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Back To Vidyya Final Standards For Electronic Health Care Transactions Published

Health Plans, Health Care Clearinghouses And Health Care Providers Who Make Electronic Transactions Will Be Required To Use These Standards Beginning October 2002

The U.S. Health Care Financing Administration (HCFA) made public last week the final standards for electronic health care transactions, and for code sets to be used in standard transactions. Health plans, health care clearinghouses and health care providers who make electronic transactions will be required to use these standards beginning October 2002. The final rules are available at index.htm and in this Vidyya. They should appear in the Federal Register next week.

The final rules are at the heart of the administrative simplification provisions of the Health Insurance Portability and Accountability Act of 1996, or HIPAA. These provisions are intended to create a standard format for electronic data interchange among providers and payers and their intermediaries. HCFA estimates that there are about 400 proprietary formats in use for electronic health care data exchanges in the US. The goal of national standards is to save costs by simplifying the administration of electronic health care transactions.

The transaction standards have been among the least controversial of HIPAA’s proposed regulations, and they are the first to be finalized. They start the clock running on HIPAA compliance—by October 2002 health plans, providers and health care clearinghouses will have to use prescribed standards and code sets in electronic transactions, including purely internal transactions. However, covered entities will be permitted to use health care clearinghouses or other intermediaries to conduct transactions, and clearinghouses will be permitted to receive and transmit nonstandard transactions when acting on behalf of other covered entities. Private arrangements among covered entities that would have the effect of changing or supplementing the standards will be prohibited.

Health plans are subject to additional standards. They will be required to conduct electronic claims transactions in standard format with any person wishing to do so. This entails an obligation both to accept standard transactions, and to process them promptly. Health plans may not offer providers incentives to use direct data entry. Small health plans—those with less than $5 million in annual receipts—will have an additional year to come into compliance.

Other standards have been proposed to protect the privacy and security of electronic data, and to establish national identifiers, but they are still under review. The proposed privacy regulations, in particular, have prompted a record number of public comments.
(Standards for Privacy of Individually Identifiable Health Information; Proposed Rule, 64 Fed. Reg. 59918 (Nov. 3, 1999); corrections to the Proposed Rule were published in 65 Fed. Reg. 427 (Jan. 5, 2000).

Standard Transactions. The regulations establish standards for the following transactions:

  • Health claims or equivalent encounter information

  • Eligibility for a health plan

  • Referral certification and authorization

  • Health care claim status

  • Enrollment and disenrollment in a health plan

  • Health care payment and remittance advice

  • Health plan premium payments

  • Coordination of benefits.

Health plans and clearinghouses will have to comply with all of these standards; health care providers are affected by the first four only. HCFA plans to publish a separate rule setting standards for first report of injury.

The transaction standards for pharmacy are the National Council for Prescription Drug Programs’ Telecommunications Standard and Batch Transaction Standard. For other transactions, the standards are the ASC X12N standards published by the Washington Publishing Company. Implementation guidelines for the pharmacy standards are available at and for the dental, professional and institutional standards at

Code sets. The final rules require health plans, health care clearinghouses and providers to use prescribed diagnostic and procedure codes on electronic transactions. The principal code sets are—

  • ICD-9-CM: International Classification of Diseases, Ninth Revision, Clinical Modification, which classifies both diagnoses (Volumes 1 & 2) and procedures (Volume 3). It is used by hospitals and ambulatory care providers.

  • CPT-4: Physician Current Procedural Terminology, which is used by physicians.

  • HCPCS: The Health Care Financing Administration’s Procedure Coding System, which contains codes for medical supplies and equipment, injectable drugs, transportation services, and other services not found in CPT-4.

  • The Code on Dental Procedures and Nomenclature, maintained by the American Dental Association, which is used for reporting dental services.

  • NDC: National Drug Codes, which are used for reporting prescription drugs in pharmacy transactions and some claims by health claim professionals.

Organizations that are covered by HIPAA would be wise not to wait until the eleventh hour to begin addressing the regulations. There is much to do in relatively little time. DHHS intends to finalize the privacy and security regulations this year—a schedule that would require full-scale HIPAA compliance around the end of 2002. The direction of the regulations is clear enough to permit covered entities to begin now assessing their health data technology, and identifying potential compliance gaps. Many are already doing this.

A common first step is to form a multi-disciplinary HIPAA team to plan the assessment and compliance project. The proposed mandate to protect health data in every aspect of operations, as well as in dealings with business partners, suggests that the HIPAA team should be broadly based, and sponsored at the highest levels of the organization. Outside assistance should be brought in as appropriate, and technology and other vendors should be involved.

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Editor: Susan K. Boyer, RN
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