HIPAAdvisor: Q & A with Steve Fox

Talking to Ourselves: Within a Corporate Entity

QUESTION: Unlike the proposed rule, I understand that the final rule on Standards for Electronic Transactions is applicable to  transmissions within corporate entities.  When and how is this rule applicable?

ANSWER: Although the proposed rule for electronic transaction  standards created an exception for transactions within a corporate  entity, the final rule does not.  Generally, under the final rule  (the "Rule"), if a covered entity electronically transmits a  transaction that is covered by the rule to either another covered  entity or within the same covered entity, then the standard transaction  must be used. 

However, the key to determining whether the Rule is applicable in any  particular circumstance is in the detailed functional description that  corresponds to the applicable transaction.  These functional  descriptions set forth the scope of each transaction standard.  For  example, referral certification and authorization transactions are  defined as any of the following transmissions:

• a request for the review of health care to obtain an authorization for the health care,
• a request to obtain authorization for referring an individual to another health care provider, or
• a response to a request described in either of the two cases above.

If the transaction at issue falls within the scope of the functional  description for the applicable transaction standard, then regardless  of whether the transmission is internal or external, covered  entities are required to comply with the transaction standard.  Data  submissions or exchanges for purposes other than those designated in  the Rule are not transactions as defined by the Rule and therefore  do not require use of the standards.  Therefore, a two-pronged  analysis should be applied whenever the issue of the applicability  of the Rule arises.  First, is the transmission one of the covered  transactions under the Rule?  Second, does the transmission fall  within the scope of the functional description set forth in the  Rule?  The transaction standards are applicable only if the answer  to both of these questions is yes.

The Department of Health and Human Services determined that a  departure from the proposed rule was necessary in order to prevent  the exception from defeating the rule.  Because of the rapid  consolidation within the corporate health care industry, the  seemingly simple task of devising a tenable definition of "corporate  entity" posed an incredible and ultimately overwhelming challenge.   There was also a concern that the proposed exception would not have  promoted the utilization of nationalized standards, as intended,  because the exception would require each health care provider that  is owned by or under contract with one or more health plans to use  the in-house, non-standardized transaction favored by each health plan.

Read past HIPAA Legal Q/A articles.

This article was co-authored by Rachel H. Wilson, Esq., an associate at Pepper Hamilton.

Disclaimer: Steve's responses offer information that is general in nature and should not be relied upon as legal advice. Only your attorney is qualified to evaluate your specific situation and provide you with customized advice.

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