DEPARTMENT OF HEALTH AND HUMAN SERVICES 

OFFICE OF 

INSPECTOR GENERAL 

Inspector General 

June 2003 

OEI-09-02-00422 

HIPAA Readiness: 

Administrative Simplification 

for Medicare Part B Providers 
OFFICE OF INSPECTOR GENERAL

The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as amended, 

is to protect the integrity of the Department of Health and Human Services (HHS) programs, as well as 

the health and welfare of beneficiaries served by those programs. This statutory mission is carried out 

through a nationwide network of audits, investigations, and inspections conducted by the following 

operating components: 

Office of Audit Services 

The OIG's Office of Audit Services (OAS) provides all auditing services for HHS, either by conducting 

audits with its own audit resources or by overseeing audit work done by others. Audits examine the 

performance of HHS programs and/or its grantees and contractors in carrying out their respective 

responsibilities and are intended to provide independent assessments of HHS programs and operations in 

order to reduce waste, abuse, and mismanagement and to promote economy and efficiency throughout the 

Department. 

Office of Evaluation and Inspections 

The OIG's Office of Evaluation and Inspections (OEI) conducts short-term management and program 

evaluations (called inspections) that focus on issues of concern to the Department, the Congress, and the 

public. The findings and recommendations contained in the inspections reports generate rapid, accurate, 

and up-to-date information on the efficiency, vulnerability, and effectiveness of departmental programs. 

Office of Investigations 

The OIG's Office of Investigations (OI) conducts criminal, civil, and administrative investigations of 

allegations of wrongdoing in HHS programs or to HHS beneficiaries and of unjust enrichment by 

providers. The investigative efforts of OI lead to criminal convictions, administrative sanctions, or civil 

monetary penalties. The OI also oversees State Medicaid fraud control units which investigate and 

prosecute fraud and patient abuse in the Medicaid program. 

Office of Counsel to the Inspector General 

The Office of Counsel to the Inspector General (OCIG) provides general legal services to OIG, rendering 

advice and opinions on HHS programs and operations and providing all legal support in OIG’s internal 

operations. The OCIG imposes program exclusions and civil monetary penalties on health care providers 

and litigates those actions within the Department. The OCIG also represents OIG in the global settlement 

of cases arising under the Civil False Claims Act, develops and monitors corporate integrity agreements, 

develops model compliance plans, renders advisory opinions on OIG sanctions to the health care 

community, and issues fraud alerts and other industry guidance. 
EXECUTIVE SUMMARY 

OBJECTIVE 

To determine if Medicare Part B providers expect to comply with the electronic data 

transaction standards and code sets mandated by the Health Insurance Portability and 

Accountability Act (HIPAA) by October 2003. 

BACKGROUND 

The purpose of Title II of HIPAA is to improve the efficiency of the health care system by 

establishing standards to facilitate the electronic transmission of data between providers and 

payers. Electronic data interchange can eliminate the inefficiencies associated with handling 

paper documents. It reduces administrative costs and improves overall data quality for 

transactions, such as health care payments and coordination of benefits.1 

In accordance with the provisions of Title II of HIPAA, the Secretary of Health and Human 

Services has promulgated regulations mandating the use of specific standards for eight different 

types of electronic transactions and medical code sets. Covered entities that filed an extension 

must implement the standards by October 16, 2003. 

This report is based on the results of a mail survey of a stratified random sample of Medicare 

Part B providers, which includes, among others, physicians, durable medical equipment 

suppliers, and independently-practicing therapists that submitted claims to Medicare carriers 

between July 1, 2001, and June 30, 2002. 

1

65 FR 50312 (August 17, 2000) 

HIPAA Readiness: Medicare Part B Providers i OEI-09-02-00422
FINDINGS 

Ninety-four percent of Medicare Part B providers expect to be in compliance with 

HIPAA standards by October 2003 

According to respondents, Medicare Part B providers are making significant progress in 

meeting the HIPAA deadline. Ninety-four percent of Medicare Part B providers indicated a 

moderate to high level of satisfaction that they will meet the October deadline. Approximately 

half of the providers are developing contingency plans in the event their system is not in 

compliance by October 2003. 

External barriers may affect compliance 

Approximately 47 percent of the respondents who listed potential barriers to compliance 

expressed concerns that vendors and trading partners could affect their ability to meet the 

compliance deadline. 

CONCLUSION 

According to respondents, Medicare Part B providers are making progress toward meeting the 

compliance target of October 16, 2003, for implementing the HIPAA electronic transaction 

standards and code sets. Ninety percent or more of the providers have developed 

implementation schedules and internal and external testing strategies, and are working with 

system vendors to implement the electronic standards. Furthermore, more than 85 percent are 

relying on their professional associations to assist them in developing implementation strategies. 

When asked about barriers to achieving compliance, respondents expressed concern that 

vendors and trading partners may affect their ability to meet the compliance date. 

HIPAA Readiness: Medicare Part B Providers ii OEI-09-02-00422 
TABLE OF CONTENTS 

PAGE

EXECUTIVE SUMMARY ...................................................... i

INTRODUCTION ............................................................. 1

FINDINGS .................................................................. 5

Anticipated compliance .................................................... 5

External barriers .......................................................... 7

CONCLUSION .............................................................. 8

APPENDIX A: Glossary of selected HIPAA-related terms and acronyms .................. 9

APPENDIX B: Confidence intervals for key survey questions .......................... 10

APPENDIX C: Nonrespondent analysis .......................................... 13

ACKNOWLEDGMENTS ..................................................... 15

HIPAA Readiness: Medicare Part B Providers iii OEI-09-02-00422 
INTRODUCTION 

OBJECTIVE 

To determine if Medicare Part B providers expect to comply with the electronic data 

transaction standards and code sets mandated by the Health Insurance Portability and 

Accountability Act (HIPAA) by October 2003. 

BACKGROUND 

Congress instituted significant reforms to the health care industry with the passage of HIPAA. 

Title I of HIPAA ensures the availability and portability of health care insurance coverage, while 

Title II creates a regulatory framework to improve the efficiency of the health care system by 

establishing standards that will facilitate the electronic transmission of data between providers 

and payers. (See Appendix A for a glossary of HIPAA-related terms and acronyms.) The 

goal is to create a seamless transfer of data with limited manual intervention. 

Administrative Simplification 

Under Title II, Subtitle F (Administrative Simplification), the Secretary of Health and Human 

Services has the authority to: (1) mandate the use of standards for the electronic exchange of 

health care data, (2) specify what medical and administrative code sets should be used, (3) 

require the use of national identification systems, and (4) specify the types of measures required 

to protect the security and privacy of personally-identified health care information. 

Electronic Transactions and Code Sets 

Electronic data interchange (EDI) is the electronic transfer of information in a standard format 

between trading partners. Compared to paper transactions, EDI substantially reduces handling 

and processing time by reducing the administrative burden, lowering operating costs, and 

improving overall data quality.2 

Transactions are the exchange of information between two parties to carry out financial or 

administrative activities related to health care. The standards for electronic transmission of each 

of the transactions are codified in the Code of Federal Regulations 

2

65 FR 50312 (August 17, 2000) 

HIPAA Readiness: Medicare Part B Providers 1 OEI-09-02-00422
(45 CFR Parts 160 and 162). The rule provides standards for eight types of electronic 

transactions: 

1. Health care claims or equivalent encounter information 

2. Health care payment and remittance advice 

3. Coordination of benefits 

4. Health care claim status 

5. Enrollment and disenrollment in a health plan 

6. Eligibility for a health plan 

7. Health plan premium payments 

8. Referral certification and authorization 

The rule also contains requirements concerning the use of standardized code sets, such as 

medical diagnostic codes and medical procedure codes to encode data elements in the 

transactions. The following code sets have been adopted.3 

< International Classification of Diseases, 9th Edition, Clinical Modification 

(ICD-9-CM), Volumes 1 and 2 

< International Classification of Diseases, 9th Edition, Clinical Modification, Volume 3 

Procedures 

< National Drug Codes (NDC) for retail pharmacy transactions 

< Code on Dental Procedures and Nomenclature 

< Combination of Health Care Financing Administration Common Procedure Coding 

System (HCPCS) and Current Procedural Terminology, Fourth Edition (CPT- 4) for 

physician services and other health care services 

< Health Care Financing Administration Common Procedure Coding System (HCPCS) 

for all other substances, equipment, supplies, or other items used in health care services 

Covered entities, defined as clearinghouses, health plans, and providers that use the electronic 

exchange of health information as part of their business, will be required to adopt these 

standards. The compliance date for this rule (45 CFR Parts 160 and 162) was originally 

October 16, 2002. The Administrative Simplification Compliance Act, signed into law on 

December 27, 2001, extends the compliance date by 1 year to October 16, 2003. The 

extension applies only to those covered entities that filed an extension with the Centers for 

Medicare & Medicaid Services (CMS) by October 16, 2002. For these entities, October 16, 

2003, is the compliance date. Since the implementation date is several months away, CMS has 

not yet developed standards to measure compliance. 

3

45 CFR § 160.1002 

HIPAA Readiness: Medicare Part B Providers 2 OEI-09-02-00422
METHODOLOGY 

This is one in a series of HIPAA readiness surveys. We used a mail survey as the primary tool 

to conduct this evaluation. We mailed surveys during the week of December 2, 2002. We 

conducted two follow-up mail requests during the weeks of January 13, 2003, and January 27, 

2003. We tracked those providers for which we could not find a current address or phone 

number through state licensing boards, the Unique Physician Identification Number registry, 

Medicare carriers, hospitals, and billing services. We continued to mail surveys and obtain 

survey responses through fax and telephone interviews until April 4, 2003. 

We selected a stratified random sample of 150 Medicare Part B providers who submitted 

claims to Medicare carriers between July 1, 2001, and June 30, 2002. Stratification allowed us 

to test for differences in compliance strategies, contingencies, and barriers among providers, 

based on the number of claims they submitted to Medicare. We divided the providers into 

three strata: 

Stratum Number of 

Claims 

Size of 

Population 

Sample 

Size 

Number 

of 

responses 

Percent of 

responses 

1 1 to 500 

claims 1,607,207 50 40 80.0% 

2 501 to 5,000 

claims 324,847 50 45 90.0% 

3 5,001 claims 

or more

 13,325 50 43 86.0% 

TOTAL 1,945,379 150 128 85.3% 

We randomly ordered the population of providers within each stratum. We then selected the 

first 50 providers in each stratum that were covered by HIPAA, were still in business, and were 

not under investigation by the Office of Inspector General’s Office of Investigations. 

Our unweighted response rate was 85.3 percent. We had an 81.9 percent weighted response. 

Of the 128 respondents, 107 were physicians, 12 were durable medical equipment suppliers, 

and the rest were independently-practicing therapists, chiropractors, clinical social workers, 

nurse anesthetists, clinical laboratory, or portable x-ray suppliers. Practice administrators, 

business owners, billing services managers, financial officers, compliance officers, and clinic 

managers, who identified themselves as the person 

HIPAA Readiness: Medicare Part B Providers 3 OEI-09-02-00422 
responsible for coordinating the HIPAA Simplification Regulations, completed the surveys. 

For weighted estimates of key survey questions along with their corresponding confidence 

intervals, see Appendix B. We also tested for differences among the three strata for six of the 

questions (see Appendix B). We performed a nonrespondent analysis by strata and type of 

provider. In addition, we tested for differences between early and late responders. Our 

nonrespondent analysis did not detect a bias with respect to those factors (see Appendix C). 

The estimates given in this report are based on the portion of the sample who responded to our 

survey. 

We surveyed the providers about their level of readiness in four broad areas: 

1. Assessment and awareness activities 

2. Barriers that have impeded or are current obstacles to achieving compliance 

3. Compliance strategies, such as sequencing and testing plans 

4. Contingency planning 

We did not independently verify the accuracy of the responses. 

The inspection was conducted in accordance with the Quality Standards for Inspections 

issued by the President’s Council on Integrity and Efficiency. 

HIPAA Readiness: Medicare Part B Providers 4 OEI-09-02-00422 
FINDINGS 

We conducted a mail survey of a stratified random sample of Medicare Part B providers. Our

response rate was 85.3 percent. Overall, according to respondents, Medicare Part B

providers are making progress toward meeting the compliance deadline of 

October 16, 2003, for implementing the HIPAA electronic transaction standards and code

sets. Ninety-four percent expect to be in compliance by the deadline.

Ninety-four percent of Medicare Part B providers expect to be 

in compliance with HIPAA standards by October 2003 

Almost all Medicare Part B providers submitted a compliance extension form. As a result, they 

have until October 16, 2003, to implement the electronic transaction standards and code sets. 

Ninety-four percent4 (representing 96 percent of the Part B claims) of Medicare Part B 

providers indicated a moderate to high level of satisfaction that they expected to meet the 

HIPAA compliance deadline. At the time of our survey, 88 percent of the providers expressed 

a moderate to high level of satisfaction that they were ready to implement the HIPAA electronic 

standards. 

Providers have developed internal and external testing strategies 

Approximately 90 percent of the Part B providers said that they either have or intend to 

develop a testing strategy that includes internal and external data interfaces. Overall, 

46 percent have begun some level of testing. Slightly more than half of the providers said that 

they had received notices from carriers regarding coordination of transaction testing. 

Providers are developing implementation strategies to achieve compliance 

Part B providers indicated that they are developing plans to meet the compliance date. Ninetysix percent of the providers plan to, are in the process of, or have completed an implementation 

schedule. Approximately 95 percent of the providers said they plan to or are currently 

working with systems vendors to implement the standards. More than 80 percent of the 

providers are using a clearinghouse. Of those, more than 90 percent will continue to do so. 

Since the majority of providers indicated they were using clearinghouses and working with 

vendors to integrate compliant systems, most of the implementation strategies include a 

combination of the following: 

4

This 94 percent is based on survey respondents. As a weighted percent of the entire sample of 

150 providers, 18.1 percent did not respond to the survey, 77.2 percent indicated that they had moderate to high 

expectations that they would be compliant, and the remaining 4.7 percent indicated that they had low expectations 

that they would be compliant. See Appendix C for our nonrespondent analysis. 

HIPAA Readiness: Medicare Part B Providers 5 OEI-09-02-00422 
1. Using internal staff to plan, develop, and implement the standards 

2. Hiring a technical systems consultant or vendor to take full responsibility for planning, 

developing, and implementing the new standards 

3. Purchasing components of a new system or additions to the current system from a 

vendor to meet the standards 

According to respondents, providers are using expert resources outside their organization to 

help implement the HIPAA standards and code sets. More than 85 percent stated that they 

have used or plan to use their professional associations for information to assist them in 

developing implementation strategies. 

Sixty-eight percent of the respondents indicated that they plan to purchase or already have 

purchased new system components as part of their implementation strategy. However, only 27 

percent said that they or their contract vendors had conducted any cost-benefit analysis. 

Although 94 percent of the providers expressed a moderate or higher level of satisfaction that 

they will be compliant, more than 50 percent indicated that they were developing contingency 

plans in the event their system is not compliant by October 2003. 

Implementation strategies vary according to provider’s claims volume 

As part of our analysis, we reviewed the responses from six questions regarding implementation 

strategies among the survey strata. We found a significant variation in responses to the 

question, “Does your organization have a sequencing (prioritization) strategy for implementing 

the HIPAA electronic transactions?” We found that providers that file between 1 and 5,000 

claims (strata 1 and 2) are less likely to use a sequencing strategy. This may be attributed to 

the systems these providers are using currently to transact their claims. For example, billing 

services may be purchasing “ready to use” software with all of the new transactions 

implemented simultaneously. The point estimates and the chi-square test information regarding 

the relationships are included in Appendix B. 

HIPAA Readiness: Medicare Part B Providers 6 OEI-09-02-00422 
External barriers may affect compliance 

When asked to list as many as three barriers to compliance, 47 percent of the respondents 

listed one or more. The most common were: 

< Vendors may not meet the implementation date. 

< Third party payers, trading partners, and carriers may not be compliant.

< Implementation is costly.

The majority of the respondents who cited barriers expressed concerns that external entities, 

over which they have no control, may affect their ability to transmit and receive HIPAA 

compliant transactions. 

HIPAA Readiness: Medicare Part B Providers 7 OEI-09-02-00422 
CONCLUSION 

According to respondents, Medicare Part B providers are making progress toward meeting the 

compliance target of October 16, 2003, for implementing the HIPAA electronic transaction 

standards and code sets. Ninety percent or more of the providers have developed 

implementation schedules and internal and external testing strategies, and are working with 

system vendors to implement the electronic standards. Furthermore, more than 85 percent are 

relying on their professional associations to assist them in developing implementation strategies. 

When asked about barriers to achieving compliance, respondents expressed concern that 

vendors and trading partners may affect their ability to meet the compliance date. 

HIPAA Readiness: Medicare Part B Providers 8 OEI-09-02-00422 
APPENDIX A 

Glossary of Selected HIPAA-related Terms and Acronyms

Administrative Simplification: the use of mandated standards for the electronic exchange of health 

care data and specific measures to protect the security and privacy of personally identifiable health care 

information. 

Clearinghouse: an entity that processes information received from one entity in a nonstandard format 

into a standard transaction, or receives a standard transaction and converts it to a nonstandard format for 

a receiving entity. 

Code Set: the tables of terms, medical concepts, diagnostic codes, or procedure codes and descriptions 

used to encode information in a transaction. 

Contingency Plan: a plan developed by covered entities to provide an alternative for submitting or 

receiving HIPAA electronic transactions after October 2003, in the event that the covered entity’s system 

conversion fails or is incomplete. 

Covered Entity: any health plan, health care clearinghouse, or a health care provider who transmits any 

health information in electronic form in connection with a transaction covered by the HIPAA standards. 

Electronic Data Interchange (EDI): any electronic exchange of formatted data. 

EDI Translator: a software tool for accepting an EDI transmission and converting the data into another 

format, or for converting a non-EDI file into an EDI format for transmission. 

Medicare Part B Provider: includes physicians, durable medical equipment providers, diagnostic 

laboratories, radiology services, chiropractic services, nurse practitioners, and physician assistants. 

Sequencing: a process plan developed by a covered entity to implement each of the transaction 

standards in a logical sequence. 

Standard Transactions: the exchange of information between two parties that complies with the 

requirements established under HIPAA. 

Trading Partner: an external entity, such as a customer, with whom the covered entity does business. 

A trading partner can be so designated for some purposes and considered a business associate for other 

purposes. 

Translator: see EDI translator. 

Vendor: software and/or hardware entities that provide HIPAA compliant services, consulting, and/or 

products to covered entities. Vendors may be business associates or trading partners. 

HIPAA Readiness: Medicare Part B Providers 9 OEI-09-02-00422 
APPENDIX B 

Confidence Intervals for Key Survey Questions 

The following tables show the point estimates and 95 percent confidence intervals for selected statistics. 

These statistics are based on an 85 percent response rate to our survey. 

Compliance/Testing 

Survey Question Response Point 

Estimate 

95 Percent 

Confidence Interval 

Has your organization submitted a 

compliance extension form under the 

Administrative Simplification 

Compliance Act? 

All respondents who 

answered “yes” 95.5% 89.9% - 100.0% 

How ready do you believe your 

organization is, at this point, to 

implement the HIPAA electronic 

transaction standards? 

All respondents who 

answered “5,” “4,” or “3” on 

a scale of 1 to 5 (for levels 

of satisfaction) 

87.5% 79.7% - 95.3% 

How confident are you that your 

organization will meet the October 2003, 

target for implementing the electronic 

transactions? 

All respondents who 

answered “5,” “4,” or “3” on 

a scale of 1 to 5 (for levels 

of satisfaction) 

94.2% 88.6% - 99.9% 

Has the organization begun any testing 

of its applications of the HIPAA 

electronic transactions? 

All respondents who 

answered “yes” 45.8% 33.1% - 58.4% 

Does your organization have an overall 

strategy for testing its HIPAA 

compliant data systems? 

All respondents who 

answered “completed,” 

“underway,” or “plan to” 

96.1% 91.9% - 100.0% 

Does the testing strategy include 

internal and external data interfaces? 

All respondents who 

answered “completed,” 

“underway,” or “plan to” 

89.9% 83.0 - 96.9% 

Has your organization received any 

notices from the fiscal intermediaries or 

carriers regarding coordination of 

testing of HIPAA electronic 

transactions? 

All respondents who 

answered “yes” 

56.3% 43.7% - 69.0% 

HIPAA Readiness: Medicare Part B Providers 10 OEI-09-02-00422 
Strategies/Contingency Planning 

Survey Question Response Point 

Estimate 

95 Percent 

Confidence Interval 

Is your organization currently using 

clearinghouse(s) or other organizations 

to process any part of its HIPAA 

electronic transactions? 

All respondents who 

answered “yes” 81.7% 72.0% - 91.5% 

Is your organization currently working 

with a systems vendor(s) to implement 

the HIPAA electronic standards? 

All respondents who 

answered “completed,” 

“underway,” or “plan to” 

94.9% 89.2% - 100.0% 

Has your organization used its 

professional association(s) for 

information to assist you in developing 

a transaction compliance strategy? 

All respondents who 

answered "completed,” 

“underway,” or “plan to” 85.8% 77.0% - 94.6% 

Has your organization created a 

schedule to implement the changes in its 

data system to comply with the HIPAA 

electronic transaction standards 

deadline? 

All respondents who 

answered “completed,” 

“underway,” or “plan to” 96.6% 92.5% - 100.0% 

Has your organization purchased new 

software, hardware, or system 

component(s) to meet transaction 

compliance requirements 

All respondents who 

answered “completed,” 

“underway,” or “plan to” 68.1% 56.1% - 80.1% 

Have you, your contracted vendor(s), or 

any consultants conducted a 

cost/benefit analysis for implementing 

the HIPAA electronic transaction 

standards? 

All respondents who 

answered “yes” 

27.4% 14.9% - 39.8% 

Has your organization developed a 

contingency plan in the event its system 

is not compliant by October 2003? 

All respondents who 

answered “completed,” 

“underway,” or “plan to” 

56.8% 43.9% - 69.8% 

Barriers 

Survey Question Response Point 

Estimate 

95 Percent 

Confidence Interval 

How satisfied are you with the resources 

your organization is committing to meet 

the HIPAA electronic transaction 

standards? 

All respondents who 

answered “5,” “4,” or “3” on 

a scale of 1 to 5 (for levels 

of satisfaction) 

92.4% 85.5% - 99.3% 

HIPAA Readiness: Medicare Part B Providers 11 OEI-09-02-00422 
We compared responses among the three strata of providers: stratum1 (less than 

501 claims), stratum 2 (501 to 5,000 claims), and stratum 3 (more than 5,000 claims) for six 

questions, which we thought might show significant differences among strata. Only one 

question is statistically significant at the 95 percent confidence level. Using the Bonferroni 

method for multiple comparisons, a comparison was statistically significant if the p-value was 

less than 0.05 divided by 6 or approximately 0.008. 

Compliance/Testing 

Survey Question Measurement Point 

Estimate 

Chi-Square Test 

Degrees of 

Freedom P-value 

How confident are you that your 

organization will meet the October 

2003, target for implementing the 

electronic transactions? 

All respondents who 

answered “5,” “4,” or 

“3” on a scale of 1 

to 5 (for levels of 

satisfaction) 

95.0 stratum 1 

91.1 stratum 2 

97.7 stratum 3 

2 0.390 

Has your organization begun any 

testing of its applications of HIPAA 

electronic transactions? 

All respondents who 

answered “yes” 

50.0 stratum 1 

28.9 stratum 2 

55.8 stratum 3 

2 0.023 

Strategies/Contingency planning 

Survey Question Measurement Point 

Estimate 

Chi-Square Test 

Degrees of 

Freedom P-value 

Is your organization currently using 

clearinghouse(s) or other 

organizations to process any part of 

its HIPAA electronic transactions? 

All respondents who 

answered “yes” 

82.5 stratum 1 

79.1 stratum 2 

72.1 stratum 3 2 0.524 

Has your organization identified the 

steps necessary to implement the 

HIPAA electronic standards? 

All respondents who 

answered “completed,” 

“underway,” or “plan 

to” 

100.0 stratum 1 

95.6 stratum 2 

97.6 stratum 3 2 0.221 

Does your organization have a 

sequencing (prioritization) strategy 

for implementing the HIPAA 

electronic transactions? 

All respondents who 

answered “yes” 

45.9 stratum1 

54.5 stratum 2 

78.0 stratum 3 2 0.007* 

Has your organization developed a 

contingency plan in the event the 

system is not compliant by October 

2003? 

All respondents who 

answered “completed,” 

“underway,” or “plan 

to” 

58.3 stratum 1 

51.1 stratum 2 

68.3 stratum 3 

2 0.264 

* Statistically significant at the 95 percent confidence level. Additionally, 47.8 percent of providers who submitted 

up to and including 5,000 claims (strata 1 and 2) have a sequencing strategy, compared with 78.0 percent of providers 

who submitted more than 5,000 claims (stratum 3). This difference is significant at the 95 percent confidence level (pvalue of 0.002). 

HIPAA Readiness: Medicare Part B Providers 12 OEI-09-02-00422 
APPENDIX C 

Nonrespondent Analysis 

To evaluate the effect of nonrespondents on the results of the survey, we performed three 

chi-square tests. The differences in response rate among the strata were not statistically 

significant at the 95 percent confidence level. 

Stratum Number of Claims Response Rate 

Chi-Square Test 

Degrees of 

freedom P-value 

1 1 to 500 claims 80.0% 

2 501 to 5,000 claims 90.0% 2 0.376

3 5,001 claims or more 86.0% 

The difference in response rate between durable medical equipment (DME) suppliers and all 

other providers was significant at the 95 percent confidence level. We evaluated the possible 

effect of this difference on our estimate that 94.2 percent of Medicare Part B providers have 

moderate to high expectations that they will be compliant with HIPAA standards by October 

2003. Assuming that the non-respondents (none of whom were DME providers) had 

responded to the question, “How confident are you that your organization will meet the 

October 2003 target for implementing the electronic transactions?” using the weighted 

proportion for respondents who were not DME providers, then the estimate change is 

negligible, from 94.2 percent to 94.1 percent. 

Type of Provider Response Rate (Weighted) 

Chi-Square Test 

Degree of 

Freedom P-value 

DME provider 100.0% 

1 0.027 

All other providers 80.2 % 

HIPAA Readiness: Medicare Part B Providers 13 OEI-09-02-00422 
Analysis by Time of Response 

As an additional guard against biased results, surveys may be reviewed for differences which 

exist between early and late respondents. The rationale is that late respondents and 

nonrespondents may share certain tendencies. For example, when compared to early 

respondents, late respondents and nonrespondents could have similar characteristics with 

respect to HIPAA readiness. 

We compared the proportion of Part B providers who had moderate to high expectations that 

they will be in compliance between providers who responded on or before March 1, 2003, 

(68.0 percent of the respondents) and providers who responded after that date. The difference 

was not significant at the 95 percent confidence level. 

Date of 

Response 

Number of 

respondents 

Proportion who 

expected to be 

compliant (weighted) 

Chi-Square Test 

Degree of 

Freedom P-value 

On or before 

March 1, 2003 87 95.1% 

1 0.682 

After 

March 1, 2003 41 92.3% 

HIPAA Readiness: Medicare Part B Providers 14 OEI-09-02-00422 
ACKNOWLEDGMENTS 

This report was prepared under the direction of Paul A. Gottlober, Regional Inspector General 

for Evaluation and Inspections, and Deborah W. Harvey, Assistant Regional Inspector General 

for Evaluation and Inspections, in San Francisco. Other principal Office of Evaluation and 

Inspections staff who contributed include: 

Timothy Brady, Project Leader Linda Frisch, Program Specialist

Silvia Chin, Program Analyst

Robert Gibbons, Program Analyst

Cheryl Dotts, Program Assistant

HIPAA Readiness: Medicare Part B Providers 15 OEI-09-02-00422