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Will HIPAA 5010 Hurt

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   November 2011

With THE HIPAA 5010 DEADLINE right around the corner, HMT asked select industry experts the following question:

How will the adoption of HIPAA 5010 (federally mandated to take place by Jan. 1, 2012) affect practice profitability?

As with any change, things always get worse before they get better,” says Deborah Robb, physician services director, TrustHCS. “HIPAA 5010 is no exception.”
Indeed, although most of our experts remain cautiously optimistic that HIPAA 5010 will eventually improve the current state of affairs by helping to prepare the industry for ICD-10, many agree it may first cause budgetary shortfalls, which will be most keenly felt by smaller organizations.

According to Jim Akimchuk, CFO, Culbert Healthcare Solutions, “The 5010 standards involve specific data-field adjustments and changes in how claims are submitted and processed by clearinghouses and payers.”

Regardless of the difficulties associated with change, it’s not something that can be put off any longer. The U.S. is the last industrialized country to make the move to ICD-10; most of Europe has been on it for years.

Mary Pat Whaley, a fellow in the American College of Medical Practice Executives, says the American Medical Association (AMA) recommends the following to protect your cash in January: Submit as many transactions as possible before Jan. 1, 2012; decrease expenses before Jan. 1, 2012, to increase cash reserves; consider establishing a line of credit with a financial institution; research payers’ advance payment policies; and consider using manual or paper processes to complete transactions until the electronic transactions are fixed. - P.C.


Jim Akimchuk, CFO,
Culbert Healthcare Solutions

By itself, the adoption of 5010 will impact practice profitability within the claims and remittance processes. Just as the HIPAA conversion a few years ago increased the incidence of delayed or denied claims, so will 5010 affect practice cash flow – but on a smaller scale.

The 5010 standards involve specific data-field adjustments and changes in how claims are submitted and processed by clearinghouses and payers. These are changes that have failure points, which means they also have negative cash-flow consequences for those practices that are unprepared. For example, failure to comply with the new requirement to use nine-digit ZIP codes in the “billing provider” and “service facility location” address fields could mean delayed or denied claims. The cost of denial resolution may increase – at least temporarily – as processes are worked out.

There is an expense component to consider, as well. Practices must budget for either in-house or outsourced information technology staff to make software changes, and then coordinate testing and validation with payers and clearinghouses. Overall, 5010 will require a high level of one-on-one orchestration with each payer.

The key to navigating the change with minimal disruption to profitability is to catch potential problems early. Understand specific vendor policies now to ease the transition and minimize denials and delayed cash flow. Ultimately, the financial impact of 5010 standards on practice profitability will depend on how well practices manage the details of the changeover, monitor failure points and communicate with payers, clearinghouses and other revenue cycle management vendors.


Jackie Griffin,
manager of training and project implementation, Gateway EDI

HIPAA 5010 will improve practice profitability by increasing the speed and accuracy of the claims submission process in several ways, including:

Standardizing claims formats across the industry to simplify today’s complex claims submission process. With the current 4010 format, local variations of formats create opportunities for data-entry errors that can delay or deny payments.

Making the language and definitions of claim entry information clearer and consistent across all payers to reduce the effort required by those processing the claims. Today, language is left up to individual interpretation, which slows down the process and can cause errors. 

Removing redundant data entry. With 4010, you are required to send data at both the claim and service line level. The new 5010 format removes these redundancies, so you only need to report them once. The result is a more streamlined claims submission process that requires less staff time and provides faster turnaround on payments. 

All of these changes bring efficiencies that will get you paid faster and reduce administrative costs. Of course, some of you may be concerned about the additional up-front time needed for your staff to make the transition and get comfortable using 5010. However, once your practice is up and running on 5010, your staff will be freed up for other activities, such as strengthening customer service, which will make your practice more competitive in the post-healthcare reform environment.


Steven ZoBell,
VP of product development, ADP AdvancedMD

One of the biggest challenges with the HIPAA 5010 migration is the fact that payers and providers both have to be ready to receive and submit claims, respectively, on the same date of Jan. 1, 2012. With past initiatives, such as NPI, providers and payers had a transition period when they could each respectively test their systems. With 5010, payers will be dealing with their potential issues at the same time providers are dealing with theirs. This matters to a practice because when a claim fails to go through, it could be difficult to know in which system the problem lies. This could likely result in a delay in payment while all parties trace the flow of data.

A greater implication for providers using a legacy client/server system is that this transition could bring their cash flow to a dead stop. As we are only two months from the deadline, if a system has not yet been upgraded to 5010 compatibility, there is a very real chance it won’t be upgraded in time. Not only could these providers have to hold claims after the deadline while waiting for their system upgrade, but each day they hold a claim gets them one day closer to missing the filing time limits. With cloud-based software, this challenge is not present; the software typically has regular updates for additional features and functionality, including regulatory changes such as HIPAA 5010 compliance.


Deborah Robb,
BSHA, CPC, physician services director, TrustHCS

As with any change, things always get worse before they get better; HIPAA 5010 is no exception. Time and resources will be required for the project. This will affect small practices to a greater extent due to the resource limitations. Practices will also see their margins squeezed in the short run and should prepare for this financially.
Practices that go beyond the required changes and alter their workflow will find long-term efficiencies to streamline claims-management processes and enhance revenue cycles. Planning should be well underway in three key areas: information systems, training and budget.

Information systems from practice-management vendors, clearinghouses, billing services, EHRs and reporting systems should have already been evaluated for 5010 compatibility and upgrade costs identified. All the changes must be tested to assure no cash-flow impact on Jan 1, 2012.

Practices must identify who needs to be trained and to what extent. There will be staff downtime for training affecting productivity. End-to-end training with all partners is essential, including software vendors, payers and clearinghouses.
Budgets will need to be beefed up on the expense side for implementation costs, systems changes, resource materials, testing, consultants and training. Also, it is important to have a back-up plan in case transactions do not work in order to mitigate disruptions to the revenue stream.

The bottom line is that HIPAA 5010 will reduce practices’ bottom lines – at least in the short run.


Stephen S. Hau,
president and CEO, Shareable Ink

The new standards will have a negative impact on practice profitability, if covered entities (such as physicians and hospitals) are non-compliant or unprepared.  While this update is important to address limitations in the previous standard (4010A1) and to prepare the industry for ICD-10 code sets, we all know that change is difficult, particularly when it requires alterations to both behavior and the underlying software. 

As an example of behavioral changes, starting on Jan. 1, 2012, “anesthesia time” must be reported in minutes. This may not seem like a major issue, but anesthesia time has been reported in units for decades, and the law of “human nature” tells us that old habits can be very hard to change.

Meanwhile, software vendors are not included in the list of covered entities, but their products must comply with HIPAA 5010 to properly support their customers. Physicians and hospitals should conduct a gap analysis with their vendors as soon as possible. Software updates are likely required. Depending on the product and its configuration (installed versus “software as a service”), significant implementation and training may be required.


Andrew Fitzpatrick,
CEO, Washington Publishing Company, the founding publisher of HIPAA implementation guides and code sets

The 5010 mandate and EDI standards do not necessarily have a direct impact on revenue, but the more concerning impact is to cash flow. Specific to revenue cycle management, this means that for any claims- management process involving a clearinghouse or direct payer route, if either isn’t equipped to handle the 5010 standards, the practice or hospital can expect payment delays via pended or rejected claims.

I predict many providers’ cash flow will be hit hard early next year as a result of zero or poor testing preparation required for proper compliance. As we arrive at year’s end, hopefully many have already initiated testing with payers and clearinghouses. At this juncture, testing is critical.

Fortunately, the financial disruption will be short term. In the long run, there are opportunities for the 5010 transactions and code sets to positively enhance cash flow and profitability while reducing bad debt or write-offs. For example, the improved 270/271 eligibility/benefits inquiry and response transactions make it easier for providers to know upfront payers’ and patients’ coverage before services are rendered.


Alison Schambach,
senior healthcare business consultant, Edifecs

HIPAA 5010 is both an opportunity and a risk to practice profitability. And like any major project, the devil is in the details. A well-thought-out testing strategy to address both internal and external testing with trading partners is important, with the latter at greatest risk for not getting done.

Providers may see near-term cash-flow problems in the first half of 2012, as everyone adapts to 5010 and works out the bugs in their systems. There will likely be some payment-processing delays caused by minor format errors. For example, 5010 no longer allows billing providers to use a post office box for claims transactions.

Providers can avoid bigger issues by proactively communicating and testing with their trading partners, working closely with their practice management system vendors and not just assuming all will be ready on Jan. 1.
HIPAA 5010 can also enhance practice profitability by enabling greater business process automation. Providers can use the increased granularity of administrative information to cut costs, speed payments and spend less time fixing errors. Billing, payment posting and eligibility verification are just three of the processes that will benefit. And, of course, 5010 sets the stage for ICD-10, which has its own set of opportunities and risk.

For providers, the business impact of HIPAA 5010 may cause some initial disruption, but they can overcome it. They need to work closely with their vendor to implement 5010 correctly, conduct thorough internal and external testing and always communicate early and often with trading partners.



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