Fact Sheets


Details for: HHS ADOPTS OPERATING RULES FOR ELECTRONIC FUNDS TRANSFERS/REMITTANCE ADVICE



For Immediate Release: Tuesday, August 07, 2012
Contact: CMS Media Relations
202-690-6145


HHS ADOPTS OPERATING RULES FOR ELECTRONIC FUNDS TRANSFERS/REMITTANCE ADVICE

ACTION

The Centers for Medicare & Medicaid Services (CMS) today announced an interim final rule with comment period (IFC) under which the Department of Health and Human Services (HHS) adopts operating rules for the health care electronic funds transfers (EFT) and remittance advice transaction under the Health Insurance Portability and Accountability Act of 1996 (HIPAA). 

 

Section 1104 of the Affordable Care Act (the Affordable Care Act) requires HHS to issue a series of regulations over the next five years for the purpose of streamlining health care administrative transactions, encouraging greater use of standards by providers, and making existing standards work more efficiently.   On July 8, 2011, HHS published the first regulation, an IFC that adopted operating rules for two electronic health care transactions to make it easier for physician practices and hospitals to determine whether a patient is eligible for coverage and the status of a health care claim submitted to a health insurer. On January 10, 2012, HHS published a second regulation, an IFC adopting standards for health care claim payments made via EFT and for electronic remittance advice (ERA). 

 

The regulation announced today is the third in the series. It adopts EFT and ERA operating rules that, when implemented by health plans, are estimated to save the industry, primarily physician practices, between $300 million and $3.3 billion over the next ten years.  

Some of the future administrative simplification rules will address the adoption of:

•        A standard unique identifier for health plans;

•        A standard for claims attachments; and

•        Requirements that health plans certify compliance with all HIPAA standards and operating rules.

 

BACKGROUND

Congress addressed the need for a consistent framework for electronic health care transactions and other administrative simplification issues through HIPAA.  HIPAA amended the Social Security Act (the Act) by adding Part C—Administrative Simplification—to Title XI of the Act, requiring HHS to adopt standards for certain electronic administrative health care transactions to enable health information to be exchanged more efficiently and to achieve greater uniformity in the transmission of health information.  

Section 1104(b)(2)(A) of the Affordable Care Act amended section 1173(a)(2) of the Act by adding the electronic funds transfers (EFT) transaction to the list of electronic health care transactions for which the Secretary must adopt a standard under HIPAA. Section 1104(b)(2)(C) of the Affordable Care Act further requires the adoption of operating rules for all HIPAA electronic health care transactions.

Standards include implementation specifications for electronic formats as well as requirements for the data included in that format. By contrast, operating rules include best business practices on how electronic transactions are transmitted and often target obstacles that physician practices, hospitals and health plans encounter in using electronic transactions.  For instance, the EFT & ERA Operating Rule Set adopted in today’s rule requires health plans to offer a standardized, online enrollment for EFT and ERA so that physician practices and hospitals can more easily enroll with multiple health plans to receive those transactions electronically.  Among other requirements, the EFT & ERA Operating Rule Set requires health plans to send the EFT within a certain number of days of the ERA, making it easier for physician practices and hospitals to reconcile their accounts.  The EFT & ERA Operating Rule Set also includes requirements for the initial set-up for the electronic communication between providers and health plans.

In general, the savings and benefits related to use of EFT for business and consumer payments are well established.  The most common savings are in paper, printing, and postage costs, as well as savings in staff time to manually process and deposit paper checks.   Yet adoption and use of EFT by the health care industry has been low, resulting in administrative savings that go unrealized.  The obstacles to greater use of EFT by the health care industry can be lessened by standardization of the EFT transaction and operating rules that target difficulties for physician practices and hospitals in using EFT and ERA.   Beyond the material and administrative time savings for health care providers and health plans, the time and resources that physician practices and hospitals spend on billing and related tasks will be better spent delivering health care to patients.

On March 23, 2011, the National Committee on Vital and Health Statistics (NCVHS) sent a letter to the Secretary recommending that the Council for Affordable Quality Healthcare's Committee on Operating Rules for Information Exchange (CAQH CORE) be named as the authoring entity for operating rules for all health care EFT and ERA transactions.   Between March and August 2011, CAQH CORE held more than 30 open calls and over 15 straw polls with industry and government representatives to discuss and develop operating rules for EFT and ERA.  Over 80 health care entities, including health plans, clearinghouses, providers, and financial institutions, were represented at weekly meetings and worked hard to build consensus on the operating rules. On Dec. 7, 2011, the NCVHS sent a letter to the Secretary recommending that the CAQH CORE EFT & ERA Operating Rule Set be adopted.  Based on that recommendation, HHS is adopting the CORE EFT & ERA Operating Rule Set   and  transaction.

The goal for adopting these operating rules is to support and enhance the health care EFT and ERA transactions and improve the transaction's functionality by applying necessary business rules and guidelines for the electronic exchange of information. 

PROVISIONS OF THE IFC ANNOUNCED TODAY

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 has not adopted standards for acknowledgements. 

 

Covered entities must be in compliance with the EFT & ERA Operating Rule Set by January 1, 2014. 

 

COSTS/BENEFITS

The EFT & ERA Operating Rule Set is expected to have the most substantial cost and benefit impacts on physician practices, hospitals and health plans. For physician practices and hospitals, there is little to no cost to implement the health care EFT & ERA Operating Rule Set, as providers are the receivers of the transaction and not the senders.

This IFC is estimated to have a net savings of between $300 million and $3.3 billion over ten years.   Both costs and benefits are calculated within four areas of administrative tasks:

1)  Provider enrollment in EFT and ERA;

2)  Implementing connectivity between trading partners;

3)  Reassociation of the payment information with the remittance information; and

4)  Posting payment adjustments and claim denials.

 

Costs will be borne by the health plans, with much of the benefits coming to providers. 

·     CMS estimates that the cost to implement the EFT & ERA Operating Rules is $1.2 to $2.7 billion for government and commercial health plans, third party administrators (TPAs), and hospitals and physician practices over ten years. 

 

·     CMS estimates that the savings and cost benefit to using EFT & ERA Operating Rules is $3 to $4.5 billion for government and commercial health plans, TPAs, hospitals and physician office over ten years.

 

We anticipate that the use of operating rules may help foster electronic payments.  We had previously estimated that use of the health care EFT standards would save an estimated 800,000 pounds of paper over ten years.

The operating rules build upon industry-wide health care EFT standards adopted in January of this year. Together with the health care EFT standards, the EFT and ERA operating rules are estimated to save between $2.7 billion and more than $9 billion in administrative costs over ten years by reducing inefficient manual administrative processes for physician practices, hospitals, and health plans.

REGULATION EFFECTIVE DATE/COMPLIANCE DATE

The effective date of this regulation is August 10, 2012.  All HIPAA-covered entities must be in compliance with the EFT & ERA Operating Rule Set by January 1, 2014.

The IFC announced today may be viewed at www.ofr.gov/inspection.aspx.  The IFC will be published in the Federal Register on Aug. 10, 2012, and comments are due on Oct. 9, 2012.

A news release on the rule may be viewed at http://www.hhs.gov/news and at   http://www.cms.gov/apps/media/press_releases.asp.

 

#  #  #   

 


Page Last Modified: 5/14/07 12:00 PM
Help with File Formats and Plug-Ins

Submit Feedback