Medicare warns of payment delays for claims that don't meet HIPAA rules

Federal officials are anxious to spur the implementation of electronic standards.

By Joel B. Finkelstein — Posted March 22, 2004

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Washington -- Doctors have been slow to comply with federal electronic health transaction standards. But the government plans to give them a jolt by holding noncompliant Medicare claims an extra two weeks.

As mandated by the Health Insurance Portability and Accountability Act, physicians filing electronic claims with Medicare were supposed to be using the standard format as of Oct. 16, 2003. At that time, the Centers for Medicare & Medicaid Services implemented a contingency plan allowing physicians to continue submitting noncompliant claims, known as legacy claims, as long as they were moving toward meeting HIPAA standards.

The agency is now preparing to launch the next phase of its contingency plan.

Physicians' offices that are still sending in legacy claims after July 6 will get paid, but the claims will be treated as if they were submitted on paper.

Paper claims are reimbursed no sooner than 27 days after they are received, compared with 14 days for HIPAA-compliant electronic claims.

CMS is continuing to follow advice from industry watchers who warned that stopping the flow of reimbursement could have devastating effects on the medical community, especially small practices. Under the law, the agency could be imposing fines on noncompliant entities, a route it has chosen not to take.

According to the latest numbers, close to 70% of the health care industry is now submitting electronic claims in HIPAA-standard format. However, large entities, such as hospitals, health plans and other medical institutions, appear to constitute the bulk of that number.

Experts said that the rate for physician practices, especially small ones, is still very low. While an exact number is hard to nail down, experts said it seems to be hovering somewhere below 15%.

CMS appears anxious to close that gap.

"This is a wake-up call," said Ed Jones, a consultant and chair of the Workgroup for Electronic Data Interchange, which tracks HIPAA compliance.

The agency's move offers physicians another incentive to update their computers and become HIPAA-compliant, said Jones. There is already mounting evidence that moving from paper to electronic record keeping and transactions is to physicians' advantage, he said.

In addition to poor compliance rates, other evidence shows that most small medical practices are still having difficulty switching to the new electronic format.

WEDI recently sent a report to Dept. of Health and Human Services Secretary Tommy Thompson detailing information gathered from testimony from industry members about the current status of compliance efforts.

According to that report, industrywide compliance with the HIPAA electronic format is moving forward, but it is a slow process that has been further delayed by unexpected obstacles.

For example, it is still unclear exactly what constitutes a compliant claim, experts said.

While there is general agreement on the format of HIPAA claims, the data needed to satisfy Medicare's billing department aren't apparent.

Despite industry urgings, CMS has yet to codify in a rule what data elements are required in a HIPAA-compliant claim. The agency may not be sure itself, and the criteria may be changing, perhaps even loosening, as implementation progresses, experts said.

Obstacles in the road

While the low compliance rates may be troubling to CMS, the holdup may be out of physicians' hands.

Many practices, especially small ones, rely on an outside company for their billing, and these physicians have been waiting for their vendors to get their acts together.

"Group practices are still fighting with vendors to upgrade their systems," said Robert Tenant, government affairs manager for the Medical Group Management Assn. "But many of the vendors are still not ready."

If a vendor is not yet HIPAA-compliant and does not have a set timetable for complying with the law, physicians should seek out another company to handle their billing, experts suggested.

However, some physicians may not relish that option because of the considerable cost, not only in terms of capital investment, but in the time and expense of retraining staff. And as Tenant points out, how do doctors know which is a better vendor?

Physicians may face another hurdle -- knowing when they have achieved compliance.

CMS has not provided physicians with much feedback on the electronic claims they do submit. Since physicians are still getting paid for legacy claims, it may not be clear whether the agency deemed their attempts HIPAA-compliant or simply acceptable under the current contingency plan.

And for those physicians who send their claims through a clearinghouse, multiple layers of intermediaries may make it hard to determine where a missing claim has been held up, experts said.

It could mean that the doctor did not include enough information, or it could mean the clearinghouse is having trouble with compliance, or it could just mean the claim got lost.

Experts also warn that this is just the beginning.

The industry has been so focused on claims that other electronic transactions, such as premium payments, eligibility status and referrals, have fallen by the wayside.

Problems are sure to pop up as physicians and others begin trying to carry out these functions in a HIPAA-compliant manner, the experts said.

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