Recently Issued CMS HIPPA Electronic Funds Transfers Standards

Written by on March 2, 2012 in Law & Finance - No comments

By Tatiana Melnik

On Jan. 5, 2012, Centers for Medicare and Medicaid Services (CMS) issued an interim final rule that specifies new standards under Health Insurance Portability Accountability Act (HIPAA) for electronic funds transfers (EFT) and remittance advice transactions. Comments are due within 60 days after publication of this regulation, which is the second in a series of regulations to be issued over the next five years as required by Section 1104 of the Affordable Care Act’s administrative simplification provisions to standardize electronic health care transactions. Once finalized, all covered entities must comply by Jan. 1, 2014.

The common interchange structure standards adopted under HIPAA will minimize the industry’s reliance on multiple formats for electronic data interchange (EDI). By creating greater uniformity in data exchange and reduction in the amount of paper forms needed for transmitting data, the administrative burden on covered entities will dramatically decrease.   CMS estimates that as a result of this interim final rule, covered entities could reduce administrative costs by up to $4.5 billion dollars over the next 10 years.

Despite the gains made since the passage of the initial EDI and EFT standards, health care policy makers determined that new EFT standards were required, in part, because the administrative burden in processing health care related transactions remains high. CMS, for example, cites a May 2010 study in the journal Health Affairs which found that physicians spend nearly 12 percent of every dollar they receive from patients to cover the costs of filling out forms and performing other excessively complex administrative tasks.

With the interim final rule, the U.S. Department of Health and Human Services (HHS) has adopted two standards for the health care EFT:

  • Cash Concentration and Disbursement Plus (CCD+) Addenda implementation specifications in the 2011 National Automated Clearing House Association Operating Rules & Guidelines.
  • Reassociation trace number (TRN) Segment implementation specifications in the X12 835 type three technical reports (TR3) for the data content of the Addenda Record of the CCD+Addenda.

CMS anticipates that health care EFT standards will have the most substantial cost and benefit impacts on commercial and government health plans, physician practices and hospitals.    Specifically, health plans will have direct costs associated with implementing and using the standards due to required software upgrades and associated training. CMS anticipates that because physician practices and hospitals receive payments electronically and do not remit payments in this manner, these providers will incur little to no cost to implement the standards. Even so, physician practices and hospitals must upgrade billing software to address the changes and staff members must be trained on the new standards.

Despite these initial and recurring costs, CMS estimates that over 10 years, the savings for commercial health plans could be as much as $40 million and $31 million for Medicaid, the Children’s Health Insurance Program and the Indian Health Service. Similarly, physician practices and hospitals should see savings of $3 billion to $4.5 billion over the next 10 years as health plans implement the health care EFT standards. Future administrative simplification rules will address adoption of a standard unique identifier for health plans, a standard for claims attachments and requirements that health plans certify compliance with all HIPAA standards and operating rules.

Reprinted with permission from Dickinson Wright PLLC


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