Margret Amatayakul and Michael R. Cohen

Courtesy of HIPAA, virtually every healthcare provider must complete a major systems conversion on or before October 16, 2003.

This prospect is particularly daunting because it involves not just providers, but also every quarter of the U.S. healthcare system. Completing the transition to compliance with the HIPAA transaction standards will require exceptional coordination among all parties.

It's not too early for providers to prepare for a worst-case scenario. A lot could go wrong, and indeed, many are anticipating a "train wreck," in which many provider claims transactions fail to make it through the system.

The impact of problems with 837 claims transactions would be immediate and obvious-delay in submitting or processing claims would lead to a corresponding delay in payment. In a true worst-case scenario, providers could exceed the health plans' time limit for submitting a claim and forfeit payment entirely. Problems with other transactions could cause errors or delays in referrals, inaccurate eligibility data, and erroneous coordination of benefits-all of which will have serious cash-flow implications.

What Could Go Wrong?

The factors that could produce a calamity are many. The greatest risk appears to be due to insufficient transactions testing. This critical step has gotten off to a sluggish start because many covered entities have yet to complete their HIPAA-compatible system upgrade and cannot even begin to test.

Even those covered entities that have upgraded have been slow to initiate testing, choosing instead to rely on their clearinghouses to fill any gaps and reformat transactions as necessary. But just because your clearinghouse has tested its transactions does not guarantee that the clearinghouse will not have problems with sending your transactions through to your payers. And even if you test with your clearinghouse, a problem between the clearinghouse and the third party could sabotage your transactions. For example, in a given locale, a low-volume health plan may not get tested and something as simple as a delimiter might not be correctly applied. Unfortunately, many clearinghouses appear to be unwilling to test end-to-end.

Once started, therefore, testing must be thorough-successful completion of point-to-point testing with just your transactions going to your clearinghouse, or your transactions going to one of many payers is not enough. Without complete "end-to-end" testing, in which a test transaction is followed through every link in the chain of electronic communications, you could overlook problems that could disrupt submission of claims to even your biggest payer, which for many providers is Medicare. For example, you may be the center of excellence in a specialty with an unusual situational data requirement for which the clearinghouse did not test.

CMS has identified a number of potential problems that providers could encounter, including inadequate software, incompatible identifiers, limited transactional capabilities of clearinghouses, and different interpretations of reporting requirements.

Inadequate software. Software glitches could impede your ability to create, transmit, or receive transactions.

Incompatible identifiers. Clear standards for identifiers have not yet been developed because National Health Plan Identifier regulations have not been finalized. As a consequence, some payers could require you to use an identifier that your information system cannot support.

Limited transactional capabilities of clearinghouses. Your clearinghouse could still be unable to produce clean/acceptable claims, even though it is contractually obligated to do so and it has received HIPAA certification from a reputable certification firm.

Different interpretations of reporting requirements. Your claims may have all the data elements necessary for adjudication but still be rejected by a payer's information system because you and the payer have different interpretations about how and/or whether to report a situational element.

A Call for Action

In May, such concerns prompted several organizations to present testimony to the National Committee on Vital and Health Statistics (NCVHS) and write to HHS secretary Tommy Thompson, citing evidence that many providers, payers, and clearinghouses are at serious risk of not being ready for the October 16, 2003, compliance date. These organizations expressed concern that health plan costs of processing paper claims will skyrocket and providers' cash flow will bottom out. Some of these organizations have called for another extension or some form of grace period. Others have urged "commercial reasonableness" in accordance with state insurance laws.

As of early July 2003, the NCVHS, in its advisory role to Secretary Thompson, recommended against an extension. The committee cited unfairness to those who already had taken the deadline seriously and concern that another extension would convey a lack of commitment to the process. The NCVHS, however, did recommend flexibility in the first six months of enforcement. Whatever relief may yet come, the problem will remain-although the size of the "train wreck" might be reduced.

What Should You Do?

The most immediate steps you should take, then, are to push steadily to complete your appropriate upgrades and testing and to develop contingency plans. Your contingency plan should be organizationally specific, taking into account your highest areas of risk.

For example, your plan might include a readiness to revert to paper claims where permitted. This option does have one major limitation, however: Medicare will not accept paper claims after October 16, 2003, unless the organization meets the program's definition of a small provider (i.e., fewer than 10 FTEs). Nonetheless, if this option is part of your plan, you should immediately forewarn your payers about this contingency measure.

You may also decide to use direct data entry (DDE) or payer-supplied software, which includes the freeware that soon will be available to Medicare intermediaries. If you are considering using such software, you may want to test it early to learn how it works, make sure it is feasible, and determine what other contingencies are needed.

Other measures in your contingency plan might include: 

  • Having a backup, or alternative, clearinghouse to use if your internally controlled functions or current clearinghouse are not ready
  • Establishing sufficient cash reserves to carry you through an extended payment drought (which may mean aggressively working down accounts receivable this summer and arranging bank lines of credit)
  • Having access to additional staff or outside resources, in case you need to revert to paper, DDE, or other labor-intensive activities
  • Having clear lines of communication and troubleshooting defined and agreed upon with your major trading partners, so if a problem occurs, it can be addressed promptly with a minimum of finger-pointing
  • Negotiating with willing payers for interim payments at predetermined levels, pending determination for claims after processing problems are resolved
  • Notifying the board of possible spikes in days in accounts receivable to avoid surprises 

The risk of transactions problems is high. The economic stakes are even higher. Thorough end-to-end testing will help manage that risk. But even with thorough testing and certification, the risk of problems that are outside of your control will still be there. If a problem occurs, every day that it remains unsolved may cost you heavily. Any means to get quickly on the road to cash-flow recovery will be invaluable. Isn't it prudent to start your contingency planning now?


Margret Amatayakul, RHIA, CHPS, FHIMSS, is president, Margret\A Consulting, LLC, Schaumburg, Ill.

Michael R. Cohen is president, MRC Consulting Group, Wheaton, Ill., and a member of HFMA's First Illinois Chapter.

Questions or comments about this article may be sent to Margret Amatayakul at margretcpr@aol.com .

Publication Date: Friday, August 01, 2003

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