CMS to Stop Accepting Claims that Aren't HIPAA Compliant

With compliance now above 99 percent, the Centers for Medicare and Medicaid Services (CMS) on Oct. 1 will stop accepting electronic Medicare claims that do not conform to HIPAA standards for transactions and code sets.

"We are firmly committed to an interoperable electronic healthcare system, and the close-to-100-percent compliance with HIPAA standards for claims shows that the healthcare industry shares this commitment," CMS administrator Mark McClellan said in a written statement.

The move, announced Thursday, means that CMS will end its contingency plan for providers to meet the standards just short of two years past the official HIPAA transaction compliance deadline of Oct. 16, 2003.

As of June, only 0.5 percent of all Medicare fee-for-service providers were sending noncompliant claims, according to CMS. Physician practices were the most up-to-date, with a noncompliance rate of just 0.45 percent, while hospitals were 1.45 percent short of full compliance and clinical laboratories were at 1.72 percent.

CMS says that only about 31 percent of Medicare claims were compliant when the standards took effect in 2003, and that the numbers were lower for commercial payers. As an incentive for providers to meet the HIPAA requirements, CMS currently expedites standard transactions. Those who submit fee-for-service Medicare claims in nonstandard format or on paper must wait two weeks longer for reimbursements.

However, CMS officials say that they have no way of knowing what percentage of transactions comes directly from providers or how many providers still must rely on clearinghouses. Nor do they define compliance.

"What does Medicare mean by compliant?" wonders Tom Gilligan, executive director of the Association for Electronic Health Care Transactions (AFEHCT), a Washington, D.C.-based group of vendors and clearinghouses. "What kinds of edits is Medicare subjecting the claims to?"

At least one major private payer, Humana, has enlisted a vendor and two clearinghouses to work with providers to achieve close to 100 percent compliance according to Humana spokesman Jim Turner.

The Oct. 1 deadline cut-off only affects the X12 837 code set for electronic claims within fee-for-service Medicare, though CMS says that it will end grace periods for other transactions "in the near future." Next on the CMS enforcement agenda is the X12 835 transaction—remittance advice.

The declaration does not apply to Medicare managed care providers or private-sector healthcare billing. CMS said in July 2003 that commercial payers were welcome to institute their own contingency plans as long as covered entities made good-faith efforts to come into compliance, and the agency has not set an end date for that policy.

Likewise, the new policy does not address a controversial provision of the HIPAA transaction regulations that gives individual payers the right to implement unique addenda to the standard code sets.
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