2. Standard: Health Care Payment and Remittance Advice (Subpart L)

[Please label any written comments or e-mailed comments about this section with the subject: Payment]

a. Background

The filing of claims for reimbursement (especially when a large number of patients have more than one insurer), control of those claims, association of payments, denials or rejections received with the patient records, posting of adjudication data to those records, reconciliation of payments sent to financial institutions, and storage and retrieval of patient accounts is a very labor intensive process when conducted manually. The process is further complicated by the diverse requirements and processes for activities such as billing, payment, and notification of the large number of health plans, which requires that health care provider staff stock multiple types of forms, be trained in the variety of requirements, be able to interpret the wide range of coding schemes used by each health plan, and maintain billing and payment manuals for each health plan.

We believe that automation can greatly reduce the labor required for these processes, especially if every health plan becomes automated around a standard model so that health care providers are not required to deal with different requirements and software. Automation of the payment and remittance advice process can provide many benefits: health care providers can post claim decisions and payments to accounts without manual intervention, eliminating the need for re-keying data; payments can be automatically reconciled with patient accounts; and resources are freed to address patient care rather than paper and electronic administrative work.

The ASC X12N Subcommittee established a workgroup in late 1991 to develop the ASC X12N 835 - Health Care Claim Payment/Advice, since there was no existing standard capable of handling the large datasets necessary for health care.

i. Candidates for the Standards

Prior to development of the ASC X12N 835, there were very few electronic formats available for the health care claim payment and remittance advice function. As researched by the HISB, existing standards that could be considered for national implementation under HIPAA for health care claim payment/remittance advice included:

ASC X12N 835 - Health Care Claim Payment/Advice, version 3070; ASC X12N 820 Payment Order/Remittance Advice; and the National Standard Format (NSF) for Remittance Version 2.0

ii. Recommended Standard

The standard for remittance advice proposed in this proposed rule is the ASC X12N 835 Health Care Claim Payment/Advice.

HHS chose this standard primarily because of advice received from industry members. Health care providers and health plans in the ASC X12N Subcommittee rejected the ASC X12N 820 due to its lack of health care specific information for this function. The X12N 820 is used for electronic payment of health insurance premiums by employers. Although the NSF is used by a large number of Medicare providers, we rejected it because it is not an ANSI- accredited standard and it lacks an independent, nongovernmental body for maintenance.

The ASC X12N 835 may be used in conjunction with payment systems relying either on electronic funds transfer or the creation of paper checks. It may be sent through the banking system or it may be split with the electronic funds transfer portion directed to a bank, and the data portion sent either directly or through a health care clearinghouse to the individual for whom the funds are intended. If paper checks are used, the entire transaction is sent either directly or through a health care clearinghouse to the individual for whom the funds are intended. In all cases, however, the health care provider may use the electronic data in its own system, gaining efficiency by means of automatic posting of patient accounts. Uniformity is just as important as it is for health care claims, since there would be little gain in efficiency for the health care provider who must adapt to multiple formats and multiple data contents for remittance advice. This transaction is suitable for use only in batch mode.

HHS, based on recommendations, has determined that the ASC X12N 835 - Health Care Claim Payment/Advice is the best candidate for adoption under HIPAA. A wide range of the health care community participated in its initial design, and the ASC X12N is ANSI-accredited. Whereas the NSF met 5 of the criteria against which we evaluated the standards, the ASC X12N standards met all 10. The NSF does not improve the efficiency and effectiveness of the health care system (#1) because a standard implementation does not exist. The NSF was developed primarily for Medicare and, therefore, does not meet all of the needs of the user community (#2). It is not supported by an ANSI-accredited SDO (#5). There are no testing or implementation procedures in place (#6). Due to its fixed-length structure, it does not incorporate flexibility to adapt easily to change (#10).

Data elements for the standard and other information may be found in Addendum 2.

b. Requirements

In § 142.1202, we would specify the ASC X12N 835 Health Care Claim Payment/Advice (004010X091) as the standard for payment and remittance advice transactions. We would also specify the source of the implementation guide and incorporate it by reference.

i. Health plans.

In § 142.1204, Requirements: Health plans, we would require health plans to use only the standard specified in § 142.1202 for electronically transmitting payment and remittance advice transactions.

ii. Health care clearinghouses.

We would require in § 142.1206 that each health care clearinghouse use the standard specified in § 142.1202 for payment and remittance advice transactions.

c. Implementation Guide and Source

The implementation guide for the ASC X12N 835 (004010X091) is available at no cost from the Washington Publishing Company site at the following Internet address: http://www.wpc-edi.com/hipaa/.

Users without access to the Internet may purchase implementation guides from Washington Publishing Company directly: Washington Publishing Company, 806 W. Diamond Ave., Suite 400, Gaithersburg, MD, 20878; telephone 301-590-9337; FAX: 301-869- 9460. The data definitions and description of data conditions may also be obtained from this website.

[Top of Page] [Previous] [Next:Coordination of Benefits]