Industry Behavior Needs to Change in Standardizing HIPAA Transactions

Stanley NachimsonCompliance – Not Just a Legal Term, It Actually Makes Good Business Sense

By Stanley Nachimson, Nachimson Advisors

I have always considered myself a very close follower of the rules – whether I agree with them or not, I tend to stick very closely to them.  And when I was at CMS working on the HIPAA regulations and implementation, I was a bit of a “strict constructionist”.    The transaction standards were set (mostly by outside organizations like X12), they were adopted thru regulation, and the industry was supposed to comply with the standards by a set date.  Why?  Well, first it was the law, but secondly it made a lot of sense for all health plans, providers, and clearinghouses to be using the same electronic standards to exchange data.  The formats and data were known, software could be easily developed, and the exchange would happen easily.  Lower costs, better information, etc., etc.  It seemed like a win-win for everyone.

But a funny thing happened on the way to achieving the goals of the standardization.  Somehow, many entities decided that they didn’t have to comply exactly.  That they could come “close” to complying, or they could say they complied but really didn’t, or that it was too much trouble to comply.  The requirement that health plans support every one of the mandated HIPAA transactions was ignored in a relatively large number of cases.  Health plans neglected to set up the transactions for eligibility or claims status or remittance advices, vendors did not build the capabilities into their software, and providers did not know, did not care, or even were afraid to demand that health plans support the standards.  And health plans did not “force” providers to send standard transactions, they tended to let deviations through “as long as it did not impact the business flow”.

Now, we can say that the industry is still operating “OK”, and that transactions are flowing, and providers are generally getting paid.  While that may be true, the fact is that we are not operating as well as we should, and that some providers are not getting the full benefits of using electronic transactions.  That means that we are not operating at a high efficiency level, and we are taking money that could be spent on patient care and wasting it on phone calls, faxes, mistakes, etc.  We’ve seen the studies on waste in the system, we’ve seen the cost-benefit of automation, but we don’t seem to feel this applies to us in health care.   Yet strangely, we are one of the very few industries that have federal laws requiring standardization of electronic transactions.  And the original law (HIPAA of 1996) was even re-iterated and expanded in the Patient Protection and Affordable Care Act of 2009.

Now, how do we change industry behavior?  There are some sticks and carrots; Medicare requires most providers to submit electronic claims and pays them quicker than paper claims, for example.  But the real money and time savers – eligibility and claim status transactions – seem to be ignored.

From a provider perspective, they are being disadvantaged and seem to be submissive about it.   I would implore providers and there representatives to step forward and begin using the CMS enforcement process to send in complaints about plans and vendors who do not fully support the standards.  There are even processes to that anonymously, but there are also regulations in place to protect complainants against reprisals.

We all deserve a fully functioning administrative system which saves time and money, improves the business process, and allows for success instead of frustration.  Let’s work towards that.

Stanley Nachimson is principal of Nachimson Advisors, a health IT consulting firm dedicated to finding innovative uses for health information technology and encouraging its adoption.  He focuses on assisting health care providers, vendors, and plans with their ICD-10 and other regulatory implementations, and is the director of the NCHICA-WEDI Timeline Initiative.  He serves on the Board of Advisors for QualEDIx Corporation, an innovative health care IT testing company and is the author of the authoritative paper on the cost of ICD-10 for physician practices. He also co-chairs the HIMSS ICD-10 Task Force and the WEDI ICD-10 Testing Workgroup. He served for over 30 years in the US Department of Health and Human Services in a variety of statistical, management, and health technology positions.  His last ten years prior to his 2007 retirement were spent in developing HIPAA policy, regulations, and implementation planning and monitoring, beginning CMS’s work on Personal Health Records, and serving as the CMS liaison with several industry organizations, including WEDI and HITSP. Contact him at