EFT and RA Transaction Operating Rules IFC Published in Federal Register August 10
August 10, 2012. Today, the Interim Final Rule with comment period (IFC): Administrative Simplification: Adoption of Operating Rules for Electronic Funds Transfers (EFT) and Remittance Advice Transactions, was published in the Federal Register. The effective date of the IFC is the date of publication, August 10, 2012. Comments on the IFC may be submitted to the Department of Health and Human Services (HHS) on or before October 9, 2012, with submission instructions included on page 48008 of the IFC. The Executive Summary (without footnotes) from the IFC follows:
“A. Purpose of the Regulatory Action. Health care spending in the United States constitutes nearly 18 percent of the US Gross Domestic Product (GDP) and costs an average of $9,000 per person annually. Many factors contribute to the high cost of health care in the United States, but studies point to administrative costs as having a substantial impact on the growth of spending and an area of costs that could likely be reduced.
“One area of administrative burden that can be lessened for health care providers is the time and labor spent interacting with multiple health insurance plans, called billing and insurance related (BIR) tasks. The average physician spends a cumulative total of 3 weeks a year on BIR tasks according to one study, and, in a physician’s office, two-thirds of a full-time employee per physician is necessary to conduct BIR tasks.
“The tasks and costs of activities directly related to collecting payments is a category of BIR tasks. Nearly 40 percent of nonclinical staff time spent on BIR tasks in a physician practice is dedicated to activities directly related to collecting payments. According to estimates that are discussed more broadly in the Regulatory Impact Analysis (RIA) [of the IFC], most health care providers collect and deposit paper checks, and manually post and reconcile the health care claim payments in their accounting systems. By automating some of these tasks, time and labor spent on the collection of payments can be decreased. Automation can be achieved through the electronic transfer of information or electronic date interchange (EDI). Through the use of electronic funds transfers (EFT) for health care claim payments and the use of electronic remittance advice (ERA) that describes adjustments to the payments, BIR costs can be decreased.
“The benefits of EFT have been realized in many other industries. The benefits include material cost savings, fraud control, and improved cash flow and cash forecasting. The benefits of ERA have also been demonstrated in terms of cost savings in paper and mailings. By receiving remittance advice electronically, providers can use electronic denial management tools that dramatically improve payment recovery and reconciliation. Despite these advantages, an estimated 70 percent of health care claim payments continue to be in paper check form and an estimated 75 percent of remittance advices is sent through the mail in paper form.
“There is evidence that the use of operating rules for specific electronic health care transactions results in higher use of EDI by health care providers. We expect usage of EFT and ERA by the health care industry will increase and administrative savings will be realized when industry implements the operating rules for those transactions.
“B. Legal Authority for the Regulatory Action. The legal authority for the adoption of operating rules rests in section 1173(g) of the Social Security Act (the Act). Section 1173(g) of the Act was added by section 1104(b)(2) of the Patient Protection and Affordable Care Act (Public Law 111-148), enacted on March 23, 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (Public Law 111-152), enacted on March 30, 2010 (collectively known as and hereinafter referred to as the Affordable Care Act.
“C. Summary of the Major Provisions of the Regulatory Action. In this interim final rule with comment period (IFC), we are adopting the Phase III Council for Affordable Quality Healthcare (CAQH) Committee on Operating Rules for Information Exchange (CORE) EFT & ERA Operating Rule Set, including the CORE v5010 Master Companion Guide Template, for the health care EFT and remittance advice transaction (hereinafter referred to as the EFT & ERA Operating Rule Set), with one exception: We are not adopting Requirement 4.2, titled ‘Health Care Claim Payment/Advice Batch Acknowledgement Requirements,’ of the Phase III Core 350 Health Care Claim Payment/Advice (835) Infrastructure Rule because that requirement requires the use of the Accredited Standards Committee (ASC) X12 999 acknowledgement standard, and the Secretary [of HHS] has not adopted standards for acknowledgements.
“Covered entities must be in compliance with the EFT & ERA Operating Rule Set by January 1, 2014.
“D. Costs and Benefits. Both costs and benefits are analyzed by examining the costs and cost savings of implementing and using the EFT & ERA Operating Rule Set adopted in this IFC in the following four areas of administrative tasks–
“To a large extent, the costs of implementing the EFT & ERA Operating Rule Set will be borne by the health plans, with much of the benefits accruing to providers. Many health plans actively participated in the development of these rules, and the requirements they put on themselves were carefully deliberated. In the RIA of this IFC, we estimate the cost to implement the EFT & ERA Operating Rule Set is $1.2 to $2.7 billion for government and commercial health plans, including third party administrators (TPAs), hospitals, and physician offices. The savings from and cost benefit of using the EFT & ERA Operating Rule Set is $3 to $4.5 billion for government and commercial health plans, hospitals, and physician offices. The net savings derived from using the EFT & ERA Operating Rule Set over 10 years ranges from approximately $300 million to $3.3 billion.”
Ed Jones, Author & Healthcare AuthorityFiled Under: 5010 Version, HIPAA Law: Administrative Simplification, Health Care Reform, Transactions & Code Sets