health Care Claim: 
Dental, Version 4010, May 2000, Washington Publishing Company, 
004010X097. (Incorporated by reference in Sec.  162.920).
    (3) Professional health care claims. The ASC X12N 837--Health Care 
Claim: Professional, Volumes 1 and 2, Version 4010, May 2000, 
Washington Publishing Company, 004010X098. (Incorporated by reference 
in Sec.  162.920).
    (4) Institutional health care claims. The ASC X12N 837--Health Care 
Claim: Institutional, Volumes 1 and 2, Version 4010, May 2000, 
Washington Publishing Company, 004010X096. (Incorporated by reference 
in Sec.  162.920).
    (b) For the period from October 16, 2002 through October 15, 2003:
    (1) Retail pharmacy drugs claims. The National Council for 
Prescription Drug Programs (NCPDP) Telecommunication Standards 
Implementaiton Guide, Version 5, Release 1, September 1999, and 
equivalent NCPDP Batch Standards Batch Implementation Guide, Version 1, 
Release 1, (Version 1.1), January 2000, supporting Telecomunication 
Version 5.1 for the NCPDP Data Record in the Detail Data Record. 
(Incorporated by reference in Sec.  162.920).
    (2) Dental, health care claims. The ASC X12N 837--Health Care 
Claim: Dental, Version 4010, May 2000, Washington Publishing Company, 
004010X097. and Addenda to Health Care Claim: Dental, Version 4010,

[[Page 8398]]

October 2002, Washington Publishing Company, 004010X097A1. 
(Incorporated by reference in Sec.  162.920).
    (3) Professional healt care claims. The ASC X12N 837--Health Care 
Claims: Professional, Volumes 1 and 2, Version 4010, may 2000, 
Washington Publishing Company, 004010X098 and Addenda to Health Care 
Claims: Professional, Volumes 1 and 2, Version 4010, October 2002, 
Washington Publishing Company, 004010x098A1. (Incorporated by reference 
in Sec.  162.920).
    (4) Institutional health care claims. The ASC X12N 837--Health Care 
Claim: Institutional, Volumes 1 and 2, Version 4010, May 2000, 
Washington Publishing Company, 004010X096. (Incorporated by reference 
in Sec.  162.920).

    6. Section 162.1202 is revised to read as follows:


Sec.  162.1202  Standards for eligibility for a health plan 
transaction.

    The Secretary adopts the following standards for the eligibility 
for a health plan transaction:
    (a) For the period from October 16, 2002 through October 15, 2003:
    (1) Retail pharmacy drugs. The National Council for Prescription 
Drug Programs Telecommunications Standards Implementaiton Guide, 
Version 5, Release 1, September 1999, and equivalent NCPDP Batch 
Standards Batch Implementation Guide, Version 1, Release 0, February 1, 
1996. (Incorporated by reference in Sec.  162.920).
    (2) Dental, professional, and institutional health care eligibility 
benefit inquiry and response. The ASC X12N 270/271--Health Care 
Eligibility Benefit Inquiry and Response, Version 4010, May 2000, 
Washington Publishing Company,004010X092. (Incorporated by reference in 
Sec.  162.920).
    (b) For the period on and after October 16, 2003:
    (1) 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. 
(Incorporated by reference in Sec.  162.920).
    (2) Dental, professional, and institutional health care eligibility 
benefit inquiry and response. The ASC X12N 270/271--Health Care 
Eligibility Benefit Inquiry and Response, Version 4010, May 2000, 
Washington Publishing Company, 004010X092. (Incorporated by reference 
in Sec.  162.920).
    (b) For the period on and after October 16, 2003:
    (1) Retail pharmacy drugs. The National Council for Prescription 
Drug Programs 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 Telecommunications Standard 
Implementation Guide, Version 5, Release 1 (Version 5.1) for the NCPDP 
Data Record in the Detail Data Record. (Incorporated by reference in 
Sec.  162.920).
    (2) Dental, professional, and institutional health care eligibility 
benefit inquiry and response. The ASC X12N 270/271--Health Care 
Eligibility Benefit Inquiry and Response, Version 4010, May 2000, 
Washington Publishing Company, 004010X092 and Addenda to Health Care 
Eligibility Benefit Inquiry and Response, Version 4010, October 2002, 
Washington Publishing Company, 004010X092A1. (Incorporated by reference 
in Sec.  162.920).

    7. Section 162.1302 is revised to read as follows:


Sec.  162.1302  Standards for referral certification and authorization 
transaction.

    The Secretary adopts the following standards for the referral 
certification and authorization transaction:
    (a) For the period from October 16, 2002, through October 15, 2003: 
The ASC X12N 278--Health Care Services Review--Request for Review and 
Response, Version 4010, May 2000, Washington Publishing Company, 
004010X094. (Incorporated by reference in Sec.  162.920).
    (b) For the period on and after October 16, 2003:
    (1) Retail pharmacy drug 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 Telecommunications Standard 
Implementation Guide, Version 5, Release 1 (Version 5.1) for the NCPDP 
Data Record in the Detail Data Record. (Incorporated by reference in 
Sec.  162.920).
    (2) Dental, professional, and institutional referral certification 
and authorization. The ASC X12N 278--Health Care Services Review--
Request for Review and Response, Version 4010, May 2000, Washington 
Publishing Company, 004010X094 and Addenda to Health Care Services 
Review--Request for Review and Response, Version 4010, October 2002, 
Washington Publishing Company, 004010X094A1. (Incorporated by reference 
in Sec.  162.920).

    8. Section 162.1402 is revised to read as follows:


Sec.  162.1402  Standards for health care claim status transaction.

    The Secretary adopts the following standards for the health care 
claim status transaction:
    (a) For the period from October 16, 2002 through October 15, 2003: 
The ASC X12N-276/277 Health Care Claim Status Request and Response, 
Version 4010, May 2000, Washington Publishing Company, 004010X093. 
(Incorporated by reference in Sec.  162.920).
    (b) For the period on and after October 16, 2003: The ASC X12N-276/
277 Health Care Claim Status Request and Response, Version 4010, May 
2000, Washington Publishing Company, 004010X093 and Addenda to Health 
Care Claim Status Request and Response, Version 4010, October 2002, 
Washington Publishing Company, 004010X093A1. (Incorporated by reference 
in Sec.  162.920).

    9. Section 162.1502 is revised to read as follows:


Sec.  162.1502  Standards for enrollment and disenrollment in a health 
plan transaction.

    The Secretary adopts the following standards for the enrollment and 
disenrollment in a health plan transaction.
    (a) For the period from October 16, 2002 through October 15, 2003: 
ASC X12N 834--Benefit Enrollment and Maintenance, Version 4010, May 
2000, Washington Publishing Company, 004010X095. (Incorporated by 
reference in Sec.  162.920).
    (b) For the period on and after October 16, 2003: ASC X12N 834--
Benefit Enrollment and Maintenance, Version 4010, May 2000, Washington 
Publishing Company, 004010X095 and Addenda to Benefit Enrollment and 
Maintenance, Version 4010, October 2002, Washington Publishing Company, 
004010X095A1. (Incorporated by reference in Sec.  162.920).

    10. Section 162.1602 is revised to read as follows:


Sec.  162.1602  Standards for health care payment and remittance advice 
transaction.

    The Secretary adopts the following standards for the health care 
payment and remittance advice transaction.
    (a) For the period from October 16, 2002 through October 15, 2003:
    (1) Retail pharmacy drug claims and remittance advice. The NCPDP 
Telecommunication Standard Implementation Guide, Version 5

[[Page 8399]]

Release 1, September 1999, and equivalent NCPDP Batch Standard Batch 
Implementation Guide, Version 1 Release 0, February 1, 1996. 
(Incorporated by reference in Sec.  162.920).
    (2) Dental, professional, and institutional health care claims and 
remittance advice. The ASC X12N 835--Health Care Claim Payment/Advice, 
Version 4010, May 2000, Washington Publishing Company, 004010X091. 
(Incorporated by reference in Sec.  162.920).
    (b) For the period on and after October 16, 2003: Health care 
claims and remittance advice. The ASC X12N 835--Health Care Claim 
Payment/Advice, Version 4010, May 2000, Washington Publishing Company, 
004010X091, and Addenda to Health Care Claim Payment/Advice, Version 
4010, October 2002, Washington Publishing Company, 004010X091A1. 
(Incorporated by reference in Sec.  162.920).

    11. Section 162.1702 is revised to read as follows:


Sec.  162.1702  Standards for health plan premium payments transaction.

    The Secretary adopts the following standards for the health care 
premium payments transaction.
    (a) For the period from October 16, 2002 through October 15, 2003: 
The ASC X12N 820--Payroll Deducted and Other Group Premium Payment for 
Insurance Products, Version 4010, May 2000, Washington Publishing 
Company, 004010X061. (Incorporated by reference in Sec.  162.920).
    (b) For the period on and after October 16, 2003: The ASC X12N 
820--Payroll Deducted and Other Group Premium Payment for Insurance 
Products, Version 4010, May 2000, Washington Publishing Company, 
004010X061, and Addenda to Payroll Deducted and Other Group Premium 
Payment for Insurance Products, Version 4010, October 2002, Washington 
Publishing Company, 004010X061A1. (Incorporated by reference in Sec.  
162.920).

    12. Section 162.1802 is revised to read as follows:


Sec.  162.1802  Standards for coordination of benefits information 
transaction.

    The Secretary adopts the following standards for the coordination 
of benefits information transaction.
    (a) For the period from October 16, 2002 through October 15, 2003:
    (1) Retail pharmacy drug claims. The National Council for 
Prescription Drug Programs Telecommunication Standard Implementation 
Guide, Version 5, Release 1, September 1999, and equivalent NCPDP Batch 
Standard Batch Implementation Guide, Version 1, Release 0, February 1, 
1996. (Incorporated by reference in Sec.  162.920).
    (2) Dental health care claims. The ASC X12N 837--Health Care Claim: 
Dental, Version 4010, May 2000, Washington Publishing Company, 
004010X097. (Incorporated by reference in Sec.  162.920).
    (3) Professional health care claims. The ASC X12N 837--Health Care 
Claim: Professional, Volumes 1 and 2, Version 4010, May 2000, 
Washington Publishing Company, 004010X098. (Incorporated by reference 
in Sec.  162.920).
    (4) Institutional health care claims. The ASC X12N 837--Health Care
    Claim: Institutional, Volumes 1 and 2, Version 4010, May 2000, 
Washington
    Publishing Company, 004010X096. (Incorporated by reference in Sec.  
162.920).
    (b) For the period on and after October 16, 2003:
    (1) Retail pharmacy drug claims. The National Council for 
Prescription Drug Programs 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 Telecommunications 
Standard Implementation Guide, Version 5, Release 1 (Version 5.1) for 
the NCPDP Data Record in the Detail Data Record. (Incorporated by 
reference in Sec.  162.920).
    (2) Dental health care claims. The ASC X12N 837--Health Care Claim: 
Dental, Version 4010, May 2000, Washington Publishing Company, 
004010X097 and Addenda to Health Care Claim: Dental, Version 4010, 
October 2002, Washington Publishing Company, 004010X097A1. 
(Incorporated by reference in Sec.  162.920).
    (3) Professional health care claims. The ASC X12N 837--Health Care 
Claim: Professional, Volumes 1 and 2, Version 4010, May 2000, 
Washington Publishing Company, 004010X098 and Addenda to Health Care 
Claim: Professional, Volumes 1 and 2, Version 4010, October 2002, 
Washington Publishing Company, 004010X098A1. (Incorporated by reference 
in Sec.  162.920).
    (4) Institutional health care claims. The ASC X12N 837--Health Care 
Claim: Institutional, Volumes 1 and 2, Version 4010, May 2000, 
Washington Publishing Company, 004010X096 and Addenda to Health Care 
Claim: Institutional, Volumes 1 and 2, Version 4010, October 2002, 
Washington Publishing Company, 004010X096A1. (Incorporated by reference 
in Sec.  162.920).


(Catalog of Federal Domestic Assistance Program No. 93.773, 
Medicare-- Hospital Insurance; and Program No. 93.774, Medicare--
Supplementary Medical Insurance Program)

    Dated: January 31, 2003.
Tommy G. Thompson,
Secretary.
[FR Doc. 03-3876 Filed 2-13-03; 3:07 pm]
BILLING CODE 4120-01-P