I. Background
A. Electronic Data Interchange
Electronic data interchange (EDI) refers to the electronic transfer of information in a standard format between trading partners. When compared with paper submissions, EDI can substantially lessen the time and costs associated with receiving, processing, and storing documents. The use of EDI can also eliminate inefficiencies and streamline processing tasks, which can in turn result in less administrative burden, lower operating costs, and improved overall data quality.
The health care industry recognizes the benefits of EDI, and many entities in the industry have developed proprietary EDI formats. However, with the increasing use of health care EDI standards, the lack of common, industry-wide standards has emerged as a major obstacle to realizing potential efficiency and savings.
B. Statutory and Regulatory Background
1. Statutory Background
The Congress included provisions to address the need for developing a consistent framework for electronic transactions and other administrative simplification issues in the Health Insurance Portability and Accountability Act of 1996 (HIPAA), Pub. L. 104-191, which became law on August 21, 1996. Through subtitle F of title II of that statute, the Congress added to title XI of the Social Security Act (the Act) a new Part C, titled "Administrative Simplification." The purpose of this part is to improve the Medicare and Medicaid programs in particular and the efficiency and effectiveness of the health care system in general, by encouraging the development of standards and requirements to enable the electronic exchange of certain health information.
Part C of title XI consists of sections 1171 through 1179 of the Act. Section 1172 of the Act and the implementing regulations make any standard adopted under part C applicable to: (1) health plans; (2) health care clearinghouses; and (3) health care providers who transmit any health information in electronic form in connection with a transaction covered by 45 CFR part 162.
In general, section 1172 of the Act requires any standard adopted by the Secretary of Health and Human Services (the Secretary) under this part to be a standard that has been developed, adopted, or modified by a standard setting organization (SSO). The Secretary may adopt a different standard if the standard will substantially reduce administrative costs to providers and health plans compared to the alternatives, and the standard is promulgated in accordance with the rulemaking procedures of subchapter III of chapter 5 of Title 5, U.S.C.
Section 1172 of the Act also sets forth consultation requirements that must be met before the Secretary may adopt standards. In the case of a standard that is developed, adopted, or modified by an SSO, the SSO must consult with the following Data Content Committees (DCCs) in the course of the development, adoption, or modification of the standard: the National Uniform Billing Committee (NUBC), the National Uniform Claim Committee (NUCC), the Workgroup for Electronic Data Interchange (WEDI), and the American Dental Association (ADA). In the case of any other standard, the Secretary is required to consult with each of the above-named groups before adopting the standard and must also comply with the provisions of section 1172(f) of the Act regarding consultation with the National Committee on Vital and Health Statistics (NCVHS).
Section 1173 of the Act requires the Secretary to adopt standards for transactions, and data elements for such transactions, to enable the electronic exchange of health information. Section 1173 lists the transactions and sets out requirements for the specific standards the Secretary is to adopt: unique health identifiers, code sets, security standards, electronic signatures, and transfer of information among health plans.
Section 1174 of the Act permits the Secretary to make modifications to any established standard after the first year, but not more frequently than once every 12 months. It permits the Secretary to modify an initial standard at any time during the first year of adoption, if he determines that the modification is necessary to permit compliance with the standard.
Section 1175 of the Act requires that covered entities comply with modifications to standards or implementation specifications made after initial adoption by stating that the Secretary will designate a compliance date that may not be earlier than 180 days after the modification is adopted.
We discussed HIPAA-specific legislation in greater detail in the Transactions Rule (65 FR 50312) and the December 28, 2000 final rule, "Standards for Privacy of Individually Identifiable Health Information" (65 FR 82462) (the Privacy Rule). Rather than repeating the discussion in its entirety here, we refer the reader to those documents for further information about EDI and the statutory background.
2. Regulatory Background
On May 7, 1998 (63 FR 25272) the Secretary proposed Standards for Electronic Transactions and Code Sets. On August 17, 2000 the final rule on Standards for Electronic Transactions and Code Sets was published in the Federal Register (65 FR 50312). In the August 17, 2000 final rule, (the Transactions Rule), the Secretary adopted standards for eight electronic transactions and six code sets. The transactions are:
- Health Care Claims or Equivalent Encounter Information;
- Eligibility for a Health Plan;
- Referral Certification and Authorization;
- Health Care Claim Status;
- Enrollment and Disenrollment in a Health Plan;
- Health Care Payment and Remittance Advice;
- Health Plan Premium Payments; and
- Coordination of Benefits.
The code sets are:
- International Classification of Diseases, 9th Edition, Clinical Modification, Volumes 1 and 2;
- International Classification of Diseases, 9th Edition, Clinical Modification, Volume 3 Procedures;
- National Drug Codes;
- Code on Dental Procedures and Nomenclature;
- Health Care Financing Administration Common Procedure Coding System; and
- Current Procedural Terminology, 4th Edition.
This final rule adopts modifications to the August 17, 2000 transaction and code set standards.
3. Statutory Requirements and Implementation Instructions for EDI Standards
Section 1172(d) of the Act requires the Secretary to establish specifications for implementing each adopted standard. However, because the implementation instructions are voluminous, they were incorporated by reference in the Transactions Rule. This approach, to incorporate by reference, is commonly used by the Federal Register when external organizations are tasked with developing standards that are subsequently adopted as national standards. We are using this approach in this final rule to adopt modifications to the specified standards that were proposed in the May 31, 2002 proposed rules, CMS-0003-P (67 FR 38044) and CMS-0005-P (67 FR 38050).
C. Designated Standard Maintenance Organization (DSMO) Process
In our May 31, 2002 proposed rule, CMS-0005-P (67 FR 38050), we described in detail the process used by the Designated Standard Maintenance Organization (DSMO) Memorandum of Understanding (MOU) for receiving, managing and processing requested changes to the adopted standards. CMS-0005-P identified the six DSMOs and explained that we had used the process specified in the MOU to develop the proposed modifications to standards adopted in regulations. For ease of reference, we have included the DSMO names and respective websites below. Both of the SSOs (Accredited Standards Committee ASC X12N and the National Council for Prescription Drug Programs (NCPDP)) that develop standards adopted by the Secretary are DSMOs.
DSMO Names and Website Addresses
- Accredited Standards Committee X12N (ASC X12N) (http://www.x12.org).
- Health Level Seven, Inc. (HL 7) (http://www.hl7.org).
- National Council for Prescription Drug Programs (NCPDP) (http://www.ncpdp.org).
- National Uniform Billing Committee (NUBC) (http://www.nubc.org).
- National Uniform Claim Committee (NUCC) (http://www.nucc.org).
- Dental Content Committee of the American Dental Association (http://www.ada.org).
For additional information regarding the DSMO change request process, see the MOU document, which is available at: www.hipaa-dsmo.org/mou.pdf.
As we stated in CMS-0005-P (67 FR 38050), a significant number of change requests were submitted through the DSMO process after the initial EDI transaction standards were adopted in the regulations. Many of those change requests were for changes that were considered by the submitters to be essential to permit initial implementation of the standards throughout the entire healthcare industry. Those change requests addressed specific details or elements within the implementation specifications.
Changes considered essential for implementation of the adopted standards were reviewed by the DSMOs and assigned "fast track" status for development within the authority of the DSMO process. (Other changes that were not considered essential are going through the general change request management process set forth in the MOU.) As specified in the MOU, the DSMOs then presented those changes deemed essential for initial implementation to the NCVHS. The NCVHS held public hearings on those proposed changes (transcripts of those hearings are available at http://www.ncvhs.hhs.gov). The NCVHS recommended that the Secretary adopt all of the changes proposed by the DSMOs as modifications to the national standards. Those changes are reflected in the modifications to standards that are adopted by this final rule.