Daily Rules, Proposed Rules, and Notices of the Federal Government
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Health care spending in the United States constitutes nearly 18 percent of the U.S. Gross Domestic Product (GDP) and costs an average of $9,000 per person annually.
Blanchfield, Bonnie B., James L. Hefferman, Bradford Osgood, Rosemary R. Sheehan, and Gregg S. Meyer, “Saving Billions of Dollars—and Physician's Time—by Streamlining Billing Practices,”
One area of administrative burden that can be lessened for health care providers is the time and labor spent interacting with multiple health insurance plans, called billing and insurance related (BIR) tasks. The average physician spends a cumulative total of 3 weeks a year on BIR tasks according to one study,
The tasks and costs of activities directly related to collecting payments is a category of BIR tasks. Nearly 40 percent of nonclinical staff time spent on BIR tasks in a physician practice is dedicated to activities directly related to collecting payments.
The benefits of EFT have been realized in many other industries. The benefits include material cost savings, fraud control, and improved cash flow and cash forecasting. The benefits of ERA have also been demonstrated in terms of cost savings in paper and mailings. By receiving remittance advice electronically, providers can use electronic denial management tools that dramatically improve payment recovery and reconciliation. Despite these advantages, an estimated 70 percent of health care claim payments continue to be in paper check form and an estimated 75 percent of remittance advice is sent through the mail in paper form.
There is evidence that the use of operating rules for specific electronic health care transactions results in higher use of EDI by health care providers.
The legal authority for the adoption of operating rules rests in section 1173(g) of the Social Security Act (the Act). Section 1173(g) of the Act was added by section 1104(b)(2) of the Patient Protection and Affordable Care Act (Pub L. 111-148), enacted on March 23, 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152), enacted on March 30, 2010 (collectively known as and hereinafter referred to as the Affordable Care Act).
In this interim final rule with comment period (IFC), we are adopting the Phase III Council for Affordable Quality Healthcare (CAQH) Committee on Operating Rules for Information Exchange (CORE) EFT & ERA Operating Rule Set, including the CORE v5010 Master Companion Guide Template, for the health care EFT and remittance advice transaction (hereinafter referred to as the EFT & ERA Operating Rule Set), with one exception: We are not adopting Requirement 4.2, titled “Health Care Claim Payment/Advice Batch Acknowledgement Requirements,” of the Phase III CORE 350 Health Care Claim Payment/Advice (835) Infrastructure Rule because that requirement requires the use of the Accredited Standards Committee (ASC) X12 999 acknowledgement standard, and the Secretary has not adopted standards for acknowledgements.
Covered entities must be in compliance with the EFT & ERA Operating Rule Set by January 1, 2014.
Both costs and benefits are analyzed by examining the costs and cost savings of implementing and using the EFT & ERA Operating Rule Set adopted in this IFC in the following four areas of administrative tasks—
• Provider enrollment in EFT and ERA;
• Implementing infrastructure and communication networks between trading partners;
• Reassociation of the payment information with the remittance information; and
• Posting payment adjustments and claim denials.
To a large extent, the costs of implementing the EFT & ERA Operating Rule Set will be borne by the health plans, with much of the benefits accruing to providers. Many health plans actively participated in the development of these rules, and the requirements they put on themselves were carefully deliberated. In the RIA of this IFC, we estimate that the cost to implement the EFT & ERA Operating Rule Set is $1.2 to $2.7 billion for government and commercial health plans, including third party administrators (TPAs), hospitals, and physician offices. The savings from and cost benefit of using the EFT & ERA Operating Rule Set is $3 to $4.5 billion for government and commercial health plans, hospitals, and physician offices. The net savings derived from using the EFT & ERA Operating Rule Set over 10 years ranges from approximately $300 million to $3.3 billion.
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 Act by adding Part C—Administrative Simplification—to Title XI of the Act, requiring the Secretary of the Department of Health and Human Services (HHS) (the Secretary) to adopt standards for certain transactions to enable health information to be exchanged more efficiently and to achieve greater uniformity in the transmission of health information.
In the August 17, 2000
Section 1172(a) of the Act states that—
Any standard adopted under [HIPAA] shall apply, in whole or in part, to * * *
(1) A health plan.
(2) A health care clearinghouse.
(3) A health care provider who transmits any health information in electronic form in connection with a [HIPAA transaction].
In the January 16, 2009
As January 1, 2012 approached, we became aware that there were still a number of outstanding issues and challenges impeding full implementation of Version 5010 and Version D.0. Therefore, we announced two consecutive 90-day periods during which we would not initiate enforcement action against any covered entity through June 30, 2012.
Table 1 summarizes the full set of transaction standards adopted in the Transactions and Code Sets final rule and as modified in the Modifications final rule.
In general, the HIPAA transaction standards enable electronic data interchange using a common interchange structure, thus minimizing the industry's reliance on multiple data transmission formats. According to a recent report to Congress by the National Committee on Vital and Health Statistics (NCVHS), “[t]he HIPAA electronic data requirements for standardized formats and content were intended to move the health care industry from a manual to an electronic system to improve security, lower costs, and lower the error rate.”
However, according to the NCVHS report, “the speed of adoption [of electronic transactions] across industry has been disappointing.”
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) EFT payments among financial institutions are used in accordance with U.S. Federal Reserve regulations (12 CFR Part 370) and maintained by the Federal Reserve and NACHA—The Electronic Payments Association (known as NACHA). Additionally, credit card issuers employ detailed operating rules (for example, Cirrus Worldwide Operating Rules) describing things such as types of members, their responsibilities and obligations, and licensing and display of service marks.
Before the passage of the Affordable Care Act, States enacted various laws that were analogous to operating rules, in that they established business rules directed toward more efficient and effective transmission of electronic health care transactions. Similarly, the CAQH Committee on Operating Rules for Information Exchange (CORE), a nonprofit alliance of health care stakeholders, developed voluntary operating rules for the health care industry. CAQH CORE's operating rules include business rules that require common platform standards, establish companion guide formats, define the rights and responsibilities of all parties in a transaction, establish response times and error resolution, require specific acknowledgement standards and data content, remove optionality from specific data content, and establish business rules directed at efficient and effective business practices. Voluntary agreements among health care industry stakeholders to use operating rules were shown to reduce costs and administrative complexities.
Through the Affordable Care Act, Congress sought to promote implementation of electronic transactions and achieve cost reduction and efficiency improvements by creating more uniformity in the implementation of standard transactions. This was done by mandating the adoption of a set of operating rules for each of the HIPAA transactions. Section 1173(g)(1) of the Act, as added by section 1104(b)(2)(C) 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 Affordable Care Act defines operating rules and specifies the role of 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)(B) 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).
Further, section 1104(b)(2) of the Affordable Care Act 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—
(2) Operating Rules Development.— 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 standards issued under Health Insurance Portability and Accountability Act of 1996. * * *
(3) Review and recommendations.— The National Committee on Vital and Health Statistics shall * * *
(C) 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;
(D) Evaluate whether such operating rules are consistent with electronic standards adopted for health information technology.
In the July 8, 2011
Section 1104(b)(2)(A) of the Affordable Care Act amended section 1173(a)(2) of the Act by adding the EFT transaction to the list of electronic health care transactions for which the Secretary must adopt a standard under HIPAA. Section 1104(c)(2) of the Affordable Care Act required the Secretary to promulgate a final rule to establish an EFT standard, and authorized the Secretary to do so by an interim final rule. That section further required the standard to be adopted by January 1, 2012, in a manner ensuring that it is effective by January 1, 2014.
Section 1104(b)(2)(C) of the Affordable Care Act also added a requirement, at section 1173(g)(4)(B)(ii) of the Act, for the Secretary to adopt a set of operating rules for electronic funds transfers (EFT) transactions and health care payment and remittance advice transactions that shall “(I) allow for automated reconciliation of the electronic payment with the remittance advice; and (II) be adopted not later than July 1, 2012, in a manner ensuring that such operating rules are effective not later than January 1, 2014.”
Section 1104(b)(2)(C) of the Affordable Care Act also amended section 1173 of the Act by adding section 1173(g)(4)(C) of the Act, which 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.”
To better explain the context in which a standard for EFT was adopted, we review below how the health care electronic funds transfers (EFT) and remittance advice transaction is used to transmit health care claim payments.
In the January 10, 2012
• The transmission of any of the following from a health plan to a health care provider:
++ Information about the transfer of funds.
++ Payment processing information.
• The transmission of either of the following from a health plan to a health care provider:
++ Explanation of benefits.
++ Remittance advice.
The transmission described in § 162.1601(a), hereinafter referred to as a health care EFT, is primarily a financial transmission, and the data content is payment information. Traditionally, health care payments were in the form of paper checks sent through the mail, and use of EFT for health care claim payments remains low. When an EFT is used, the payment is generally transmitted through the ACH Network, the same network that transmits salary payments via Direct Deposit, though there are instances when other networks are used, such as Fedwire.
The transmission described in § 162.1601(b) is the ERA. A health plan rarely pays a provider the exact amount a provider bills the health plan for health care claims. A health plan adjusts the claim charges based on contract agreements, secondary payers, benefit coverage, expected copays and co-insurance, and other factors. These adjustments are described in the ERA through the use of four codes: Claim Adjustment Reason Codes (CARCs), Remittance Advice Remark Codes (RARCs), Claim Adjustment Group Codes (CAGCs), and NCPDP External Code List Reject Codes (NCPDP Reject Codes).
CARCs identify reasons why the claim or services are not being paid as charged. For instance, “163” means “attached references on the claim was not received.” RARCs provide additional information about the adjustment. For instance, “M30” means “missing pathology report.” CAGCs categorize CARCs by financial liability. For instance, “PR” means “patient responsibility.” NCPDP Reject Codes identify reasons why a retail pharmacy claim was rejected. For instance, “73” means “refills are not covered.”
With few exceptions, the ERA and the health care EFT are sent in different electronic formats through different networks, contain different data that have different business uses, and are often received by the health care provider at different times. The health care EFT is transmitted from the health plan's treasury system. It is then processed by financial institutions, and ultimately entered into the health care provider's treasury system. The path of the health care EFT through the ACH Network from health plan to provider is represented in Illustration A by the solid arrow.
In contrast, the ERA is traditionally sent from the health plan's claims processing system and processed through the provider's billing and collections system. The path of the ERA from health plan to provider is represented in Illustration A by the arrow with dashes.
When both the health care EFT and the ERA to which it corresponds arrive at the health care provider (often at different times), the two transmissions must be matched back together or “reassociated” by the provider; that is, the provider must associate the ERA with the payment that it describes. This process is referred to as “reassociation.”
Providers receive many payments from different health plans, often separated from the ERA or paper remittance advice by days or even weeks. This makes reassociation of the payment with the remittance advice a slow burdensome task, especially when
The Health Care EFT Standards IFC adopted standards for the format and the data content for the electronic transmission that a health plan sends to its financial institution in order to initiate a health care claim payment to a health care provider via the ACH Network.
One of the goals of the Health Care EFT Standards IFC was to adopt standards for the format and data content of the health care EFT that would ensure that the provider could reassociate the health care EFT with the ERA by matching identical data elements between the two. The Health Care EFT Standards IFC requires that a specific ACH file format be used with specific data content when health plans originate a health care EFT with their financial institutions to transmit through the ACH Network.
Specifically, the Health Care EFT Standards IFC adopts the ACH Network format known as the Corporate Credit or Deposit Entry (CCD) with Addenda Record (CCD+Addenda) as the standard that health plans must use to originate an EFT for health care payments made through the ACH Network. The data content of the Addenda Record is also standardized by the Health Care EFT Standards IFC: Health plans must include the TRN Segment, an ASC X12 data segment the implementation specifications of which are found in the ASC X12 835 TR3 (hereinafter referred to as the X12 835 TR3) in the Addenda Record of the CCD+Addenda. No protected health information (PHI) is to be included in the health care EFT transaction according to the standards adopted in the Health Care EFT Standards IFC. For a comprehensive description of the EFT transmission through the ACH Network, please see the Health Care EFT Standards IFC (77 FR 1556).
The standard for the ERA is the X12 835 TR3, adopted in the Transactions and Code Sets final rule. An updated version of the X12 835 TR3, Version 5010, was adopted in the Modifications final rule.
By requiring health plans to use the same format to originate a health care EFT as that used by financial institutions to transmit an EFT through the ACH Network, there will be one less step in formatting/translating the data in the overall transaction and, therefore, a decrease in the risk that an error or omission will be made in that translation. Consistent format and data elements in the file format used by health plans to originate an EFT through the ACH Network will make it more likely that the provider will be able to reassociate the health care EFT with the ERA because of identical data elements contained in both.
The NCVHS was established by Congress to serve as an advisory body to the Secretary on health data, statistics, and national health information policy, and has been assigned a significant role in the Secretary's adoption of standards, code sets, and operating rules under HIPAA.
Per the Affordable Care Act, the Health Care EFT Standards IFC was based on recommendations from the NCVHS after a hearing the NCVHS Subcommittee on Standards held on December 3, 2010 on standards and operating rules for the health care payment and remittance advice transaction. During the December 2010 hearing titled “Administrative Simplification under the Patient Protection and Affordable Care Act Standards and Operating Rules for Electronic Funds Transfer (EFT) and Remittance Advice (RA),”
The testimony, both written and verbal, described many aspects and issues of the health care electronic funds transfers (EFT) and remittance advice transaction. Testifiers described the advantages to using EFT to pay health care claims. The savings in time and money for health plans and health care providers that EFT affords was paramount amongst these advantages. Testifiers presented a number of case studies to illustrate these benefits as well as a number of obstacles to greater EFT use in health care. We refer the reader to the testimonies posted to the NCVHS Web site at
During the December 2010 NCVHS hearing, it became evident that no operating rules for the heath care electronic funds transfers (EFT) and remittance advice transaction had yet been written by any entity. On February 17, 2011, following the December 2010 NCVHS Subcommittee on Standards hearing, the NCVHS sent a letter to the Secretary stating that “NCVHS has formally requested potential operating rules authoring entities to develop and present their applications to be authoring entities for operating rules for the health care EFT standard and ERA standard. These will be reviewed by NCVHS after they are received, and further recommendations will be considered.”
After the February 17, 2011 letter was sent, three entities applied to be the authoring entity for the EFT and ERA operating rules: ASC X12 (for nonpharmacy ERA transactions); NCPDP (for pharmacy ERA transactions); and CAQH CORE (for all EFT and ERA transactions). The NCVHS evaluated the applications from the three potential authoring entities. Each application was evaluated based on the statutory requirements including: (1) Focus on administrative simplification; (2) having a multistakeholder and consensus-based process for development of operating rules; (3) building on the transaction standards issued under HIPAA; and (4) plans to develop operating rules that meet the functional requirements defined in the statute.
On March 23, 2011 the NCVHS sent a letter to the Secretary recommending that CAQH CORE, in collaboration with NACHA-The Electronic Payments Association, be named as the “candidate authoring entity for operating rules for all health care EFT and ERA transactions, with the provision that this entity submit to NCVHS fully vetted operating rules for consideration by the committee, by August 1, 2011.”
Between March and August 2011, CAQH CORE held more than 30 open calls and over 15 straw polls with industry and government representatives to discuss, debate, and develop operating rules for EFT and ERA. Over 80 health care entities, including health plans, clearinghouses, providers, and financial institutions, were represented at weekly meetings and spent hundreds of hours of analyzing, reviewing, and consensus-building on the operating rules.
CAQH CORE collaborated with the medical, pharmacy, and financial services industries in the following ways in order to draft the operating rules:
• Conducted research, for example, reviewed over 100 EFT and ERA enrollment forms to identify gaps in data collection.
• Held open calls and shared draft documentation with a wide range of constituents, many of which in turn forwarded copies of the drafts to their affiliates.
• Vetted the complete draft CAQH CORE operating rules through the weekly call process, open update calls, surveys, and straw polls, and shared updates on the CAQH CORE and NACHA Web sites.
On August 1, 2011 CAQH CORE and NACHA-The Electronic Payments Association, submitted five separate draft EFT and ERA operating rules to the NCVHS for consideration
• Draft Phase III CORE ERA Infrastructure (835) Rule
• Draft Phase III CORE EFT Enrollment Data Rule
• Draft Phase III CORE ERA Enrollment Data Rule
• Draft Phase III CORE EFT & ERA Reassociation (CCD+/835) Rule
• Draft Phase III CORE Uniform Use of CARCs and RARCs (835) Rule; includes Draft CORE-required Code Combinations for CORE-defined Business Scenarios.
In its August 1, 2011 letter to the NCVHS, CAQH CORE urged the NCVHS to consider the rules as draft: “Further vetting is underway to finalize the rules per the CAQH CORE process or to identify further dialogue that should occur within the industry.”
On October 10, 2011, CORE produced another draft of the EFT & ERA Operating Rule Set in which the five rules were packaged as a set, titled: “Draft Phase III CORE EFT & ERA Operating Rule Set.” Hereinafter, we will refer to the complete set of Draft Phase III CORE EFT & ERA Operating Rules as of October 10, 2011 as the EFT & ERA Draft Operating Rule Set.
On December 7, 2011, the NCVHS sent a letter to the Secretary recommending that the EFT & ERA Draft Operating Rule Set be adopted, conditional on the authoring entities making certain revisions to the proposed operating rules (recommendations 1.1 and 1.2), including the following:
• All references to the CORE certification requirement are removed from any documents that are adopted as mandatory by HHS, and that the CAQH CORE Web site be similarly updated and amended. The NCVHS noted that one of the items specifically excluded in the Eligibility and Claim Status Operating Rules IFC is the requirement that all entities (providers, health plans and clearinghouses) using the operating rules be CORE certified, and stated that the “language in the operating rules that requires CORE certification specifically can be misleading.”
• “The Secretary worked with CAQH CORE to develop a naming convention that consistently and easily identifies the transaction to which the rule applies.”
Subsequent to the December 7, 2011 NCVHS letter, CORE edited the Draft EFT & ERA Operating Rule Set per the NCVHS recommendation that references to the CORE certification be removed. The final version, published by CAQH CORE on June 27, 2012, is titled the Phase III CORE EFT & ERA Operating Rule Set (June 27, 2012).
Discussions are underway between the Secretary and CORE as to NCVHS' second recommendation that a different naming convention be developed for operating rules. However, it was not possible to develop a new naming convention in the period between the December, 2011 recommendation from NCVHS and the publication of this IFC.
In 45 CFR 162.1603, we adopt CAQH CORE Phase III CORE EFT & ERA Operating Rule Set (Approved June 2012), hereinafter referred to as the EFT & ERA Operating Rule Set, for the health care EFT and remittance advice transaction, with one exception noted later in this section of the IFC. In § 162.920, we list the EFT & ERA Operating Rule Set as being incorporated by reference.
The EFT & ERA Operating Rule Set includes the following rules: (1) Phase III CORE 380 EFT Enrollment Data Rule; (2) Phase III CORE 382 ERA Enrollment Data Rule; (3) Phase III Core 360 Uniform Use of Claim Adjustment Reason Codes and Remittance Advice Remark Codes (835) Rule; (4) CORE-required Code Combinations for CORE-defined Business Scenarios for the Phase III Core Uniform Use of Claim Adjustment Reason Codes and Remittance Advice Remark Codes (835) Rule; (5) Phase III CORE 370 EFT & ERA Reassociation (CCD+/835) Rule; and (6) Phase III CORE 350 Health Care Claim Payment/Advice (835) Infrastructure Rule.
The Phase III CORE 350 Health Care Claim Payment/Advice (835) Infrastructure Rule includes a requirement, at 4.4.1, that entities' companion guides must follow the format/flow as defined in the CORE v 5010 Master Companion Guide Template, so we are also adopting the CORE v 5010 Master Companion Guide Template.
We exclude the Phase III CORE 350 Health Care Claim Payment/Advice (835) Infrastructure Rule Requirement 4.2 in § 162.1603(a)(6). We are not adopting the Phase III CORE 350 Health Care Claim Payment/Advice (835) Infrastructure Rule Requirement 4.2, titled “Health Care Claim Payment/Advice Batch Acknowledgement Requirements” because that requirement requires the use of the ASC X12 999 acknowledgement standard, and the Secretary has not adopted standards for acknowledgement transactions.
Table 2 summarizes the high level requirements of the EFT & ERA Operating Rule Set. Table 2 does not include all aspects of the EFT & ERA Operating Rule Set, and readers are advised to refer to the EFT & ERA Operating Rule Set itself.