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From the October 2003 Issue Converting Interim HIPAA Fixes Into Long-Term Strategies |
Converting Interim
HIPAA Fixes HIPAA still represents an opportunity for MCOs to strengthen their financial efficiency, but only if they employ a strategic approach. By Daren Donnelson
Unlike Y2K preparations that had a definite endpoint, HIPAA is an ongoing effort for organizations to maintain compliance with the privacy standards as well as the transaction standards that come into play during infrastructure upgrades and implementation of new systems. In addition, the transaction standards themselves may become a moving target, as the industrywide adoption of them is likely to uncover areas where the standards need to evolve. With the deadline date nearly here, most organizations are now formulating the next steps in their long-term HIPAA strategies. While many organizations are prepared for the final transaction and code sets deadline, numerous managed care organizations (MCOs) are still wrestling with becoming compliant or going back to fix the interim solutions that helped them achieve compliance. In fact, a recent report from Forrester Research (“Will Web Services Kill WebMD?” June 2003) surveyed 27 health plans and found that, as of June, 51 percent were still configuring systems to accommodate HIPAA transaction and code sets. HIPAA compliance is more than just a regulatory issue for MCOs; it is a business driver and an opportunity to implement increased efficiencies. Managed care organizations must realize that noncompliance with any aspect of HIPAA is likely to result in lost business and decreased revenues. Healthcare providers and business partners, also regulated by HIPAA mandates, will be pressured to conduct business with compliant organizations. As a result, providers will shift their business to the MCOs that can deliver timely and accurate reimbursements for claims that are submitted using HIPAA-compliant transaction formats. In essence, the HIPAA-compliance challenges of an organization become a business opportunity for its competitors. Next Steps Following the October Deadline Generally, MCOs have taken either tactical or strategic approaches with their HIPAA remediation efforts, noted Wes Rishel, a Gartner research director, in his HIPAA Summit presentation, “HIPAA: An Industry Progress Report.” Tactical approaches are the “quick road” to HIPAA compliance, relying heavily on transaction translation software and clearinghouse mapping technologies. This approach makes few changes to organizations’ core claims processing systems. These tactical approaches do provide a return on investment in the short term, but do little to remedy process inefficiencies, and may even rely on re-keying paper-based claims. The strategic approach takes the more global perspective of not only complying with HIPAA regulations, but also improving data models and business processes. This approach may even include replacing entire host systems and revamping architecture strategies. Although a more costly approach, such strategic initiatives provide a higher return on investment in terms of improved administrative efficiencies, including quicker adjudication and better reporting, according to the Gartner report. Both approaches have their merits, but the strategic approach positions MCOs to better compete in the highly competitive marketplace. However, due to time constraints and budget limitations, a great many MCOs have selected to pursue tactical approaches for a portion, if not all, of their remediation efforts. With the HIPAA transaction and code sets deadline approaching, these organizations are now looking to evolve their tactical solutions into long-term strategies. Migrating Tactical Fixes The next step for MCOs using tactical fixes is to define, automate and streamline processes to increase efficiency and reduce operational costs, which are vital to the success of their businesses. Currently, a large percentage of payers are using integration/translation engines (also called integration brokers) to format the transactions they receive from providers and clearinghouses. Once received by the translation engine, these transactions are reformatted into the formats required by the payer’s claims processing system. While this accommodates fundamental processes, greater efficiencies can be achieved by integrating automated claims scrubbing and validation edits based on user-defined rules. For example, an organization that implements automated business rules, also called business-logic claims editing or scrubbing, can make sure claims are properly formatted and eligible to be processed without any manual intervention. Based on the business rules established by the payer, inbound claims can be automatically scrubbed to determine member eligibility, participating providers, valid CPT codes and valid ICD-9 codes. As a result, incorrectly formatted claims can be rejected before the claim is passed to the host system, which reduces the processing demands on the system as well as manual intervention of claims staff. In scenarios where manual intervention is necessary, such as routine medical staff review of specific claims types, the business rules can be configured to flag these claims and place them in a folder for review. Clearinghouse Relationships HIPAA has changed the landscape of healthcare clearinghouses for several reasons. First, clearinghouses have had to retool their infrastructures to accommodate the new HIPAA transaction and code sets, and the majority of clearinghouses are still in the process of infrastructure modifications. Second, with the average cost of a claims submission through a clearinghouse ranging from 30 cents to 35 cents, as many as 48 percent of payers feel they are not receiving enough value from the clearinghouse to justify the cost, according to Forrester Research. With numerous clearinghouses unable to accommodate all of the HIPAA transaction and code sets, many payers are seeking relationships with “intermediary” clearinghouses, also called transaction exchange portals, that not only accommodate the full set of HIPAA transaction and code sets, but also offer data translation and business rules capabilities. Payers can engage these transaction exchange portals to serve as data translators between providers and their primary clearinghouse, enabling transactions to pass in standard and nonstandard formats. Typically regional in their coverage, these transaction exchange portals are likely to become the target of acquisitions by the larger clearinghouses as the industry’s consolidation trend continues. HIPAA has given payers additional leverage to negotiate transaction fees with clearinghouses. Payers are asking themselves, “Why pay full price when the clearinghouse can’t accommodate all the HIPAA transactions?” In response, payers are aggressively pursuing their clearinghouse partners to discount transaction fees, and they are also seeking additional relationships with HIPAA-compliant clearinghouses to offer providers with secondary and tertiary sources for claims submissions. Furthermore, a modest movement among payers is urging clearinghouses to offer flat-fee claims submission plans. These plans offer payers an opportunity to pay a flat monthly fee to submit a limited number of transactions. For example, a clearinghouse would charge a flat fee to payers that have 5,000 to 10,000 transactions per month, and an increased fee for payers having a higher number of transactions each month. Increased Clearinghouse Expenditures MCOs need to realize that their clearinghouse expenses might increase substantially following the October deadline. Several industry organizations, including the Workgroup for Electronic Data Interchange and the American Hospital Association, have expressed concern about the likelihood of a highly increased number of rejected claims starting Oct. 16. These rejected claims are the result of data format inconsistencies and other system anomalies as providers, payers and clearinghouses begin attempting to use HIPAA-compliant transaction and code sets exclusively. The result: Each rejected claim creates an additional clearinghouse transaction fee for MCOs to pay. That single transaction fee can become a significant expense when it is multiplied by the tens of thousands of claims that are processed by a large MCO each day. For example, a payer using a clearinghouse that rejects 1,000 claims per day could amass an additional $9,000 to $10,500 (using the average per transaction rate of 30 cents to 35 cents) in clearinghouse expenses each month. Additional transaction expenses will be incurred as MCOs begin supporting additional HIPAA transaction and code sets to support other lines of businesses or offer additional services such as online checking of claims status (276/277 formats) and eligibility (270/271 formats). Overall, payers are seeking additional services from their clearinghouses beyond the basic delivery of claims submissions, which may increase efficiency, but will also escalate clearinghouse costs. Such added services include transaction translation, business rule integration and Web browser-based interfaces to manage accounts. Some clearinghouses are offering a Web-based interface for providers to directly enter claims into the interface. This direct-entry capability is ideal for payers dealing with small physician offices or for larger payers that scan in faxed claims using optical character recognition (OCR) software. For payers using OCR software, the direct-entry capability greatly increases the accuracy of claims submissions and reduces claims rejections. Many payers are even looking to establish direct connections with integrated delivery networks, national laboratory chains and other large provider groups to facilitate real-time transactions and cost reductions. Direct connections are a cost-effective strategy for payers if they have sophisticated IT infrastructures to accommodate the transactions, and if they are doing a high volume of transactions with large provider organizations. Adding New Capabilities The bulk of HIPAA remediation efforts by payers have focused on the core business functionality of handling 837 and 835 transactions. With these capabilities in place, payers can begin working on the expansion of their service offerings by handling strategic transactions such as accommodating the following formats: 276/277 claims status, 270/271 eligibility and 278 healthcare services review. Whether offered via Web-based interfaces or traditional electronic data interchange, delivering these capabilities to providers is necessary to gain a competitive advantage in the marketplace. Transaction engines are the key to unlocking this data from older claims systems by translating data between HIPAA-compliant formats and those required by host systems. However, unlocking this functionality can come at a substantial expense, whether organizations build their own transaction maps in-house or purchase additional “off-the-shelf” maps from their vendors. Beyond developing or purchasing these maps, much of the value of engaging in these remediation and service improvement projects comes from the organization’s efforts to define and document processes, which uncover areas that can be improved to gain new efficiencies. Once these automated processes become integrated into the business strategy, organizations can reduce manual intervention and begin to gain a competitive advantage.
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Legacy Consulting Services © 2003 Nelson Publishing, Inc |
Following years of anxiety, a sense of urgency and
increased expenditures on information technology, the final deadline for healthcare organizations to be compliant with the Health Information Portability and Accountability Act (HIPAA) is days away. Oct. 16, 2003, marks the deadline for compliance with the transaction and code sets standards mandated by
HIPAA.
Daren Donnelson is the CEO of Legacy Consulting Services, Frisco, Texas. Contact him at