HIPAA scramble may delay Medicaid pay

Some states still trying to respond to the regulation are eyeing reserve funds, planning to accept noncompliant claims or turning to clearinghouses to make sure physicians get paid.

By Joel B. Finkelstein, amednews staff. Aug. 25, 2003.

Washington -- Many state Medicaid programs are struggling with implementing new federal electronic transaction standards, and that could mean delayed physician reimbursement come the Oct. 16 compliance deadline. But states are trying to plan ahead to ensure payments continue to flow.

New Mexico is one example. The state's Human Services Dept., which runs the Medicaid program, has spent more than $7 million, just since June, trying to prepare for implementation of the Health Insurance Portability and Accountability Act's electronic transaction rule.

HIPAA holdups
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Topic: HIPAA
Region: States

That's after spending $14 million the past couple of years updating its Medicaid claims processing system, only to find out that it would not be HIPAA compliant.

As questions are being raised about accounting tactics that allowed the state to sign a contract with the system vendor without competitive bidding, New Mexico officials are starting to point fingers, and the state is expected to miss the compliance deadline.

"If that is the case, I am concerned about delays in payment," said James Spence, MD, president of the New Mexico Medical Society.

The society doesn't really care about who is to blame for missing the deadline, it just wants to make sure physicians will still get paid for providing services.

Delaware is the first state to be certified by CMS as HIPAA compliant.

Dr. Spence said the group is working with the state to set up a reserve fund, "something to tide us over until the state is HIPAA compliant."

The cash reserve would allow the state to pay physicians and others based on historical reimbursement levels. Once the Medicaid program worked out its compliance problem, it could go back and process the claims that had been filed in the interim.

On the flip side, Delaware was recently certified by the Centers for Medicare & Medicaid Services as fully compliant, making it the first state to the finish line.

However, experts expect that success story to be one of the few. Officials in many states expect to be working on compliance well past the October deadline.

Like New Mexico, other states' health services agencies are having problems implementing the new electronic standards. Many are working on their claims-processing systems, while simultaneously developing contingency plans. Most want to ensure that the physicians and medical centers that have large numbers of Medicaid patients still have cash flow after the deadline.

Some are turning to clearinghouses that allow practices to file claims through online data input. States are relying on these companies to deal with compliance. However, because physician practices have to transfer data from their records to the online form, it can be time-consuming. The services also commonly charge per claim, making it expensive for larger offices.

80% of Medicaid agencies expect to be HIPAA compliant by Oct. 16.

Other state agencies likely will continue to accept noncompliant electronic claims, at least for awhile.

The U.S. Dept. of Health and Human Services has said that, according to its interpretation of the law, it is illegal for any payer to reimburse a physician based on claims that do not comply with the HIPAA standard.

Still, that may be the contingency plan for some states, which see no alternative. They are taking to heart CMS guidance, which says enforcement will be complaint-driven and designed to help entities that are subject to the rules come into compliance. These programs are banking on physicians not complaining about getting paid.

Unique implementation problems

According to a March report from the HHS Office of Inspector General, 80% of Medicaid agencies expect to be fully compliant by Oct. 16. Another report suggested one of five U.S. territories will be ready.

Some experts question that assessment because state officials have been hesitant to openly admit they are behind on implementation schedules.

The statistic may also be misleading because updating claims-processing systems is only part of achieving compliance. The other part is testing with physicians' offices, and no one is sure how long that will take.

CMS officials expect it to be an ongoing, evolving process, possibly over the next couple of years.

In the meantime, the agency told states that they can continue to use local codes particular to Medicaid beyond the deadline.

Local codes allow Medicaid physicians to bill the program for services that no other health plan pays for, such as transportation or eyeglass repair. Some states have as few as 75 of these codes, while others have local codes numbering well into the thousands.

Even with the respite, states expect conversion of local codes to the new standard to be a major hurdle.

In addition, Medicaid has to deal with crossover claims for patients who are also on Medicare. This adds another layer of complexity to using a standard form and code set.

Other hindrances to states trying to get programs into compliance include budget deficits, outdated computer systems, changing implementation goals, difficult outreach to rural practices and a potential flood of paper claims.

ADDITIONAL INFORMATION:

HIPAA holdups

24 states said conversion of Medicaid local codes will be a big problem. Some states have as many as 10,000 codes unique to Medicaid.

21 states said they face potential budget cuts and deficits that would interfere with implementation of the standards.

21 states complained about the regulatory environment, including delays in the issuance of regulations and guidance, last-minute changes to the standards and inconsistent interpretations by the Centers for Medicare & Medicaid Services.

18 states reported having difficulty reaching rural practitioners and are concerned that a significant number of small practices could revert to paper claims.

Source: Dept. of Health and Human Services, Office of the Inspector General