Doctors warned about October's HIPAA deadline

Experts say contingency plans are needed so that payment is not severely disrupted by new electronic transaction standards.

By Joel B. Finkelstein, amednews staff. May 19, 2003.

Washington -- Five months may seem far off, but industry watchers are warning doctors that they are running out of time to ensure that Medicare and insurance companies will accept their bills after the Oct. 16 deadline for switching to standardized electronic claims.

The change is required under the Health Insurance Portability and Accountability Act of 1996.

Possible alternatives for stragglers
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"The industry has been so focused on compliance with the privacy rule that transactions have been put on the back burner," said Robert Tenant, government affairs manager for the Medical Group Management Assn.

Another problem has been that physicians are largely reliant on their software vendors to supply them with upgrades before they can even begin testing the new electronic claims procedures. Some national vendors have been slow to develop compliant software in part because the federal government took so long to come out with a final rule, Tenant said.

Experts have been urging doctors to become more proactive in calling and questioning vendors. Practices need to find out if vendors will be ready soon, and if not, physicians need to start shopping for new ones, they advise.

"I have been disappointed to see that physicians have not taken this to heart," said Jeffery Hausfeld, MD, a practicing physician and CEO of HIPAA Innovations in Bethesda, Md., a company that offers HIPAA compliance products.

The HIPAA deadline for electronic transaction standards is Oct. 16.

Physicians have been falling prey to "HIPAA hysteria." They are overwhelmed by what seems like a never-ending task, he said. But working with their software vendors, doctors can be ready in time, Dr. Hausfeld added.

Still, experts worry that many physicians will not start early enough. Tenant recalled the flurry of waiver applications last September when covered entities, including doctors, had only a few weeks left to apply for the one-year postponement of the electronic transaction rules.

He said he expects a similar situation this year but on a much more complex scale, with thousands of practices waiting until the 11th hour to begin testing system compliance. This could potentially overload payers with testing requests.

"It'll be a mad dash," Tenant said.

Mainly out of concern that many practices, particularly small ones, will not be ready in time, proponents of electronic data interchange are urging the Dept. of Health and Human Services to give physicians more time to implement the new electronic format.

In a letter to HHS Secretary Tommy Thompson, the Workgroup for Electronic Data Interchange warned that "a substantial number of covered entities are not sufficiently far along to achieve compliance" with the transaction rule by the deadline.

A paper train wreck

Despite much progress within the industry, contingency plans are needed to avert a train wreck if physicians begin switching back to paper filing or if payers stop reimbursing for claims that are not fully compliant, the workgroup said.

MGMA's Tenant said that even now, insurers are reporting increases in paper filing. If, as expected, the October deadline is met with a deluge of paper claims, payers will be overwhelmed and reimbursement could be slowed to a crawl.

Practices with fewer than 10 full-time employees can use paper claims.

HHS has said physicians should not expect to be reimbursed for Medicare claims that do not comply with the standard electronic format after Oct. 16. This change is required by the Administrative Simplification Compliance Act.

That law requires all but very small practices to switch to electronic Medicare claims.

With a waiver from the department, practices with fewer than 10 full-time employees are allowed to use paper claims, rather than trying to comply with the electronic standards. Other groups also may be able to obtain an exemption; however, HHS has yet to release a rule that would explain who can and how to apply for such a waiver.

Despite this uncertainty, or perhaps because of it, experts fear that many small offices may revert to filing paper claims rather than risk losing income from Medicare, Medicaid and possibly even private health plans.

But "trying to submit paper claims in an industry so heavily weighted in favor of electronic transactions will put physicians at a disadvantage," Dr. Hausfeld said.

Some payers are promising to turn around electronic claims within three days, while paper claims could take much longer.

No word from the government

HHS has yet to respond to the workgroup's letter or other industry concerns. It is in a difficult position, Tenant explained.

The department is understandably wary of announcing that the rule will not be fully enforced because such an action risks running afoul of federal law, or, at the very least, would encourage others to violate the law. On the other hand, if the implementation process fails and significantly interrupts the reimbursement process, the department will be the first to be blamed.

There is reason to hope that HHS will be understanding about the need for an extended transition period, HIPAA experts said.

For one, it is clear that although not every practice applied for last years' deadline extension, HHS has not made any effort to punish or even track down those who should already theoretically be compliant. Second, HHS has had difficulty getting its own system upgraded to begin the testing process, they said.

Finally, many state Medicaid programs are requesting more time and are developing contingency plans because they do not expect to be ready by October.

"They are dealing with mainframes that are 20 years old," Dr. Hausfeld explained.

ADDITIONAL INFORMATION:

Possible alternatives for stragglers

The Workgroup for Electronic Data Interchange estimates that if even 5% of practices are not fully compliant with the electronic transaction rule in October, it could seriously disrupt the health care system. It recommends that the Dept. of Health and Human Services consider a couple of contingency strategies:

Physicians' offices should be allowed to submit claims that are compliant in form, if not substance. Practices won't likely have too hard a time switching to the standardized claims format, but they might have more difficulty adapting to requirements for new data they are not used to collecting.

Physicians who are not ready to submit compliant claims should be allowed to continue submitting, for a limited transitional period, noncompliant transactions. This is considered a preferable alternative to forcing practices to revert to filing paper claims.