Standards for Electronic Transactions and Code Sets

III. Analysis of, and Responses to, Comments on the Proposed Rules

In response to the May 31, 2002 publication of the two proposed rules, we received over (300) timely public comments. The comments came from a variety of sources, including health care associations and societies, entities named in the HIPAA legislation, health plans, DSMOs, health care providers, Federal health plans, and private individuals.

Our process of reviewing and associating like comments identified areas of the proposed rules that required additional review in terms of their effect on policy, consistency, or clarity of the modifications to the standards, and areas that were technical and specifically related to the implementation specifications. We consulted with the DSMOs on technical comments that related specifically to the implementation specifications.

We present comments and responses generally in the order in which the proposals appeared in the May 31, 2002 proposed rules. We begin with comments and responses about the compliance dates, and continue with comments and responses on the proposals in CMS-0003-P (67 FR 38044), and those in CMS-0005-P (67 FR 38050).

A. Compliance Date

Under the Act, as reflected in §160.104, the Secretary establishes the compliance date for modifications to standards. The compliance date must not be earlier than 180 days after the effective date of the adoption of the modification. We had not proposed a compliance date in the proposed rules.

The Administrative Simplification Compliance Act (ASCA) (Pub. L. 107-105) was enacted on December 27, 2001. This law provided an extension to the compliance date adopted in the Transactions Rule (65 FR 50312) for covered entities that submitted, by October 15, 2002, plans to the Secretary indicating how they will come into compliance by October 16, 2003. Small health plans were not provided with an extension opportunity, but also have a compliance date of October 16, 2003. Because this final rule is modifying standards that are currently in effect and with which compliance is otherwise required, ASCA is relevant. ASCA did not address its effect on those covered entities otherwise required to come into compliance by October 16, 2002, or how modifications to standards were to be implemented.

Comment: Numerous commenters expressed support for the adoption of the modifications and stressed the urgency for implementing the modifications to meet compliance by October 16, 2003. We received some comments requesting clarification for the processing of non-compliant claims submitted before the compliance date of October 16, 2003, but processed after October 16, 2003. A few commenters recommended extensions of up to 90 days after October 16, 2003 to allow for an orderly migration to the adopted modifications. The modifications to the transactions are referred to collectively in this final rule as the "Addenda." One commenter suggested that the Department of Health and Human Services (HHS) establish a transition period as a precedent for implementation of future transaction standard versions, such as ASC X12N 4050. One commenter asked for clarification as to whether the ASCA extension was for 1 year after the 180-day adoption period for the Addenda. We received a few comments concerning the impact that publication of this rule would have on the April 2003 ASCA HIPAA testing requirements. One commenter suggested that HHS adopt the ASC X12N 4050 Version implementation specifications, instead of the ASC X12N 4010 Addenda.

Response: The effective date for this final rule is 30 days after the date of publication in the Federal Register. Standards are adopted and implementation specifications are established as of the effective date of this final rule. Trading partner agreements should determine the processing requirements for non-compliant claims submitted by covered entities that have requested a compliance extension for the period between October 16, 2002 and October 16, 2003.

To avoid confusion over the interaction between the compliance dates for the original rule, the compliance dates for these modifications, and the ASCA extension dates, we have revised the regulations text at 45 CFR 162.900. Covered entities, other than small health plans, that have timely submitted a compliance plan will be required to come into compliance with the Transactions Rule as amended by these modifications no later than October 16, 2003. ASCA, however, complicates the compliance picture greatly.

Hundreds of thousands of entities, including numerous large health plans, have obtained 1-year extensions under ASCA. Consequently, those entities, as well as small health plans, are not required to conduct covered transactions in standard form until October 16, 2003, as clarified at section 162.900. Section 162.923 (a) provides that covered entities must conduct transactions as standard transactions, except as otherwise provided in part 162. Thus, we interpret §162.923(a), when read with section 162.900, to mean that if both sides to a transaction are not required to conduct it in standard form (that is, if one side is required to conduct the transaction in standard form but the other side is not), neither side is required to conduct it in standard form, provided that the requirements to §162.925 do not apply. Thus, for example, even where a covered health care provider failed to submit a compliance plan, it would not be required to comply with the Transactions Rule with respect to the covered transactions which it actually conducts during the period of October 16, 2002 through October 15, 2003, insofar as the transactions are with a health plan that is not required to comply during this period because it (1) has obtained a 1-year extension under ASCA, or (2) is a small health plan. Similarly, a health plan that is subject to the October 16, 2002 compliance date would not be required to conduct coordination of benefits in standard form with another health plan , if the latter plan was not conducting the transaction in standard form because it (1) has obtained a 1-year extension under ASCA, or (2) is a small health plan.

Further, even where compliance is required (that is, the October 16, 2002 compliance date applies to both sides to the covered transaction and neither covered entity submitted a compliance plan), we recognize that the modifications adopted as a result of CMS-0003-P and CMS-0005-P are necessary to permit the transactions covered by these proposed rules to be conducted in standard form, and that such transactions could not feasibly be required before the compliance date for the modifications in this final rule, October 16, 2003. We will not invoke our authority to penalize noncompliance with standards that our own delay in issuing this final rule has made infeasible.

With respect to the remaining universe of transactions with which compliance would otherwise be required, as between covered entities that did not submit compliance plans, we recognize that covered entities may find it difficult to determine which of their trading partners must also comply in this interim year, and may in good faith mistakenly assume that the other side to a transaction is exempted from the compliance requirement. We also note that the failure to issue the modifications below earlier has made testing of the standards between trading partners difficult, if not infeasible. Also, complying with the unmodified standards would result in implementation problems and divert resources from complying with the modified standards, which will become the industry standard in October 2003.

In light of these considerations, we have come to two decisions. First, we are affording those covered entities that have a present compliance obligation the opportunity to comply with either the unmodified transaction standards or the modified transaction standards in this interim 1-year period. This policy is reflected in §162.900(c)(1) below. Second, we intend to take into account the numerous obstacles to compliance that exist and will work with covered entities to bring them into compliance during this interim period, through among other things, corrective action plans. We will reserve our authority to penalize noncompliance for those cases of noncompliance where such voluntary efforts fail or where covered entities fail to make reasonable efforts to come into compliance.

The modifications proposed in the two proposed rules published on May 31, 2002 and promulgated in this final rule were expressly designed and adopted to assist compliance with the standards. These modifications will, no doubt, greatly facilitate the process of becoming compliant.

We accordingly believe that publication of this final rule and the adopted revisions in the Addenda permit sufficient time to meet the ASCA testing requirements for April 2003, and the October 16, 2003 compliance date. Trading partner agreements should determine the processing requirements for non-compliant claims submitted by covered entities that have requested a compliance extension until October 16, 2003.

ASCA provided the option to obtain a 1-year extension to covered entities, excluding small health plans. We have no statutory authority to extend the compliance dates beyond this 1-year extension period. We also believe that extending the compliance dates further, were we permitted to do so, would place additional and unacceptable burdens on covered entities that are compliant on schedule.

With regard to adopting the 4050 Version of the Implementation Guides, it is our understanding that the healthcare industry is in the midst of implementing the 4010 Version of the Implementation Guides. Adopting a new version of the guides would unfairly burden those who are completing the testing and implementation of the 4010 Version. Also, when covered entities are fully functional with the 4010 Version and its Addenda, they will have a better opportunity to assess improvements for future versions of the Implementation Guides.