Federal Register, Volume 76 Issue 131 (Friday, July 8, 2011)

[Federal Register Volume 76, Number 131 (Friday, July 8, 2011)]
[Rules and Regulations]
[Pages 40458-40496]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-16834]

[[Page 40457]]

Vol. 76

Friday,

No. 131

July 8, 2011

Part II

Department of Health and Human Services

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45 CFR Parts 160 and 162

Administrative Simplification: Adoption of Operating Rules for
Eligibility for a Health Plan and Health Care Claim Status
Transactions; Interim Final Rule

Federal Register / Vol. 76, No. 131 / Friday, July 8, 2011 / Rules
and Regulations

[[Page 40458]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Office of the Secretary

45 CFR Parts 160 and 162

[CMS-0032-IFC]
RIN 0938-AQ12

Administrative Simplification: Adoption of Operating Rules for
Eligibility for a Health Plan and Health Care Claim Status Transactions

AGENCY: Office of the Secretary, HHS.

ACTION: Interim final rule with comment period.

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SUMMARY: Section 1104 of the Administrative Simplification provisions
of the Patient Protection and Affordable Care Act (hereafter referred
to as the Affordable Care Act) establishes new requirements for
administrative transactions that will improve the utility of the
existing HIPAA transactions and reduce administrative costs.
Specifically, in section 1104(b)(2) of the Affordable Care Act,
Congress required the adoption of operating rules for the health care
industry and directed the Secretary of Health and Human Services to
``adopt a single set of operating rules for each transaction * * * with
the goal of creating as much uniformity in the implementation of the
electronic standards as possible.''
This interim final rule with comment period adopts operating rules
for two Health Insurance Portability and Accountability Act of 1996
(HIPAA) transactions: eligibility for a health plan and health care
claim status. This rule also defines the term ``operating rules'' and
explains the role of operating rules in relation to the adopted
transaction standards. In general, transaction standards adopted under
HIPAA enable electronic data interchange through a common interchange
structure, thus minimizing the industry's reliance on multiple formats.
Operating rules, in turn, attempt to define the rights and
responsibilities of all parties, security requirements, transmission
formats, response times, liabilities, exception processing, error
resolution and more, in order to facilitate successful interoperability
between data systems of different entities.

DATES: Effective Date: These regulations are effective on June 30,
2011. The incorporation by reference of the publications listed in this
interim final rule is approved by the Director of the Office of the
Federal Register June 30, 2011.
Compliance Date: The compliance date for this regulation is January
1, 2013.
Comment Date: To be assured consideration, comments must be
received at one of the addresses provided below, no later than 5 p.m.
on September 6, 2011.

ADDRESSES: In commenting, please refer to file code CMS-0032-IFC.
Because of staff and resource limitations, we cannot accept comments by
facsimile (FAX) transmission.
You may submit comments in one of four ways (please choose only one
of the ways listed)
1. Electronically. You may submit electronic comments on this
regulation to http://www.regulations.gov. Follow the ``Submit a
comment'' instructions.
2. By regular mail. You may mail written comments to the following
address ONLY: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-0032-IFC, P.O. Box 8013,
Baltimore, MD 21244-8013.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments to
the following address ONLY: Centers for Medicare & Medicaid Services,
Department of Health and Human Services, Attention: CMS-0032-IFC, Mail
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
4. By hand or courier. If you prefer, you may deliver (by hand or
courier) your written comments before the close of the comment period
to either of the following addresses:
a. For delivery in Washington, DC--Centers for Medicare & Medicaid
Services, Department of Health and Human Services, Room 445-G, Hubert
H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC
20201.
(Because access to the interior of the Hubert H. Humphrey Building
is not readily available to persons without Federal government
identification, commenters are encouraged to leave their comments in
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing
by stamping in and retaining an extra copy of the comments being
filed.)
b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid
Services, Department of Health and Human Services, 7500 Security
Boulevard, Baltimore, MD 21244-1850.
If you intend to deliver your comments to the Baltimore address,
please call telephone number (410) 786-1066 in advance to schedule your
arrival with one of our staff members.
Comments mailed to the addresses indicated as appropriate for hand
or courier delivery may be delayed and received after the comment
period.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT:
Shannon Whetzel (410) 786-3267.
Matthew Albright (410) 786-2546.
Denise Buenning (410) 786-6711.

SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following Web
site as soon as possible after they have been received: http://regulations.gov. Follow the search instructions on that Web site to
view public comments.
Comments received timely will be also available for public
inspection as they are received, generally beginning approximately 3
weeks after publication of a document, at the headquarters of the
Centers for Medicare & Medicaid Services, 7500 Security Boulevard,
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30
a.m. to 4 p.m. To schedule an appointment to view public comments,
phone 1-800-743-3951.

I. Background

A. Introduction

The background discussion below presents a partial statutory and
regulatory history related only to the statutory provisions and
regulations that are important and relevant for purposes of this
interim final rule with comment period. For further information about
electronic data interchange, the complete statutory background, and the
regulatory history, see the proposed rule entitled ``Health Insurance
Reform; Modifications to the Health Insurance Portability and
Accountability Act (HIPAA) Electronic Transaction Standards,''
published in the Federal Register on August 22, 2008 (73 FR 49742).
Congress addressed the need for a consistent framework for
electronic health care transactions and other administrative
simplification issues through the Health Insurance Portability and
Accountability Act of 1996 (HIPAA), (Pub. L. 104-191), enacted on
August 21, 1996. HIPAA amended the

[[Page 40459]]

Social Security Act (hereinafter referred to as the Act) by adding Part
C--Administrative Simplification--to Title XI of the Act requiring the
Secretary of the Department of Health and Human Services (hereinafter
referred to as the Secretary) to adopt standards for certain
transactions to enable health information to be exchanged
electronically and to achieve greater uniformity in the transmission of
health information. Electronic Data interchange (EDI) enables providers
and payers to process financial and administrative transactions faster
and at a lower cost than manual transactions.
In the August 17, 2000 Federal Register (65 FR 50312) we published
a final rule entitled ``Health Insurance Reform: Standards for
Electronic Transactions'' (hereinafter referred to as the Transactions
and Code Sets rule). This rule implemented some of the HIPAA
Administrative Simplification requirements by adopting standards for
electronic health care transactions developed by standard setting
organizations (SSOs), and medical code sets to be used in those
transactions. Accordingly, we adopted the Accredited Standards
Committee (ASC) X12 standards Version 4010 and the National Council for
Prescription Drug Programs (NCPDP) Telecommunication standard Version
5.1, which are specified at 45 CFR part 162, subparts K through S. All
health plans, health care clearinghouses, and health care providers who
transmit health information in electronic form (referred to as covered
entities) are required to comply with these adopted standards.
In the January 16, 2009 Federal Register, we published a final rule
entitled, ``Health Insurance Reform; Modifications to the Health
Insurance Portability and Accountability Act (HIPAA) Electronic
Transaction Standards'' (74 FR 3296) (hereinafter referred to as the
Modifications final rule), that, among other things, adopted updated
versions of the standards [(ASC X12 Version 5010 (hereinafter referred
to as Version 5010)] and NCPDP Version D.0) for the electronic health
care transactions originally adopted in the Transactions and Code Sets
final rule. Covered entities are required to comply with the updated
standards for electronic health care transactions on January 1, 2012.
Table 1 lists HIPAA standard transactions.

Table 1--Current Adopted Standards for HIPAA Transactions
------------------------------------------------------------------------
Standard Transaction
------------------------------------------------------------------------
ASC X12 837 D..................... Health care claims--Dental.
ASC X12 837 P..................... Health care claims--Professional.
ASC X12 837 I..................... Health care claims--Institutional.
NCPDP D.0......................... Health care claims--Retail pharmacy
drug.
ASC X12 837 P and NCPDP D.0....... Health care claims--Retail pharmacy
supplies and professional services.
NCPDP D.0......................... Coordination of Benefits--Retail
pharmacy drug.
ASC X12 837 D..................... Coordination of Benefits--Dental.
ASC X12 837 P..................... Coordination of Benefits--
Professional.
ASC X12 837 I..................... Coordination of Benefits--
Institutional.
ASC X12 270/271................... Eligibility for a health plan
(request and response)--dental,
professional, and institutional.
NCPDP D.0......................... Eligibility for a health plan
(request and response)--Retail
pharmacy drugs.
ASC X12 276/277................... Health care claim status (request
and response).
ASC X12 834....................... Enrollment and disenrollment in a
health plan.
ASC X12 835....................... Health care payment and remittance
advice.
ASC X12 820....................... Health plan premium payment.
ASC X12 278....................... Referral certification and
authorization (request and
response).
NCPDP D.0......................... Referral certification and
authorization (request and
response)--retail pharmacy drugs.
NCPDP 5.1 and D.0................. Retail pharmacy drug claims
(telecommunication and batch
standards).
NCPDP 3.0......................... Medicaid pharmacy subrogation (batch
standard).
------------------------------------------------------------------------

In general, the transaction standards adopted under HIPAA enable
electronic data interchange using a common interchange structure, thus
minimizing the industry's reliance on multiple formats. While the
standards significantly decrease administrative burden on covered
entities by creating greater uniformity in data exchange, and reduce
the amount of paper forms needed for transmitting data, gaps created by
the flexibility in the standards permit each health plan to use the
transactions in very different ways, which remains an obstacle to
achieving greater health care industry administrative simplification.
These gaps include all of the following:
Performance and system availability. Because the standards
permit the flexibility of conducting the transactions in batch mode or
real-time, in order to minimize the number of different
implementations, some submitters have resorted to contracting with
clearinghouses for transaction exchanges that require batch
submissions, and simultaneously are utilizing internal resources for
real-time submissions. Some batch submissions are only conducted
overnight. Typically batch submissions can be substantially slower than
real-time transmissions, and systems may be available only at certain
times for conducting certain transactions.
Connectivity and transportation of information. In
traditional trading partner agreements, health plans specify their
connectivity options for conducting the standard transactions. These
options can vary from plan to plan. For example, some payers only
conduct the transactions through a contracted clearinghouse. Others
offer a direct connection to their system. Still others use both--
contract with a clearinghouse for some transactions, and offer direct
connect solutions for other transactions. Also, there are some plans
that offer a number of options, and negotiate a choice with each
trading partner, including providers.
Security and authentication. Currently, security standards
do not prescribe requirements for levels of security and authentication
when conducting the standard transactions and accessing protected
health information. A covered entity's level of security and
authentication requirements is determined by the individual entity's
periodic assessments for security risk and vulnerabilities.
Organizations have latitude to determine and document the number and
types of security safeguards that they implement. Although this
flexibility supports the implementation

[[Page 40460]]

of security safeguards that are consistent with the uniqueness of
various organizations, it also limits standardization for security
compliance.
Business scenarios and expected responses. The standards
do not define methods by which trading partners, including providers,
establish electronic communication links, or types of hardware and
software to exchange EDI data. Each trading partner, including
providers, separately provides specific requirements; for example, the
number of transactions that are submitted in a file. Transaction
processing in each entity's system will vary from one trading partner,
including providers, to another. The responses to compliantly
implementing these various transaction processing systems are
identified by trading partners, including providers, in documentation
that is in addition to the adopted implementation guides. These types
of documented business requirements can vary in terms of number and
complexity.
Data content refinements. In accordance with trading
partner agreements, plans can ignore certain data that are submitted if
not needed by them to conduct the transaction. They also can refine
certain data elements and require their submission. Trading partner
agreements and additional documentation that plans develop permit plans
to define specific types of data and to clarify the specific data that
is required to be submitted for successful completion of a transaction.
Although the standards limit the number of data elements that can be
defined or optionally submitted, a plan's individual business flow and
operations may impose specific data definition and submission
requirements.
These gaps, among other challenges in the implementation of the
standards, have spurred the creation of companion guides by health
plans. Health plans have created these companion guides to describe
their unique implementation of HIPAA transactions and how they will
work with their business partners. Historically, companion guides have
been used to establish business practices such as response time, system
availability, communication protocols, hours of operation, amount of
claim history available for inquiries and real-time adjustments,
security practices, and more. Health plans' companion guides vary in
format and structure. Such variance can be confusing to trading
partners (those entities, including providers, who exchange HIPAA
compliant electronic transactions), who must implement them in addition
to the specifications in the transaction standard implementation
guides. Further, each companion guide is unique for each different
health plan.
Currently, according to the American Medical Association (AMA)
there are over 1,200 such companion guides in existence (http://www.ama-assn.org/ama1/pub/upload/mm/368/hipaa-tcs.pdf). As mentioned
previously, companion guides require providers and trading partners,
including providers, to adhere to different transaction implementation
rules for different health plans. Therefore, the widespread
proliferation of health plan companion guides is particularly
burdensome to health care providers, and we believe has subverted the
goal of administrative simplification.
Over the past 5 years, this proliferation of health plan companion
guides has given rise to the development of operating rules. To
facilitate successful interoperability between data systems of
different entities, operating rules more clearly define the rights and
responsibilities of all parties, security requirements, transmission
formats, response times, liabilities, exception processing, error
resolution and more. Operating rules have been shown to reduce costs
and administrative complexities as will be described later in this
interim final rule with comment period.
The use of operating rules is widespread and varied among other
industries. For example, uniform operating rules for the exchange of
Automated Clearing House (ACH) payments among ACH associations are used
in compliance with U.S. Federal Reserve regulations (12 CFR Part 370),
and maintained by the Federal Reserve and the Electronic Payments
Network. Additionally, credit card issuers employ detailed operating
rules (for example, Cirrus Worldwide Operating Rules) describing types
of members, their responsibilities and obligations, licensing and
display of service marks, etc.

B. Operating Rules Mandated by the Affordable Care Act

Congress sought to address the aforementioned problems in the
health care industry by requiring the adoption of operating rules for
the health care industry as outlined in the Patient Protection and
Affordable Care Act (Pub L. 111-148), enacted on March 23, 2010, and by
the Health Care and Education Reconciliation Act of 2010, (Pub. L. 111-
152), which was enacted on March 30, 2010 (hereinafter referred to as
the Affordable Care Act). Section 1173(g)(1) of the Act, as added by
section 1104(b)(2) of the Affordable Care Act, requires the Secretary
to ``adopt a single set of operating rules for each transaction * * *
with the goal of creating as much uniformity in the implementation of
the electronic standards as possible.''
The role of operating rules is to support the adopted standards for
health care transactions in order to foster and enhance uniform use of
the adopted standards and implementation guides across the health care
industry. Standards and operating rules overlap in their functions to
increase uniformity, but differ in their purposes. While standards are
mainly concerned with the content transmitted in a transaction,
operating rules provide for the method of how the information should be
transmitted, as well as the elimination of certain situationality in
the use of data content contained in the standards. Situationality
refers to the fact that many transaction requirements only apply if the
situation is presented. For example, in the 271 eligibility response
transaction, the health plan name is only required when a specific plan
name exists for the plan for which the individual has coverage.
Operating rules augment the standards in the following three
important ways:
They contain additional requirements that help implement
the standard for a transaction in a more consistent manner across
health plans. For example, when a provider currently sends an
eligibility for a health plan inquiry to a health plan, the standard
allows responses ranging from a simple ``yes'' or ``no'', to the
inclusion of a complete range of information. The operating rule
requires the health plan to return patient eligibility and financial
responsibility for a specified list of service type codes including,
but not limited to, dental, vision, medical, hospital inpatient, and
emergency care. This requirement ensures that a provider, who submits
the same inquiry to multiple payers, receives a consistent response for
an eligibility for a health plan inquiry. This reduces the number of
customized transactions when dealing with multiple health plans, thus
saving both time and money.
They address ambiguous or conditional requirements in the
standard and clarify when to use or not use certain data elements or
code values. For example, the standard may leave it to the discretion
of the health plan whether or not to return the health plan's name in a
particular field, creating the possibility of inconsistency in health
plan responses. An operating rule may require that the health plan name
always be returned and that it

[[Page 40461]]

always be returned in one particular specified manner. This encourages
uniformity and alleviates the problem of providers receiving
inconsistent information.
They specify how trading partners, including providers,
should communicate with each other and exchange patient information,
with the goal of eliminating connectivity inconsistencies. Currently,
individual health plans specify the transmission methods they expect
each of their trading partners, including providers, to use for
electronic transactions. Mandating one uniform method decreases the
amount of work and inconsistencies providers experience when dealing
with multiple payers with differing transmission methods.
The Affordable Care Act presents a definition of operating rules
and provides a great deal of guidance about the role Congress
envisioned for operating rules in relation to the standards. Operating
rules are defined by section 1171(9) of the Act (as added by section
1104(b)(1) of the Affordable Care Act) as ``the necessary business
rules and guidelines for the electronic exchange of information that
are not defined by a standard or its implementation specifications as
adopted for purposes of this part.'' Additionally, section
1173(a)(4)(A) of the Act (as added by section 1104(b)(2) of the
Affordable Care Act) requires that--

The standards and associated operating rules adopted by the
Secretary shall--
(i) to the extent feasible and appropriate, enable determination
of an individual's eligibility and financial responsibility for
specific services prior to or at the point of care;
(ii) be comprehensive, requiring minimal augmentation by paper
or other communications;
(iii) provide for timely acknowledgment, response, and status
reporting that supports a transparent claims and denial management
process (including adjudication and appeals); and
(iv) describe all data elements (including reason and remark
codes) in unambiguous terms, require that such data elements be
required or conditioned upon set values in other fields, and
prohibit additional conditions (except where necessary to implement
State or Federal law, or to protect against fraud and abuse).''

Section 1104(b)(2) of the Affordable Care Act also amended section
1173 of the Act by adding new subsection (a)(4)(B), which states that,
``[i]n adopting standards and operating rules for the transactions* *
*, the Secretary shall seek to reduce the number and complexity of
forms (including paper and electronic forms) and data entry required by
patients and providers.''
Section 1104(b)(2) of the Affordable Care Act added section
1173(g)(1) to the Act, which states that, ``[s]uch operating rules
shall be consensus-based and reflect the necessary business rules
affecting health plans and health care providers and the manner in
which they operate pursuant to standards issued under Health Insurance
Portability and Accountability Act of 1996.''
New sections 1173(g)(2)(D), (g)(3)(C), and (g)(3)(D) of the Act
also clarify the scope of operating rules. They provide that,

In adopting operating rules under this subsection, the Secretary
shall consider recommendations for operating rules developed by a
qualified nonprofit entity that meets the following requirements * *
* (D) The entity builds on the transactions issued under Health
Insurance Portability and Accountability Act of 1996. * * * The
National Committee on Vital and Health Statistics shall * * * (C)
determine whether such operating rules represent a consensus view of
health care stakeholders and are consistent with and do not conflict
with other existing standards; (D) evaluate whether such operating
rules are consistent with electronic standards adopted for health
information technology

We take from the statutory context the following information about
operating rules to be adopted under HIPAA:
They are business rules and guidelines;
They are necessary for the electronic exchange of
information;
They are not defined by a standard;
They do not conflict with the existing HIPAA standards;
They are consensus based;
They are consistent with HIPAA and Health Information
Technology (HIT) standards adopted by the Secretary; and
Together with standards they encourage the use of
electronic transactions by reducing ambiguities currently permitted by
the standard, resulting in better-defined inquiries and responses that
add value to provider practice management and health plan operations.

II. Provisions of the Interim Final Rule With Comment Period

A. Definition of Operating Rules

Section 1171(9) of the Act, as added by section 1104(b)(1) of the
Affordable Care Act, defines operating rules as ``the necessary
business rules and guidelines for the electronic exchange of
information that are not defined by a standard or its implementation
specifications as adopted for purposes of this part.'' We are adding
the term ``operating rules'' to the definitions in regulations at 45
CFR 162.103, and defining it just as it appears in the statute. We note
that, in the statutory reference, ``this part'' refers to Part C of
Title XI of the Act, Administrative Simplification. In the regulation
at 45 CFR 162.103, ``this part'' refers to Part 162 of the CFR, the
part in which the definition appears, which contains the regulations
that pertain to, among other things, the HIPAA transactions and code
sets. The following discussion further explains operating rules and
their scope, in light of their relationship to the standards.
Business rules and guidelines are not defined by the statute, nor
has the health care industry specifically defined business rules or
guidelines for itself. These are very broad terms and there are many
ways to define them. Generally, business rules and guidelines are
statements that refine and specify. For purposes of operating rules,
business rules and guidelines are statements that refine and specify.
While operating rules may have a very broad scope as business rules
and guidelines in order to cover the full spectrum of data content,
from data elements to standards, we believe there are limitations. To
meet the definition of operating rules, business rules and guidelines
must be ``necessary * * * for the electronic exchange of information
that are not defined by a standard or its implementation
specifications.'' We interpret the term ``necessary'' to be those
operating rules needed to facilitate better communication between
trading partners, including providers, to fill gaps in the standards,
and to fulfill the purposes and principles set out in sections
1173(a)(4)(A)(i) through (iv) and (B) of the Act.
If a business rule or guideline is necessary for the electronic
exchange of information, it must also be one that is ``not defined by''
a HIPAA standard or its implementation specifications in order to meet
the definition of an operating rule. We consider a business rule or
guideline that does not duplicate what is in the standard to be one
that is not defined by the standard. Business rules and guidelines that
duplicate what is in the standard are not operating rules under our
interpretation.
The National Committee on Vital and Health Statistics (NCVHS) is
tasked with reviewing any operating rule developed and recommended to
the Secretary for adoption. The NCVHS is to make recommendations to the
Secretary and determine whether such operating rules represent a
consensus view of the health care stakeholders and are consistent with
and do not conflict with other

[[Page 40462]]

existing standards under section 1173(g)(3)(C) of the Act. The NCVHS
must also determine if such operating rules are consistent with
electronic standards adopted for health information technology under
section 1173(g)(3)(D) of the Act. From these statutory provisions, we
understand that operating rules should be consistent with and not be in
conflict with the adopted HIPAA standards and HIT standards (for
example, those standards that address governance, funding and
infrastructure of controlled vocabularies, value sets and vocabulary
subsets to be used primarily to further interoperability between
providers and systems). We believe that, if an operating rule imposes a
requirement that would make it impossible for a party to comply with
both the associated HIPAA standard and the operating rule, then the
operating rule conflicts with the standard. This interpretation is
consistent with fundamental principles and precedents regarding when a
conflict exists. If a party is able to satisfy both the requirements of
the standard and the requirements of the operating rule, there is no
conflict and the operating rule is consistent with the standard. Table
2 illustrates what we consider to be a conflict by presenting
hypothetical scenarios that illustrate when an operating rule could or
could not conflict with a standard.

Table 2--Could an Operating Rule Conflict With a Standard?
----------------------------------------------------------------------------------------------------------------
Does the operating
Statement in the rule's statement
Statement in the standard operating rule conflict with the Justification
standard's statement?
----------------------------------------------------------------------------------------------------------------
``X is recommended.''.............. ``X is ``required.''.. No.................... It is possible for an
entity to comply with both
the standard and the
operating rule.
``X is not required.''............. ``X is required.''.... No.................... It is possible for an
entity to comply with both
the standard and the
operating rule.
``X cannot be required.''.......... ``X is required.''.... Yes................... It is impossible for an
entity to comply with both
the standard and the
operating rule.
``X is required.''................. ``X is required.''.... No.................... It is possible for an
entity to comply with both
the standard and the
operating rule. (However,
to the extent that the
statement in the operating
rule duplicates the
statement in the standard,
the operating rule
statement would not be
considered an operating
rule.)
``X is at the discretion of person ``X is required.''.... No.................... It is possible for an
1. Person 2 entity to comply with both
cannot require it.'' the standard and the
operating rule.
``X is required.''................. ``X is required, so is No.................... It is possible for an
Y.''. entity to comply with both
the standard and the
operating rule.
``X is required. No other can be ``X is required, so is Yes................... It is impossible for an
required.'' Y.''. entity to comply with both
the standard and the
operating rule.
----------------------------------------------------------------------------------------------------------------

Our current definition of standard at 45 CFR 160.103 is very broad.
In fact, it is so broad that it could include operating rules as we are
defining that term at Sec. 162.103. Therefore, we are revising the
definition of standard at Sec. 160.103 to be clear that standards and
operating rules are separate and distinct. See the ``Additional
Requirements'' section for discussion of this change.

B. National Committee on Vital and Health Statistics and the Affordable
Care Act

The National Committee on Vital and Health Statistics (NCVHS) was
established by Congress to serve as an advisory body to the Department
of Health and Human Services (DHHS) on health data, statistics and
national health information policy, and has been assigned a significant
role in the Secretary's adoption of operating rules under section
1173(g)(3) of the Act (as added by section 1104(b)(2) of the Affordable
Care Act).
In July 2010, the NCVHS' Subcommittee on Standards convened a
hearing to discuss the Affordable Care Act's provisions pertaining to
operating rules for the eligibility for a health plan and health care
claim status transactions. Section 1173(g)(3) requires the NCVHS to do
the following:
Advise the Secretary whether a nonprofit entity meets the
requirements for development of operating rules.
Review the operating rules developed and recommended by
such nonprofit entity.
Determine whether such operating rules represent a
consensus view of the health care stakeholders and are consistent with
and do not conflict with other existing standards.
Evaluate whether such operating rules are consistent with
electronic standards adopted for health information technology.
Submit to the Secretary a recommendation as to whether the
Secretary should adopt such operating rules.
The NCVHS engaged in a comprehensive review of health care
operating rules and their authors, with the goal of determining whether
an entity was qualified to develop operating rules for transactions and
to evaluate existing operating rules for purposes of making a
recommendation to the Secretary as to whether those operating rules
should be adopted. The process consisted of a full day of public
testimony on July 20, 2010, with participation by more than 20
stakeholders representing a cross section of the health care industry,
including health plans, provider organizations, health care
clearinghouses, pharmacy industry representatives, health care industry
associations, standards developers, professional associations,
representatives of Federal and State health plans, the banking
industry, and the entities proposing to serve as operating rules
authoring entities.
During the hearing, testifiers reiterated the need for greater
consistency and standardization in HIPAA transactions consistent with
the Affordable Care Act amendments to the HIPAA, which highlight the
need to improve the use of standard transactions, increase industry
adherence to the implementation specifications of the standards,
encourage greater adoption of electronic transactions, and enable more
timely

[[Page 40463]]

updates and adoption of the HIPAA standards. Testifiers claimed that
all of these could help reduce the clerical burden on the industry in
the use of paper and the non-standard use of the current transaction
standards.
We believe that the considerable public participation in the NCVHS
hearings for adoption of operating rules demonstrates an increasing
level of support and interest from broader segments of the health care
industry. Per the NCVHS' recommendation, we will work with industry to
continue this public exchange of information regarding operating rules,
standards and their respective roles in administrative simplification.
Based on the NCVHS testimony (http://www.ncvhs.hhs.gov/100719ag.htm) and the NCVHS' analysis of the operating rules and
qualifications of the candidate authoring entities, the NCVHS developed
a set of recommendations to the Secretary, which are outlined in the
following discussions.

C. Operating Rules Authoring Entities

Section 1173(g)(3)(A) of the Act charges the NCVHS with advising
the Secretary as to whether a nonprofit entity meets the statutory
requirements for developing the operating rules to be adopted by the
Secretary. Those requirements, at section 1173(g)(2) of the Act,
include all of the following:
The entity focuses its mission on administrative
simplification.
The entity demonstrates a multi-stakeholder and consensus-
based process for development of operating rules, including
representation by or participation from health plans, health care
providers, vendors, relevant Federal agencies, and other standards
development organizations.
The entity has a public set of guiding principles that
ensure the operating rules and process are open and transparent, and
supports nondiscrimination and conflict of interest policies that
demonstrate a commitment to open, fair, and nondiscriminatory
practices.
The entity builds on the transaction standards issued
under the Health Insurance Portability and Accountability Act of 1996.
The entity allows for public review and updates of its
operating rules.
Of those organizations testifying at the July 2010 NCVHS hearing,
two organizations formally requested to be considered authoring
entities for operating rules. These entities were the Council for
Affordable Quality Healthcare's (CAQH) Committee on Operating Rules for
Information Exchange (CORE) and the National Council for Prescription
Drug Programs (NCPDP).
The CAQH, a nonprofit alliance of health plans and trade
associations, supports industry collaboration on initiatives that
simplify health care administration (http://www.caqh.org/about.php).
The CAQH launched the CORE with the goal of giving providers access to
eligibility and benefits information before or at the time of service.
The CAQH CORE is engaged in the development of voluntary operating
rules for the facilitation of administrative health care transactions.
It has already developed operating rules for the eligibility for a
health plan and health care claim status transactions. The CAQH CORE
has also demonstrated that the use of these rules yields a return on
investment for both business operations and systems within today's
complex health care environment (http://www.caqh.org/COREIBMstudy.php).
The NCPDP is a not-for-profit standards development organization
(SDO) accredited by the American National Standards Institute (ANSI),
with over 1,500 members representing the pharmacy services industry
(http://ncpdp.org/WP.aspx). It is one of several SDOs involved in
health care information technology and standardization, with a focus on
retail pharmacy services, and has member representation from the
pharmacy services sector of health care (http://ncpdp.org/about.aspx).
The operating rules the NCPDP brought forth to NCVHS focus on the
retail-pharmacy sector.
The July 2010 NCVHS hearings were followed by a request from the
NCVHS Subcommittee on Standards to both the CAQH CORE and the NCPDP as
authoring entity candidates, to respond to detailed questionnaires
about their ability to meet the statutory requirements of the
Affordable Care Act as authoring entities for health care operating
rules. The NCVHS request solicited specific documentation from the two
candidates to validate their previous testimony, including minutes,
voting records and copies of bylaws. Both the CAQH CORE and the NCPDP
responded to the Subcommittee's request and submitted their respective
applicable materials. A synopsis of the candidates' responses can be
found on the Internet at http://www.ncvhs.hhs.gov/100930lt2.pdf.
Upon review of the CAQH CORE's and the NCPDP's respective responses
to the NCVHS questionnaire, the NCVHS determined that both
organizations met the statutory requirements to be an operating rules
authoring entity. The NCVHS noted, however, that there are still
adjustments to process and procedures that may be required of both
organizations to enhance transparency, citing the need for more
formalized relations with each other and with other SDOs, inclusion of
a more diverse cadre of stakeholders, and a more formal public review
process. Both the CAQH CORE and the NCPDP acknowledged these issues in
their submitted responses to the NCVHS (http://www.ncvhs.hhs.gov/100930lt2.pdf).
The NCVHS advised the Secretary in its letter dated September 30,
2010, (http://www.ncvhs.hhs.gov/100930lt2.pdf) that the CAQH CORE meets
the requirements of section 1173(g)(2) of the Act to be the operating
rules authoring entity for the non-retail pharmacy-related eligibility
for a health plan and health care claim status standard transactions
with additional qualifying requirements. In the same letter, the NCVHS
stated that the NCPDP met the requirements to be the authoring entity
for operating rules for retail pharmacy-related eligibility
transactions (as outlined in the Telecommunications Standard
Implementation Guide Version D.0) also with additional qualifying
requirements. Those requirements for both the CAQH CORE and the NCPDP
are as follows:
Require authoring entities to maintain minutes,
attendance, voting records, and other appropriate documentation that
will help the NCVHS conduct verification that the authoring entities
have utilized an open, consensus-driven process with broad stakeholder
participation and provided an opportunity for public comment in
authoring any new operating rules or new versions of existing operating
rules, consistent with such processes followed by ANSI-accredited
standards development organizations.
Continue to use the NCVHS and its open process to
evaluate, select, and recommend any new qualifying operating rules
authoring entities when it comes time to adopt operating rules for
other transactions, or for newer versions of the operating rules for
the transactions for which the CAQH CORE and the NCPDP are being
recommended to be named authoring entities at this time.
After our own review and analysis of the CAQH CORE and the NCPDP
applications for consideration to be authoring entities for their
respective developed operating rules, and the NCVHS' recommendation, we
have determined that the CAQH CORE is qualified to be the operating
rules authoring entity for non-retail

[[Page 40464]]

pharmacy-related eligibility for a health plan and health care claim
status standard transactions per section 1173(g)(2) of the Act.
At the time of the hearing, the NCVHS based its recommendation to
appoint the NCPDP as an operating rules authoring entity on the
testimony presented. However, upon further review and consultation, we
have determined that the NCPDP's standard provides enough detail and
clarity to operationalize the standards to the point where no gaps
exist that operating rules would need to fill and no further
infrastructure or data content rules need to be adopted. (For a more
detailed discussion, see section III. of this interim final rule with
comment period).

D. Adoption of Operating Rules

1. Adoption of the CAQH CORE Phase I and Phase II Operating Rules for
the Non-Retail Pharmacy Eligibility for a Health Plan and Health Care
Claim Status Transactions (Updated for Version 5010)
The CAQH CORE builds consensus among health care industry
stakeholders on a set of operating rules that facilitate administrative
interoperability between health plans and providers by building on
applicable HIPAA transaction requirements, enabling providers to submit
transactions from any system, and facilitating administrative and
clinical data integration. The CAQH CORE uses a phased approach for
developing operating rules. This approach allows for developing rules
and implementing them via incremental, achievable milestones, and helps
to maximize rule adoption. The CAQH CORE Phase I operating rules were
developed in 2006 and focused on the eligibility for a health plan
transaction. The CAQH CORE Phase II rules, developed in 2008, added
operating rules for the health care claim status transaction, and more
rules for the eligibility for a health plan transaction that were not
included in Phase I. Both the CAQH CORE Phase I and Phase II operating
rules were updated to accommodate the Version 5010 HIPAA standards,
which were adopted by the Secretary via the final rule published in the
Federal Register on January 16, 2009 (74 FR 3296) and with which HIPAA
covered entities must be compliant on January 1, 2012.
The CAQH CORE operating rules (updated for Version 5010) include
both infrastructure rules and data content rules. The infrastructure
rules help improve data content flow between provider and payer. They
improve interoperability by addressing all of the following:
Connectivity--provide a uniform way for stakeholders to
connect (through the Internet).
Response Times--specify that information will be available
in real time.
System Availability--specify systems delivering
information be available a certain amount of time.
Patient Identification--help assure patient matching/
identification can occur.
The CAQH CORE's first set of operating rules (updated for Version
5010) are Phase I rules for eligibility for a health plan transaction.
They help electronically confirm patient benefit coverage, copay,
coinsurance, and base deductible. In addition, through requirements to
use common Internet protocols, they allow providers to access needed
patient information prior to or at the point of care. The CAQH CORE's
second set of operating rules (updated for Version 5010) are the Phase
II rules for the eligibility for a health plan and health care claim
status transactions. They expand on the first set by adding a
requirement for transaction recipients to send back patient remaining
deductible amounts, rules to improve patient matching, health care
claim status infrastructure requirements (for example, response time)
and more prescriptive connectivity requirements.
We have examined each of the CAQH CORE Phase I and Phase II
operating rules and are adopting those that we believe further enhance
the HIPAA transactions by better facilitating communication between
trading partners, including providers, filling gaps in the associated
standards, and fulfilling the requirements, purposes, and principles
set out in the statute at sections 1173(a)(4)(A)(i through iv) and (B).
Of the eight CAQH CORE Phase I operating rules (updated for Version
5010), we are adopting the following six:
Phase I CORE 152: Eligibility and Benefit Real Time
Companion Guide Rule, version 1.1.0, March 2011, and CORE Version 5010
Master Companion Guide Template, 005010, 1.2, March 2011.
Phase I CORE 153: Eligibility and Benefits Connectivity
Rule, version 1.1.0, March 2011.
Phase I CORE 154: Eligibility and Benefits 270/271 Data
Content Rule, version 1.1.0, March 2011.
Phase I CORE 155: Eligibility and Benefits Batch Response
Time Rule, version 1.1.0, March 2011.
Phase I CORE 156: Eligibility and Benefits Real Time
Response Time Rule, version 1.1.0, March 2011.
Phase I CORE 157: Eligibility and Benefits System
Availability Rule, version 1.1.0, March 2011.
We are adopting all five of the CAQH CORE Phase II operating rules
(updated for Version 5010). They include the following:
Phase II CORE 250: Claim Status Rule, version 2.1.0, March
2011, and CORE Version 5010 Master Companion Guide Template, 005010,
1.2, March 2011.
Phase II CORE 258: Eligibility and Benefits 270/271
Normalizing Patient Last Name Rule, version 2.1.0, March 2011.
Phase II CORE 259: Eligibility and Benefits 270/271 AAA
Error Code Reporting Rule, version 2.1.0, March 2011.
Phase II CORE 260: Eligibility & Benefits Data Content
(270/271) Rule, version 2.1.0, March 2011.
Phase II CORE 270: Connectivity Rule, version 2.2.0, March
2011.
Both the CAQH CORE Phase I and Phase II operating rules (updated
for Version 5010) that we are adopting in this interim final rule with
comment period can be found on the CAQH CORE Web site at http://www.caqh.org/COREVersion5010.php. Below we briefly describe those
operating rules.
The Phase I CORE 152: Eligibility and Benefit Real Time Companion
Guide Rule (updated for Version 5010) and CORE Version 5010 Master
Companion Guide Template provide a standardized format for health plan
companion guides. As mentioned previously, health plans have the option
of creating a companion guide that describes the specifics of how they
implement the HIPAA transactions. Currently, health plans have
independently created companion guides that vary in format and
structure, which can be confusing to trading partners, including
providers, and providers who must review numerous companion guides
along with the Version 5010 Implementation Guides. To address this
issue, the CAQH CORE developed the CORE Version 5010 Master Companion
Guide Template to ensure that the structure of each health plan's
companion guide is similar to every other health plan's companion
guide, making it easier for providers to find information quickly.
Developed with input from multiple health plans, system vendors,
provider representatives and healthcare and HIPAA industry experts, the
CAQH CORE template organizes information into several sections
including, general information (sections 1 through 9) and

[[Page 40465]]

transaction-specific information (section 10), as well as appendices
that provide helpful information, such as an information checklist,
descriptions of typical business scenarios, transmission examples,
FAQs, and a summary of the changes between companion guides. The CAQH
CORE recognizes that different health plans may have different
requirements, so the CORE v5010 Master Companion Guide Template gives
health plans the flexibility to tailor companion guides to meet each of
their own particular needs.
The Phase I CORE 153: Eligibility and Benefits Connectivity Rule
(updated for Version 5010) addresses usage patterns for both batch and
real time transactions, the exchange of security identifiers, and
communications-level errors and acknowledgements. It does not define
the specific content of the message.
Currently, multiple connectivity methods, some based on open
standards, others on proprietary approaches, are in use for
administrative electronic transactions in the health care industry.
Health care providers and health plans support multiple connectivity
methods to connect to different health plans, clearinghouses, provider
organizations and others, which add costs for health plans and
providers. This rule is designed to provide a ``safe harbor'' that
providers and health plans can be assured will be supported by any
trading partner, including providers. Safe harbors are essentially
connectivity requirements. When trading partners including providers,
agree to follow the same connectivity requirements, connectivity is
better enabled. This rule is not intended to require trading partners,
including providers, to remove existing connections that do not match
the rule, nor is it intended to require that all trading partners,
including providers, must use this method for all new connections. It
is expected that some trading partners, including providers, may agree
to use different communication mechanism(s) and/or security
requirements than that described by this rule. The rule simply provides
a secure connection for those entities that do not currently have one.
The Phase I CORE 154: Eligibility and Benefits 270/271 Data Content
Rule (updated for Version 5010) provides more robust and consistent
information prior to or at the point of care. It specifies the minimum
requirements for using the ASC X12 005010X279A1 Eligibility Benefit
Request and Response (270/271) to inquire about health plan insurance
coverage and to respond to such an inquiry using the ASC X12
005010X279A1 Eligibility Benefit Request and Response (270/271). The
requirements address certain situational elements and codes and are in
addition to requirements contained in the Version 5010 270/271
implementation guides. This rule provides for not only determination of
an individual's eligibility but also his financial responsibility
information for co-pay, deductible, and coinsurance prior to or at the
point of care. This rule covers, for example, the following content in
the Version 5010 271:
The dates of eligibility under the health plan (contract)
level for past and future dates and the dates of eligibility at the
benefit level if different from the contract level.
The patient financial responsibility for each specified
benefit at the base contract amounts for both in-network and out-of-
network.
The name of the health plan when it exists in the health
plan's system.
Compliance with the requirements of this operating rule will
ultimately reduce the time it takes providers to track down such
information after the service has been rendered, and decrease the
provider's accounts receivable.
The Phase I CORE 155 and 156: Eligibility and Benefits Batch
Response and Real Time Response Rules (updated for Version 5010)
streamline and improve the flow of transactions by imposing timeframe
requirements for when a response is to be submitted for an eligibility
for a health plan inquiry.
For a Version 5010 270 batch mode response to a provider's inquiry
submitted by 9:00 pm Eastern time of a business day, the response must
be returned by 7:00 am Eastern time the following business day. The
maximum response time when processing in real time mode must be 20
seconds or less.
The Phase I CORE 157: Eligibility and Benefits System Availability
Rule (updated for Version 5010) also streamlines and improves the flow
of transactions. It recognizes that many institutional providers need
to be able to conduct health plan eligibility activities at any time.
It also recognizes that health plans have a business need to take their
eligibility and other systems offline periodically in order to perform
system maintenance, which means that some systems will not be available
for eligibility inquiries and responses on certain nights and weekends.
The rule requires that systems be available to process eligibility
inquiries no less than 86 percent of the time per calendar week for
real and batch modes, and requires health plans to publish regularly
scheduled downtime. It ensures that systems are up and running in a
consistent manner and that trading partners, including providers, are
aware of any downtime so they can plan accordingly.
The Phase II CORE 250: Claim Status Rule (updated for Version 5010)
encourages and increases the use of the health care claim status
transaction by providing for batch and real-time response times, system
availability, the use of a companion guide template, and support for
the CORE ``safe harbor'' connectivity requirement. These elements
included in the CORE 250 rule follow the same requirements as and build
upon the same requirements as for the eligibility for a health plan
transaction infrastructure rules included in Phase I CORE 152, Phase I
CORE 155, Phase I CORE 156 and Phase I CORE 157 rules we are adopting
in this interim final rule with comment period. This means that Phase
II CORE 250 rule (updated for Version 5010) requires each health plan
to: follow the companion guide format requirement as provided in CORE
152, which is the CORE Version 5010 Master Companion Guide Template;
support the CORE ``safe harbor'' connectivity requirements; support a
maximum response time of 20 seconds from the time of submission of a
Version 5010 276 for real time and for batch mode response to a
provider's inquiry submitted by 9 p.m. Eastern time of a business day,
the response must be returned by 7 a.m. Eastern time the following
business day; ensure system availability of no less than 86 percent per
calendar week for both real time and batch modes; and follow the
companion guide format requirement as provided in CORE 152, which is
the CORE v5010 Master Companion Guide Template.
The CORE 258: Eligibility and Benefits 270/271 Normalizing Patient
Last Name Rule (updated for Version 5010). Health plans and health care
providers must be able to uniquely identify patients in order to
ascertain patient eligibility. Although the Version 5010 270/271
standards specify data elements and data element attributes that may be
used to identify an individual, the standards do not address the use of
punctuation and special characters. Therefore, the way health plans
identify individuals does not always match the way providers identify
individuals, which results in the rejection or denial of eligibility
transactions. The CAQH CORE 258 rule addresses certain aspects of
individual identification that enhance the real time processing of
eligibility inquiries and responses.
The Phase II CORE 259: Eligibility and Benefits 270/271 AAA Error
Code

[[Page 40466]]

Reporting Rule (updated for Version 5010) provides consistent and
specific patient identification information on reasons for patient
identification errors on an eligibility for a health plan inquiry. This
allows providers to know specifically why they did not receive a match
in an eligibility for a health plan inquiry, instead of trying to
determine for themselves the reasons for the error and what corrective
action is needed. This rule improves the specificity and standardized
use of the AAA codes that would give providers better feedback to
understand what information is missing or incorrect in order to obtain
a valid match. It defines a standard way for health plans to report
errors in the eligibility response that cause a health plan not to be
able to respond with a Version 5010 271 showing eligibility information
for the requested patient or subscriber. The goal is to use a unique
error code wherever possible for a given error condition so that the
re-use of the same error code is minimized. Where this is not possible,
the goal (when re-using an error code) is to return a unique
combination of one or more AAA segments along with one or more of the
submitted patient identifying data elements such that the provider will
be able to determine as precisely as possible what data elements are in
error and take the appropriate corrective action.
The Phase II CORE 260: Eligibility & Benefits Data Content (270/
271) Rule (updated for Version 5010) builds on and enhances the Phase I
CORE 154: Eligibility and Benefits 270/271 Data Content Rule (updated
for Version 5010) by requiring the provision in the eligibility
response of the remaining patient deductible amounts for certain
service type codes. The use of this rule further reduces the time it
takes to track down this information manually or eliminates the time
completely after the service has been rendered and decreases the
provider's accounts receivable.
The CAQH CORE determined that Phase I CORE rules should focus on
improving electronic eligibility and benefits verification, as
eligibility is the first transaction in the claims process. Thus, if
eligibility and benefits are accurately known to health care providers,
all the associated electronic transactions that follow will be more
effective and efficient. The Phase I CORE 154: Eligibility and Benefits
270/271 Data Content Rule (updated for Version 5010) primarily outlined
a set of requirements for health plans to return base (not remaining or
accumulated) patient financial responsibility related to the
deductible, co-pay and co-insurance for a set of 12 services in the ASC
X12 005010X279A1 Eligibility Benefit Request and Response (270/271),
and for vendors, clearinghouses and providers to transmit and use that
financial data. The Phase II CORE 260: Eligibility & Benefits Data
Content (270/271) Rule (updated for Version 5010) extends and enhances
the CORE Phase I Version 5010 271 transaction by requiring the
provision of remaining deductible amounts for both the Phase I required
12 service type codes and an additional set of 39 other service type
codes.
The Phase II CORE 270: Connectivity Rule (updated for Version
5010), which applies to both the eligibility for a health plan and
health care claim status transactions, builds on CORE 153: Eligibility
and Benefits Connectivity Rule (updated for Version 5010) by requiring
additional connectivity specifications which further facilitate
interoperability. This rule addresses the message envelope metadata
(that information which defines the context for interpretation of the
rest of the data in the message, for example, response codes, request
methods, etc.) and the message envelope, (a fixed number of fields that
show source, destination, tag, and communicator) and the submitter
authentication requirements for both batch and real time transactions,
and communications-level errors.
This rule improves utilization of electronic transactions by
enabling more entities to interoperate with other entities, including
reducing the implementation barrier for small entities (for example,
small providers). It also extends the Phase I CORE 153: Eligibility and
Benefits Connectivity Rule (updated for Version 5010) and establishes a
safe harbor by further specifying the connectivity that all covered
entities must demonstrate and implement.
Tables 3 and 4 summarize each of the CAQH CORE Phase I and Phase II
Version 5010 operating rules, which we are adopting in this interim
final rule with comment period, as reflected in 45 CFR 162.920,
162.1203, and 162.1403.

Table 3--The CAQH Core Phase I Operating Rules
[Updated for version 5010]
------------------------------------------------------------------------
Rule High level requirements
------------------------------------------------------------------------
Phase I CORE 152: Eligibility and Goal: Standardize template/
Benefit Real Time Companion Guide common structure of companion
Rule, Version 1.1.0, March 2011 and guides for more efficient
CORE Version 5010 Master Companion reference.
Guide Template, 005010, 1.2, March Requirements: Standard template/
2011. structure for companion
guides.
Phase I CORE 153: Eligibility and Goal: Provide a ``safe harbor''
Benefits Connectivity Rule, Version that application vendors,
1.1.0, March 2011. providers, and health plans
can be assured will be
supported by any trading
partner including providers,
to facilitate connectivity
standardization and
interoperability across the
exchange of health
information.
Requirements: Supports data
exchange over the public
Internet (HTTP/S).
Phase I CORE 154: Eligibility and Goal: Enable more robust and
Benefits 270/271 Data Content Rule, consistent exchange of
Version 1.1.0, March 2011. eligibility information.
Requirements: Specifies what is
to be included in the 271
eligibility for a health plan
response to a 270 eligibility
for a health plan inquiry.
Phase I CORE 155: Eligibility and Goal: Streamline and improve
Benefits Batch Response Time Rule, flow of transactions.
Version 1.1.0, March 2011. Requirements: Response time is
20 seconds or less for real
time, next day for batch.
Phase I CORE 156: Eligibility and
Benefits Real Time Response Time Rule,
Version 1.1.0, March 2011.
Phase I CORE 157: Eligibility and Goal: Streamline and improve
Benefits System Availability Rule, flow of transactions.
Version 1.1.0, March 2011. Requirements: Systems must be
available 86 percent per
calendar week, and regular
downtime must be published.
------------------------------------------------------------------------

[[Page 40467]]

Table 4--The CAQH Core Phase II Version 5010
------------------------------------------------------------------------
Rule High level requirements
------------------------------------------------------------------------
Phase II CORE 250: Claim Status Rule, Goal: Promote increased
Version 2.1.0, March 2011. availability and usage of the
health care claim status
transaction through rules for
real-time and batch response
times, system availability,
and connectivity.
Requirements: Application of
real-time and batch response
times, system availability,
and connectivity rules for
health care claim status
transactions, which were
derived from the eligibility
Phase I infrastructure rules.
Phase II CORE 258: Eligibility and Goal: Improve patient matching.
Benefits 270/271 Normalizing Patient Requirements: Normalize the
Last Name Rule, Version 2.1.0, March submitted and stored last name
2011. (e.g., remove special
characters, suffixes/prefixes)
before trying to match.
Phase II CORE 259: Eligibility and Goal: Provide better
Benefits 270/271 AAA Error Code information on why a match did
Reporting Rule, Version 2.1.0, March not occur in an eligibility
2011. for a health plan request.
Requirements: Return specified
AAA codes for each error
condition.
Phase II CORE 260: Eligibility & Goal: Provide additional
Benefits Data Content (270/271) Rule, financial responsibility/
Version 2.1.0 , March 2011. patient liability information
in response to an inquiry and
support more high volume
service type codes.
Requirements: Includes
remaining deductible amount
(plus static copay and
coinsurance information) in
response to an eligibility for
a health plan inquiry, along
with 39 additional service
type codes beyond the service
type codes provided in Phase
I.
Phase II CORE 270: Connectivity Rule, Goal: Provide more
Version 2.2.0, March 2011. comprehensive connectivity
specifications to further
interoperability.
Requirements: Includes
requirements for two message
envelope standards submitter
authentication (i.e., username/
password, digital
certificates) and metadata.
------------------------------------------------------------------------

In 45 CFR 162.103, we provide that a standard transaction means ``a
transaction that complies with an applicable standard adopted under
this part.'' In this interim final rule with comment period we are
adopting operating rules and requiring that covered entities comply
with those operating rules when conducting a transaction for which we
have adopted a standard. In order to reflect that requirement in
regulation text, in part, we need to modify the definition of standard
transaction to be clear that a standard transaction is one that
complies with the adopted standard and the adopted associated operating
rule. Therefore, we are amending the definition of standard transaction
at 45 CFR 162.103. See the ``Additional Requirements'' section for
discussion of this change.
In the following sections, we identify and discuss several specific
CAQH CORE operating rule requirements that we believe require further
explanation. These include acknowledgements, certification, and the use
of the CAQH CORE companion guide template. We believe these topics
require additional explanation because in this interim final rule with
comment period, we are not adopting the operating rules that pertain to
acknowledgements or the requirements within the adopted operating rules
that pertain to acknowledgements, nor are we adopting the CAQH CORE
certification policies. Additionally, we believe we need to be
especially clear that we are adopting the CAQH CORE companion guide
template to avoid any confusion as to whether the companion guide
template is included as part of the companion guide rules under CAQH
CORE Phase I and Phase II rules we are adopting.
a. Acknowledgements Operating Rules
Acknowledgements are responses transmitted by EDI that inform
submitters whether or not their transaction has been received or if
there are problems with the transaction. The use of acknowledgements
adds a great deal of value to the underlying transactions for which
they are sent by informing the sender that a transaction has been
received or has been rejected. Without acknowledgements, it is
difficult for the sender to know whether the intended recipient
received the transmission, which often results in the sender repeatedly
querying the intended receiver as to the status of the transmission.
In the February 2010 report to the NCVHS, the Designated Standards
Maintenance Organization (DSMO), which receives and processes requests
for adopting new standards or modifying adopted standards recommended
that the NCVHS consider acknowledgements for adoption as HIPAA
transactions, using the Version 5010 999, 271, 277, and TA1 standards.
In the DSMO recommendation, it was noted that acknowledgements help the
health care industry better reconcile the status of transmitted EDI
transactions, especially when sending claims and remittance
transactions. The transaction sender benefits from knowing that the
receiving party has successfully received the transaction or has
encountered errors that need to be reconciled.
We have received anecdotal reports of wide-spread industry use of
acknowledgements on a voluntary basis, and we understand that
provisions for acknowledgements are contained in many health plans'
companion guides. It is our understanding also that the health care
industry has long supported, and even anticipated, the adoption of an
acknowledgement transaction standard under HIPAA. The CAQH CORE 150 and
151 rules (updated for Version 5010) specifically pertain to requiring
the use of the Version 5010 999, 271, and 277 acknowledgements.
Additionally, the use of acknowledgements is referenced throughout many
of the other CAQH CORE rules adopted in this interim final rule with
comment period, including the CORE v5010 Master Companion Guide
Template.
Section 1173(a)(4)(A)(iii) of the Act, as added by section 1104(b)
of the Affordable Care Act, provides that standards and associated
operating rules shall ``provide for timely acknowledgement, response,
and status reporting that supports a transparent claims and denial
management process (including adjudication and appeals).'' This new
provision is an indication of Congress' recognition of the important
role acknowledgements play in EDI.

[[Page 40468]]

Although we are not requiring compliance with any of the CAQH CORE rule
requirements regarding acknowledgements, we are addressing the
important role acknowledgements play in EDI by strongly encouraging the
industry to implement the acknowledgements requirements in the CAQH
CORE rules we are adopting herein. We reflect the exclusion of the
requirement to use acknowledgments in regulation text at Sec. 162.1203
and Sec. 162.1403.
Until such time as the Secretary adopts a standard for
acknowledgments, we support the industry's ongoing voluntary use of
acknowledgements and encourage even more widespread use. We welcome
industry and stakeholder comments on this topic.
b. CAQH CORE Operating Rules Certification
Currently, the CAQH CORE administers a voluntary certification
process, for a fee. Once the entity passes the certification
requirements, the CAQH CORE assigns the status of ``CORE-certified
Entity'' and requires those entities to adhere to the CAQH CORE
policies. The CAQH CORE operating rules are free and available for
voluntary use today, and any trading partner, including providers, can
opt to use them, they would simply not be able to claim that they were
``CORE certified entities.''
Throughout the CAQH CORE rules we are adopting, there are also many
references to CORE certification. For example, the rules reference
CORE-certified entity, CORE-authorized testing vendor, CORE-certified
participant, and the like. In many places, the rules describe what is
required for the successful completion of the approved CORE test suite,
CORE testing requirements, etc. In this interim final rule with comment
period, we are not requiring covered entities to obtain the CAQH CORE
certification or to adhere to the CAQH certification policies for Phase
I and Phase II operating rules. We want to be clear that we are not
requiring compliance with any aspect of CORE certification.
We note that section 1173(h)(1)(A) of the Act (as added by section
1104(b)(2) of the Affordable Care Act) requires that health plans
certify to the Secretary no later than December 31, 2013 that they are
in compliance with any applicable HIPAA standards and associated
operating rules for the eligibility for a health plan, health care
claim status, and health care payment and remittance advice
transactions. Until we develop a certification process in accordance
with section 1173(h) of the Act specifying health plan compliance
requirements, health plans and all other covered entities are not
required to certify compliance with the CAQH CORE Version 5010
operating rules we are adopting. We reflect the exclusion of CORE
certification in regulation text at Sec. 162.1203 and Sec. 162.1403.
c. Use of the CAQH CORE Companion Guide Template
During the July 2010 NCVHS hearing, the NCVHS also heard testimony
concerning the continued use of companion guides when operating rules
are adopted. The NCVHS indicated that it does not wish to encourage the
perpetual use of companion guides, which subvert the goals of
administrative simplification; however, it acknowledged that companion
guides may continue to be necessary for proprietary information,
transmission instructions, and other limited business purposes, and
will likely never be totally replaced by operating rules or updated
versions of the standards.
The NCVHS recommended that the Secretary require that any companion
guides deemed necessary by health plans not conflict with the HIPAA
standards, implementation specifications and operating rules, and that
they follow a standard format and content agreed upon by industry
consensus across all sectors. The NCVHS stated that companion guides
should be limited to providing basic trading partner, including
providers, facts, such as contact information, Web sites, service phone
numbers, and other necessary information for conducting business, etc.
With input from health plans, system vendors, provider
representatives and healthcare/HIPAA industry experts, the CAQH CORE
has developed a companion guide template as part of their Phase I and
Phase II operating rules (updated for Version 5010) that organizes
information into several simple sections and gives health plans the
flexibility to tailor the document to meet their particular needs. The
CORE 152: Eligibility and Benefit Real Time Companion Guide Rule states
that the ASC X12 005010X279A1 Eligibility Benefit Request and Response
(270/271) transactions must follow the format/flow as defined in the
CORE v5010 Master Companion Guide Template. The CORE 250: Claim Status
Rule (updated for Version 5010) includes a requirement that entities
using the ASC X12N/005010X212 Health Care Claim Status Request and
Response (276/277) transactions must follow the format/flow as defined
in the Phase I CORE 152, which is the CORE v5010 Master Companion Guide
Template. The CAQH CORE companion guide template can be found on the
CAQH CORE Web site at http://www.caqh.org/pdf/CLEAN5010/MasterCompGuidTemp-Version 5010.pdf.
We are requiring that covered entities that use or plan to use
companion guides comply with the CORE 152 and CORE 250 rules
requirement to use the CORE v5010 Master Companion Guide Template for
the eligibility for a health plan and health care claim status
transactions.
d. Updates to Standards and Operating Rules
Section 1173(i) of the Act provides for the establishment of a
review committee for the purposes of reviewing and amending the adopted
standards and operating rules. It calls for a hearing of this review
committee no later than April 2014 and not less than biennially
thereafter as well as a report outlining recommendations for updating
and improving the standards and operating rules. Per the statute, this
review committee can include the NCVHS, or any appropriate committee as
determined by the Secretary.
Additionally, section 1173(a)(5) of the Act provides for the
solicitation of input from the NCVHS and the Health Information
Technology Standards Committee, as well as the standards setting
organizations and stakeholders as determined appropriate by the
Secretary for the purposes of describing ``(i) whether there could be
greater uniformity in financial and administrative activities and
items, as determined appropriate by the Secretary; and (ii) whether
such activities should be considered financial and administrative
transactions * * * for which the adoption of standards and operating
rules would improve the operation of the health care system and reduce
administrative costs.''
Finally, we note that this interim final rule with comment period
does not specify the timing or the process for updating operating
rules. The timing and process for updating these, as well as future
operating rules will be forthcoming.
e. Additional Information
The current definition of standard at 45 CFR 160.103 is written so
broadly that it could include operating rules as we are defining that
term at Sec. 162.103. However, as we have determined that operating
rules are separate and distinct from standards, and that standards do
not encompass operating rules, we believe it is necessary to revise the
definition of standard to specifically

[[Page 40469]]

exclude operating rules. Therefore, we have amended the definition of
standard at Sec. 160.103 to exclude operating rules.
Currently, 45 CFR 162.103 provides that a standard transaction
means ``a transaction that complies with an applicable standard adopted
under this part.'' In this interim final rule with comment period we
are adopting operating rules and requiring covered entities to comply
with those operating rules when conducting a transaction for which we
have adopted a standard. We believe it is necessary to revise the
definition of a standard transaction in order to be clear that a
standard transaction is one that uses the adopted standard as well as
the adopted operating rule for that transaction. Therefore, we are
amending the definition of a standard transaction at 45 CFR 162.103 to
mean ``a transaction that complies with an applicable standard and
associated operating rules adopted under this part.''
Section 1173(a)(4)(A)(iv) of the Act provides that the standards
and associated operating rules must ``describe all data elements
(including reason and remark codes) in unambiguous terms, require that
such data elements be required or conditioned upon set values in other
fields, and prohibit additional conditions (except where necessary to
implement State or Federal law, or to protect against fraud and
abuse).'' We interpret this provision to mean that covered entities may
not require additional data conditions of their trading partners,
including providers, outside of those already included in the adopted
standards and associated operating rules, except where it is necessary
to implement State or Federal law, or to protect against fraud and
abuse. Our regulations at 45 CFR 162.915 already place restrictions on
covered entities with regard to what they may require of their trading
partners including providers, concerning standards. Currently, under
Sec. 162.915(a), covered entities may not enter into a trading partner
agreement that would change the definition, data condition, or use of a
data element or segment in a standard. We do not need to do anything to
incorporate the statutory requirement of section 1173(a)(4)(iv) of the
Act into our regulations with regard to standards; however we believe
it is appropriate to revise Sec. 162.915(a) to expand the restriction
to include operating rules. Therefore, we are amending Sec. 162.915(a)
to include operating rules. The law permits limited circumstances under
which covered entities may require additional data conditions where
necessary to implement State or Federal law, or to protect against
fraud and abuse. Therefore, we are also amending Sec. 162.915(a) to
reflect that narrow exception.
f. Conclusion
Based on our analysis of the CAQH CORE operating rules and the
recommendations of the NCVHS, and for the reasons provided in the
previous discussions, we are adopting the CAQH CORE operating rules
(updated for Version 5010), including the companion guide template, for
the non-retail pharmacy eligibility for a health plan and health care
claim status transactions, as reflected at 45 CFR 162.920, 162.1203,
and 162.1403. We are not requiring compliance with any of the
requirements of the operating rules that pertain to the use of
acknowledgements and CAQH CORE certification.
2. NCPDP Telecommunication Standard Implementation Guide Version D.0
Operating Rules for Retail Pharmacy Transactions
In its testimony before the NCVHS, the NCPDP stated that the NCPDP
Version D.0 standard represents retail pharmacy industry consensus on
clarification of transactions, data elements, data values, and
situations of usage. Additionally, the NCPDP testified at the July 2010
NCVHS hearing that it also publishes a free NCPDP Version D.0 Editorial
document, which is updated quarterly, and contains frequently asked
questions, examples, and further clarifications, as well as addresses
Medicare Part D prescription drug program needs that the industry
brings forward. As business requirements change, as clarifications are
needed, and as questions are asked, the NCPDP has indicated that, where
possible, the information in the NCPDP Version D.0 Editorial will be
incorporated into future versions of the NCPDP Version D.0 standard to
further support ongoing retail pharmacy business needs.
The NCPDP formally requested that the NCVHS recommend to the
Secretary that the NCPDP Version D.0 standard be adopted as the
operating rule for use with the retail pharmacy eligibility for a
health plan transaction, and the NCVHS included this recommendation in
its September 30, 2010 letter to the Secretary.
The pharmacy industry has long been utilizing NCPDP standards to
conduct electronic transactions. These standards provide for real-time
claims adjudication, eligibility and benefit verification, real-time
ordering by the physician, and sharing of medication history. We
believe that the NCPDP Version D.0 standard itself provides enough
detail and clarity to operationalize the standards to the point where
no gaps exist that operating rules would need to fill, so that no
further infrastructure or data content rules need to be adopted at this
time. Additionally, we believe that the NCPDP Version D.0 standard
already fulfills the purposes and principles of sections 1173(a)(4)(A)
and (B) of the Act so that the adoption of operating rules to
supplement or enhance the standard is not appropriate at this time.

III. Effective and Compliance Dates

Section 1173(g)(4)(B)(i) of the Act states that ``[t]he set of
operating rules for eligibility for a health plan and health claim
status transactions shall be adopted not later than July 1, 2011, in a
manner ensuring that such operating rules are effective not later than
January 1, 2013.'' In each of our previous HIPAA rules, the date on
which the rule was effective was the date on which the rule was
considered to be established or adopted, or, in other words, the date
on which adoption took effect and the CFR was accordingly amended.
Typically, the effective date of a rule is 30 or 60 days after
publication in the Federal Register. Under certain circumstances the
delay in the effective date can be waived, in which case the effective
date of the rule may be the date of filing for public inspection or the
date of publication in the Federal Register.
The effective date of standards, implementation specifications,
modifications, or operating rules that are adopted in a rule, however,
is different than the effective date of the rule. The effective date of
standards, implementation specifications, modifications, or operating
rules is the date on which covered entities must be in compliance with
the standards, implementation specifications, modifications, or
operating rules. Here, the Act requires that the operating rules be
effective not later than January 1, 2013. This means that covered
entities must be in compliance with the operating rules by January 1,
2013. If we receive comments that compel us to change any of the
policies we are finalizing in this interim final rule with comment
period, we will seek to finalize any such changes by January 1, 2012,
to allow sufficient time for industry preparation for compliance.

IV. Waiver of Proposed Rulemaking

Under 5 U.S.C. 553(b) of the Administrative Procedure Act (APA), we
are required to publish a notice of proposed rulemaking in the Federal

[[Page 40470]]

Register. In addition, the APA mandates a 30-day delay in the effective
date. Sections 553(b) and (d) of the APA provide for an exception from
these APA requirements. Section 553(b)(B) of the APA authorizes an
agency to dispense with normal rulemaking requirements for good cause
if the agency makes a finding that notice and comment procedures are
impracticable, unnecessary, or contrary to the public interest. Section
553(d)(3) of the APA allows the agency to avoid the 30-day delay in
effective date where the agency finds good cause to do so and includes
a statement of support.
Subsection (C) of section 1173(g)(4) of the Act is titled
``Expedited Rulemaking'' and provides that ``[t]he Secretary shall
promulgate an interim final rule applying any standard or operating
rule recommended by the [NCVHS] pursuant to paragraph (3). The
Secretary shall accept and consider public comments on any interim
final rule published under this subparagraph for 60 days after the date
of such publication.'' It is clear to us the statute intends that the
ordinary notice and comment rulemaking procedures of the APA do not
apply here. We are statutorily required to proceed with an interim
final rule with comment period, which means we are compelled by the
statute to dispense with normal APA notice and comment procedures. In
light of the statutory requirement for us to publish an IFC for the
adoption of these operating rules, we conclude that it is unnecessary
for us to undertake ordinary notice and comment procedures and
therefore, for good cause, we waive them. In accordance with the
requirements of section 1173(g)(4)(C) of the Act, we are providing a
60-day public comment period.
We also find good cause for waiving the 30-day delay in the
effective date of this interim final rule with comment period. The 30-
day delay is intended to give affected parties time to adjust their
behavior and make preparations before a final rule takes effect.
Sometimes a waiver of the 30-day delay in the effective date of a rule
directly impacts the entities required to comply with the rule by
minimizing or even eliminating the time during which they can prepare
to comply with the rule. That is not the case here. In this case,
covered entities are not required to comply with the adopted operating
rules until January 1, 2013, nearly one-and-one-half years after the
publication of this interim final rule with comment period; a waiver of
the 30-day delay in the effective date of the rule does not change that
fact. A waiver is in fact inconsequential here to covered entities--
their statutorily-prescribed date of compliance remains January 1,
2013. Because we believe the 30-day delay is unnecessary, we find good
cause to waive it.

V. Collection of Information Requirements

Under the Paperwork Reduction Act of 1995, we are required to
provide 60-day notice in the Federal Register and solicit public
comment before a collection of information is submitted to the Office
of Management and Budget (OMB) for review and approval. In order to
fairly evaluate whether an information collection should be approved by
OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995
requires that we solicit comment on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
We are soliciting public comment on each of these issues for the
following section of this document that contains information collection
requirements (ICRs): Specifications: Companion Guides Template.
In current practice, companion guides are developed by individual
health plans and require providers to adhere to different transaction
implementation rules for each health plan. Health plans have created
these companion guides to describe the specifics of how they implement
the HIPAA transactions and how they will work with their trading
partners. Health plans' companion guides vary not only in format and
structure, but also in size, being anywhere from a few to 60 pages or
more. Such variances can be confusing to trading partners and providers
who must implement them along with the standard implementation guides,
and who must refer to different companion guides for different health
plans. As previously stated, there are currently more than 1,200 such
companion guides in use today.
Use of the CORE 152: Eligibility and Benefit Real Time Companion
Guide Rule and the CORE 250: Claim Status Rule, two of the operating
rules adopted in this interim final rule with comment period provide a
standard template/common structure that health plans must use that is
more efficient for providers to reference, given the multiple industry
companion guides they must consult today.
The increasing use of health care EDI standards and transactions
has raised the issue of the applicability of the PRA. The OMB has
determined that this regulatory requirement (which mandates that the
private sector disclose information and do so in a particular format)
constitutes an agency-sponsored third-party disclosure as defined under
the PRA.
The burden associated with the requirements of this interim final
rule with comment period, which is subject to the PRA, is the initial
onetime burden on health plans to use a standardized template for
companion guides. The burden associated with the routine or ongoing
maintenance of the information reported in the standard template format
for companion guides is exempt from the PRA as defined in 5 CFR
1320.3(b)(2).
Based on the assumption that the burden associated with systems
modifications that need to be made to implement the standard template
for companion guides may overlap with the systems modifications needed
to implement other HIPAA standards, and the fact that the standard
template for companion guides will replace the use of multiple
companion guides, resulting in an overall reduction of burden for
providers, commenters should take into consideration when drafting
comments that: (1) One or more of these current companion guides may
not be used; (2) companion guide modifications may be performed in an
aggregate manner during the course of routine business; and/or (3)
systems modifications may be made by contractors such as practice
management vendors, in a single effort for a multitude of affected
entities.
Health plans that issue companion guides do so, in part, to direct
providers on how to implement the ASC X12 and, in the case of the NCPDP
standards, they issue payer sheets specific to their requirements and
often times provide other plan-specific information, such as contact
information, address, etc. It is expected that even with the advent of
operating rules, companion guides will never be completely eliminated,
but the companion guides themselves may be greatly reduced in size and
complexity as a result of the use of operating rules. The companion
guide templates serve the purpose of providing a uniform structure for
health plans to use when preparing companion guides. The use of these
templates by health plans currently issuing companion guides is
considered to be a one-time action and is considered a permanent
standard

[[Page 40471]]

template for a health plan companion guide.
The information collection burden associated with this interim
final rule with comment period is for the costs for adapting a health
plan companion guide(s) to the CORE v5010 Master Companion Guide
Template, 005010, 1.2, March 2011 as required by the CAQH CORE
operating rules for the eligibility for a health plan and health care
claim status standard transactions. This is a one-time burden on health
plans that will commence no later than January 1, 2013, the date by
which HIPAA covered entities must be using the adopted operating rules
for eligibility for a health plan and health care claim status
transactions.
Common practice in the industry is for companion guides to be
published as electronic documents and updated periodically in the
routine course of business. Companion guides are posted to and made
available on health plan Web sites trading partners, including
providers, to access; therefore, printing and shipping costs are not
considered. As the transition to the template is a one-time
requirement, we do not estimate any ongoing labor costs associated with
the use of this template beyond the initial first year conversion. We
have estimated the one-time conversion to the template will cost
industry $3,028,000. Our calculations were determined as follows:
The current length of health plan companion guides related to the
eligibility for a health plan and health care claim status
transactions, is anecdotally estimated at anywhere from just a few, to
60 or more pages. We estimate it will take a health plan staff person,
most likely a technical writer, from 1 to 4 hours per page to reformat
companion guides into the standard template for companion guides. This
burden would involve re-entering of information, reconfiguration of the
sequence in which information appears, addition of information, and
other word processing and related tasks. It also would require specific
technical knowledge, such as expertise in the Version 5010 standard
transactions. We estimate that a technical writer, at an estimated
hourly salary rate of $31.55, would make these revisions. Using the
high estimate obtained in testimony to the NCHVS by the American
Medical Association of 1,200 companion guides currently in use, we
calculate an estimated average of 40 pages, (48,000 responses) at an
average rate of 2 hours per page (1,200 guides x 40 pages x 2 hours per
page x hourly rate of $31.55), for a one-time burden of $3,028,800
across the industry for health plans that issue companion guides to
adopt the standard template for health plan companion guides. As
existing word processing capabilities would be used for this task, we
do not anticipate any software, hardware or other specialized equipment
to be purchased and/or maintained for this specific purpose.
If you comment on these information collection and recordkeeping
requirements, please do either of the following:
1. Submit your comments electronically as specified in the
ADDRESSES section of this interim final rule; or
2. Submit your comments to the Office of Information and Regulatory
Affairs, Office of Management and Budget, Attention: CMS Desk Officer,
CMS-0032-IFC; Fax: (202) 395-6974; or E-mail: [email protected].

VI. Response to Comments

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

VII. Regulatory Impact Analysis

A. Introduction

We have examined the impacts of this interim final rule with
comment as required by Executive Order 12866 on Regulatory Planning and
Review (September 30, 1993), the Regulatory Flexibility Act (RFA)
(September 19, 1980, Pub. L. 96-354) (as amended by the Small Business
Regulatory Enforcement Fairness Act of 1996, Pub. L. 104-121), section
1102(b) of the Social Security Act, section 202 of the Unfunded
Mandates Reform Act of 1995 (Pub. L. 104-4), Executive Order 13132 on
Federalism (August 4, 1999), and the Congressional Review Act (5 U.S.C.
804(2)).
We have prepared a Regulatory Impact Analysis that, to the best of
our ability, presents the costs and benefits of this interim final rule
with comment period. Executive Orders 12866 and 13563 direct 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).
Executive Order 13563 emphasizes the importance of quantifying both
costs and benefits, of reducing costs, of harmonizing rules, and of
promoting flexibility. Executive Order 13563 also directs agencies to
not only engage public comment on all regulations, but also calls for
greater communication across all agencies to eliminate redundancy,
inconsistency and overlapping, as well as outlines processes for
improving regulation and regulatory review.
A regulatory impact analysis (RIA) must be prepared for major rules
with economically significant effects ($100 million in 1995 dollars or
more in any 1 year). This rule has been designated an ``economically''
significant regulatory action, under section 3(f)(1) of Executive Order
12866 as it will have an impact of over $100 million on the economy in
any 1 year. Accordingly, the rule has been reviewed by the Office of
Management and Budget. We anticipate that the adoption of these
operating rules would result in benefits that outweigh the costs to
providers and health plans.
Our Regulatory Impact Analysis also meets the various requirements
of the Unfunded Mandates Reform Act of 1995 (URMA). Section 202 of the
URMA requires that agencies assess the anticipated costs and benefits
before issuing any rule whose mandate requires spending in any 1 year
of $100 million in 1995 dollars, updated annually for inflation in any
1 year by State, local, or Tribal governments, in the aggregate, or by
the private sector. That threshold level is currently approximately
$136 million. Based on our analysis, we anticipate that the private
sector would incur costs exceeding $136 million per year in the first 2
years following publication of the rule.
In addition, under section 205 of the UMRA (2 U.S.C. 1535), having
considered at least three alternatives that are referenced in the RIA
section of this rule, HHS has concluded that the provisions in this
rule are the most cost-effective alternative for implementing HHS'
statutory obligation of administrative simplification.

B. Current State, Need for Mandated Operating Rules and General Impact
of Implementation

Based on the current environment, there is a need for operating
rules. When a patient calls to set up an appointment with a provider,
or comes into the office or hospital for an appointment, a staff member
will often verify the patient's eligibility, coverage, and cost-sharing
requirements. However, not all

[[Page 40472]]

providers will verify the eligibility of their patients, and even for
providers' offices that do, often just a subset of patients are
verified. Some providers, however, do not conduct eligibility
verification at all, and a claim is submitted to the health plan
without an eligibility inquiry.
Eligibility verification is done in a variety of ways including the
following:
Accessing patient ``eligibility'' information via a health
plan's secure Web site.
Telephone.
The ASC X12 270 eligibility for a health plan inquiry.
This is an electronic data interchange (EDI).
After an actual claim has been submitted to a health plan, the need
sometimes arises for a provider to follow-up on the claim regarding
where it is in the payment process. This is called a claim status
inquiry and, again, this inquiry is conducted via Web site, telephone,
or through EDI.
Currently, many providers do not use EDI at all as a means to
conduct these two transactions and, of those that do, do not
necessarily conduct them through EDI for every patient. Rather, most
providers that use EDI transactions to verify a patient's eligibility
or claim status also use telephone or other means.
In a larger context, most providers use EDI, but only for some
transactions. For instance, according to the Healthcare Efficiency
Index and the Oregon Study, over 75 percent of health care claims are
now submitted by providers through EDI.
Because of the infinite number of variations of a specific
provider's use of EDI, it is very difficult to determine the following:
(1) the number of providers who use the eligibility for a health plan
or the claim status transactions (or any other specific transaction)
via EDI; and (2) the percent of eligibility for a health plan or claim
status transactions that the average provider makes through EDI.
However, studies have estimated the total number of electronic
transactions conducted by all providers, even at the level of a
specific transaction, and we will use such estimates to arrive at our
saving assumptions.
We assume that most providers have the technological capacity to
perform EDI (or have hired a trading partner with that capacity). We
base this assumption on-- (1) the high percentage of claim submissions
that are conducted through EDI; (2) responses to the Oregon study from
providers indicating that 96 percent of hospitals and 93 percent of
ambulatory clinics (that is, physicians offices) are ready or would be
ready for EDI transactions within 2 years; and (3) the impact analysis
in the Modifications proposed rule (73 FR 49757 through 49790) that,
through industry interviews, stated ``we do not believe that the number
of providers who have no electronic capability is very high.''
There are a number of studies that have illustrated the benefits
and savings in conducting EDI in contrast to manual or paper-based
transactions. We have noted a number of them in the Impact Analysis
Resources section in this interim final rule with comment period. The
basic idea is that systems can conduct these transactions faster, less
expensive, and more accurate than human intervention. Specific to our
purpose, it is faster, less expensive, and more accurate than human
intervention for a provider's system to communicate with a health
plan's system to verify the eligibility of a patient or check the
status of a claim.
So, why do not the majority of providers who have EDI capacity: (1)
Use EDI to conduct the eligibility for a health plan or the claim
status transaction; or (2) verify all their patients' eligibility
through EDI instead of just a few? In the Oregon Survey, the most
robust study with regard to a provider environment, 87 percent of
hospitals and 60 percent of physician clinics said that the barrier to
using the electronic eligibility for a health plan transaction is that
health plans ``do not provide enough information in response to this
type of inquiry.'' This was the most frequently selected response among
the providers surveyed. In addition, 16 percent of hospitals and 20
percent of physician clinics stated that the barrier was that health
plans ``do not provide fast enough responses.''
The June 22, 2009 AMA document entitled ``Standardization of the
Claims Process: Administrative Simplification White Paper''
(hereinafter referred to as the 2009 AMA White Paper) describes the
importance of a robust response in the eligibility for a health plan
transaction: ``Receiving an explicit answer can quickly assist in
patient scheduling, billing the appropriate payer with financial
responsibility for the service, communicating the patient's financial
responsibility and reducing the number of denied claims which the
physician practice must manually handle.'' (http://www.ama-assn.org/ama1/pub/upload/mm/368/admin-simp-wp.pdf)
The picture that emerges is that providers conduct the electronic
eligibility for a health plan transaction only with health plans that
return robust eligibility information and return the response quickly.
If a provider's staff will get more and faster eligibility information
out of a specific health plan by picking up the phone or looking up the
patient online, then the manual transaction will be used instead of the
electronic transaction.
In terms of the claim status inquiry, we know that the average
providers' office telephones the health plan in order to check on claim
status. The ``Health Care Administration Expense Analysis'', produced
by the State of Washington Office of the Insurance Commissioner, found
that 37 percent of the telephone calls from providers to the State's
largest insurer were claim status inquiries (costing the plan $4
million a year on staffing costs to answer only claim status calls)
(Health Care Administration Expense Analysis: Blue Ribbon Commission
Recommendation 6, Final Report, 11-16-2007, http://www.insurance.wa.gov/consumers/documents/BRC_Efficiencies_Report.pdf.) Other studies indicate that less than 40 percent of all
claim status inquires are conducted electronically. Although we do not
have direct data that informs the reasons why providers use the
telephone instead of EDI for claim status inquiries, we can assume that
the same dynamic as the eligibility verification is at play: If the
electronic transaction is slower and produces less information, than a
manual process will be used instead.
Operating rules address this need for more and faster information.
As noted in the provision section, this interim final rule with comment
period is adopting specific operating rules with requirements regarding
response times and robust responses about a patient's eligibility from
health plans.
A number of extensive surveys, both private and governmental, have
reinforced the causal link between requiring health plans to return
fast, robust responses to the eligibility for a health plan electronic
request and an increased use in the transaction itself. In its Blue
Ribbon report, the state of Washington reported that less than 9
percent of eligibility verification requests are conducted
electronically in the state, while the state of Utah reported closer to
50 percent usage. The report credited Utah's adoption rate with the
State having an ``enhanced transaction'' in place for the eligibility
verification in which providers are told exactly the benefits a
particular patient has. The report concluded that ``improving the
enhanced message [of the eligibility for a health plan response]* * *
will greatly improve this area of administration.''
The Oregon Survey explicitly expressed the causal link between

[[Page 40473]]

``standardizing the standard'' and greater use of EDI by concluding
from its research that ``the healthcare industry is unlikely to take
major strides toward automated processes until there is greater
standardization of the methods for conducting the transactions
electronically.''
The 2009 AMA White Paper also speaks to providers' need for robust
health plan responses to the eligibility for a health plan transactions
and how such a response would affect providers: ``Such information
would also be extraordinarily valuable to physicians to ensure accurate
and timely payment, and this value would encourage wide-spread
utilization of the standard transactions by physicians and increased
physician automation. The AMA strongly supports the efforts of the
Council on Affordable Quality Healthcare Committee on Operating Rules
for Information Exchange [CAQH CORE] to not only expand the value of
the eligibility standard transaction but also continue its efforts of
adding value to electronic remittance advice and other standard
transactions * * *''
The IBM study demonstrates that electronic eligibility for health
plan transactions would increase with use of operating rules. The study
illustrates that providers' use of the eligibility for a health plan
transaction increases on two levels after operating rules are adopted.
First, more patients as a whole are having their eligibility verified,
either electronically or otherwise. Second, there is an increased use
of the electronic transaction. The participating health care entities
in the study reported increases in use of the eligibility for a health
plan electronic transaction at the average rate of 33 percent in the
first year after adopting CORE Phase I rules--a rate that participants
of the study credited to operating rules. Additionally, the IBM study
showed that providers saw on average 20 percent increase of patients
verified prior to a visit, significantly reducing practice
administrative and financial burden at the point of care.
On a more general level, in both the Transactions and Code Sets
final rule and the update to the standards in the Modifications final
rule, the savings analysis has been based on the increased use of
electronic transactions due to the implementation of standards (in the
Transactions and Code Sets final rule) and increased use of electronic
transactions due to improved standards (in the Modifications final
rule). The cost benefit of both these rules rested on the causal
relationship between improved standards and the predicted increased use
of EDI (and the cost savings that use of EDI brought with it). The
impact analysis for this interim final rule with comment period rests
on the same causality, except that we are more specific in how
operating rules cause increased use of electronic transactions.
As an example, the need for more robust and faster response to the
eligibility for a health plan transaction has been realized by states
seeking to reduce the administrative costs of health care in general.
In the ``Health Care Administration Expense Analysis,'' required by
Colorado state law and developed under the state's Commissioner of
Insurance, recommendations included requiring all health plans and
providers to use CAQH CORE Phase I and II data content and
infrastructure rules for the eligibility for a health plan and the
claim status transactions ``as a means of streamlining and
standardizing administrative interoperability between plans and
providers.'' (Senate Bill 08-135 Work Group to Develop Standardized
Electronic Identification System for Health Insurance: Final Report and
Recommendations. September 3, 2009; http://caqh.org/Host/CORE/SB135_COreport.pdf)
As well, Minnesota has a set of companion guides for the HIPAA
standard transactions. These companion guides are analogous to the
operating rules developed by the CAQH CORE in that they are intended to
standardize ``administrative processes when implementation of the
processes will reduce administrative costs.'' We have already mentioned
initiatives and reports by Oregon and Washington that seek to achieve
similar savings. (http://www.health.state.mn.us/auc/mn270271guide.pdf).
It is evident that both state governments and private industry
recognize the cost advantage to operating rules and similar ``enhanced
transaction'' business rules to accompany the HIPAA standard
transactions, in this case with regard to the eligibility for a health
plan transaction. However, both state governments and private industry
recognized the need for the adoption of operating rules on the Federal
level because of the clear advantages to a faster adoption by all
covered entities that a Federal mandate would engender. As illustrated
by the numerous State and private initiatives, there is the danger
that, without Federally mandated operating rules, different sets of
``operating rules'' will emerge, on a State by State or health plan by
health plan basis. In such a case, both plans and providers would have
to continue to customize their EDI transactions depending on the
operating rules required under a particular state or contract.
As well, some health care entities may be slow to adopt and
implement any ``operating rules'' voluntarily for fear that the Federal
government, or a particular State government, will adopt ``operating
rules'' that require a new set of implementation requirements with
associated costs.
Finally, most providers now have to conduct transactions such as
the eligibility for a health plan and the claim status transaction
through two different processes, electronic and manual and paper-based,
depending on the health plan that covers the patient or processes the
claim. As long as some health plans continue to conduct standard
transactions that are not fast or robust enough for providers' needs,
providers may continue to conclude that manually processing all such
transactions is easier and more economical.

C. Regulatory Flexibility Analysis: Impact on Small Entities

The Regulatory Flexibility Act (RFA) of 1980, Public Law 96-354,
requires agencies to describe and analyze the impact of the rule on
small entities unless the Secretary can certify that the regulation
will not have a significant impact on a substantial number of small
entities. In the health care sector, a small entity is one with between
$7 million to $34.5 million in annual revenues or is a nonprofit
organization. For details, see the SBA's Web site at http://www.sba.gov/sites/default/files/Size_Standards_Table.pdf (refer to
Sector 62--Health Care and Social Assistance). (Accessed 2-1-11).
For the purposes of this analysis (pursuant to the RFA), nonprofit
organizations are considered small entities; however, individuals and
States are not included in the definition of a small entity. We
attempted to estimate the number of small entities and provided a
general discussion of the effects of this interim final rule with
comment period, and where we had difficulty, or were unable to find
information, we solicited industry comment. We discuss the impact of
the rule on small entities in section VII.K. of this interim final rule
with comment period.
As well, section 1102(b) of the RFA requires us to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 603 of the

[[Page 40474]]

RFA. For purposes of section 1102(b) of the RFA, we define a small
rural hospital as a hospital that is located outside of a Metropolitan
Statistical Area and has fewer than 100 beds. (See the discussion at
section VII.K. of this interim final rule with comment period for our
discussion of the expected impact on small rural hospitals.)

D. Alternatives Considered

In deciding to adopt operating rules for the eligibility for a
health plan and the health care claim status transactions, we
considered a number of alternatives, on which we solicit public and
industry comments.
1. Do Not Adopt Operating Rules for Non-Retail Pharmacy Industry
We considered this option, but determined that this would only be
appropriate if operating rules for use in the health care industry were
not available, or available and already in use on a voluntary basis.
Per the aforementioned NVCHS hearings, public testimony and analysis,
the NCVHS deemed that two authoring entities who came forward and
applied to be candidates as authoring entities were qualified under the
stipulations for the adoption of operating rules in the Affordable Care
Act to act as authoring entities, namely the Council for Affordable
Quality Healthcare's (CAQH) Committee on Operating Rules for
Information Exchange (CORE) and the National Council for Prescription
Drug Programs (NCPDP). The CAQH CORE offered operating rules that, with
some exceptions, have been determined to be feasible for use with the
eligibility for a health plan transaction, and the health care claim
status transaction under HIPAA, as specified in the Affordable Care
Act. The NCPDP also offered operating rules, which are already in use
in all retail pharmacies by virtue of the pharmacies' use of the NCPDP
Telecommunications standard Version 5.1, and which will be updated on
January 1, 2012, when the update to this standard, NCPDP
Telecommunications standard Version D.0, goes into effect.
Additionally, not adopting any operating rules for the eligibility for
a health plan transaction and health care claim status transaction, as
required by the Affordable Care Act, would violate the Act's statutory
requirements under section 1104(c) ``Promulgation of Rules'', which
requires the Secretary to adopt operating rules for the two
aforementioned electronic health care transactions by no later than
July 1, 2011 with a compliance date of January 1, 2013.
2. Adopt Another Authoring Entity's Operating Rules
As previously discussed in section II.B. of this interim final rule
with comment period, section 1104(b)(3) of the Affordable Care Act
amends section 1173(g)(3)(a) of the Act by charging the NCVHS with
advising the Secretary as to whether a nonprofit entity meets the
statutory requirements for developing the operating rules to be adopted
by the Secretary, and outlines the entity's specific qualification
requirements. Of those organizations testifying at the NCVHS hearing,
two organizations formally requested to be considered authoring
entities for operating rules, namely the CAQH CORE and the NCPDP.
In its testimony before the NCVHS, the ASC X12, the standards
development organization responsible for the development of the Version
5010 standards for electronic health care transactions, expressed its
support for the NCPDP being named as an operating rule authoring entity
not only for the pharmacy industry, but for the entire health care
industry (transcript of the July 20, 2010 NCVHS Subcommittee on
Standards hearing at http://www.ncvhs.hhs.gov). The ASC X12's support
was based upon their belief that--
The NCPDP's ANSI-approved organization status supports
consensus building and open participation;
The infrastructure for the NCPDP is able to handle the
development of operating rules in the associated workgroup task group
without any modifications to procedures or processes;
The NCPDP members are frequent users of the ASC X12
standards and thus the NCPDP is familiar with them; and
The pharmacy industry's growing experience with real-time
eligibility, real-time claim status, and real-time submission of claims
beyond pharmacy.
Based on the ASC X12 testimony, the NCPDP stated that it would
consider playing a larger role if the NCVHS deemed that there should
only be one authoring entity, and would take on the role of more than
just the NCPDP standards, as appropriate.
However, with respect to the requirements for the operating rules
themselves, neither the NCPDP nor the CAQH CORE met all of the
requirements for operating rules for both health care segments. As
noted earlier, the July 2010 NCVHS hearings were followed by a request
from the NCVHS to each candidate to respond to a detailed questionnaire
about the statutory requirements. The questionnaire solicited specific
documentation to validate the testimony. Based on review of the CAQH
CORE and the NCPDP submissions to this questionnaire the NCVHS
determined, and we have concurred, that neither organization can
unilaterally provide operating rules to support both retail pharmacy
and non-retail pharmacy health care segments. The NCPDP naturally
focuses on the NCPDP retail pharmacy standards, while the CAQH CORE has
focused on the ASC X12 administrative health care transactions. While
both entities have similar policies related to securing a consensus
view of health care stakeholders and ensuring that rules are consistent
with (and do not conflict with) other existing standards, neither
organization has rules in place for both health care segments. While
addressing the retail pharmacy industry's needs relative to operating
rules, the NCPDP did not present to the NCVHS for their consideration
any existing NCPDP operating rules to accommodate the ASC X12
standards. The CAQH CORE has phases of operating rules that accommodate
the ASC X12 standard for electronic health care transactions, but are
not specific to retail pharmacy transactions.
3. Wait for Resolution of All Outstanding Technical and Administrative
Issues Before Adopting the Operating Rules Developed by the Authoring
Entities
Both the CAQH CORE and the NCPDP demonstrated to the NCVHS that
their operating rules were based upon broad public and stakeholder
input. However, as previously discussed in section II. of this interim
final rule with comment period, there are certain exceptions that exist
with regard to our adoption of the CAQH CORE operating rules in their
entirety. Upon analysis, we declined to adopt the CAQH CORE operating
rules for the ASC X12 999 acknowledgement transaction, and the
references to being ``CORE certified'' contained in the CAQH CORE
Operating Rules as we have already described in section II.F. of this
interim final rule with comment period. If we had opted to wait until
the resolution of the administrative issues affecting the adoption of
the entire CAQH CORE operating rules, it would seriously delay the
health care industry's ability to begin to achieve the benefits of
administrative simplification.
Additionally, as described in section III of this interim final
rule with comment period, we have declined to adopt the NCPDP business
rules and guidelines as embedded in its NCPDP

[[Page 40475]]

Telecommunication Standard Version D.0, as they do not qualify as
operating rules as defined in section II.A. of this interim final rule
with comment period. The NCPDP business rules and guidelines are
embedded within the NCPDP Telecommunications Standard Version D.0, and
while technically not operating rules as defined by this interim final
rule with comment period, they function as such nonetheless in that
they provide robust business rules and guidelines for use in retail
pharmacy transactions. The pharmacy industry is already preparing to
use the NCPDP Version D.0 standard in their day-to-day pharmacy
transactions as required by the January 16, 2009 final rule (74 FR
3296) adopting the NCPDP Telecommunication Standard Version D.0 for use
in retail pharmacy transactions, effective January 1, 2012. The NCPDP
Telecommunications Standard Version D.0 already provides a full and
robust array of tools for the retail pharmacy industry to realize the
potential benefits of administrative simplification.

E. Impact Analysis Resources

We have considered a number of different cost benefit studies that
have been conducted by industry and independent entities in recent
years. The background and conclusions on these studies and surveys will
illuminate how we calculated our assumptions and how we applied them to
this impact analysis. In this section, we briefly describe these
studies, as well as an explanation of all of the following:
The depth and completeness of the analysis and supporting
evidence for the conclusions.
Data sources and a presentation of the data limitations.
The perceived objectivity of the analysis as demonstrated
by the discussion of data sources and the rigor of the analysis.
Our ability to explain and justify the findings and
conclusions presented in the study.
We then present assumptions and an impact analysis for each of the
covered entity types, referencing the data and conclusions of the
various studies. The following is a description of the studies and
reports referenced for this impact analysis.
1. The Milliman Study
Electronic Transaction Savings Opportunities for Physician
Practices, hereinafter referred to as the Milliman study, was published
by Milliman in January 2006 (http://transact.emdeon.com/documents/milliman_study.pdf). Milliman is an international consulting and
actuarial firm serving health care payers, service providers and
consumer organizations. The Milliman study was commissioned by the
Emdeon Corporation, a nationwide clearinghouse that provides a wide
variety of information exchange services that connects payers,
providers and patients in the U.S. health care system. The study's main
objective focused on how much providers could save by implementing
electronic transactions. The Milliman study's calculations are based on
examining labor time and costs required to perform both manual and
electronic transactions. These labor costs include employee benefits,
payroll taxes, and general and administrative overhead. Notably, the
study compensated for related fees for transactions and set-up costs
for electronic transactions.
The Milliman study's methodology was basically mathematical, using
factors established through payrolls and average administrative costs,
as opposed to research based on surveys or interviews with providers.
Milliman's calculations were based on a model of a provider's
administrative processes developed with assumptions about the operating
environment of the typical solo physician practice. Ultimately,
Milliman tested its results ``by observing administrative procedures in
actual physician practices and medical groups.''
The study reflected other industry research that found that, while
manual processes are very similar among physicians, ``there is much
greater variance among practices * * * in the use of technology and the
associated costs for electronic transactions.'' In some cases,
providers are fully automated. In the majority, however, there is a mix
of electronic and manual processes, as well as processes that require a
wide range of levels of human intervention.
Milliman found that a single-physician practice could save as much
as $42,000 a year by moving processes from manual to electronic. This
estimate is based on a physician office that moves from all manual
transactions to fully electronic for six standard transactions. For our
impact analysis, this savings could not be used as a factor to project
savings for all physicians ($42,000 x the number of physicians), as
other studies have demonstrated that most providers are already using
some of the electronic transactions.
Milliman's approach was to look at provider costs and benefits, and
we opine that it appears to be objective in its assumptions. The
Milliman study will be useful in our impact analysis as it provides
labor and administrative overhead costs.
The Milliman study was published in 2006. In its calculations, it
accounted for inflation and other factors that may have changed since
its source data were gathered and the study was finally published.
However, its final conclusions are somewhat dated, and we will consider
this in our assumptions.
2. The AHIP Survey (2006)
America's Health Insurance Plans' (AHIP) Center for Policy and
Research conducted a survey of its members to examine the issue of
claims processing and turnaround times for claim payments. The survey
is summarized in the document entitled ``An Updated Survey of Health
Care Claims Receipt and Processing Times, May 2006'' at http://www.ahipresearch.org/pdfs/PromptPayFinalDraft.pdf.
AHIP is a national association representing nearly 1,300 companies
providing health insurance coverage to more than 200 million Americans.
The study is a follow-up to a survey done in 2002. We took data from
the AHIP study to develop assumptions about savings calculations for
health plans.
3. The McKinsey Analysis
Overhauling the U.S. Healthcare Payment System conducted by
McKinsey & Company, hereinafter referred to as the McKinsey analysis,
was published in The McKinsey Quarterly on June 2007 (http://www.mckinseyquarterly.com/Overhauling_the_US_health_care_payment_system_2012). McKinsey & Company is an international management
consulting firm advising companies on strategic, organizational,
technology, and operational issues. The McKinsey analysis relies on a
number of different resources in order to calculate the cost of non-
electronic transactions compared with the cost of electronic
transactions. As in the Milliman study, the McKinsey analysis makes the
case for the move from paper to electronic transactions. Their analysis
used sources including Faulkner & Gray Health Data Directory; Health
Data Management; HIPAA Survey--Claims and Payment Practices; Milliman;
National Health Expenditures, Centers for Medicare & Medicaid Services
(CMS); U.S. Department of Health and Human Services (HHS); and
McKinsey's own analysis. For its analysis' cost per transaction, it
appears McKinsey relied mostly on the Milliman study.

[[Page 40476]]

As noted, the McKinsey analysis brings together secondary sources
to make its assumptions, so it is not based on any primary research or
surveys. However, the McKinsey analysis does summarize these secondary
sources into quantitative ranges that are useful to our impact
analysis. For instance, based on secondary sources, the McKinsey
analysis gives a range of 1.4 to 3.5 billion total eligibility
verifications annually, both electronic and non-electronic, across the
health care industry. While this is a broad range, it is useful in
estimating the low and high estimates for our calculations.
The McKinsey analysis suggests that making the flow of dollars in
the health care industry more efficient through electronic means will
trim the administrative costs that are spent on the payment system,
which its analysis calculates as 15 percent of every healthcare dollar.
The McKinsey analysis was objective in its approach, especially
with regard to its data on eligibility for a health plan transactions
because it was focused on claim-centered transactions. Its emphasis was
mostly on the deficiencies and possibilities regarding payment flow
between payers and providers, with commentary on the involvement of
financial institutions. Its recommendations did not include mention of
operating rules or the eligibility for a health plan transaction, so we
find its data neutral with regard to the purpose of this impact
analysis. The McKinsey analysis, presented in June 2007, is used by
other related industry studies, and, because we could not identify
studies or analyses that argued against its conclusions, we presume
that it reflects industry assumptions.
4. The Healthcare Efficiency Report
The National Progress Report on Healthcare Efficiency, hereinafter
referred to as the Healthcare Efficiency Report, is the first annual
report from the U.S. Healthcare Efficiency Index (USHEI), (http://www.ushealthcareindex.com). an industry forum for monitoring business
efficiency in healthcare USHEI's advisory council consists of
representatives from hospitals, clearinghouses, health care
consultants, health plans and other entities (http://www.ushealthcareindex.com/advisorycouncil.php). The USHEI was launched
in 2008 to raise awareness of the cost savings associated with the
adoption of electronic transactions in health care. The USHEI National
Progress Report takes the Milliman, McKinsey, and other studies and
applies them to a tool that measures current status of electronic
transaction usage (in percentages of transactions) and projects
possible cost savings if those percentages are increased.
The Healthcare Efficiency Report analyzed the eligibility for a
health plan transaction as a part of its Phase 1, which relied on the
Milliman study and the McKinsey report for most of its data.
Nevertheless, the Healthcare Efficiency Report consolidates the
secondary sources in an original and illustrative manner, and appears
to be an accepted yardstick for administrative simplification in the
health care industry.
The Healthcare Efficiency Report repeats an important point
presented by Milliman and which we considered in our analysis: Even
among providers that use electronic means to conduct some of their
transactions, there is a broad range of how much they utilize standard
transactions, which standard electronic transactions they use, and
which transactions are still conducted manually.
5. The Oregon Provider and Payer Survey
Like the Milliman, McKinsey, and the Healthcare Efficiency Report,
the Oregon Provider and Payer Survey, hereinafter referred to as the
Oregon Survey, (http://www.oregon.gov/OHPPR/HEALTHREFORM/AdminSimplification/Docs/FinalReport_AdminSimp_6.3.10.pdf) sought to
estimate the possible cost savings that would be realized if there was
a continual shift from nonelectronic to electronic transactions among
healthcare entities in Oregon. The survey was conducted by the Oregon
Health Authority, Office for Oregon Health Policy and Research, which
conducts impartial, non-partisan policy analysis, research, and
evaluation, and provides technical assistance to support health reform
planning and implementation in Oregon. The Office serves in an advisory
capacity to Oregon Health Policy Board, the Oregon Health Authority,
the Governor, and the Legislature. The survey asked payers, providers,
and clearinghouses a number of qualitative questions in terms of how
administrative simplification can best be realized.
The study was comprehensive, and used both secondary sources and a
survey in which responses were gathered from 55 percent of the State's
hospitals and 225 of the State's ``ambulatory clinics.'' Of those 225
ambulatory clinics, 69 percent were clinics with less than 9
clinicians, and 23 percent were clinics with only 1 clinician. In our
impact analysis on providers, the category of ``physicians''
corresponds to the Oregon Survey's category of ``ambulatory clinics.''
Of all the studies cited in this impact analysis, the Oregon Survey
had the most recent and statistically valid data with regard to
provider use of electronic transactions and gave the clearest picture
of how providers verify eligibility. The study received quantitative
and qualitative data from a large number and range of providers. Oregon
itself is a mix or rural and urban communities. However, we recognize
that there are regional differences in the health care industry and the
fact that only Oregon health care entities were surveyed.
6. The IBM Study
In 2009, the CAQH CORE contracted with IBM's Global Business
Services, the world's largest business and technology services provider
with the aim towards helping companies manage their IT operations and
resources, to conduct a study (hereinafter referred to as the IBM
study) (http://www.caqh.org/COREIBMstudy.php) to assess the costs and
benefits to health plans, provider groups, and vendors of adopting the
CAQH CORE Phase I rules, which include the operating rules for the
electronic eligibility for a health plan transaction, as adopted under
this interim final rule with comment period. According to the IBM
study, industry-wide adoption of the CAQH CORE Phase I rules could
potentially yield $3 billion in savings in 3 years.
The IBM study consisted of interviews during which participants
answered a set of questions geared towards assessing the costs and
savings of adopting the CAQH CORE operating rules. Participants in the
study included six national and regional health plans, five
clearinghouses and vendors, and six providers. The health plans
together represented 33 million commercial members, 1.2 million
providers, 22 million eligibility verifications per month, and 30
million claims per month. The providers included hospitals, physician
groups, and a surgery center.
The IBM study did not track the costs and benefits of adopting the
operating rules for the health care claim status transactions. It did
attempt to track the costs and benefits of the infrastructure elements
of the operating rules (connectivity, response time, system
availability, acknowledgements, and companion guides) but health plan
study participants were not able to fully account for the costs related
to implementation, citing that they may

[[Page 40477]]

have allocated some costs to IT overhead.,
Highlights of the IBM study closely parallel the three key
objectives outlined above that necessitate the adoption of operating
rules:
Providers rapidly took advantage of the new capabilities
that the operating rules provided; for example, real-time transactions
(page 20 of IBM study report).
The average return on investment (ROI) for health plans
surveyed in the study was less than a year. Average initial and on-
going cost of implementing the operating rules for an individual health
plan was $592,000. The average savings, due mostly to moving away from
telephone to electronic transaction over the same time period, was
nearly $2.7 million for an individual health plan (page 23 of the IBM
study report). The ratio of verifications to claims was up from .63 to
.73 after the operating rules were adopted (page 20 of IBM study
report).
7. The 2009 Health Affairs Survey
In 2009, Health Affairs published survey results in an article
entitled ``What Does It Cost Physician Practices to Interact With
Health Insurance Plans,'' authored by Lawrence P. Casalino, Sean
Nicholson, David N. Gans, Terry Hammons, Dante Morra, Theodore
Karrison, and Wendy Levinson (Health Affairs, 28, no. 4(2009):w533-
w543, published online May 14, 2009; 10:1377hlthaff.28.4.2533). The
survey collected data from physicians from those identified as working
in solo or two-physician practices, and physicians from those working
in practices of three or more. Selection was stratified by specialty
type--primary care (including family physicians, general internists,
and general pediatricians), medical specialists, and surgical
specialists, for a total of 895 physician practices. The survey asked
about the physicians' offices' interactions with health plans by the
physicians themselves and by staff at the administrative level,
including the nursing staff, clerical staff, senior administrators, and
lawyers and accountants.
The survey was able to calculate the mean time and cost that a
physician's office spent interacting with health plans according to the
size of the practice and according to the level at which the
interaction took place, that is, whether the interaction was with the
physicians themselves, the nursing staff, the administrative staff, or
with the accountants, etc.
Among other conclusions, the study demonstrated that a single
physician spent a mean average of 3 hours a week interacting with
plans, while nursing and clerical staff spent much larger amounts of
time.
We find the conclusions of the survey to be valid based on the
large sampling of physicians' offices that were used. We will be
applying some of the results of the survey to our calculation of
savings for providers.
8. The Project SwipeIt (MGMA) Study
In 2009, the Medical Group Management Association (MGMA) launched
an industry wide effort calling on health insurers, vendors, and
healthcare providers to adopt standardized, machine-readable patient ID
cards by Jan. 1, 2010. In support of the effort, the MGMA developed
costs estimates of implementing a machine-readable patient ID card.
Ultimately, the project's aim is for administrative simplification. The
Project SwipeIt study demonstrated the quantifiable benefits to
administrative simplification. Therefore, some of Project SwipeIt
study's estimates, especially the base assumptions used in the savings
calculations can be applied to our impact analysis of the
implementation of operating rules.
Through their study, the MGMA estimated that it costs $25 to
resubmit a denied claim. Additionally they found that 50 percent of the
time claims are being denied because of incorrect patient information.
We believe this could also be alleviated through the implementation of
operating rules since eligibility information, including patient
information, will be returned prior to or at the point of care.
The MGMA cites many resources that were used to gather their data
for their analysis. We find that the data used in the MGMA study are
relevant to our analysis and therefore we will use some of this data in
our calculations of provider savings.
We invite public and industry stakeholder comments on our
assumptions.

F. Impacted Entities

All HIPAA covered entities would be affected by this interim final
rule with comment period, as well as software vendors and any other
business associates providing transaction related services, such as
billing support and third party administrators (TPAs). Covered entities
include all health plans, health care clearinghouses, and health care
providers that transmit health information in electronic form in
connection with a transaction for which the Secretary has adopted a
standard. We note that health care providers may choose not to conduct
transactions electronically. Therefore, they would be required to use
these operating rules only for HIPAA transactions that they conduct
electronically. However, one of the objectives of operating rules is to
not only decrease manual transactions by entities that currently
conduct some health care transactions electronically, but to make
electronic transactions, specifically the eligibility for a health plan
and health care claim status transactions attractive to those entities
that do not currently use the HIPAA standards in EDI transactions to
verify eligibility or claim status. (See the Transactions and Code Sets
rule (65 FR 50361) for a more detailed discussion of affected entities
under the HIPAA.)
As mentioned previously in this interim final rule with comment
period, the barrier to adoption of the HIPAA standards is due to their
flexibility and ``situationality'' that allows health plans to
implement them in very different ways. It allows plans to send back
information that is inconsistent from plan to plan. By making these
optional or situational elements mandatory, more entities, especially
providers, will have more consistent data across health plans, making
it easier to determine what information they will be receiving in a
transaction, thus increasing the use of electronic transactions.
We recognize that a few health plans have already embraced the use
of the CAQH CORE operating rules and have, in a published report on the
utility of operating rules in the health care industry, noted
substantive return on investment (ROI) derived from reduced costs
associated with avoidance of manual (both paper and staff time)
response to provider inquiries. This raises the question of why all
health plans would not voluntarily adopt the use of operating rules (or
standards, for that matter) given the benefits. We opine that there are
a number of barriers, including a tendency by providers to simply
accept the status quo, for example, whatever information currently is
provided to them by a health plan; a health plan's lack of experience
with, and knowledge of, the role that operating rules play in making a
standard work more efficiently, given that the use of operating rules
is not yet widespread throughout the health care industry; and the
expense to a health plan of systems and other business transitions
without a regulatory mandate for adoption. Despite projected savings,
health plan system managers would be hard pressed to obtain from their
managements the upfront funds, staff and/or contractors, and corporate
commitment needed for such a

[[Page 40478]]

transition without a regulatory requirement. Absent specifications as
codified in regulation, health plans could be confused as to which
operating rule version to use, and/or any exceptions to the use of
operating rules that may or may not be effective, which would adversely
affect enforcement of the HIPAA transaction and code sets. In our
impact analysis, we analyze the impact of moving from non-electronic to
electronic transactions among all entities, whether they currently use
some electronic transactions or not. We assume that most providers and
health plans use some electronic transactions and very few if any use
none. Through the use of operating rules, we assume that all entities
will increase their use of electronic transactions. The total savings
and return on investment for each category of covered entity will not
include the costs associated with setting up the basic infrastructure
to send and receive standard health care transactions. Those costs are
accounted for in the May 7, 1998 (63 FR 25300) proposed rule entitled,
``Health Care Reform: Standards for Electronic Transactions''. The
costs included in this impact analysis include only those that are
necessary to implement the operating rules as adopted for the two HIPAA
transactions stipulated in this interim final rule with comment period.
Based on industry surveys and research referenced herein, we do not
believe there are many entities that are not capable of conducting
electronic transactions. As stated previously, according to the Oregon
Survey, 96 percent of hospitals and 93 percent of ambulatory clinics
(physicians) in that state indicated that they were ready, or could be
ready within 2 years, to implement a system for electronic information
exchange. Although the study only reflects Oregon providers, we believe
the study's findings demonstrate that there will be very few covered
entities that will not have the ability to conduct electronic health
care transactions by the time the operating rules are required to be
implemented.
The segments of the health care industry that will be affected by
the implementation of operating rules include the following:
Providers: Physicians and Hospitals
Health Plans
Clearinghouses and Vendors
Please note that we have not included an impact to pharmacies
because this interim final rule with comment period adopts only
operating rules for the eligibility for a health plan (270/271) and the
health care claim status (276/277) transactions which are not used by
the retail pharmacy industry for drugs and medications. Therefore, we
assume no impact to pharmacies of this interim final rule with comment
period.
Table 5 outlines the number of entities in the health care industry
that we use in our analysis along with the sources of those numbers. We
have not apportioned the data to reflect any particular sub-segment of
the industry, other than ``physicians'' and ``hospitals'' in general
terms. In this impact analysis, the number of providers impacted is not
a factor in our calculation of the benefits of the adoption of these
operating rules. (The number if providers are a factor in our
calculation of providers costs.) Rather, benefits for providers are
based on the total number of all health care claims throughout the
health care system, including non-hospital institutions. We invite
public comment on our assumptions and estimates, particularly as they
related to non-hospital institutions.

Table 5--Type and Number of Affected Entities
------------------------------------------------------------------------
Type Number Source
------------------------------------------------------------------------
Providers--Offices of Physician 234,222 Health Insurance
Offices (includes offices of Reform; Modifications
mental health specialists). to the Health
Insurance Portability
and Accountability Act
(HIPAA) Electronic
Transaction Standards;
Proposed Rule, http://edocket.access.gpo.gov/2008/pdf/E8-19296.pdf,
(based on the AMA
statistics).
Providers--Hospitals........... 5,764 Health Insurance
Reform; Modifications
to the Health
Insurance Portability
and Accountability Act
(HIPAA) Electronic
Transaction Standards;
Proposed Rule, http://edocket.access.gpo.gov/2008/pdf/E8-19296.pdf.
Providers--All................. 239,986 Physicians Offices +
Hospitals.
Health Plans--Commercial....... 4,523 The of health
plans was obtained
from the 2007 Economic
Census Data--Finance
and Insurance (sector
52)--NAICS code
5241114 (Direct health
and medical insurance
carriers). (n=4,523)
http://factfinder.census.gov/servlet/IBQTable?_bm=y&-ds_name=EC0752A1&-geo_id=01000US&-dataitem=* dataitem=*.
Health Plans--Government....... 54 Represents the 51 state
Medicaid programs,
Medicare, the
Veteran's
Administration (VA),
and Indian Health
Service (IHS).
Health Plans--All.............. 4577 Census Data for
commercial plans
(n=4,523) + Medicaid
agencies (N=51) +
Medicare, VA and IHS =
4,577 total health
plans.
Clearinghouses................. 51 EC EDI Vantage Point
Healthcare Directory--
6th Edition (n=51)
http://www.ec-edi.biz/content/en/dir-guest-login.asp.
Vendors........................ 51 EC EDI Vantage Point
Healthcare Directory--
6th Edition (n=51)
http://www.ec-edi.biz/content/en/dir-guest-login.asphttp://www.ec-edi.biz/content/en/dir-guest-login.asp.
------------------------------------------------------------------------

Also, although we acknowledge the impact to ERISA (Employee
Retirement Income Security Act) plans, we did not include them in our
analysis due to the complexity involved with describing downstream
costs to these plans, as well as members/beneficiaries of health plans,
tax payers, etc. While it is understood that the approximately 2.5
million ERISA plans (and, ultimately, their members) may be charged by
their third party administrators (TPAs) and health insurance companies
to comply with any Federal regulation, ultimately we assume that the
4,577 plans that do business as health plans, or their business
associates, are the entities conducting the transactions and that is
where the costs will be incurred. We assume that few, if any, of the
ERISA plans do their own transactions. Additionally, because not all
ERISA plans are required to report, it is difficult to determine the
exact number of ERISA plans.

G. Impact Analysis Approach

This impact analysis is framed by the two key objectives that
operating rules will achieve by augmenting the eligibility for a health
plan and health care claim status transactions:
Decrease covered entities' use of more costly manual
activities, including telephone and paper-based transactions,

[[Page 40479]]

by addressing ambiguous requirements of the standards and clarifying
when to use or not use certain elements or code values. We assume that
the cost and benefits of these operating rules will be directed toward
covered entities that currently perform some or no eligibility for a
health plan and claim status transactions. For those who currently
perform these two standard transactions, we assume that their volumes
of electronic transactions will increase due to operating rules.
Decrease the clerical burdens that are associated with the
inconsistent use of these two standard transactions; for example, the
instances of denied claims and pended claims that burdens patients,
providers, and health plans in terms of time and money.
Our overall calculation for this analysis is as follows:
(X * Y) + C-Z = Annual Return on investment of operating rules
implementation

Where--

X = annual increase in number of electronic eligibility for a health
plan and health care claim status transactions due to operating
rules implementation
Y = savings per transaction conducted electronically
C = savings through decrease in claim denials for providers and
pended claims for health plans
Z = cost of operating rules implementation

In order to make this calculation, we need to describe baseline
assumptions, transaction increase assumptions, and cost assumptions
that correspond to the X, Y, C, and Z factors in the calculation before
arriving at costs and benefits.
In section VII.H. of this interim final rule with comment period,
we describe the baseline assumptions for each of the two transactions.
The baseline assumptions include, first, an estimate on the number of
electronic and non-electronic eligibility for a health plan
transactions and health care claim status transactions, respectively,
that physicians, providers, and health plans will be conducting in
2012, the year before the operating rules take effect. Second, from
those estimates, we will estimate the number of eligibility for a
health plan transactions and health care claim status transactions that
are conducted electronically starting in 2012. For the baseline
assumption on the number of electronic transactions in 2012, we have
developed a range of high and low estimates derived from data gathered
from a number of studies. This range of high and low reflects different
estimates that are presented by industry studies that have attempted to
arrive at a similar baseline. The final baseline assumption is an
estimate on the rate of increased use of each of the two transactions
due to operating rules adopted herein for 10 years after implementation
of the operating rules (X factor in the calculation).
The transaction increase estimate (X factor in the calculation)
assumes an annual percentage increase in the use of the eligibility for
a health plan and health care claims status electronic transactions due
to the implementation of operating rules. In this specific baseline
assumption, we will be giving a range of high and low estimates.
Although these estimates on the increase in usage due to operating
rules are informed by industry studies, specifically the IBM study,
they also illustrate the uncertainty inherent in such a predictive
estimate. As we have described, there is a causal link between
operating rules and increased use of EDI. However, the rate of
increased use of the two transactions is dependent on many factors
above and beyond operating rules. For instance, visits to physicians'
offices and hospital emergency and outpatient departments are
experiencing a steady rise, translating into an accompanying rise in
health care transactions in general. (The CDC reports that health care
visits increased 25 percent from 1997 to 2007: http://www.cdc.gov/nchs/data/series/sr_13/sr13_169.pdf accessed on June 21). The range of
estimates on the increased use of the two electronic transactions
included in our baseline assumptions should be viewed as a reflection
of the uncertainties involved.
For our cost assumptions, Z in the calculation is the total cost of
implementing the operating rules for both the eligibility for a health
plan transaction and the health care claim status transaction. The
costs will be analyzed according to each impacted category of health
care entity. Many of our estimates in terms of cost are derived from
the cost estimates in the Modifications final rule because industry
studies we surveyed focused on savings rather than costs. These costs
will be presented in a range of high and low estimates to reflect the
broad range in readiness for operating rule implementation among
covered entities in terms of infrastructure, software, and business
process. In section VII.I. of this interim final rule with comment
period, we describe our cost assumptions.
For our savings assumptions, Y and C in the calculation, Y is the
dollar savings per eligibility of a health plan and health care claim
status transaction that is saved when the transactions are conducted
electronically as opposed to non-electronically, and C is the dollar
saved, or cost avoided, of a decrease in claim denials for providers
and a decrease in pended claims for health plans. For the C estimate,
we will again provide a high and low range of estimates. Industry
studies indicate that more robust eligibility for a health plan
transactions will result in a decrease in pended and denied claims
(which, in turn, will result in savings). However, we are less certain
of the percent of decrease that operating rules will effect, so we have
reflected this uncertainty with a range. In section VII.J. of this
interim final rule with comment period, we describe our savings
assumptions.
Our analysis begins with a description of the baseline and
transaction increase assumptions; that is, how we arrived at the
numbers of eligibility for a health plan transactions and health care
claim status conducted electronically as of 2012, and our assumptions
on what percentage of annual increase in the transactions are due to
the implementation of operating rules. We will subsequently describe
our cost assumptions, savings assumptions, and finally summarize the
costs and savings. The costs and savings will also be presented in a
range of high and low estimates.
In general, the high and low range approach used in this impact
analysis illustrates both the range of probable outcomes, based on
state and industry studies, as well as the uncertainty germane to a
mandated application of business rules on an industry with highly
complex business needs and processes. Within those ranges, however, the
summary demonstrates that there is considerable return on investment
resulting from the implementation of operating rules. We solicit
comments on these assumptions as well as the direct costs of
implementing these operating rules adopted under this interim final
rule with comment period.

H. Baseline Assumptions

1. Baseline Assumption A
Total number of electronic and nonelectronic eligibility for a
health plan and health care claim status transactions conducted by
providers.
We estimate that the total number of claims submitted, both
electronically and manually, for the year 2012 is 5.6 billion. This
estimate is the average of the high and low estimates given in the
January 2009 Modifications final rule, http://edocket.access.gpo.gov/2009/pdf/E9-740.pdf.
In order to arrive at the number of eligibility verifications
conducted in 2012, both electronic and non-electronic, we applied the
per claim

[[Page 40480]]

ratio as concluded by the Oregon Survey. The Oregon Survey concluded
that, for every claim submitted, the low estimate was 0.68 eligibility
verifications per claim; the high estimate was 1.12 eligibility
verifications per claim submitted. We use the average of these two
estimates, 0.9 eligibility verifications per claim submitted. We then
assume that of the 5.6 billion claims submitted, 0.9 of those were
preceded by an eligibility inquiry to come up with approximately 5
billion eligibility verifications.
In order to arrive at the number of claim status inquiries
conducted in 2012, both electronic and non-electronic, we again applied
the per claim submitted ratio as concluded by the Oregon Survey. The
Oregon Survey concluded that, for every claim submitted, they estimated
that 0.14 claim status inquiries were submitted. We looked at other
studies that included various numbers for claim status transactions,
but we believe the Oregon Survey to be the most valid picture of
providers' use of these transactions based on the interviews conducted.
Based on our previous assumptions, we estimate that there will be 784
million claim status inquiries conducted in 2012.
To find the total number of eligibility for a health plan
transactions and health care claim status transactions that physicians
and hospitals conducted individually, we divided the total number of
eligibility for a health plan transactions and health care claim status
transactions between physicians and hospitals by a factor of 9 to 1;
that is, approximately 90 percent of all eligibility for a health plan
and health care claim status inquiries, electronic and non-electronic,
are conducted by physicians, while 10 percent are conducted by
hospitals. We have taken this physician to hospital ratio from the
Oregon Survey due to its reliance on direct provider input. The survey
indicated that physicians are responsible for 91 percent of all
eligibility for a health plan transactions and 89 to 90 percent of
health care claim status transactions.

Table 6--Estimates on Total Number of Eligibility and Health Care Claim Status Inquiries, Electronic and Non-
Electronic Conducted Annually
----------------------------------------------------------------------------------------------------------------
Total number of
transactions,
electronic and non- Number conducted Number conducted
electronic, by physicians by hospitals
conducted per year (90%) (10%)
(in millions)
----------------------------------------------------------------------------------------------------------------
Claim submissions................................... 5,600 N/A N/A
Eligibility inquiries............................... 5,040 4,536 504
Claim status inquiries.............................. 784 705.6 78.4
----------------------------------------------------------------------------------------------------------------

For the health plan eligibility transaction, we determined that the
total number of eligibility for a health plan inquiries conducted
electronically by physicians to be between 453.6 million, and 201.6
million for hospitals. The Oregon Survey found that approximately 10
percent of all eligibility for a health plan transactions conducted by
physicians are electronic. Other studies appear to contradict Oregon's
findings by a considerable margin. For instance, the Healthcare
Efficiency Index reports that 40 percent of all eligibility for a
health plan transactions are conducted electronically and the McKinsey
report estimates 40 to 50 percent. We weighed the Oregon Survey more
heavily, and estimated that 10 percent, or 453.6 million, of all
eligibility for a health plan transactions conducted by physicians are
electronic. (Table 7). For the percentage of hospitals' use of the
electronic eligibility for a health plan transaction, we relied on the
Oregon Survey's finding that 40 percent, or 201.6 million, of all
eligibility for a health plan inquiries conducted by hospitals are
electronic. This Oregon estimate appears to be more in line with other
industry studies on the use of these transactions. (Table 7).
For the health care claim status electronic transaction, the Oregon
Survey found that none of the physicians or hospitals it surveyed uses
the health care claim status electronic transaction. Instead,
physicians and hospitals use the telephone and, to a lesser extent, a
secure Internet Web site provided by the health plan or contractor to
check the status of health care claims.
Although, as we have stated before, the Oregon Survey appears to
have the most valid methodology, the McKinsey study's conclusion
implies that many providers do conduct the health care claim status
transaction electronically (30 to 50 percent). The two studies are
basically incompatible with respect to conclusions about usage of the
electronic health care claim status transaction. As noted, a percentage
of the health care claim status checks are conducted through the
Internet. It is possible that the numbers of the McKinsey analysis are
affected by considering Web-based health care claim status transactions
as ``electronic.'' Only the Oregon Survey is clear in its methodology
to make a distinction between electronic data interchange of HIPAA
transactions and electronic Web-based transactions. Still, the McKinsey
analysis has been used by others, for example, the Healthcare
Efficiency Report, to demonstrate the frequency of use of HIPAA
standard transactions.
We assume that there are some physicians who use the electronic
health care claim status and response transaction, but believe that the
McKinsey study's high estimate of 30 to 50 percent of health care claim
status transactions being electronic is too high given the Oregon
Survey finding. We estimate that 10 percent of all health care claim
status inquiries, 70.56 million for physicians and 7.84 million for
hospitals, will be made electronically in 2012. Again, we weigh the
Oregon Survey more heavily. (See Table 7).
In order to determine the number of eligibility for a health plan
and health care claim status transactions that health plans respond to
electronically, we use the number of eligibility for a health plan
inquiries for physicians and hospitals added to the number of health
claim status inquiries for physicians and hospitals, based on our
assumption that for all inquiries submitted by physicians and
hospitals, health plans will submit the same number of responses. We
assume that health plans will conduct 655.2 million electronic
eligibility responses and 78.4 million claim status responses.

[[Page 40481]]

Table 7--Estimates on Number of Electronic Eligibility for a Health Plan and Health Care Claim Status
Transactions Conducted by Providers and Health Plans
----------------------------------------------------------------------------------------------------------------
Number of total
eligibility for a Total number of
health plan and electronic
health care claim Percentage of eligibility for a
For 2012 status inquiries inquiries that are health plan and
(non-electronic electronic health care claim
and electronic) status as of 2012
conducted (in (in millions)
millions)
----------------------------------------------------------------------------------------------------------------
Physicians:
Eligibility for a Health Plan.................. 4,536 10 453.6
Health Care Claim Status....................... 705.6 10 70.56
Hospitals:
Eligibility for a Health Plan.................. 504 40 201.6
Health Care Claim Status....................... 78.4 10 7.84
Health Plans:
Eligibility for a Health Plan.................. N/A N/A 655.2
Health Care Claim Status....................... N/A N/A 78.4
----------------------------------------------------------------------------------------------------------------

2. Baseline Assumption B
Transaction Increase Assumptions: Annual increase in use of
electronic eligibility for a health plan and health care claims status
transactions due to implementation of operating rules.
a. Providers
As stated, there is a direct causal link between the implementation
of operating rules and an increase in the use of eligibility for a
health plan and health care claim status transactions industry-wide.
In its conclusions, the IBM study estimated the baseline growth of
total health care eligibility for a health plan transaction
transactions (electronic and non-electronic) to be 10 percent without
operating rules over a period of 3 years. It then estimated a 25
percent increase in the use of electronic eligibility for a health plan
transaction across the entire industry if operating rules are
implemented. For our analysis, we have assumed a more conservative
growth rate in the use of the electronic eligibility for a health plan
transactions than that of the IBM study both in general (that is, not
attributed to any particular factor) and as a result of the
implementation of operating rules.
We have estimated a 15 percent annual growth rate in general from
2013 through 2017, and then an 8 percent annual growth for 5 years
thereafter. This general growth rate is reflected in Table 8. In
general, eligibility for a health plan inquiries, electronic and non-
electronic, for both physicians and hospitals, are expected to increase
annually due to a number of market forces. For one, it is anticipated
that population trends will increase the total overall number of
patient visits and claims in the United States, especially in regards
to baby-boomers who will require more care in the coming years. (http://www.cdc.gov/nchs/data/databriefs/db41.htm). It is probable that this
increase alone will account for our 15 percent estimated annual growth
rate of the use of the eligibility for a health plan transaction. As
well, it is probable that providers will adopt EDI out of necessity
from the sheer number of health care visits and claims that will
experienced. In summary, we have chosen this estimate as our general
predicted increase because it is a probable increase, even without the
mandated implementation of operating rules.
With the implementation of operating rules, the estimate on the
increased use of transactions by providers moves from probable to
practical. The estimate on the percentage increase due to operating
rules is the primary savings driver in our per transaction benefit
analysis. Again, we assume a more conservative growth rate due to
operating rules than the IBM study. In this regard, our analysis of the
IBM study follows: Although the IBM study did not control for other
factors that may have contributed to an increased use of the
eligibility for a health plan transaction, the study was based on
interviews which directed respondents to isolate the costs and benefits
of operating rules in particular. While it is probable that other
factors contributed to the extreme increase in the use of the
transaction among the study's participants, the participants themselves
believed that both the costs and benefits were a consequence of the
operating rules and CAQH CORE certification.
However, because the IBM study analyzed a comparably small number
of entities that have adopted operating rules, we are hesitant to
accept the study's conclusions as the normative result of implementing
operating rules for the eligibility for a health plan transaction.
There may be entities that have implemented (or will implement) the
operating rules that did not experience the same success as those that
were surveyed in the study.
With this in mind, we have given a high and low range of probable
increase usage rates due to operating rules. Our low and high estimate
of 10 to 12 percent annual for the first 5 years falls far below the
IBM study's average rate (25 percent annual increase). We believe these
estimates are conservative, but do not believe that we are justified in
estimating a more aggressive growth.
We also assume that 5 years after implementation of the operating
rules the 10 to 12 percent annual growth due to operating rules will
decrease to 5 percent a year. We assume this will be due to the fact
that by this time the health care industry will have implemented the
operating rules thus making the use of the electronic transactions more
widespread, resulting in market stabilization and less of an increase
in the number of electronic transactions.
We then estimate the annual increase in the number of electronic
eligibility for a health plan inquiries from physicians and hospitals
respectively due to operating rules. It is calculated by multiplying
the range of total number of electronic eligibility for a health plan
inquiries by the range of total percent increase in electronic
transactions due to operating rules per year.

[[Page 40482]]

Table 8--Annual Increase in Number of Electronic Eligibility for a Health Plan Transactions for Physicians Due to Implementation of Operating Rules
--------------------------------------------------------------------------------------------------------------------------------------------------------
I II III IV V VI VII
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of
electronic Number increase Total percentage Total percentage Number increase Number increase
eligibility for in electronic increase in increase in in electronic in electronic
health plan eligibility for electronic electronic eligibility for eligibility for
transactions (in health plan eligibility for eligibility for health plan health plan
Year millions). transactions health plan health plan transactions transactions
Assumes 15% from previous transactions transactions from previous from previous
increases first year (in from previous from previous year due to year due to
5 yrs/8% millions) (high year due to year due to operating rules operating rules
increase second = low) operating rules operating rules (in millions) (in millions)
5 yrs (low) (percent) (high) (low) (high)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2012........................................ 453.6 0.0 0 0 0.0 0.0
2013........................................ 521.6 68.0 10 12 45.4 54.4
2014........................................ 599.9 78.2 10 12 52.2 62.6
2015........................................ 689.9 90.0 10 12 60.0 72.0
2016........................................ 793.3 103.5 10 12 69.0 82.8
2017........................................ 912.4 119.0 10 12 79.3 95.2
2018........................................ 985.3 73.0 5 5 45.6 45.6
2019........................................ 1064.2 78.8 5 5 49.3 49.3
2020........................................ 1149.3 85.1 5 5 53.2 53.2
2021........................................ 1241.2 91.9 5 5 57.5 57.5
2022........................................ 1340.5 99.3 5 5 62.1 62.1
-----------------------------------------------------------------------------------------------------------
Totals.................................. ................ ................ ................ ................ 573.5 634.6
--------------------------------------------------------------------------------------------------------------------------------------------------------

Table 9--Annual Increase in Number of Electronic Eligibility for a Health Plan Transactions for Hospitals Due to Implementation of Operating Rules
--------------------------------------------------------------------------------------------------------------------------------------------------------
I II III IV V VI VII
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of
electronic Number increase Total percentage Total percentage Number increase Number increase
eligibility for in electronic increase in increase in in electronic in electronic
health plan eligibility for electronic electronic eligibility for eligibility for
transactions (in health plan eligibility for eligibility for health plan health plan
Year millions). transactions health plan health plan transactions transactions
Assumes 15% from previous transactions transactions from previous from previous
increases first year (in from previous from previous year due to year due to
5 yrs/8% millions) (low = year due to year due to operating rules operating rules
increase second high) operating rules operating rules (in millions) (in millions)
5 yrs (low) (high) (low) (high)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2012........................................ 201.6 0.0 0 ................ ................ 0.0
2013........................................ 231.8 30.2 10 12 20.2 24.2
2014........................................ 266.6 34.8 10 12 23.2 27.8
2015........................................ 306.6 40.0 10 12 26.7 32.0
2016........................................ 352.6 46.0 10 12 30.7 36.8
2017........................................ 405.5 52.9 10 12 35.3 42.3
2018........................................ 437.9 32.4 5 5 20.3 20.3
2019........................................ 473.0 35.0 5 5 21.9 21.9
2020........................................ 510.8 37.8 5 5 23.6 23.6
2021........................................ 551.7 40.9 5 5 25.5 25.5
2022........................................ 595.8 44.1 5 5 27.6 27.6
-----------------------------------------------------------------------------------------------------------
Totals.................................. ................ ................ ................ ................ 254.9 282.1
--------------------------------------------------------------------------------------------------------------------------------------------------------

We assume that health care claim status inquiries will increase
annually for all providers in general at a rate of 20 percent a year
for the first 5 years, for many of the same reasons as our estimates on
the usage rate of the eligibility for a health plan transaction. We
also assume that this rate of increase will slow after 5 years to about
10 percent a year. This general growth rate is reflected in Tables 10
and 11. We expect health care claim status transactions to be adopted
at a higher rate than the eligibility for a health plan transaction
because there is significantly less use of the transaction now (and so
there is more room for growth).
We again have given a range of high and low estimates for the rate
of increase that can be attributed to the implementation of operating
rules. We have estimated a 12 to 15 percent annual growth in usage
attributable to operating rules from 2013 through 2017, and then a 7
percent annual growth in usage for 5 years thereafter.

[[Page 40483]]

Table 10--Annual Increase in Number of Health Care Claim Status Transactions for Physicians Due to Implementation of Operating Rules
--------------------------------------------------------------------------------------------------------------------------------------------------------
I II III IV V VI VII
--------------------------------------------------------------------------------------------------------------------------------------------------------
Minimum number
of electronic Number increase Total percentage Total percentage Number increase Number increase
health care in electronic increase in increase in in electronic in electronic
claim status health care electronic electronic health care health care
transactions (in claim status health care health care claim status claim status
Year millions). transactions claim status claim status transactions transactions
Assumes 20% from previous transactions transactions from previous from previous
increases first year (in from previous from previous year due to year due to
5 yrs/10% millions) (high year due to year due to operating rules operating rules
increase second = low) operating rules operating rules (in millions) (in millions)
5 yrs (low) (high) (low) (high)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2012........................................ 70.6 0.0 0 0 0.0 0.0
2013........................................ 84.7 14.1 12 15 8.5 10.6
2014........................................ 101.6 16.9 12 15 10.2 12.7
2015........................................ 121.9 20.3 12 15 12.2 15.2
2016........................................ 146.3 24.4 12 15 14.6 18.3
2017........................................ 175.6 29.3 12 15 17.6 21.9
2018........................................ 193.1 17.6 7 7 12.3 12.3
2019........................................ 212.4 19.3 7 7 13.5 13.5
2020........................................ 233.7 21.2 7 7 14.9 14.9
2021........................................ 257.1 23.4 7 7 16.4 16.4
2022........................................ 282.8 25.7 7 7 18.0 18.0
-----------------------------------------------------------------------------------------------------------
Totals.................................. ................ ................ ................ ................ 138.0 153.8
--------------------------------------------------------------------------------------------------------------------------------------------------------

Table 11--Annual Increase in Number of Health Care Claim Status Transactions for Hospitals Due to Implementation of Operating Rules
--------------------------------------------------------------------------------------------------------------------------------------------------------
I II III IV V VI VII
--------------------------------------------------------------------------------------------------------------------------------------------------------
Minimum number
of electronic Number increase Total percentage Total percentage Number increase Number increase
health care in electronic increase in increase in in electronic in electronic
claim status health care electronic electronic health care health care
transactions (in claim status health care health care claim status claim status
Year millions). transactions claim status claim status transactions transactions
Assumes 20% from previous transactions transactions from previous from previous
increases first year (in from previous from previous year due to year due to
5 yrs/10% millions) (high year due to year due to operating rules operating rules
increase second = low) operating rules operating rules (in millions) (in millions)
5 yrs (low) (high) (low) (high)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2012........................................ 7.8 0.0 0 0 0.0 0.0
2013........................................ 9.4 1.6 12 15 0.9 1.2
2014........................................ 11.3 1.9 12 15 1.1 1.4
2015........................................ 13.5 2.3 12 15 1.4 1.7
2016........................................ 16.3 2.7 12 15 1.6 2.0
2017........................................ 19.5 3.3 12 15 2.0 2.4
2018........................................ 21.5 2.0 7 7 1.4 1.4
2019........................................ 23.6 2.1 7 7 1.5 1.5
2020........................................ 26.0 2.4 7 7 1.7 1.7
2021........................................ 28.6 2.6 7 7 1.8 1.8
2022........................................ 31.4 2.9 7 7 2.0 2.0
-----------------------------------------------------------------------------------------------------------
Totals................................. ................ ................ ................ ................ 15.3 17.1
--------------------------------------------------------------------------------------------------------------------------------------------------------

b. Health Plans
To find the increase in electronic eligibility for a health plan
and health care claims status transactions annually for health plans,
we add the total annual increase usage of the two transactions by
providers. The sum again gives us a low to high range of increased
usage of the two transactions due to operating rules.
We solicit comments on these baseline assumptions.

[[Page 40484]]

Table 12--Annual Increase in Number of Eligibility for a Health Plan Transactions due to Implementation of Operating Rules
--------------------------------------------------------------------------------------------------------------------------------------------------------
I II III IV V VI VII
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year Physician number increase in
electronic eligibility for a
health plan transactions from
previous year due to operating
rules in millions
Hospital number increase in
electronic eligibility for a
health plan transactions from
previous year due to operating
rules in millions
Plan number increase in electronic
eligibility for a health plan
transactions from previous year
due to operating rules in millions
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low High Low High Low High
--------------------------------------------------------------------------------------------------------------------------------------------------------
2012........................................ 0.0 0.0 0.0 0.0 0.0 0.0
2013........................................ 45.4 54.4 20.2 24.2 65.5 78.6
2014........................................ 52.2 62.6 23.2 27.8 75.3 90.4
2015........................................ 60.0 72.0 26.7 32.0 86.7 104.0
2016........................................ 69.0 82.8 30.7 36.8 99.6 119.6
2017........................................ 79.3 95.2 35.3 42.3 114.6 137.5
2018........................................ 45.6 45.6 20.3 20.3 65.9 65.9
2019........................................ 49.3 49.3 21.9 21.9 71.2 71.2
2020........................................ 53.2 53.2 23.6 23.6 76.9 76.9
2021........................................ 57.5 57.5 25.5 25.5 83.0 83.0
2022........................................ 62.1 62.1 27.6 27.6 89.6 89.6
-----------------------------------------------------------------------------------------------------------
Totals.................................. 573.5 634.6 254.9 282.1 828.3 916.7
--------------------------------------------------------------------------------------------------------------------------------------------------------

Table 13--Annual Increase in Number of Health Care Claim Status Transactions for Health Plans Due to Implementation of Operating Rules
--------------------------------------------------------------------------------------------------------------------------------------------------------
I II III IV V VI VII
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year Physician number increase in
electronic health care claim status
transactions from previous year due
to operating rules in millions
Hospital number increase in
electronic health care claim status
transactions from previous year due
to operating rules in millions
Plan number increase in health care
claim status transactions from
previous year due to operating rules
in millions
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low High Low High Low High
--------------------------------------------------------------------------------------------------------------------------------------------------------
2012.................................. 0.0 0.0 0.0 0.0 0.0 0.0
2013.................................. 8.5 10.6 0.9 1.2 9.4 11.8
2014.................................. 10.2 12.7 1.1 1.4 11.3 14.1
2015.................................. 12.2 15.2 1.4 1.7 13.5 16.9
2016.................................. 14.6 18.3 1.6 2.0 16.3 20.3
2017.................................. 17.6 21.9 2.0 2.4 19.5 24.4
2018.................................. 12.3 12.3 1.4 1.4 13.7 13.7
2019.................................. 13.5 13.5 1.5 1.5 15.0 15.0
2020.................................. 14.9 14.9 1.7 1.7 16.5 16.5
2021.................................. 16.4 16.4 1.8 1.8 18.2 18.2
2022.................................. 18.0 18.0 2.0 2.0 20.0 20.0
-----------------------------------------------------------------------------------------------------------------
Totals............................ 138.0 153.8 15.3 17.1 153.4 170.9
--------------------------------------------------------------------------------------------------------------------------------------------------------

I. Cost Assumptions

1. Providers
We assume that physicians and hospitals will incur some start-up
costs for implementing operating rules. These include training of staff
and changes to internal business processes. Unlike the costs to health
plans, we assume that the costs are less likely to be expensive
infrastructure updates, because we assume most providers will already
have the necessary infrastructure in place to accommodate the operating
rules adopted under this interim final rule with comment period. We
base this assumption on industry studies that demonstrates that EDI is
utilized in over 75 percent of claim submissions. This means that the
majority of providers or their business partners are capable of
transmitting EDI.
While we assume that there may remain some providers who do not
conduct any EDI, the operating rules adopted herein do not apply to
providers who prefer paper-based or manual transactions. If such a
provider were to move to EDI after learning of the advantages of
operating rules, the provider's costs for initial EDI infrastructure
can be found in the Transaction and Code Sets final rule, and impacts
of the operating rules per se can be found in this interim final rule
with comment period. In summary, costs regarding initial EDI
infrastructure to transmit HIPAA transactions are not a factor in our
estimates. We solicit comments on these assumptions.
We assume the costs of implementing operating rules will mostly be
borne by health plans. However, we expect that some costs will be borne
by providers in the form of increased fees from vendors and
clearinghouses, such as upgraded software costs and an increase in per-
claim transaction fees based on the increase in volume of transactions.
These fees are variable depending on existing infrastructure, number of
providers in a practice, geographic areas, etc. To account for possible
costs to providers, we have assumed that the costs attributed to
implementing the Modifications final rule are applicable here. We
estimate the cost for providers

[[Page 40485]]

to implement operating rules will be 25 percent of the total unadjusted
costs estimated by the Modifications rule. We use this estimate based
on the fact that most of the costs of implementing operating rules will
be realized by health plans due to the more robust information they
will be required to send in these transactions. As well, any software
updates that providers will need may only apply to the eligibility for
a health plan and health care claim status transactions, unlike the
Modifications rule, which required software updates that applied to up
to seven transactions. (See Table 14.)
We base our estimates on provider costs solely on the Modifications
final rule because the types of costs included in that impact analysis
are similar to those that would be borne by implementing operating
rules: software upgrades; training; and testing of transaction
improvements.
We believe that these costs are high considering the fact that the
Modifications rule applies to seven different transactions, while the
operating rules adopted in this interim final rule with comment period
only applies to two. However, we have no evidence or justification for
supporting a lower cost.

Table 14--Provider Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
Physicians' cost Hospitals' cost
to implement to implement
operating rules operating rules
for eligibility for eligibility
Unadjusted total for a health Unadjusted total for a health
physicians' cost plan and health hospital's cost plan and health
from care claim from care claim Total cost to
modifications status modifications status providers
final rule transactions final rule transactions
(25% of (25% of
modifications modifications
final rule final rule
estimates) estimates)
--------------------------------------------------------------------------------------------------------------------------------------------------------
5010 Implementation Costs--Low................................ $370 $93 $792 $198 $291
5010 Implementation Costs--High............................... 740 185 1,584 396 581
5010 Transition Costs--Low.................................... 174 44 373 93 137
5010 Transition Costs--High................................... 348 87 746 187 274
Total Costs--Low.............................................. 544 136 1,165 291 427
Total Costs--High............................................. 1,088 272 2,330 583 855
--------------------------------------------------------------------------------------------------------------------------------------------------------

2. Health Plans
As stated earlier, we assume that health plans will bear the
majority of costs of adopting operating rules. All of the studies that
were considered for this impact analysis provided qualitative
descriptions of the possible costs of adoption; however, the IBM study
was the only one to attribute specific costs of operating rule adoption
for health plans. The IBM study gave a range of costs: $8,000 to $1.7
million total cost of adoption including IT staff services such as
programming, software, and hardware across a number of systems; and
annual ongoing costs of $0 to $79,000 for IT staff services such as
programming, and minor hardware and software upgrades to annually
update operating rules.
In contrast, total implementation costs to implement the updated
Version 5010 of the HIPAA standards ranged from an average of $1.14 to
$2.28 million per health plan, excluding government health plans. We
assume that implementing Version 5010 may be comparable to implementing
the operating rules adopted herein. However the Modifications rule
broadly amends or alters seven HIPAA standard transactions. This
interim final rule with comment period adopts operating rules for only
two transactions.
To calculate the range of costs for health plans we start with the
low and high costs to health plans estimated in the Modifications rule.
We increased these costs by 14 percent to account for the 14 percent
increase in the number of health plans from the Modifications rule. We
estimate the cost for health plans to implement operating rules will be
50 percent of the total costs estimated by the Modifications rule. We
estimated a low cost of $2.6 billion and a high $5.1 billion for health
plans. We reduced the estimate of health plans costs based upon the
Modifications final rule because, unlike the Modifications final rule,
operating rules adopted herein only apply to the eligibility for a
health plan and health care claim status transactions.
We will assume that the ongoing cost to maintaining operating rules
for eligibility for a health plan and health care claim status will
continue 2 years after implementation. However, since we do not know
what updates will be needed at this time, we cannot determine costs for
those updates. Afterwards, we will assume that ongoing costs will
decrease to zero. We base this assumption on the IBM study finding that
the majority of the ongoing cost was due to IT staff services for
programming, and after 2 years we assume that this programming will no
longer be necessary.
Note that by using 4,577 as the total number of health plans, we
have not adjusted for the number of health plans that have already
updated their infrastructure and communications, and have already
implemented the operating rules. This includes not only those health
plans that have been certified by the CAQH CORE as having implemented
portions of Phase I and, perhaps, Phase II, but also health plans that
have done so without going through the CAQH CORE certification process.
As we have noted, a number of states have statutes that are similar, to
the CAQH CORE operating rules with which all health care entities
operating in the same state must comply. Therefore, we believe our
costs may be overstated. We invite public and interested stakeholder
comments on our cost assumptions.

[[Page 40486]]

Table 15--Cost to Health Plans of Operating Rule Adoption for
Eligibility for a Health Plan and Health Care Claim Status Transactions
------------------------------------------------------------------------
Health plans' cost
to implement
Total health operating rules
plans' cost from for eligibility
modifications for a health plan
final rule (+14% and claim status
to account for transactions (50%
increase in number of adjusted
of plans) modifications
final rule
estimates)
------------------------------------------------------------------------
5010 Implementation Costs--Low.. $3,483 $1,742
5010 Implementation Costs--High. 6,968 3,484
5010 Transition Costs--Low...... 1,640 820
5010 Transition Costs--High..... 3,279 1,639
Total Costs--Low................ 5,123 2,562
Total Costs--High............... 10,246 5,123
------------------------------------------------------------------------

3. Vendors and Clearinghouses
None of the studies considered for this impact analysis were able
to quantify the costs and savings, or the return on investment of
adopting operating rules for vendors or clearinghouses. As previously
mentioned, we expect that some costs will be borne by providers in the
form of increased fees from vendors and clearinghouses, such as
upgraded software costs and an increase in per-claim transaction fees
based on the increase in volume of transactions.
Because of this we believe that costs to vendors will be the same
as the costs expected by providers since vendors pass along their costs
to their provider clients in the form of increased fees, which are
included as the costs to providers of implementing these operating
rules. Additionally, we believe that costs to clearinghouses for
routing of additional electronic transactions, which we assume will be
due to implementation of the operating rules, are included in the costs
expected by health plans. We invite interested stakeholder comments
regarding these costs and assumptions for vendors and clearinghouses.

J. Savings Assumptions

1. Providers
We have analyzed two areas in which providers will find savings or
avoid costs upon implementation of the operating rules for eligibility
for a health plan and health care claim status transactions. The first
area that provides considerable cost savings is the avoidance of claim
denials that implementation of the eligibility for a health plan
operating rules is estimated to provide. The second area of savings for
providers will be the per transaction savings of moving eligibility for
a health plan and health care claim status transactions from non-
electronic to EDI.
It is difficult, if not impossible, to estimate the number of
eligibility for a health plan and claim status transactions conducted
per provider, even as an average. Given the added difficulty of the
range of technological capabilities of providers, it would be
difficult, if not impossible, to make any assumptions on the cost or
benefit on a per provider basis, or to project an estimate of increased
EDI use for any one provider.
This impact analysis will not base its cost or benefit to providers
on the number of providers or on a per-provider or average provider
basis. It would be specious to presume that such numbers reflect any
real situation in a provider's office. Rather, we will look at the
total number of eligibility for a health plan and claim status
transactions that we estimate all providers conduct through a given
year, and estimate an increase based on the implementation of operating
rules. In the same vein, we will calculate a savings based on an
estimate of the total number of denied claims, instead of attempting to
calculate an average of denied claims per provider.
In the area of claims denials, we assume that there will be a low
to high range of $$560 million to $700 million annual cost savings in
the reduction of denied claims once the eligibility for a health plan
transaction operating rules are implemented. We base this assumption on
a number of studies. We use the total annual number of claims submitted
from the Modifications final rule as mentioned above, 5.6 billion, and
divide it between physicians and hospitals according to the Oregon
Survey's 9 to 1 ratio of physician to hospital transactions. We then
take the 5 billion annual claims for physicians and 560 million for
hospitals and apply the 5 percent of denied claims as outlined in the
MGMA Project Swipe IT study. With this number, we consider the IBM
study data that found that the implementation of eligibility for a
health plan operating rules resulted in a 10 percent to 12 percent
decrease in denied claims. We have consistently created low to high
ranges in this impact analysis that uses the results of the IBM study
as the ``best case'' or high estimates, and we will do so here as well.
We have provided a range of 8 to 10 percent decrease in denied claims
due to operating rules.
This results in a total of 22.4 million to 28 million denied claims
for providers that could be avoided through eligibility for a health
plan operating rules. We then take these numbers and apply them to the
cost to providers of processing denied claims, which is $25 per denied
claim according to a December 2000 study sponsored by the Medical Group
Management Association, http://www.acpinternist.org/archives/2000/12/claimsdenied.htm). This results in $560 million to $700 million in
annual savings for providers due to implementation of operating rules
for the eligibility for a health plan transaction.

X * Y * Z * A = Total annual savings to providers by avoiding denied
claims

Where:

X = Total number of claims (Column II)
Y = Percent of claims that are denied (Column III)
Z = Percent of denied claims that will be avoided by implementing
eligibility for a health plan operating rules (Column V)
A = Cost for providers to resubmit a single denied claim (Column
VII)

[[Page 40487]]

Table 16--Annual Savings to Providers for Avoiding Claims Denials After Implementation of Operating Rules for Eligibility for a Health Plan
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
I II III IV V VI VII VIII IX X XI
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total Percent of Number of
number of claims claims
claims (in denied denied in
millions) (MGMA 2007) millions =
(percent) (Col II) x
(Col III) Percent of denied claims
that will be avoided
through eligibility for
a health plan operating
rules (IBM: 10%-12%)
(percent)
Number of denied claims Cost to
that will be avoided resubmit a
through eligibility for denied
a health plan operating claim
rules in millions = (Col (Larch
IV) x (Col V/VI) 2000, ACP-
ASIM
Observer) Total annual savings of
eligibility for a health
plan operating rules
through reduction in
claims denial in
millions (Col VII/VIII)
x (Col IX)
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
........... ........... ........... LOW HIGH LOW HIGH ........... LOW HIGH
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Physician..................................................... 5,040 5 252 8 10 20.16 25.2 $25 504 630
Hospital...................................................... 560 5 28 8 10 2.24 2.8 25 56 70
---------------------------------------------------------------------------------------------------------------------------------
Totals.................................................... ........... ........... ........... ........... ........... 22.4 28 ........... 560 700
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In the area of per transaction savings, we assume that the move
from non-electronic to electronic transmission of the eligibility for a
health plan transaction will save providers, physicians and hospitals,
$2.10 per transaction. This number reflects the difference in labor
time and costs required to conduct the electronic transaction compared
to the manual transaction. It includes the difference in the cost of
labor--employee salary, benefits, and payroll taxes--as well as the
difference in general overhead.
We arrived at $2.10 savings per transaction after analyzing a
number of the studies already mentioned, including the Health
Efficiency Report, the Milliman study, and the IBM study. We decided
that the IBM study's estimate of a savings of $2.10 per eligibility for
a health plan transaction that moves from non-electronic to electronic
was the best starting estimate because, unlike the other studies, the
IBM study surveyed entities that actually realized costs savings as a
result of the use of operating rules for the electronic eligibility for
a health plan transactions. As well, the IBM study gives us the most
conservative estimate, as can be seen by comparing it with other
studies' conclusions.
We assume that the move from non-electronic to EDI transmission of
the health care claim status transaction will save physicians and
hospitals $3.33 per transaction. The benefits to physicians in
streamlining the health care claim status transaction through operating
rules are potentially significant if, as we assume, it leads to less
dependence on more time consuming and costly manual means, and
increased use of the EDI transaction.
Unlike the eligibility for a health plan transaction analysis, we
did not base our savings per health care claim status transaction for
providers on the IBM study, as the IBM study did not measure the impact
of the operating rules for the health care claim status transaction.
Instead, we took our assumptive savings of $3.33 per transaction from
the number that is used in all studies we analyzed and which was first
illustrated in the Milliman study. We will use this assumption as this
is the number on which industry studies appear to agree. However, we
note that, as the health care claim status transaction is very seldom
used, there is very little data on which to base actual savings.
Note that the low to high estimates on the estimated increase in
the transactions based on operating rules are carried through this
calculation. We arrived at this range in our calculations described in
the baseline assumptions.

Table 17--Savings for Providers per Eligibility for a Health Plan and
Health Care Claims Status Transaction That Moves From Nonelectronic to
Electronic for Providers
------------------------------------------------------------------------
Savings for every
eligibility for a Savings for every
health plan health care claim
Source transaction that status transaction
moves from non- that moves from
electronic to non-electronic to
electronic electronic
------------------------------------------------------------------------
Health Efficiency Report........ $2.95 $3.33
Oregon Survey (low estimate).... 2.46 3.33
Milliman study.................. 2.44 3.33
IBM study....................... 2.10 NA
Our assumption.................. 2.10 3.33
------------------------------------------------------------------------

[[Page 40488]]

Table 18--Provider (Physician and Hospitals) Savings for Eligibility
--------------------------------------------------------------------------------------------------------------------------------------------------------
I II III IV V VI
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low number High number
increase in increase in
eligibility for eligibility for
a health plan a health plan
transactions transactions Savings per Low annual High annual
Year from previous from previous transaction savings in savings in
year due to year due to millions millions
operating rules operating rules
in millions in millions
(from table 12) (from table 12)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2012......................................................... 0.0 0.0 $0.0 $0.0 $0.0
2013......................................................... 65.5 78.6 2.10 137.6 165.1
2014......................................................... 75.3 90.4 2.10 158.2 189.9
2015......................................................... 86.7 104.0 2.10 182.0 218.4
2016......................................................... 99.6 119.6 2.10 209.3 251.1
2017......................................................... 114.6 137.5 2.10 240.6 288.8
2018......................................................... 65.9 65.9 2.10 138.4 138.4
2019......................................................... 71.2 71.2 2.10 149.4 149.4
2020......................................................... 76.9 76.9 2.10 161.4 161.4
2021......................................................... 83.0 83.0 2.10 174.3 174.3
2022......................................................... 89.6 89.6 2.10 188.3 188.3
------------------------------------------------------------------------------------------
Total.................................................... ................ ................ ................. 1,739.5 1,925.0
--------------------------------------------------------------------------------------------------------------------------------------------------------

Table 19--Provider (Physician and Hospitals) Savings for Claim Status
--------------------------------------------------------------------------------------------------------------------------------------------------------
I II III IV V VI
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low number High number
increase in increase in
health care health care
claim status claim status
transactions transactions Savings per Low annual High annual
Year from previous from previous transaction savings in savings in
year due to year due to millions millions
operating rules operating rules
in millions in millions
(from table 13) (from table 13)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2012......................................................... 0.0 0.0 $0.0 $0.0 $0.0
2013......................................................... 9.4 11.8 3.33 31.3 39.2
2014......................................................... 11.3 14.1 3.33 37.6 47.0
2015......................................................... 13.5 16.9 3.33 45.1 56.4
2016......................................................... 16.3 20.3 3.33 54.1 67.7
2017......................................................... 19.5 24.4 3.33 65.0 81.2
2018......................................................... 13.7 13.7 3.33 45.5 45.5
2019......................................................... 15.0 15.0 3.33 50.0 50.0
2020......................................................... 16.5 16.5 3.33 55.0 55.0
2021......................................................... 18.2 18.2 3.33 60.5 60.5
2022......................................................... 20.0 20.0 3.33 66.6 66.6
------------------------------------------------------------------------------------------
Total.................................................... ................ ................ ................. 510.8 569.0
--------------------------------------------------------------------------------------------------------------------------------------------------------

Table 20--Provider Savings Summarized
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low savings High savings
-----------------------------------------------------------------------------------------------------------
Annual provider Annual provider
Year savings due to Annual provider Total annual savings due to Annual provider Total annual
increased use of savings due to savings to increased use of savings due to savings to
electronic decrease in providers (in electronic decrease in providers (in
transactions claim denials millions) transactions claim denials millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2013........................................ $168.92 $560 $729 $204.27 $700 $904
2014........................................ 195.83 560 756 236.87 700 937
2015........................................ 227.08 560 787 274.75 700 975
2016........................................ 263.40 560 823 318.78 700 1,019
2017........................................ 305.61 560 866 369.98 700 1,070
2018........................................ 183.85 560 744 183.85 700 884
2019........................................ 199.46 560 759 199.46 700 899
2020........................................ 216.42 560 776 216.42 700 916
2021........................................ 234.84 560 795 234.84 700 935
2022........................................ 254.83 560 815 254.83 700 955
-----------------------------------------------------------------------------------------------------------

[[Page 40489]]

Cumulative Totals....................... ................ ................ 7,850 ................ ................ 9,494
--------------------------------------------------------------------------------------------------------------------------------------------------------

2. Health Plans
We have analyzed two areas in which health plans will find savings
or avoid costs upon implementation of the operating rules for
eligibility for a health plan and health care claim status
transactions. The first area that provides considerable cost savings is
a decrease in the number of pended claims that implementation of the
eligibility for a health plan operating rules is estimated to provide.
Pended claims are claims that necessitate a manual review by the health
plan. The second area of savings for health plans will be the per
transaction savings of moving eligibility for a health plan and health
care claim status transactions from non-electronic to EDI transmittal.
In the area of pended claims, we base this assumption on a study by
the America's Health Insurance Plans in 2006 (AHIP Center for Policy
and Research, An Updated Survey of Health Care Claims Receipt and
Processing Times (May 2006) at http://www.ahipresearch.org/pdfs/PromptPayFinalDraft.pdf).
We start our calculation with the total annual number of claims
submitted based on the Modifications final rule as mentioned
previously, 5.6 billion. AHIP reported that 14 percent of all claims
were pended by health plans, which calculates to 784 million pended
claims. The AHIP study broke down the reasons why claims were pended.
Four of those categories, including lack of necessary information, no
coverage based on date of service, non-covered/non-network benefit or
service, and coverage determination, we believe can be avoided by
implementing operating rules for the eligibility for a health plan
transaction and the increased use of the eligibility for a health plan
transactions. These categories comprise 31 percent of all pended
claims. We also assume that many pended claims can be avoided with
increased use of the claim status transaction and its operating rules.
However, we were unable to establish a correlation between use of claim
status operating rules and a decrease in pended claims, and have not
included any savings attributable to the claim status operating rules.
To reflect the uncertainty of this effect of operating rules on a
``downstream'' process, we estimate that 20 to 25 percent of pended
claims could be avoided through use of operating rules. (See Table 21.)
AHIP estimated that $0.85 was the cost to reply electronically to a
``clean'' claim submission, while $2.05 was the cost to claims that
``necessitate manual or other review cost,'' according to the study.
The difference is $1.20, which is the per pended claim factor we use
for our cost savings analysis. (See Table 21.)
This results in $188 million to $235 million for health plans in
annual savings of eligibility for a health plan operating rules through
reduction in pended claims.

X * Y * Z * A = Total annual savings to providers by avoiding denied
claims

Where:

X = Total number of claims (Column I)
Y = Percent of claims that are pended (Column II)
Z = Percent of pended claims that will be avoided by implementing
eligibility for a health plan operating rules (Column IV)
A = Cost for health plans to manually review a pended claim (Column
VI)

Table 21--Annual Savings to Plans for Avoiding Pended Claims After Implementation of Operating Rules for Eligibility for a Health Plan
--------------------------------------------------------------------------------------------------------------------------------------------------------
I II III IV V VI VII VIII IX X
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of Number of Total annual Total annual
Percent of pended claims pended claims savings of savings of
Percent of pended claims that will be that will be eligibility eligibility
pended claims that will be avoided avoided for a health for a health
Number of that will be avoided through through plan plan
Total number Percent of claims pended avoided through eligibility eligibility Cost to operating operating
of claims in claims pended claims in through eligibility for a health for a health review a rules through rules through
millions (AHIP 2006) millions = eligibility for a health plan plan pended claim reduction in reduction in
(Col I) x for a health plan operating operating (AHIP, 2006) pended claims pended claims
(Col II) plan operating operating rules in rules in in millions in millions
rules (AHIP rules (AHIP millions = millions = (Col VI) x (Col VII) x
2006) Low 2006) High (Col III x (Col III) x (Col VIII) (Col VIII)
(Col IV) Low (Col V) High Low High
--------------------------------------------------------------------------------------------------------------------------------------------------------
5,600 14% 784 20% 25% 156.8 196 $1.20 $188 $235
--------------------------------------------------------------------------------------------------------------------------------------------------------

The second area of savings for health plans is the per transaction
savings of moving eligibility for a health plan and health care claim
status transactions from non-electronic to electronic transmittal. We
assume that the average savings for health plans in adopting operating
rules for eligibility for a health plan is approximately $3.13 per
transaction that moves from non-electronic to electronic, and $3.75 for
health care claim status transactions that move from non-electronic to
electronic.
To determine these savings, we assumed that the IBM study and the
Oregon Survey were the most recent and the most valid with regard to
eligibility for a health plan savings, as they are based on detailed
surveys with health plans. To arrive at our savings

[[Page 40490]]

assumption, therefore, we averaged the two studies. (See Table 22)
For health care claim status transactions, we relied solely on the
Oregon Survey, again based on the validity of its results. (See Table
22)

Table 22--Savings per Eligibility for a Health Plan and Health Care
Claim Status Transaction That Moves From Non-Electronic to Electronic
for Health Plans
------------------------------------------------------------------------
Savings for every
eligibility for a Savings for every
health plan health care claims
Source transaction that status transaction
moves from non- that moves from
electronic to non-electronic to
electronic electronic
------------------------------------------------------------------------
Oregon Survey................... $3.75 $3.75
IBM study....................... $2.50 NA
Our assumption.................. $3.13 $3.75
------------------------------------------------------------------------

Note that the low to high estimates on the estimated increase in
the transactions based on operating rules are carried through this
calculation (in Tables 23 and 24). We arrived at this range in our
calculations described in the baseline assumptions.

Table 23--Savings for Eligibility for a Health Plan Operating Rules for Health Plans
--------------------------------------------------------------------------------------------------------------------------------------------------------
I II III IV V VI
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number increase Number increase
in electronic in electronic
eligibility for eligibility for
a health plan a health plan
transactions transactions Savings per Annual savings Annual savings
Year from previous from previous transaction (in millions) (in millions)
year due to year due to low high
operating rules operating rules
(in millions) (in millions)
low high
--------------------------------------------------------------------------------------------------------------------------------------------------------
2012......................................................... 0.0 0.0 $0.0 $0.0 $0.0
2013......................................................... 65.5 78.6 3.13 205.1 246.1
2014......................................................... 75.3 90.4 3.13 235.8 283.0
2015......................................................... 86.7 104.0 3.13 271.2 325.5
2016......................................................... 99.6 119.6 3.13 311.9 374.3
2017......................................................... 114.6 137.5 3.13 358.7 430.4
2018......................................................... 65.9 65.9 3.13 206.2 206.2
2019......................................................... 71.2 71.2 3.13 222.7 222.7
2020......................................................... 76.9 76.9 3.13 240.6 240.6
2021......................................................... 83.0 83.0 3.13 259.8 259.8
2022......................................................... 89.6 89.6 3.13 280.6 280.6
------------------------------------------------------------------------------------------
Total.................................................... ................ ................ ................. 2,592.7 2,869.2
--------------------------------------------------------------------------------------------------------------------------------------------------------

Table 24--Savings for Health Care Claim Status Operating Rules for Health Plans
--------------------------------------------------------------------------------------------------------------------------------------------------------
I II III IV V VI
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number increase Number increase
in health care in claim status
claim status health care
transactions transactions Annual savings Annual savings
Year from previous from previous Savings per (in millions) (in millions)
year due to year due to transaction low high
operating rules operating rules
(in millions) (in millions)
low high
--------------------------------------------------------------------------------------------------------------------------------------------------------
2012......................................................... 0.0 0.0 $0.0 $0.0 $0.0
2013......................................................... 9.4 11.8 3.75 35.3 44.1
2014......................................................... 11.3 14.1 3.75 42.3 52.9
2015......................................................... 13.5 16.9 3.75 50.8 63.5
2016......................................................... 16.3 20.3 3.75 61.0 76.2
2017......................................................... 19.5 24.4 3.75 73.2 91.4
2018......................................................... 13.7 13.7 3.75 51.2 51.2
2019......................................................... 15.0 15.0 3.75 56.3 56.3
2020......................................................... 16.5 16.5 3.75 62.0 62.0
2021......................................................... 18.2 18.2 3.75 68.2 68.2
2022......................................................... 20.0 20.0 3.75 75.0 75.0
------------------------------------------------------------------------------------------

[[Page 40491]]

Total.................................................... ................ ................ ................. 575.2 640.8
--------------------------------------------------------------------------------------------------------------------------------------------------------

Table 25--Health Plan Savings Summarized
--------------------------------------------------------------------------------------------------------------------------------------------------------
Low savings High savings
-----------------------------------------------------------------------------------------------------------
Annual health Annual health
plan savings due Annual health Total annual plan savings due Annual health Total annual
to increased use plan savings due savings to to increased use plan savings due savings to
of electronic to decrease in health plans of electronic to decrease in health plans
transactions claim denials (in millions) transactions claim denials (in millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2013........................................ $240.4 $188 $429 $290.19 $235 $525
2014........................................ 278.2 188 466 335.93 235 571
2015........................................ 322.0 188 510 388.96 235 624
2016........................................ 372.9 188 561 450.48 235 686
2017........................................ 431.8 188 620 521.86 235 757
2018........................................ 257.5 188 446 257.45 235 493
2019........................................ 279.1 188 467 279.07 235 514
2020........................................ 302.5 188 491 302.52 235 538
2021........................................ 328.0 188 516 327.97 235 563
2022........................................ 355.6 188 544 355.57 235 591
-----------------------------------------------------------------------------------------------------------
Totals.................................. ................ ................ 5,049 ................ ................ 5,862
--------------------------------------------------------------------------------------------------------------------------------------------------------

3. Vendors and Clearinghouses
None of the studies considered for this analysis were able to
quantify the costs and savings, or the return on investment of adopting
operating rules for the eligibility for a health plan and health care
claim status inquiry and response transactions for vendors and
clearinghouses. As noted previously, we expect that some costs will be
borne by providers in the form of increased fees from vendors and
clearinghouses such as upgraded software costs.
We would anticipate that the savings, as well as the costs, to
vendors of upgrading provider software will be passed along to their
provider clients. Therefore, we assume that the costs and benefits for
vendors in implementing the operating rules will be the same as those
for providers.
Additionally, since clearinghouses work on behalf of health plans
and act as intermediaries between providers and health plan in regards
to electronic transactions, we believe that the savings, as well as the
costs, to clearinghouses for routing of additional electronic
transactions will be the same savings and costs as those expected by
health plans. We invite public and interested stakeholder comments on
our assumptions.

K. Summary

1. Providers
As previously noted, providers will assume the least cost and see
the greatest benefit from the implementation of operating rules as
required by this interim final rule with comment period. Within 10
years of implementation of the operating rules for eligibility for a
health plan and health care claim status transactions, we estimate that
there will be $7.9 billion to $9.5 billion in savings for providers at
a cost of up to $855 million.

Table 26--Summary of Provider Savings and Costs Over 10 Years
[In millions]
------------------------------------------------------------------------
Low High
------------------------------------------------------------------------
Provider Savings.................................... $7,850 $9,494
Total Provider Costs................................ 427 855
------------------------------------------------------------------------

2. Health Plans
We estimate that health plans will see a savings of $5 billion to
$5.8 billion within 10 years of the implementation of operating rules
(both for eligibility for a health plan and health care claim status
transactions). We believe that this is a conservative estimate. The IBM
study found an average return on investment of over $2 million per
health plan within 1 year of implementation. If multiplied by the
number of health plans, this results in over $9 billion savings after
the first year. We estimate that costs to health plans will range from
$2.6 billion to $5.1 billion over 10 years.
In March 2010, the Congressional Budget Office (CBO) (http://www.cbo.gov/ftpdocs/113xx/doc11379/AmendReconProp.pdf) estimated that
the administrative simplification requirements in the Affordable Care
Act would produce savings to the Federal budget. In contrast to the CBO
analysis, government health plans are not considered separately in our
impact analysis and summary estimate, and were instead included along
with private health plans. When considering the impact on the Federal
government of this interim final rule with comment period, note that
the operating rules adopted herein are only one part of the broader
administrative simplification mandates outlined in section 1104 of the
Affordable Care Act, from which a

[[Page 40492]]

greater return on investment (ROI) in total is anticipated. Also,
because we are addressing requirements that will impact the entire
health care industry, we again reiterate that we choose to make
conservative estimates based on the variation within the studies on
which to base such estimates.

Table 27--Summary of Health Plan Savings and Costs Over 10 Years
[In millions]
------------------------------------------------------------------------
Low High
------------------------------------------------------------------------
Health Plan Savings................................. $5,049 $5,862
Health Plan Costs................................... 2,562 5,123
------------------------------------------------------------------------

Table 28--Summary of Provider and Health Plan Savings and Costs Over 10
Years
[In millions]
------------------------------------------------------------------------
Low High
------------------------------------------------------------------------
Provider and Health Plan Savings.................... $12,899 $15,356
Total Provider and Health Plan Costs................ 2,989 5,978
------------------------------------------------------------------------

L. Regulatory Flexibility Analysis

The Regulatory Flexibility Act (RFA) of 1980, Public Law 96-354,
requires agencies to describe and analyze the impact of the interim
final rule with comment on small entities unless the Secretary can
certify that the regulation will not have a significant impact on a
substantial number of small entities. In the healthcare sector, the
Small Business Administration (SBA) size standards define a small
entity as one with between revenues of $7 million to $34.5 million in
any 1 year. For details, see the SBA's Web site at http://www.sba.gov/sites/default/files/Size_Standards_Table.pdf (refer to Sector 62--
Health Care and Social Assistance). (Accessed 2-1-11).
For the purposes of this analysis (pursuant to the RFA), nonprofit
organizations are considered small entities; however, individuals and
States are not included in the definition of a small entity. We have
attempted to estimate the number of small entities and provide a
general discussion of the effects of this interim final rule with
comment period, and where we had difficulty, or were unable to find
information, we solicit industry comment. Because most medical
providers are either nonprofit or meet the SBA's size standard for
small business, we treat all medical providers as small entities.
1. Number of Small Entities
The following sections discuss which entities across the health
care industry, that are impacted by this interim final rule with
comment period, are considered small entities as part of this
Regulatory Flexibility Analysis.
Providers--All health care providers are assumed to be
small entities. The number of providers utilized in this analysis is
taken from the August 21, 2008 HIPAA Electronic Transaction Standards
proposed rule, as well as the U.S. Census Bureau, Detailed Statistics,
2007 Economic Census, August 31, 2010. The determination to include all
health care providers as small entities is modeled after many previous
HHS rules which utilized the same assumption.
Clearinghouses--All clearinghouses were assumed to not be
small entities. Three national association Web sites were consulted
(EHNAC, HIMSS and the Cooperative Exchange). Additionally, the Health
Data Dictionary by Faulkner and Gray which was last published in 2000
determined that the number of clearinghouses that would be considered
small entities was negligible. The top 51 clearinghouse entities were
listed, and the range of monthly transactions was 2,500 to 4 million,
with transaction fees of $0.25 per transaction to $2.50 per
transaction. It was determined that even based on this data, few of the
entities would fall into the small entity category, and as such, we did
not count them in this RFA analysis.
Health Plans--All health plans are assumed to not be small
entities. Based on the available public data, the number of plans that
meet the SBA size standard of $7 million in annual receipts was unable
to be determined; therefore we did not include an analysis of the
impact on health plans.
Software Vendors--Vendors are not considered covered
entities under HIPAA; however we assume that all vendors are small
entities based on their relation to providers. Based on our analysis in
the regulatory impact analysis, we assume that the costs and benefits
for software vendors would be the same as those for providers.
We solicit industry comment on our above assumptions.
In total, we estimate that there are approximately 300,000 health
care organizations that may be considered small entities either because
of their nonprofit status or because of their revenues. On the provider
side, practices of doctors of osteopathy, podiatry, chiropractors,
mental health independent practitioners with annual receipts of less
than $7 million are considered to be small entities. Solo and group
physicians' offices with annual receipts of less than $9 million (97
percent of all physician practices) are also considered small entities,
as are clinics. Approximately 92 percent of medical laboratories, 100
percent of dental laboratories and 90 percent of durable medical
equipment suppliers are assumed to be small entities as well. The
American Medical Billing Association (AMBA) (http://www.ambanet.net/AMBA.htm) lists 97 billing companies on its Web site. It notes that
these are only ones with Web sites.
The Business Census data shows that there are 4,526 (plus Medicare,
VA, and IHS) firms considered as health plans and/or payers responsible
for conducting transactions with health care providers (not including
State Medicaid Agencies). For purposes of the RFA, we did not identify
a subset of small plans, and instead solicit industry comment as to the
percentage of plans that would be considered small entities. State
Medicaid agencies were also excluded from the analysis as well because
States are not considered small entities in any Regulatory Flexibility
Analysis. We solicit industry comment on this assumption.
We identified the top 51 clearinghouses/vendors in the Faulkner and
Gray health data directory from 2000, the last year this document was
produced. Health care clearinghouses provide transaction processing and
translation services to both providers and health plans.
The following table outlines the estimated number of small entities
utilized in the preparation of the initial regulatory flexibility
analysis.

Table 29--Number of Impacted Small Entities
[In Whole Numbers]
------------------------------------------------------------------------
Type Number Source
------------------------------------------------------------------------
Hospitals (NAICS 622).......... 6,505 U.S. Census Bureau,
Detailed Statistics,
2007 Economic Census,
August 31, 2010.

[[Page 40493]]

Ambulatory health care services 547,561 U.S. Census Bureau,
(NAICS code 6211). Detailed Statistics,
2007 Economic Census,
August 31, 2010.
Clearinghouses................. 0 Survey of EHNAC, HIMSS,
the Cooperative
Exchange, and the
Maryland Commission
for Healthcare)
Assume, all
clearinghouse are not
small entities.
Health Plans (including 0 Assume all health plans
Government Health Plans such are not small
as Medicare, VA and IHS). entities.
Vendors (NAICS code 5415-- 51 EC EDI Vantage Point
Computer design and related Healthcare Directory--
services). 6th Edition (n=51)
http://www.ec-edi.biz/content/en/dir-guest-login.asp.
Health Plans--Medicaid......... 0 State Medicaid agencies
were excluded from the
analysis because
States are not
considered small
entities in any
Regulatory Flexibility
Analysis.
------------------------------------------------------------------------

2. Cost for Small Entities
To determine the impact on health care providers we used Business
Census data on the number of establishments for hospitals and firms for
the classes of providers and revenue data reported in the Survey of
Annual Services for each NAICS code. Because each hospital maintains
its own financial records and reports separately to payment plans, we
decided to report the number of establishments rather than firms. For
other providers, we assumed that the costs to implement the operating
rules for eligibility for a health plan and health care claim status
transactions would be accounted for at the level of firms rather than
at the individual establishments. Therefore, we reported the number of
firms for all other providers.
In the following tables, we take the information from the impact
analysis and break out the costs for both physicians and hospitals. As
stated earlier in the impact analysis, we assume that vendor costs will
be the same as those for providers because of our assumption that
vendors will pass along their costs in the form of increased fees to
their provider clients.
As we are treating all health care providers as small entities for
the purpose of the regulatory flexibility analysis, we allocated 100
percent of the implementation costs reported in the impact analysis for
physicians and hospitals. Accordingly we treat all software vendors as
small entities based on their relationship to providers and allocate
the same costs. Table 30 shows the impact of the implementation costs
of operating rules as a percent of the provider revenues. Data on the
number of entities for these tables were gathered from the 2007 census
(http://factfinder.census.gov/servlet/IBQTable?_bm=y&-geo_id=&-fds_name=EC0700A1&-_skip=0&-ds_name=EC0762SSSZ1&-_lang=en). We used the
NAICS code 5415 computer system design and related services for
software vendors.

Table 30--Analysis of the Burden of Implementation of Operating Rules on Small Covered Entities
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small entity Implementation
Total number Number of Revenues or receipts of Op rules costs cost revenue
NAICS No. Entities of entities small entities receipts ($ in total receipts annual ($ in receipts
millions) (percent) millions) (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
6211..................... Ambulatory health care 547,561 547,561 668,453 100 136-272 0.0002-0.004
services.
622...................... Hospitals.................. 6,505 6,505 702,960 100 291-583 0.0004-0.0008
5415..................... Computer system design and 105,710 105,710 297,200 100 136-272 0.0005-0.0009
related services.
--------------------------------------------------------------------------------------------------------------------------------------------------------

In Column I we display the NAICS code for class of entity. Column
II shows the number of entities that are reported in the Business
Census for 2002 and Column III shows the number of small entities that
were computed based on the Business Census and Survey of Annual
Service. As mentioned previously, we assume that all health care
providers are small. Column IV shows revenues that were reported for
2008 in the Survey of Annual Services (http://www.census.gov/services/sas_data.html). Column V shows the percent of small entity revenues.
Column VI shows the costs to providers for implementation of
eligibility for a health plan and health care claim status operating
rules. Column VII shows the costs allocated to the small entities based
on the percent of small entity revenues to total revenues.
Column VIII presents the percent of the small entity share of
implementation costs as a percent of the small entity revenues. We have
established a baseline threshold of 3 percent of revenues that would be
considered a significant economic impact on affected entities. None of
the entities exceeded or came close to this threshold.
We note that the impact in our scenarios is consistently under the
estimated impact of 3 percent for all of the entities previously
listed, which is below the threshold we consider as a significant
economic impact. As expressed in the guidance on conducting regulatory
flexibility analyses, the threshold for an economic impact to be
considered significant is 3 percent to 5 percent of either receipts or
costs. As is clear from the analysis, the impact does not come close to
the threshold. Thus, based on the foregoing analysis, we conclude that
some small health care providers may encounter some burdens in the
course of implementing the eligibility for a health plan and health
care claim status operating rules. However, we are of the opinion that,
for most small providers, the costs will not be significant, and for
providers who are not HIPAA covered entities and do not conduct
electronic health care transactions, there is no cost.

[[Page 40494]]

We did not include an analysis of the impact on small health plans
here, because we were not able to determine the number of plans that
meet the SBA size standard of $7 million in annual receipts.
In evaluating whether there were any clearinghouses that could be
considered small entities, we consulted with three national
associations (EHNAC, HIMSS, and the Cooperative Exchange), as well as
the Maryland Commission for Health Care, and determined that the number
of clearinghouses that would be considered small entities was
negligible.
Revenues cited on the Cooperative Exchange Web site (http://www.cooperativeexchange.org/faq.html ) divided clearinghouses into
three revenue categories--small ($10 million); medium ($10 million to
$50 million) and large ($50 million or greater). We identified the top
51 clearinghouses, and determined that they are typically part of large
electronic health networks, such as Siemens, RxHub, Availity, GE
Healthcare etc., none of which fit into the category of small entity.
As referenced earlier, in a report by Faulkner and Gray in 2000, the
top 51 entities were listed, and the range of monthly transactions was
2,500 to 4 million, with transaction fees of $0.25 per transaction to
$2.50 per transaction. We determined that even based on this data, few
of the entities would fall into the small entity category, and we do
not count them in this analysis.
Based on the results of this analysis, we are reasonably confident
that the rule will not have a significant impact on a substantial
number of small entities. Nevertheless, we are specifically requesting
comments on our analysis and asking for any data that will help us
determine the number and sizes of firms implementing the operating
rules adopted in this interim final rule with comment period.
We solicit industry comment on our above assumptions.
3. Alternatives Considered
As stated in section VII.D. of this interim final rule with comment
period, we considered various policy alternatives to adopting operating
rules, including not adopting operating rules, adopting another
authoring entity's operating rules, or waiting for resolution of all
outstanding technical and administrative issues before adopting the
operating rules developed by the authoring entities. For reasons cited
in section VII.D. of this interim final rule with comment period we
have determined that none of these options were viable. Please see
section VII.D. of this interim final rule with comment period for a
discussion of these options and why we determined they were not viable.
4. Conclusion
As stated in the HHS guidance cited earlier in this section, HHS
uses a baseline threshold of 3 percent of revenues to determine if a
rule would have a significant economic impact on affected small
entities. None of the entities exceeded or came close to this
threshold. Based on the foregoing analysis, we could certify that this
interim final rule with comment would not have a significant economic
impact on a substantial number of small entities.
However, because of the relative uncertainty in the data, the lack
of consistent industry data, and our general assumptions, we invite
public comments on the analysis and request any additional data that
would help us determine more accurately the impact on the various
categories of small entities affected by this interim final rule with
comment period. In addition, section 1102(b) of the Act requires us to
prepare a regulatory impact analysis if a rule would have a significant
impact on the operations of a substantial number of small rural
hospitals. This analysis must conform to the provisions of section 603
of the RFA. For purposes of section 1102(b) of the Act, we define a
small rural hospital as a hospital that is located outside of a
metropolitan statistical area and has fewer than 100 beds. Based on the
analysis above, including that the overall costs to small hospitals is
under the $136 million threshold, we do not believe this rule would
have a significant impact on small rural hospitals, for the reasons
stated above in reference to small entities. Therefore, the Secretary
has determined that this interim final rule with comment period would
not have a significant impact on the operations of a substantial number
of small rural hospitals.

M. Accounting Statement

Table 31--Accounting Statement: Classification of Estimated Expenditures, From FY 2011 to FY 2023
[in millions]
----------------------------------------------------------------------------------------------------------------
Source citation
Category Primary estimate Minimum estimate Maximum estimate (RIA, preamble,
(millions) (millions) (millions) etc.
----------------------------------------------------------------------------------------------------------------
BENEFITS
----------------------------------------------------------------------------------------------------------------
Annualized Monetized benefits
7% Discount............... Not estimated......... $1,124............ $1,347........... RIA.
3% Discount............... Not estimated......... 1,153............. 1,376............ RIA.
Qualitative (un-quantified) Wider adoption of .................. ................. .................
benefits. standards due to
consistent use of
standards and
responses robust in
data; increased
productivity due to
decrease in manual
intervention
requirements;
avoidance of pended
claims, claim
denials, and other
obstacles to
expedited billing.
----------------------------------------------------------------------------------------------------------------
Benefits generated from plans to providers, and providers to plans.
----------------------------------------------------------------------------------------------------------------
COSTS
----------------------------------------------------------------------------------------------------------------
Annualized Monetized costs
7% Discount............... Not estimated......... $373.............. $745............. RIA.
3% Discount............... Not estimated......... 314............... 627.............. RIA.
Qualitative (un-quantified) None.................. None.............. None............. .................
costs.
----------------------------------------------------------------------------------------------------------------

[[Page 40495]]

Providers will pay costs to vendors and clearinghouses. Health plans will pay costs to software vendors,
programming and IT staff/contractors, and clearinghouses. Clearinghouses will pay costs to programming and IT
staff/contractors and software developers. Government will pay costs to vendors and staff.
----------------------------------------------------------------------------------------------------------------
TRANSFERS
----------------------------------------------------------------------------------------------------------------
Annualized monetized N/A................... N/A............... N/A.............. .................
transfers: ``on budget''.
From whom to whom?............ N/A................... N/A............... N/A.............. .................
Annualized monetized N/A................... N/A............... N/A.............. .................
transfers: ``off-budget''.
----------------------------------------------------------------------------------------------------------------

List of Subjects

45 CFR Part 160

Administrative practice and procedure, Computer technology, Health
care, Health facilities, Health insurance, Health records, Hospitals,
Medicaid, Medicare, Penalties, Reporting and recordkeeping
requirements.

45 CFR Part 162

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

For the reasons set forth in this preamble, the Department of
Health and Human Services amends 45 CFR parts 160 and 162 to read as
follows:

PART 160--ADMINISTRATIVE DATA STANDARDS AND RELATED REQUIREMENTS

0
1. The authority citation for part 160 is revised to read as follows:

Authority: 42 U.S.C. 1302(a), 42 U.S.C. 1320d-1320d-8, sec. 264
of Pub. L. 104-191, 110 Stat. 2033-2034 (42 U.S.C. 1320d-2 (note)),
5 U.S.C. 552; secs. 13400 and 13402, Pub. L. 111-5, 123 Stat. 258-
263, and sec. 1104 of Pub. L. 111-148, 124 Stat. 146-154.

Subpart A--General Provisions

Sec. 160.101 [Amended]

0
2. Amend Sec. 160.101 by removing the phrase ``and section 13410(d) of
Public Law 111-5.'' and adding in its place the phrase ``section
13410(d) of Public Law 111-5, and section 1104 of Public Law 111-148.''

0
3. Amend Sec. 160.103 by adding a paragraph (3) to the definition of
``standard'' to read as follows:

Sec. 160.103 Definitions.

* * * * *
Standard * * *
(3) With the exception of operating rules as defined at Sec.
162.103.
* * * * *

PART 162--ADMINISTRATIVE REQUIREMENTS

0
4. The authority citation for part 162 is revised to read as follows:

Authority: Secs. 1171 through 1180 of the Social Security Act
(42 U.S.C. 1320d-1320d-9), as added by sec. 262 of Pub. L. 104-191,
110 Stat. 2021-2031, sec. 105 of Pub. L. 110-233, 122 Stat. 881-922,
and sec. 264 of Pub. L. 104-191, 110 Stat. 2033-2034 (42 U.S.C.
1320d-2(note), and secs. 1104 and 10109 of Pub. L. 111-148, 124
Stat. 146-154 and 915-917.

Subpart A--General Provisions

0
5. Amend Sec. 162.103 as follows:
0
A. Adding the definition of ``operating rules''.
0
B. Revising the definition of ``standard transaction''.
The revision and addition read as follows:

Sec. 162.103 Definitions.

* * * * *
Operating rules means the necessary business rules and guidelines
for the electronic exchange of information that are not defined by a
standard or its implementation specifications as adopted for purposes
of this part.
* * * * *
Standard transaction means a transaction that complies with an
applicable standard and associated operating rules adopted under this
part.

Subpart I--General Provisions for Transactions

0
6. Amend Sec. 162.915 by revising paragraph (a) to read as follows:

Sec. 162.915 Trading partner agreements.

* * * * *
(a) Change the definition, data condition, or use of a data element
or segment in a standard or operating rule, except where necessary to
implement State or Federal law, or to protect against fraud and abuse.
* * * * *

0
7. Amend Sec. 162.920 as follows:
0
A. Revising the section heading and introductory text.
0
C. Adding paragraph (c).
The revisions and addition read as follows:

Sec. 162.920 Availability of implementation specifications and
operating rules.

Certain material is incorporated by reference into this subpart
with the approval of the Director of the Federal Register under 5
U.S.C. 552(a) and 1 CFR part 51. To enforce any edition other than that
specified in this section, the Department of Health and Human Services
must publish notice of change in the Federal Register and the material
must be available to the public. All approved material is available for
inspection at the National Archives and Records Administration (NARA).
For information on the availability of this material at NARA, call
(202) 714-6030, or go to: http://www.archives.gov/federal_register/code_of_federal_regulations/ibr_locations.html. The materials are
also available for inspection by the public at the Centers for Medicare
& Medicaid Services (CMS), 7500 Security Boulevard, Baltimore, Maryland
21244.

[[Page 40496]]

For more information on the availability on the materials at CMS, call
(410) 786-6597. The materials are also available from the sources
listed below.
* * * * *
(c) Council for Affordable Quality Healthcare's (CAQH) Committee on
Operating Rules for Information Exchange (CORE), 601 Pennsylvania
Avenue, NW. South Building, Suite 500 Washington, DC 20004; Telephone
(202) 861-1492; Fax (202) 861- 1454; E-mail [email protected]; and Internet
at http://www.caqh.org/benefits.php.
(1) CAQH, Committee on Operating Rules for Information Exchange,
CORE Phase I Policies and Operating Rules, Approved April 2006, v5010
Update March 2011.
(i) Phase I CORE 152: Eligibility and Benefit Real Time Companion
Guide Rule, version 1.1.0, March 2011, as referenced in Sec. 162.1203.
(ii) Phase I CORE 153: Eligibility and Benefits Connectivity Rule,
version 1.1.0, March 2011, as referenced in Sec. 162.1203.
(iii) Phase I CORE 154: Eligibility and Benefits 270/271 Data
Content Rule, version 1.1.0, March 2011, as referenced in Sec.
162.1203.
(iv) Phase I CORE 155: Eligibility and Benefits Batch Response Time
Rule, version 1.1.0, March 2011, as referenced in Sec. 162.1203.
(v) Phase I CORE 156: Eligibility and Benefits Real Time Response
Time Rule, version 1.1.0, March 2011, as referenced in Sec. 162.1203.
(vi) Phase I CORE 157: Eligibility and Benefits System Availability
Rule, version 1.1.0, March 2011, as referenced in Sec. 162.1203.
(2) ACME Health Plan, HIPAA Transaction Standard Companion Guide,
Refers to the Implementation Guides Based on ASC X12 version 005010,
CORE v5010 Master Companion Guide Template, 005010, 1.2, (CORE v 5010
Master Companion Guide Template, 005010, 1.2), March 2011, as
referenced in Sec. Sec. 162.1203 and 162.1403.
(3) CAQH, Committee on Operating Rules for Information Exchange,
CORE Phase II Policies and Operating Rules, Approved July 2008, v5010
Update March 2011.
(i) Phase II CORE 250: Claim Status Rule, version 2.1.0, March
2011, as referenced in Sec. 162.1403.
(ii) Phase II CORE 258: Eligibility and Benefits 270/271
Normalizing Patient Last Name Rule, version 2.1.0, March 2011, as
referenced in Sec. 162.1203.
(iii) Phase II CORE 259: Eligibility and Benefits 270/271 AAA Error
Code Reporting Rule, version 2.1.0, March 2011, as referenced in Sec.
162.1203.
(iv) Phase II CORE 260: Eligibility & Benefits Data Content (270/
271) Rule, version 2.1.0, March 2011, as referenced in Sec. 162.1203.
(v) Phase II CORE 270: Connectivity Rule, version 2.2.0, March
2011, as referenced in Sec. 162.1203 and Sec. 162.1403.

Subpart L--Eligibility for a Health Plan

0
8. Adding a new Sec. 162.1203 to read as follows:

Sec. 162.1203 Operating rules for eligibility for a health plan
transaction.

On and after January 1, 2013, the Secretary adopts the following:
(a) Except as specified in paragraph (b) of this section, the
following CAQH CORE Phase I and Phase II operating rules (updated for
Version 5010) for the eligibility for a health plan transaction:
(1) Phase I CORE 152: Eligibility and Benefit Real Time Companion
Guide Rule, version 1.1.0, March 2011, and CORE v5010 Master Companion
Guide Template. (Incorporated by reference in Sec. 162.920).
(2) Phase I CORE 153: Eligibility and Benefits Connectivity Rule,
version 1.1.0, March 2011. (Incorporated by reference in Sec.
162.920).
(3) Phase I CORE 154: Eligibility and Benefits 270/271 Data Content
Rule, version 1.1.0, March 2011. (Incorporated by reference in Sec.
162.920).
(4) Phase I CORE 155: Eligibility and Benefits Batch Response Time
Rule, version 1.1.0, March 2011. (Incorporated by reference in Sec.
162.920).
(5) Phase I CORE 156: Eligibility and Benefits Real Time Response
Rule, version 1.1.0, March 2011. (Incorporated by reference in Sec.
162.920).
(6) Phase I CORE 157: Eligibility and Benefits System Availability
Rule, version 1.1.0, March 2011. (Incorporated by reference in Sec.
162.920).
(7) Phase II CORE 258: Eligibility and Benefits 270/271 Normalizing
Patient Last Name Rule, version 2.1.0, March 2011. (Incorporated by
reference in Sec. 162.920).
(8) Phase II CORE 259: Eligibility and Benefits 270/271 AAA Error
Code Reporting Rule, version 2.1.0. (Incorporated by reference in Sec.
162.920).
(9) Phase II CORE 260: Eligibility & Benefits Data Content (270/
271) Rule, version 2.1.0, March 2011. (Incorporated by reference in
Sec. 162.920).
(10) Phase II CORE 270: Connectivity Rule, version 2.2.0, March
2011. (Incorporated by reference in Sec. 162.920).
(b) Excluding where the CAQH CORE rules reference and pertain to
acknowledgements and CORE certification.

Subpart N--Health Care Claim Status

0
9. Add Sec. 162.1403 to read as follows:

Sec. 162.1403 Operating rules for health care claim status
transaction.

On and after January 1, 2013, the Secretary adopts the following:
(a) Except as specified in paragraph (b) of this section, the
following CAQH CORE Phase II operating rules (updated for Version 5010)
for the health care claim status transaction:
(1) Phase II CORE 250: Claim Status Rule, version 2.1.0, March
2011, and CORE v5010 Master Companion Guide, 00510, 1.2, March 2011.
(Incorporated by reference in Sec. 162.920).
(2) Phase II CORE 270: Connectivity Rule, version 2.2.0, March
2011. (Incorporated by reference in Sec. 162.920).
(b) Excluding where the CAQH CORE rules reference and pertain to
acknowledgements and CORE certification.

Dated: May 26, 2011.
Donald M. Berwick,
Administrator, Centers for Medicare & Medicaid Services.
Dated: June 29, 2011.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2011-16834 Filed 6-30-11; 2:00 pm]
BILLING CODE 4120-01-P