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Last-second strategies for the HIPAA transactions rule

With the Oct. 16 deadline looming, you need to make sure your cash flow is protected if claims are rejected

From the September ACP Observer, copyright 2003 by the American College of Physicians.

By Carl Cunningham

On Oct. 16, all the claims you send electronically to health plans and payers must meet the new transactions and codes sets standards that are part of the Health Insurance Portability and Accountability Act (HIPAA). In addition, most practices will have to submit all Medicare claims electronically.

While we've known this day was coming for three years (the deadline was even postponed for a year), it appears that few people in health care are ready. Among the least prepared are physician practices, which stand to suffer the most if claims payment is disrupted.

To help minimize HIPAA's fallout on medical practices, ACP has taken a leadership role with 15 other medical specialty associations. This coalition has been lobbying Congress, the Centers for Medicare and Medicaid Services (CMS) and health plans to find ways to head off or at least alleviate potential problems.

The reality, however, is that the Oct. 16 deadline is almost here. Here are some immediate actions you need to take to get ready for HIPAA, as well as contingency plans to help your practice maintain its cash flow until your office is HIPAA-compliant.

Getting started

If you haven't done anything to prepare your practice for the HIPAA transactions rule, the bad news is that you probably are going to miss the deadline. There is still time to get started, however, so you can make your claims HIPAA-compliant as soon as possible.

Here's a short list of some of the most critical things you should do before Oct. 16:

  • Upgrade your practice management software to make it HIPAA-ready. If you haven't already done so, contact your software vendor immediately. While upgrading your software alone will not make your claims HIPAA-compliant, it is the first essential step in that direction.

    (You can check the HIPAA status of vendors online. All information is self-reported.)

  • Request testing dates from vendors, clearinghouses and payers. You probably can't complete this three-to-six-month testing process before the Oct. 16 deadline, but the sooner you start, the less time you will have to wait after the deadline before becoming compliant.

  • Complain to the CMS. If any of your payers or clearinghouses aren't ready to test, file a complaint with the CMS HIPAA hotline. The CMS has said it will talk to trading partners who are not ready to conduct end-to-end tests between practices and payers, particularly if they are Medicare intermediaries. (The agency can't do much to pressure payers to take action, however, until the Oct. 16 deadline.)

Preparing for the worst

If your practice doesn't meet that deadline, what's going to happen? Part of the problem is that no one knows for sure.

This summer, the CMS released new guidelines to address health plans worried that the HIPAA transactions regulations would force them to reject all noncompliant claims after Oct. 16. The government's message was ambiguous at best.

CMS officials said that they would not fine health plans that pay noncompliant claims—as long as those plans are providing sufficient educational outreach to providers. At the same time, the CMS also reminded insurers that paying noncompliant claims is illegal. As a result, no one is sure whether health plans will continue to pay physicians and providers whose electronic claims aren't HIPAA-compliant.

An even bigger question is whether Medicare will pay physician claims that don't meet the HIPAA standards. CMS officials have not been clear on this point, but at press time, they continued to issue instructions indicating that Medicare carriers would not pay noncompliant claims.

Even if you assume the worst-case scenario—that payers including Medicare are going to reject all noncompliant claims—there are steps you can take to help your practice avert a financial crisis.

Start by asking your payers whether they will continue paying noncompliant claims after Oct. 16. If the answer is "no," you might submit paper claims instead—but only if your health plan contracts allow it. (As of Oct. 16, Medicare will accept only electronic claims from practices with more than the equivalent of 10 full-time employees.) Be aware that payments for paper claims will likely be delayed, especially if many physician practices resort to this alternative.

You can also send your electronic claims to a clearinghouse that will at least translate them into a HIPAA-compliant format and send them onto your payers. You'll pay a small fee for each transaction, but that's better than having your claims denied. Your practice will also have to supply many of the new data elements required by the HIPAA transactions rule.

(For more on the new data you'll need to provide in electronic claims, see "HIPAA requires more than a new format for claims" online.

Some experts are predicting a system-wide "train wreck," where desperate practices resort to paper claims and clog payers' claims processing systems. Other experts, however, are more upbeat. They predict that clearinghouses may be able to "clean up" a large percentage of noncompliant electronic claims for processing.

Whichever vision of the future you believe, you need to act now. The CMS has stated very clearly that it will not postpone or delay the Oct. 16 deadline—so sooner or later, your practice must become compliant. The sooner you do so, the fewer payment headaches you are likely to suffer.

Here are other actions you can take to minimize HIPAA-related disruptions to your practice:

  • If your practice won't be ready for the HIPAA deadline, contract with a HIPAA-compliant billing service. If you can't purchase and install replacement software in time—which will be the case for most practices—a billing service may be a good interim alternative. Make sure it is reputable, effective and ready to meet the HIPAA regulations.

  • Find a HIPAA-compliant clearinghouse. Clearinghouses can use older software formats to translate claims into HIPAA compliant formats. Clearinghouses may even be able to help you supply some of the new data that HIPAA rules require in electronic claims.

    If you've installed upgraded HIPAA-ready software but haven't finished or even started testing it yet—a situation many physicians find themselves in—clearinghouses can provide the needed technical bridge between your system and that of your payers.

    But you need to contact clearinghouses now; the closer you get to the deadline, the more they'll be swamped with requests for services. Even if you already use a clearinghouse, consider finding a backup in case yours experiences problems.

  • If your practice is small enough, take advantage of Medicare's small-practice waiver. Practices with less than 10 full-time-equivalent (FTE) employees can continue filing Medicare claims on paper indefinitely. Even if you prefer to file electronically, this waiver could offer a short-term solution while you finish testing your HIPAA claims software with your Medicare intermediary.

    (The proposed interim regulations on this waiver are in the Aug. 15, 2003, Federal Register online.)

  • Order free direct data entry software from your Medicare carrier. You can use this software as a substitute in case electronic claims generated by your own practice management system software get rejected. The downside of using this software is that you'll have to enter data separately into your practice management software.

    Redundant data entry, however, may be a small price to pay to avoid payment disruptions—particularly if Medicare refuses to accept claims submitted through clearinghouses. Because it sometimes takes several weeks for delivery, you should order the software now.

  • Arrange a line of credit to cover practice expenses for 90 days. Because a line of credit costs nothing until you use it, it is a valuable safeguard against a cash flow interruption. You need to make sure your practice can meet payroll and other expenses if health plans reject your noncompliant claims.

  • Find out if your state laws limit HIPAA payment delays. If your state has a prompt payment law, it potentially could limit how long your payments may be delayed under HIPAA. Even if such state laws are preempted by HIPAA, which is probably the case, calling your insurance commissioner may at least pressure your local health plan to consider continuing payments.

  • Consider dropping health plans that won't pay noncompliant electronic claims after Oct. 16. As an out-of-network provider, you can collect up-front payments from patients. You should advise your patients that, depending on their health plan, they may or may not be able to submit paper claims themselves, usually for reduced reimbursement.

    Think of dropping a health plan only after conducting a careful financial analysis and weighing the plan's importance to your practice. Ask yourself the following questions: Is the plan profitable for your practice? How much do you depend on the plan for patients? Could you replace patients who leave because you drop the plan?

    For help in conducting this type of analysis, download the Practice Management Center's Financial Tools guide online.

    And start this analysis now, so you will have it available if you do have to make tough decisions later. Also check the cancellation clause in your provider agreement, which usually requires 30 to 90 days advance notice.

Carl Cunningham is Director of the College's Practice Management Center.

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