D. Specific Impact of the National Provider Identifier
In the May 7, 1998, proposed rule (at 63 FR 25349), we included a section that related to the specific impact of the health care provider identifier. That section of the proposed rule also indicated the Federal, State, and private costs associated with the enumeration options set out in the proposed rule.
Proposed Provisions
The May 7, 1998, proposed rule for the National Provider Identifier (NPI) contained a cost-benefit analysis based on the aggregate impact of all the HIPAA administrative simplification standards for electronic data interchange (EDI). The response to comments on the proposed aggregate analysis is contained in the Transactions Rule (at 65 FR 50345). The Transactions Rule also includes an updated impact analysis (at 65 FR 50350).
One section of the impact analysis that was published in the May 7, 1998, proposed rule for the NPI (at 63 FR 25351) contained a discussion of the costs of enumerating health care providers under each of the two enumeration options that were described in the proposed rule. Table 5, entitled "Enumeration Costs: Federal, State, and Private," was included in this part of the impact analysis in the proposed rule. This table compared the costs for each of the two proposed enumeration options. Below we respond to the comments received about that part of the impact analysis.
Comments and Responses on the Specific Impact of the National Provider Identifier
Comment: One commenter stated that the pharmacy industry will not see huge gains in the standardization of the NPI for prescriber and pharmacy because de facto standard identifiers exist for these two provider types.
Response: We agree that the pharmacy industry may not realize the benefits from standardization of health care provider numbers as quickly as other segments of the health care industry because the pharmacy industry already uses numbers to identify health care providers and pharmacies. However, once NPIs are assigned to health care providers and once the entire health care industry begins to use the NPI, we believe the pharmacy industry will see the benefits of replacing its de facto standards with the national standard.
The Drug Enforcement Administration (DEA) number was established by the DEA to identify those who prescribe or store controlled substances. It is the pharmacy industry's de facto identifier for prescribers. In developing the NPI, we considered several existing identifiers as candidates for the national health care provider identifier. One of those considered was the DEA number. However, the use of the DEA number as a national health care provider identifier does not fit the scope for which the DEA number was established. In addition, the DEA number is not available to all health care providers and, as a result, would not be appropriate as the national health care provider identifier. The National Council for Prescription Drug Programs (NCPDP) provider number, formerly called the National Association of Boards of Pharmacy (NABP) number, is the pharmacy industry's de facto identifier for pharmacies. This number was also considered a candidate for the national health care provider identifier, but did not meet two of the criteria deemed necessary for a standard identifier: it would not yield a sufficient number of identifiers and it contained intelligence.
Comment: Several commenters suggested revisions to our definitions of "HIPAA-transaction health care provider" and "non-HIPAA-transaction health care provider." They found the terms confusing.
Response: We agree and do not use those terms in this final rule.
Comment: One commenter asked that we insert the word "costs" after "start-up" and "outyear" in Table 5 headings and definitions.
Response: This comment is not applicable, as we do not include Table 5 in this final rule. We refer the reader to the discussion under "Final Provisions" in this section.
Comment: One commenter stated that we did not factor in atypical service providers that are exclusive to the Medicaid program.
Response: The Medicaid program's atypical and nontraditional service providers were included in Table 5 in the May 7, 1998, proposed rule. However, as explained in section II. A. 2, "Definition of Health Care Provider" in this preamble, most of them do not meet our definition of health care provider. Therefore, they are not included in our analyses in this final rule.
Comment: Several commenters stated the estimate that 5 percent of health care providers participating in Federal health plans and Medicaid would have updates each year is conservative and that the number is more like 12 to 15 percent. Another commenter believes it to be even higher.
Response: We have not seen documentation that would convince us our estimate was incorrect at the time the May 7, 1998, proposed rule was published. In the proposed rule, we estimated that 5 percent of the health care providers who are covered entities that conduct business with Federal health plans or Medicaid would require updates each year, and that 15 percent of the remaining health care providers that are covered entities (those that do business only with private insurers) would require updates each year. In general, health plans (including Federal health plans and Medicaid) collect more information from their enrolled health care providers than the NPS will collect when a health care provider applies for an NPI. Thus, there is more information subject to change for health care providers that are enrolled in a health plan. This fact could explain why health plans sometimes have a greater percentage of updates than what we estimated for NPI purposes in the proposed rule, and could have been the basis on which the comment was made.
The proposed rule did not include calculations for updates for health care providers who are not covered entities; we would expect that percentage would not exceed 15 percent. We computed the weighted average of the percentages of health care providers that would require updates that were used in the proposed rule (using 15 percent for these health care providers). We have concluded that approximately 12.6 percent of all existing health care providers will have updates each year.
Comment: Several commenters said that erroneous assumptions were used in stating that the costs to Federal health plans (including Medicare) and Medicaid would be zero for enumerating their own health care providers. The costs would be substantial.
Response: We acknowledge that there would have been costs to Medicaid State agencies and to Federal health plans in manipulating and reformatting their health care provider files and transferring them to CMS for loading into the NPS. There would also have been ongoing costs to Medicaid State agencies and other Federal health plans to obtain NPIs for their health care providers under option 2. In manipulating and reformatting the files, problems could be discovered in some of the health care provider records that would require investigation and resolution. The costs of investigating and resolving these problems were not recognized earlier and, therefore, were not considered in the May 7, 1998, proposed rule.
Comment: One commenter stated that the costs for option 1 as shown in Table 5 did not reflect the savings that would have accrued by preloading Medicare provider files into the NPS.
Response: While the narrative portion of the impact analysis did mention that Medicare provider files would be preloaded into the NPS under both options 1 and 2, the commenter is correct in that this was not reflected in Table 5 for option 1. However, as stated earlier in this preamble, Medicare provider files will be loaded into the NPS only if it is feasible to do so.
Final Provisions
We stated in the May 7, 1998, proposed rule that we cannot determine the specific economic impact of the NPI (and individually, each HIPAA administrative simplification standard may not have a significant impact). The overall impact analysis (65 FR 50355) made it clear that, collectively, all the standards will have a significant impact of over $100 million on the economy.
The implementation costs and benefits of the NPI were factored into that overall impact analysis. However, that impact analysis used certain assumptions that have not been realized. For example, it was assumed that all of the HIPAA standards would be issued and effective at about the same time, so that covered entities would be making their system changes at one time. For various reasons, standards have been issued and effective over a much longer period of time than expected. For example, the transaction and code set standards were published in 2000 and must be implemented by October 2003. Security standards are to be implemented by April 2005, and the NPI must be used by 2007.
Because the compliance dates cover such an extended period of time, we will estimate part of the overall cost and savings for health plans and health care providers that can be attributed to the NPI. We continue to use the impact analysis previously referenced as the set of total costs and savings.
Because the standards for transactions and codes sets, the employer identifier, and security have already been published, we assume that covered entities have already made significant system investments. Because they were aware that the NPI was an upcoming standard, they may have also made some accommodations in their systems to be able to use the NPI when it is assigned. The NPI has already been identified as a future identifier in the implementation specifications for the transaction standards.
There will still be costs and savings related to the implementation of the NPI by health plans and health care providers. These will, however, be small in comparison to those for transaction standards and security. The NPI affects only a small part of the system and business processes for any covered entity.
We estimate that the NPI would entail 10 percent of the costs and 5 percent of the savings for health plans. Health plans would need to make some system changes from their current identifiers to the NPI. They would save in not having to maintain a system of identifiers that exist today. We would estimate that for health care providers, the NPI would represent 5 percent of the costs and 10 percent of the savings. Health care providers need only to substitute the NPI for their current identifier(s). They reap greater savings by not having to keep track of separate identifiers for each health plan and possibly for each location, address, or contractual arrangement. (However, as noted earlier in this preamble, health plans may require health care providers to use identifiers other than the NPI for uses other than standard transactions.)
Looking at the overall impact analysis, while 2007 is the initial year for using the NPI, it would be the analogous to the first year of the overall impact analysis, in which most of the costs are incurred. Using the figures from above, we make the following estimates for 2007:
TABLE 2.-COSTS OF IMPLEMENTING
THE NPI IN 2007
[In millions of dollars, rounded to the nearest million]
Health Plans:
2002 Cost from Impact Analysis ... ¥146
2002 Savings ................................ 24
2007 Net for NPI for Health Plans ¥122
Health Care Providers:
2002 Cost from Impact Analysis ... ¥79
2002 Savings ................................ 61
2007 Net for NPI for Health Care Providers ................................... ¥18
Note: The figures in Table 2 have been adjusted to reflect dollars expressed for 2007. We perform the same calculations for the next 4 years. This yields the following results:
TABLE 3.-COSTS OF IMPLEMENTING THE NPI, 2007-2011
[In millions of dollars, rounded to the nearest million]
Year 2007 2008 2009 2010 2011 Total
Health Plan Costs ............................................................ 146 146 134 0 0 426
Health Plan Savings ........................................................ 24 49 73 91 103 341
Provider Costs ................................................................. 73 73 67 0 0 213
NPI Application and Update Costs .................................. 6 6 1 1 1 15
Provider Savings .............................................................. 61 122 183 219 256 840
Net Savings ...................................................................... ¥140 ¥55 54 309 358 526
NPS Costs ....................................................................... 91 9 9 9 9 128
Note: The figures in Table 3 have been adjusted to reflect dollars expressed for each year.
All costs of NPS development and operation (which include the costs of enumerating health care providers and maintaining their information in the NPS, and the costs of disseminating NPS data to the health care industry and others, as appropriate) are Federal costs.
As mentioned earlier in this preamble, HHS will contract for system development and for the enumeration, update, and data dissemination activities. We estimate the following costs for operations of the National Provider System (NPS), keeping in mind that the NPS will enumerate both covered and noncovered health care providers, and that health care providers are not being charged for obtaining NPIs.
E. Affected Entities
Health Care Providers
Health care providers and subparts, as appropriate, will apply for NPIs. Health care providers that are covered entities must begin to use NPIs in standard transactions no later than 24 months after the effective date of this regulation; and they must ensure that their subparts, if assigned NPIs, do the same. Covered health care providers that need to be identified on standard transactions must disclose their NPIs, upon request, to entities that are required to use those health care providers' NPIs on standard transactions. Covered health care providers must ensure that their subparts, if assigned NPIs, do the same.
Any negative impact on health care providers generally would be related to the initial implementation period. They would incur implementation costs for converting systems, especially those that generate electronic claims, from current health care provider identifiers to the NPI. Some health care providers would incur those costs directly and others would incur them in the form of fee increases from billing associates and health care clearinghouses.
Covered health care providers will have to use their NPIs on standard claims transactions and any other standard transactions that they conduct; they will have to ensure that their subparts, if assigned NPIs, do the same. They will also have to obtain and use the NPIs of other health care providers if those NPIs are needed on those transactions. If covered health care providers' subparts are assigned NPIs, the covered health care providers must ensure that their subparts do the same. This will be a more significant implementation workload for larger organization health care providers, such as hospitals, that will have to capture the NPIs for each health care provider practicing in the hospital if those health care providers need to be identified on hospital claims. However, these health care providers are accustomed to maintaining these types of data. Some health care providers will need access to the NPIs of other health care providers in order to identify those health care providers on standard transactions. In this regard, we encourage all health care providers to obtain NPIs and, when requested, to disclose their NPIs to covered entities that need them for inclusion on health care transactions. Some health care providers, particularly ones that do not do business with large health plans, may be resistant to obtaining NPIs and providing data about themselves to a national database. Claims processing and timely payments to health care providers could possibly be affected as health plans transition to the NPI. We encourage health plans to conduct outreach efforts in order to minimize disruptions in claims processing and timely payment. Covered health care providers are required to also furnish updates to their required NPS data within 30 days of the changes. Covered health care providers must ensure that their subparts, if assigned NPIs, do the same. (We encourage other health care providers to do the same.) The vast majority of health plans issue identifiers to the health care providers with which they conduct business in order to facilitate the electronic processing of claims and other transactions. The information that health care providers must supply in order to receive an NPI is significantly less than the information most health plans require from a health care provider in order to enroll in a health plan. We will attempt to make the processes of obtaining NPIs and updating NPS data as easy as possible for health care providers, reducing duplication of effort wherever possible and making the processes as automated as possible. Neither the statute nor this final rule requires charging health care providers (or their subparts) to receive NPIs.
After the compliance date, health care providers will no longer have to keep track of and use different identifiers with different health plans when conducting standard transactions. This should simplify health care provider billing systems and processes and reduce administrative expenses. A standard identifier should facilitate and simplify coordination of benefits, resulting in faster, more accurate payments.
Health Plans
HIPAA does not prohibit health plans from requiring their enrolled health care providers to obtain NPIs.
Health plans will have to modify their systems to use the NPI. This conversion will have a one-time cost impact on Federal, State, and private health plans and is likely to be more costly for health plans with complex systems that rely on intelligent provider numbers. Disruption of claims processing and payment delays could result. However, health plans will be able to schedule their implementation of the NPI and other standards in a manner that best fits their needs, as long as they meet the deadlines specified in this and the other final rules that implement the administrative simplification provisions. Upon the NPI compliance dates, health plans' coordination of benefits activities should be greatly simplified because all health plans will use a unique standard health care provider identifier for each health care provider. In addition, utilization review and other payment safeguard activities will be facilitated, since health care providers would use only one identifier and could be easily tracked over time and across geographic areas. Health plans currently assign their own identification numbers to health care providers as part of their enrollment procedures, and this practice would no longer be necessary. Existing enumeration systems maintained by Federal health programs could be phased out, and savings would result. Health care clearinghouses will face impacts (both positive and negative) similar to those experienced by health plans. However, implementation will likely be more complex, because health care clearinghouses deal with many health care providers and health plans. Health care providers that are not covered entities that do not wish to apply for NPIs will necessitate the need for health care clearinghouses to accommodate health care provider identifiers in addition to the NPI. In accordance with the provisions of Executive Order 12866, this regulation was reviewed by the Office of Management and Budget.