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Standards for Electronic Healthcare
Claims Attachments
V. Response to Comments
Because of the large number of public
comments we normally receive on
Federal Register documents, 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, when we proceed
with a subsequent document, we will
respond to the comments in the
preamble to that document.
VI. Regulatory Impact Analysis
[If you choose to comment on issues
in this section, please include the
caption "IMPACT ANALYSIS" at the
beginning of your comments.]
A. Overall Impact
We have examined the impacts of this
rule as required by Executive Order
12866 (September 1993, Regulatory
Planning and Review), as amended by
Executive Order 13258, and the
Regulatory Flexibility Act (RFA) (Pub.
L. 96–354), section 1102(b) of the Social
Security Act, the Unfunded Mandates
Reform Act of 1995 (Pub. L. 104–4), and
Executive Order 13132.
The impact analysis in the
Transactions Rule assessed the expected
costs and benefits associated with the
Administrative Simplification
regulations (related to employing
electronic systems for designated health
care related purposes) covering a time
span of 10 years. That analysis however
did not include electronic health care
claims attachments. Nonetheless, this
section can be read in conjunction with
the Transactions Rule analysis, since the
statistics for electronic claims can be
considered related to electronic claims
attachments.
Executive Order 12866 directs
agencies to assess all costs and benefits
of available regulatory alternatives and,
if regulation is necessary, to select
regulatory approaches that maximize
net benefits (including potential
economic, environmental, public health
and safety effects, distributive impacts,
and equity). A regulatory impact
analysis (RIA) must be prepared for
major rules with economically
significant effects ($100 million or more
in any 1 year). We consider this
proposed rule to be a major rule, as it
will have an impact of over $100
million on the economy. This impact
analysis shows a potential net savings of
between $414 million and $1.1 billion
over a 5-year period. We attempt to
provide information for the impact
analysis, focusing on savings
projections, since cost data on the
HIPAA transactions are not yet available
from the industry. We solicit such data
during the comment period for this
proposed rule. Also, as referenced
earlier, HHS provided funding for a
pilot to test the proposed standards, and
we anticipate that any cost/benefit
information that comes of that study will be provided before the final rule is
published.
The RFA requires agencies to analyze
options for regulatory relief of small
businesses. For purposes of the RFA,
small entities include small businesses,
nonprofit organizations, and small
government jurisdictions. Many
hospitals and most health care providers
and suppliers are small entities, either
by nonprofit status or by having
revenues of $6 to $29 million or less in
any 1 year. For purposes of the RFA,
nonprofit organizations are considered
small entities; however, individuals and
States are not included in the definition
of a small entity. For details, see the
Small Business Administration’s current
regulation that set forth size standards
for health care industries at (65 FR
69432).
Effective October 1, 2000, the SBA no
longer used the Standard Industrial
Classification (SIC) System to categorize
businesses and establish size standards,
and began using industries defined by
the new North American Industry
Classifications System (NAICS). The
NAICS made several important changes
to the Health Care industries listed in
the SIC System. It revised terminology,
established a separate category (Health
Care and Social Assistance) under
which many health care providers are
located, and increased the number of
Health Care industries to 30 NAICS
industries from 19 Health Services SIC
industries.
On November 17, 2000, the SBA
published a final rule, which was
effective on December 18, 2000, in
which the SBA adopted new size
standards, ranging from $5 million to
$25 million, for 19 Health Care
industries. It retained the existing $5
million size standard for the remaining
11 Health Care industries. The revisions
were made to more appropriately define
the size of businesses in these industries
that SBA believes should be eligible for
Federal small business assistance
programs.
On August 13, 2002, the SBA
published a final rule that became
effective on October 1, 2002. The final
rule amended the existing SBA size
standards by incorporating OMB’s 2002
modifications to the NAICS into its table
of small business size standards.
On September 6, 2002, the SBA
published a subsequent final rule
(effective October 1, 2002) that corrected
the August 13, 2002 final rule and
contained a new table of size standards
to clearly identify these organizations by
dollar value and by number of
employees. Some of the revisions in size
standards affected some of the entities
that are considered covered entities
under this proposed rule. For example,
the SBA revisions increased the annual
revenues for physician offices to $8.5
million (other practitioners' offices'
revenues remained at $6 million) and
increased the small business size
standard for hospitals to $29 million in
annual revenues.
The regulatory flexibility analysis for
this proposed rule is linked to the
aggregate flexibility analysis for all of
the Administrative Simplification
standards that appeared in the
Transactions Rule (65 FR 50312),
published on August 17, 2000, which
predated the SBA changes noted above.
In addition, all HIPAA regulations
published to date have used the SBA
size standards that existed at the time of
the publication of the Transactions
Rule. For this analysis, we use the
current SBA small business size
standards. Even though the SBA has
raised the small business size standards, the revised size standards have no effect
on the cost and benefit analysis for this
proposal. The revised standards simply
increase the number of health care
providers that are classified as small
businesses.
One source of information about the
health data information industry is
Faulkner & Gray’s Health Data Directory
(CY 2000 edition). Using this resource,
health care clearinghouses, billing
companies, and software vendors may
also be considered small entities.
However, for the same reasons cited
elsewhere, we do not have any cost data
to determine if this rule would have a
significant impact on small entities.
In addition, section 1102(b) of the Act
requires us to prepare a regulatory
impact analysis if a rule may have a
significant impact on the operations of
a substantial number of small rural
hospitals. This analysis must conform to
the provisions of section 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 Core-Based Metropolitan Statistical
Area and has fewer than 100 beds.
Because these attachment standards are
not mandatory for all health care
providers, but rather only for those
health care providers who conduct a
transaction electronically for which the
Secretary has adopted a standard, small
rural hospitals can continue to operate
as they do today, and we do not
anticipate a significant financial and
business impact on these covered
entities. For a more detailed discussion
of small rural hospitals, please refer to
the Transactions Rule, 65 FR 50312.
Section 202 of the Unfunded
Mandates Reform Act of 1995 (UMRA)
(2 U.S.C. 1501 et seq.) also requires that
agencies assess anticipated costs and
benefits before issuing any rule that may
result in expenditures in any one year
by State, local, or tribal governments, in
the aggregate, or by the private sector, of
$110 million. This proposed rule has
been reviewed in accordance with the
Unfunded Mandates Reform Act of 1995
and Executive Order 12875.
In the Transaction Rule’s impact
analysis, State Medicaid agencies
estimated that they could spend $10
million each to implement the entire set
of HIPAA transactions. Since electronic
claims attachments are only one
component of the entire transaction set,
and we believe that some of the
programming completed for the current
transactions will be useable for
processing electronic health care claims
attachments, we do not believe that the
States, in aggregate, will exceed the
$110 million UMRA expenditure
threshold for these new attachment
transactions.
State Medicaid agencies, which are
statutory health plans under HIPAA,
currently require and use a variety of
attachments to adjudicate claims. In
order to validate the fiscal and
operational impact of this rule, current
data on the number and types of claims
attachments for each State would be
necessary, particularly whether the
attachment types we name affect any
significant percentage or number of
Medicaid claims. We are aware of an
industry wide survey that was
conducted in the winter of 2005, which
may provide some insight into this
information for States, if the Medicaid
agencies and Medicaid providers
participated in the survey. In addition,
during the comment period, we hope
that State Medicaid agencies will
provide such information.
HHS estimated that the private sector
would require expenditures in excess of
$110 million to implement all of the
transaction standards. Since electronic
health care claims attachments are only
one of the eight transactions, and since
there are only six attachment types at
this time, our assumption is that
expenditures to meet just the electronic
health care claims attachment
requirements will not exceed the UMRA
threshold for the private sector. Even if
our assumption is incorrect, and the
costs of implementing the electronic
health care claims attachments
standards exceed the UMRA threshold,
we believe that anticipated benefits of
the proposed rule justify the added
costs.
The anticipated benefits and costs of
these proposed standards, and other
issues raised in section 202 of the
UMRA, are addressed later in this section. In addition, under section 205
of the UMRA (2 U.S.C. 1535), having
considered at least three alternatives for
the transaction standard (X12 275
version 4010, IEEE, DICOM) and two
options for the code sets (claims status
and LOINC), as outlined in the
preamble to this rule and in the
following analysis, HHS has concluded
that this proposed rule is the most cost-effective
alternative for implementing
HHS’s statutory objective of
administrative simplification.
Executive Order 13132 establishes
certain requirements that an agency
must meet when it promulgates a
proposed rule (and subsequent final
rule) that would, if finalized, impose
substantial direct requirement costs on
State and local governments, preempt
State law, or otherwise have Federalism
implications. Executive Order 13132 of
August 4, 1999, Federalism, published
in the Federal Register on August 10,
1999 (64 FR 43255), requires the
opportunity for meaningful and timely
input by State and local officials in the
development of rules that have
Federalism implications. The
Department consulted with appropriate
State and Federal agencies, including
tribal authorities and Native American
groups, as well as private organizations.
These private organizations included
WEDI and the DSMO coordinating
committee.
The Department has examined the
effects of provisions in the proposed
rule as well as the opportunities for
input by the States to the proposed rule.
The Federalism implications of the
proposed rule are consistent with the
provisions of the Administrative
Simplification subtitle of HIPAA by
which the Department was required by
the Congress to promulgate standards
for the interchange of certain health care
information via electronic means, which
standards, by statute, preempt contrary
State law.
The States were invited to participate
in the electronic claims attachment
standard development process from its
beginning in 1994. During the early
stages, a concept paper that set forth the
transactions, code sets, and key issues
being considered for the proposed rule
was provided to the States for review
and comment. Those comments have
been considered in preparation of this
proposed rule. The National Medicaid
EDI HIPAA work group (NMEH) has a
claims attachment subcommittee, which
will be active in ensuring that each State
is given the opportunity to provide
input during the public comment
period. The Department concludes that
the policy in this proposed rule has
been assessed in accordance with the
principles, criteria, and requirements in
Executive Order 13132; that this
proposed rule is not inconsistent with
that Order; that this proposed rule
would not impose significant additional
costs and burdens on the States; and
that this proposed rule would not affect
the ability of the States to discharge
traditional State governmental
functions.
1. Affected Entities (Covered Entities)
All health plans, health care
clearinghouses, and covered health care
providers that transmit any health
information in electronic form in
connection with a claims attachment
which use other electronic format(s),
and all health care providers that decide
to change from a paper format to an
electronic process for claims
attachments, would have to begin to use
the ASC X12N 277—Health Care Claim
Request For Additional Information and
ASC X12N 275—Additional Information
to Support a Health Care Claim or Encounter and the accompanying HL7
specifications for requesting and
submitting electronic health care claims
attachments. Currently, there are no
standardized electronic claim
attachment formats in consistent use
across the industry. Since health care
providers have the option of continuing
to submit paper attachment information,
there would be little potential for
disruption of claims processes and
timely payments during a particular
health plan’s transition to the ASC
X12N 277, ASC X12N 275, HL7
standards and LOINC code set use.
Implementation will simplify
processing for attachments and reduce
administrative expenses for covered
health care providers. Health plans will
be able to automate the processing of
attachment information, thus reducing
their labor costs and improving the
accuracy of attachment responses from
covered health care providers. The costs
of implementing the X12 and HL7
standards with the LOINC code set are generally one-time costs related to
conversion. The systems upgrade costs
for small covered health care providers,
health plans, and health care
clearinghouses will vary depending
upon the capabilities of hardware and
software systems in use at the time these
changes are being made. Administrative
costs may increase depending on the
data entry and data conversion options
selected in order to comply with the
standard.
2. Effects of Various Options
After ruling out certain versions of
transactions based on limitations
identified by early adopters of X12
transactions, we assessed the potential
of the later versions of ASC X12N 277—Health Care Claim Request For
Additional Information transaction; the
ASC X12N 275—Additional Information
to Support a Health Care Claim or
Encounter transaction; the HL7 CDA
message standard; and the six HL7 AIS.
These standards were measured against
the key principles listed in this
proposed rule: achieve the maximum
benefit for the least cost; avoid
incompatibility; be consistent with the
other HIPAA standards; and be
technologically independent of
computer protocols used in HIPAA
transactions. Specifically, the goal of
improving the effectiveness and
efficiencies of the health care system
through electronic means is supported
by these standards. We found that these
transactions and specifications met all
the principles, because once systems
and operations are upgraded to send
and receive the data in the new format
and with predictable content, many
other business processes will be
improved.
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