```

[Federal Register Volume 77, Number 172 (Wednesday, September 5, 2012)]
[Rules and Regulations]
[Pages 54663-54720]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-21238]

[[Page 54663]]

Vol. 77

Wednesday,

No. 172

September 5, 2012

Part II

Department of Health and Human Services

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Centers for Medicare & Medicaid Services

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45 CFR Part 162

 Administrative Simplification: Adoption of a Standard for a Unique 
Health Plan Identifier; Addition to the National Provider Identifier 
Requirements; and a Change to the Compliance Date for the International 
Classification of Diseases, 10th Edition (ICD-10-CM and ICD-10-PCS) 
Medical Data Code Sets; Final Rule

Federal Register / Vol. 77, No. 172 / Wednesday, September 5, 2012 / 
Rules and Regulations

[[Page 54664]]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

45 CFR Part 162

[CMS-0040-F]
RIN 0938-AQ13

Administrative Simplification: Adoption of a Standard for a 
Unique Health Plan Identifier; Addition to the National Provider 
Identifier Requirements; and a Change to the Compliance Date for the 
International Classification of Diseases, 10th Edition (ICD-10-CM and 
ICD-10-PCS) Medical Data Code Sets

AGENCY: Office of the Secretary, HHS.

ACTION: Final rule.

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SUMMARY: This final rule adopts the standard for a national unique 
health plan identifier (HPID) and establishes requirements for the 
implementation of the HPID. In addition, it adopts a data element that 
will serve as an other entity identifier (OEID), or an identifier for 
entities that are not health plans, health care providers, or 
individuals, but that need to be identified in standard transactions. 
This final rule also specifies the circumstances under which an 
organization covered health care provider must require certain 
noncovered individual health care providers who are prescribers to 
obtain and disclose a National Provider Identifier (NPI). Lastly, this 
final rule changes the compliance date for the International 
Classification of Diseases, 10th Revision, Clinical Modification (ICD-
10-CM) for diagnosis coding, including the Official ICD-10-CM 
Guidelines for Coding and Reporting, and the International 
Classification of Diseases, 10th Revision, Procedure Coding System 
(ICD-10-PCS) for inpatient hospital procedure coding, including the 
Official ICD-10-PCS Guidelines for Coding and Reporting, from October 
1, 2013 to October 1, 2014.

DATES: Effective date: These regulations are effective on November 5, 
2012. Compliance dates: Health plans with the exception of small health 
plans must obtain an HPID by November 5, 2014. Small health plans must 
obtain an HPID by November 5, 2015. Covered entities must use HPIDs in 
the standard transactions on or after November 7, 2016. An organization 
covered health care provider must comply with the implementation 
specifications in Sec.  162.410(b) by May 6, 2013.

FOR FURTHER INFORMATION CONTACT: Kari Gaare (410) 786-8612, Matthew 
Albright (410) 786-2546, and Denise Buenning (410) 786-6711.

SUPPLEMENTARY INFORMATION:

I. Executive Summary and Background

A. Executive Summary for This Final Rule

1. Purpose
a. Need for the Regulatory Action
    This rule adopts a standard unique health plan identifier (HPID) 
and a data element that will serve as an other entity identifier 
(OEID). This rule also adopts an addition to the National Provider 
Identifier (NPI) requirements. Finally, this rule changes the 
compliance date for the ICD-10-CM and ICD-10-PCS medical data code sets 
(hereinafter ``code sets'') from October 1, 2013 to October 1, 2014.
(1) HPID
    Currently, health plans and other entities that perform health plan 
functions, such as third party administrators and clearinghouses, are 
identified in Health Insurance Portability and Affordability Act of 
1996 (HIPAA) standard transactions with multiple identifiers that 
differ in length and format. Covered health care providers are 
frustrated by various problems associated with the lack of a standard 
identifier, such as: improper routing of transactions; rejected 
transactions due to insurance identification errors; difficulty in 
determining patient eligibility; and challenges resulting from errors 
in identifying the correct health plan during claims processing.
    The adoption of the HPID and the OEID will increase standardization 
within HIPAA standard transactions and provide a platform for other 
regulatory and industry initiatives. Their adoption will allow for a 
higher level of automation for health care provider offices, 
particularly for provider processing of billing and insurance related 
tasks, eligibility responses from health plans, and remittance advice 
that describes health care claim payments.
(2) NPI
    In the January 23, 2004 Federal Register (69 FR 3434), the U.S. 
Department of Health and Human Services (HHS) published a final rule 
establishing the standard for a unique health identifier for health 
care providers for use in the health care system and adopting the 
National Provider Identifier (NPI) as that standard (``2004 NPI final 
rule''). The rule also established the implementation specifications 
for obtaining and using the NPI. Since that time, pharmacies have 
encountered situations where they need to include the NPI of a 
prescribing health care provider in a pharmacy claim, but where the 
prescribing health care provider has been a noncovered health care 
provider who did not have an NPI because he or she was not required to 
obtain one. This situation has become particularly problematic in the 
Medicare Part D program. The addition to the NPI requirements addresses 
this issue.
(3) ICD-10-CM and ICD-10-PCS Code Sets
    In the January 16, 2009 Federal Register (74 FR 3328), HHS 
published a final rule in which the Secretary of HHS (the Secretary) 
adopted the ICD-10-CM and ICD-10-PCS (ICD-10) code sets as the HIPAA 
standards to replace the previously adopted International 
Classification of Diseases, 9th Revision, Clinical Modification, 
Volumes 1 and 2 (diagnoses), and 3 (procedures) including the Official 
ICD-9-CM Guidelines for Coding and Reporting. The compliance date set 
by the final rule was October 1, 2013.
    Since that time, some provider groups have expressed strong concern 
about their ability to meet the October 1, 2013 compliance date and the 
serious claims payment issues that might ensue if they do not meet the 
date. Some providers' concerns about being able to meet the ICD-10 
compliance date are based, in part, on difficulties they had meeting 
the compliance deadline for the adopted Associated Standard Committee's 
(ASC) X12 Version 5010 standards (Version 5010) for electronic health 
care transactions. Compliance with Version 5010 and ICD-10 by all 
covered entities is essential to a smooth transition to the updated 
medical data code sets, as the failure of any one industry segment to 
achieve compliance would negatively affect all other industry segments 
and result in returned claims and provider payment delays. We believe 
the change in the compliance date for ICD-10 gives covered health care 
providers and other covered entities more time to prepare and fully 
test their systems to ensure a smooth and coordinated transition by all 
covered entities.
b. Legal Authority for the Regulatory Action
(1) HPID
    This final rule implements section 1104(c)(1) of the Affordable 
Care Act and section 1173(b) of the Social

[[Page 54665]]

Security Act (the Act) which require the adoption of a standard unique 
health plan identifier.
(2) NPI
    This final rule imposes an additional requirement on organization 
health care providers under the authority of sections 1173(b) and 
1175(b) of the Act. It also accommodates the needs of certain types of 
health care providers in the use of the covered transactions, as 
required by section 1173(a)(3) of the Act.
(3) ICD-10-CM and ICD-10-PCS
    This final rule sets a new compliance date for the ICD-10 code 
sets, in accordance with section 1175(b)(2) of the Act, under which the 
Secretary determines the date by which covered entities must comply 
with modified standards and implementation specifications.
2. Summary of the Major Provisions
a. HPID
    This rule adopts the HPID as the standard unique identifier for 
health plans and defines the terms ``Controlling Health Plan'' (CHP) 
and ``Subhealth Plan'' (SHP). The definitions of these two terms 
differentiate health plan entities that are required to obtain an HPID, 
and those that are eligible, but not required, to obtain an HPID. This 
rule requires all covered entities to use an HPID whenever a covered 
entity identifies a health plan in a covered transaction. Because 
health plans today have many different business structures and 
arrangements that affect how health plans are identified in standard 
transactions, we established requirements for CHPs and SHPs in order to 
enable health plans to obtain HPIDs to reflect different business 
arrangements so they can be identified appropriately in standard 
transactions.
    This rule also adopts a data element to serve as an other entity 
identifier. The OEID will function as an identifier for entities that 
are not health plans, health care providers, or individuals (as defined 
in 45 CFR 160.103), but that need to be identified in standard 
transactions (including, for example, third party administrators, 
transaction vendors, clearinghouses, and other payers). Under this 
final rule, other entities are not required to obtain an OEID, but they 
could obtain and use one if they need to be identified in covered 
transactions. Because other entities are identified in standard 
transactions in a similar manner as health plans, we believe that 
establishing an identifier for other entities will increase efficiency 
by facilitating the use of a uniform identifier.
b. NPI
    This rule requires an organization covered health care provider to 
require certain noncovered individual health care providers who are 
prescribers to: (1) obtain NPIs; and (2) to the extent the prescribers 
write prescriptions while acting within the scope of the prescribers' 
relationship with the organization, disclose them to any entity that 
needs the NPIs to identify the prescribers in standard transactions. 
This addition to the NPI requirements would address the issue that 
pharmacies are encountering when the NPI of a prescribing health care 
provider needs to be included on a pharmacy claim, but the prescribing 
health care provider does not have, or has not disclosed, an NPI.
c. ICD-10-CM and ICD-10-PCS
    This rule changes the compliance date for ICD-10-CM and ICD-10-PCS 
from October 1, 2013 to October 1, 2014. We believe this change will 
give covered entities the additional time needed to synchronize system 
and business process preparation and changeover to the updated medical 
data code sets.
3. Summary of Costs and Benefits
a. HPID
    The HPID is expected to yield the most benefit for providers, while 
health plans will bear most of the costs. Costs to all commercial and 
government health plans together (Medicare, Medicaid programs, Indian 
Health Service (IHS), and Veterans Health Administration (VHA)) are 
estimated to be $650 million to $1.3 billion. However, commercial and 
government health plans are expected to make up those costs in savings. 
Further, it is our understanding that the industry will not find the 
HPID requirements to be overly burdensome. Many entities have indicated 
that they have delayed regular system updates and maintenance, as well 
as the issuance of new health plan identification cards, in order to 
accommodate the adoption of the HPID.
    Health care providers can expect savings from two indirect 
consequences of HPID implementation: (1) The cost avoidance of 
decreased administrative time spent by providers interacting with 
health plans; and (2) a material cost savings through automation of 
processes for every transaction that moves from manual to electronic 
implementation. HPID's anticipated 10-year return on investment for the 
entire health care industry is expected to be between $1.3 billion to 
$6 billion. (This estimate includes savings resulting from the ongoing 
effects of adopting the HPID rather than the immediate and direct 
budgetary effects.)
b. NPI
    The addition to the requirements for the NPI will have little 
impact on health care providers and on the health industry at large 
because few health care providers do not already have an NPI. In 
addition, covered organization health care providers may comply by 
various means. For example, a covered organization could use a simple 
verbal directive to prescribers whom they employ or contract with to 
meet the requirements. Alternately, a covered organization could update 
employment or contracting agreements with the prescribers. For these 
reasons, we believe the additional NPI requirements do not impose 
spending costs on State government or the private sector in any 1 year 
of $136 million or more, the threshold specified in the Unfunded 
Mandates Reform Act (UMRA).
c. Change of Compliance Date of ICD-10
    According to a recent survey conducted by the Centers for Medicare 
& Medicaid Services (CMS), up to one quarter of health care providers 
believe they will not be ready for an October 1, 2013 compliance 
date.\1\ While the survey found no significant differences among 
practice settings regarding the likelihood of achieving compliance 
before the deadline, based on recent industry feedback we believe that 
larger health care plans and providers generally are more prepared than 
smaller entities. The uncertainty about provider readiness is confirmed 
in another recent readiness survey in which nearly 50 percent of the 
2,140 provider respondents did not know when they would complete their 
impact assessment of the ICD-10 transition.\2\
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    \1\ Version 5010 and ICD-10 Readiness Assessment: Conducted 
among health Care providers, payers and Vendors for the Centers for 
Medicare & Medicaid Services (CMS), December 2011 (OMB Approval No: 
09938-1149). The assessment surveyed 404 providers, 101 payers, and 
90 vendors, which represents 0.1% of all physician practices, 3% of 
hospitals, and 5% of health plans.
    \2\ An impact assessment for ICD-10 is performed by a covered 
entity to determine business areas, policies, processes and systems, 
and trading partners that will be affected by the transition to ICD-
10. An impact assessment is a tool to aid in planning for 
implementation. ``Survey: ICD-10 Brief Progress,'' February 2012, 
conducted by the Workgroup for Electronic Data Interchange (WEDI).
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    By delaying the compliance date of ICD-10 from October 1, 2013 to 
October 1, 2014, we are allowing more time for covered entities to 
prepare for the transition to ICD-10 and to conduct

[[Page 54666]]

thorough testing. By allowing more time to prepare, covered entities 
may be able to avoid costly obstacles that would otherwise emerge while 
in production.
    Savings will come from the avoidance of costs that would occur as a 
consequence of significant numbers of providers being unprepared for 
the transition to ICD-10. In the Regulatory Impact Analysis (RIA) of 
this final rule, we estimate that there would be a cost avoidance of 
approximately $3.6 billion to nearly $8 billion in this regard. This 
range of estimates reflects the avoidance of two costly consequences 
that could occur should the compliance date remain October 1, 2013: (1) 
both health care providers and health plans could have to process 
health care claims manually in order for claims to be paid; and (2) 
small health care providers could have to take out loans or apply for 
lines of credit in order to continue to provide health care in the face 
of delayed payments.
    In terms of costs, commercial health plans, medium and large 
hospitals, and large physician practices are far along in their ICD-10 
implementation planning, and therefore have devoted funds, resources, 
and staff to the effort. According to our estimates, a 1-year delay of 
the ICD-10 compliance date would add 10 to 30 percent to the total cost 
that these entities have already spent or budgeted for the transition--
an additional cost to commercial entities of approximately $1 billion 
to $6.4 billion. Medicare and State Medicaid Agencies have also 
reported estimates of costs of a change in the compliance date in 
recent informal polls. Accordingly, the calculations in the RIA in this 
final rule demonstrate that a 1-year delay in the compliance date of 
ICD-10 would cost the entire health care industry approximately $1 
billion to $6.6 billion.
    We assume that the costs and cost avoidance calculated in the RIA 
will be incurred roughly over a 6- to 12-month period, from October 1, 
2013 to October 1, 2014. For simplicity sake, however, both the costs 
and the cost avoidance that result from a change in the compliance date 
of ICD-10 are calculated over the calendar year, 2014.
    We solicited comments on our assumptions and conclusions in the 
RIA.

B. Background

1. Legislative and Regulatory Overview
    In the April 17, 2012 Federal Register (77 FR 22950), we published 
a proposed rule titled ``Administrative Simplification: Adoption of a 
Standard for a Unique Health Plan Identifier; Addition to the National 
Provider Identifier Requirements; and a Change to the Compliance Date 
for ICD-10-CM and ICD-10-PCS Medical Data Code Sets'' (hereinafter 
referred to as the April 2012 proposed rule). The April 2012 proposed 
rule provides an overview of the statutory provisions and regulations 
that are relevant for purposes of the April 2012 proposed rule (77 FR 
22952 through 22954) and this final rule. We refer readers to that 
discussion.

C. The Unique Health Plan Identifier (HPID) and the Affordable Care Act

    Section 1104(c)(1) of the Affordable Care Act directs the Secretary 
to promulgate a final rule establishing a unique health plan identifier 
that is based on the input of a Federal advisory committee, the 
National Committee on Vital and Health Statistics (NCVHS). Congress 
created the NCVHS to serve as an advisory body to the Secretary on 
health data, statistics, and national health information policy. 
Section 1104 of the Affordable Care Act authorizes the Secretary to 
promulgate the rule on an interim final basis and indicates that such 
rule shall be effective not later than October 1, 2012.
    Health plans are currently identified for different purposes using 
different identifiers that have different sources, formats, and 
meaning. A health plan may have multiple identifiers, each assigned by 
a different organization for a different purpose. The following 
discussion focuses on the types of identifiers that currently may be 
used to identify health plans in standard transactions. State 
regulators, for instance, use the National Association of Insurance 
Commissioners' (NAIC) Company code to identify health plans when a 
health plan is licensed to sell or offer health insurance in a 
particular State. The U.S. Department of Labor (DOL) and the Internal 
Revenue Service (IRS) use the 9-digit Employer Identification Number 
(EIN) and a 1-digit alphabetic or a 3-digit plan number to identify 
health plans. Employers, sole proprietorships, corporations, 
partnerships, non-profit associations, trusts, estates of decedents, 
government agencies, certain individuals, and other business entities, 
use EINs to identify health plans for a host of purposes and 
transactions. The IRS uses the EIN to identify taxpayers that are 
required to file various business tax returns. Health care 
clearinghouses assign proprietary identifiers to health plans for use 
in standard transactions. Multiple clearinghouses may identify the same 
health plan using different proprietary identifiers in different 
covered transactions. Health plans may use other identifiers, such as a 
tax identification number (TIN) or an EIN, to identify themselves in 
the standard transactions, to more easily integrate into existing 
proprietary systems, or for use on health insurance cards that they 
issue to health plan enrollees.
    Not only are health plans identified using a variety of 
identifiers, but these identifiers have different formats. For 
instance, some identifiers are alphanumeric while other identifiers are 
only numeric. Identifiers also differ in length; for example, NAIC 
codes are typically five digits while an EIN is nine digits.
    The current versions of the adopted standards (ASC X12N and NCPDP) 
allow health plans to use these and other identifiers in standard 
transactions. Therefore, for the covered transactions there is 
currently no requirement for consistency in the use of identifiers for 
health plans. The transaction standards implementation guides, though, 
do provide for the use of the HPID once its use is mandated and during 
a phase-in period. Prior to this rule, health care providers, health 
plans, and health care clearinghouses consequently could use EINs, 
TINs, NAIC numbers, or health care clearinghouse or health plan-
assigned proprietary numbers to identify health plans in standard 
transactions. Industry stakeholders, especially health care providers, 
have indicated that the lack of a standard unique health plan 
identifier has resulted in increased costs and inefficiencies in the 
health care system. Health care providers are frustrated by problems 
with: the routing of transactions; rejected transactions due to 
insurance identification errors; difficulty determining patient 
eligibility; and challenges resolving errors identifying the health 
plan during claims processing.
    The Affordable Care Act specifically calls for the establishment of 
a unique identifier for health plans. There are however, other entities 
that are not health plans but that perform certain health plan 
functions and are currently identified in the standard transactions in 
the same fields using the same types of identifiers as health plans. 
For example, health care clearinghouses, third party administrators 
(TPAs), and repricers often contract with insurance companies, self-
funded group health plans, and provider- or hospital-run health plans 
to perform claims administration, premium collection, enrollment, and 
other administrative functions. As explained later in this final rule, 
we are adopting a data element--an other entity identifier--to

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serve as an identifier for these other entities.

D. The National Committee on Vital and Health Statistics (NCVHS)

    The NCVHS has been assigned a significant role in the Secretary's 
adoption of all standards, code sets, and operating rules under HIPAA, 
including the unique health plan identifier. In section 1104(c)(1) of 
the Affordable Care Act, the Secretary is directed to conduct 
rulemaking to establish a unique health plan identifier based on input 
of the NCVHS.
    The NCVHS Subcommittee on Standards fulfilled these duties by 
conducting public hearings on the health plan identifier on July 19 
through 21, 2010. Industry stakeholders, including representatives from 
health plans, health care provider organizations, health care 
clearinghouses, pharmacy industry representatives, standards 
developers, professional associations, representatives of Federal and 
State public programs, the Workgroup on Electronic Data Interchange 
(WEDI), the National Uniform Billing Committee (NUBC), the National 
Uniform Claim Committee (NUCC), and individuals with health plan 
identifier proposals provided in-person and written testimony. 
Stakeholder testimony at the hearings focused on the use and need for 
an HPID to: facilitate the appropriate routing of transactions; reduce 
the cost of managing financial and administrative information; improve 
the accuracy and timeliness of claims payment; and reduce 
dissatisfaction among health care providers and patients/members by 
improving communications with health plans and their intermediaries. 
Stakeholders provided suggestions on the types of entities that need to 
be identified in standard transactions, those that should be eligible 
to obtain an HPID, and the level of enumeration for each plan (for 
example, the legal entity, product, benefit package etc.).
    For a full discussion of the key topics and recommendations from 
the July 19 through 21, 2010 NCVHS hearings, we refer the reader to the 
April 2012 proposed rule (77 FR 22950). For the complete text of the 
NCVHS' observations and recommendations, go to http://www.ncvhs.hhs.gov/100930lt1.pdf.

E. Definition of Health Plan

    The regulatory definition of health plan at 45 CFR 160.103 was 
initially adopted in the August 17, 2000 Standards for Electronic 
Transactions final rule (65 FR 50312) (hereafter Transactions and Code 
Sets final rule). The basis for the additions to, and clarifications 
of, the definition of health plan is further discussed in the preamble 
to the December 28, 2000 final rule (65 FR 82478 and 82576) titled 
``Standards for Privacy of Individually Identifiable Health 
Information'' (hereinafter referred to as the Privacy Rule). For 
additional information on the definition of health plan, we refer 
readers to these rules.

F. The April 2012 Proposed Rule and Analysis of and Responses to Public 
Comments

    In the April 2012 proposed rule, we proposed the following:
     The adoption of the standard for a national unique HPID 
for use in all transactions for which the Secretary has adopted a 
standard (hereinafter referred to as standard transactions).
     An OEID for use by entities that do not meet the 
definition of a health plan, but that need to be identified in the 
standard transactions.
     Requirements and provisions for the implementation of both 
the HPID and OEID.
     Additions to the NPI requirements mandating that covered 
health care providers require certain noncovered individual health care 
providers who are prescribers to obtain NPIs.
     To change the compliance date for ICD-10 code sets from 
October 1, 2013 to October 1, 2014.
    In the April 2012 proposed rule, we solicited public comments on a 
number of proposals. In response to our solicitation, we received 
approximately 536 timely pieces of correspondence. Summaries of the 
public comments that are within the scope of the proposed rule and our 
responses to those comments are set forth in the various sections of 
this final rule under the corresponding headings.

II. Adopting a Standard for a Unique Health Plan Identifier (HPID)

A. The Health Plan Identifier

    We proposed HPID as the standard unique identifier for health 
plans. We also proposed: (1) Instructions and guidance concerning how 
health plans may obtain an HPID; (2) the requirements that covered 
entities will have to meet to use the HPID in standard transactions; 
and (3) provisions for the HPID in a new subpart (subpart E) at 45 CFR 
part 162.
1. Definition of ``Controlling Health Plan'' and ``Subhealth Plan''
    Health plans today have many different business structures and 
arrangements that affect how health plans are identified in standard 
transactions. There is often a ``parent'' corporation that meets the 
definition of health plan, which may be controlled by entities, such as 
holding companies, that do not meet the definition of health plan. This 
``parent'' health plan may own and operate several other entities and 
organizations, which may also meet the definition of a health plan. 
While these individual health plans that are owned by the same 
``parent'' corporation may have their own EIN or NAIC number, they may 
all use a single identifier in covered transactions because of data 
processing arrangements. In these situations, some health plans may not 
need to be identified separately in covered transactions, and may not 
need their own health plan identifier. To differentiate between health 
plan entities that would be required to obtain an HPID, and those that 
would be eligible, but not required, to obtain an HPID, we proposed and 
are adopting in this final rule, to categorize health plans as 
controlling health plans (CHPs) and subhealth plans (SHPs).
    The definitions of CHPs and SHPs are established in 45 CFR 162.103 
as follows:
a. Controlling Health Plan (CHP)
    A CHP means a health plan that--(1) controls its own business 
activities, actions, or policies; or (2)(i) is controlled by an entity 
that is not a health plan; and (ii) if it has a subhealth plan(s), 
exercises sufficient control over the subhealth plan(s) to direct its/
their business activities, actions, or policies.
    We suggested that the following considerations may be helpful in 
determining if an entity is a CHP:
     Does the entity itself meet the definition of health plan 
at 45 CFR 160.103?
     Does either the entity itself or a non health plan 
organization control the business activities, actions, or policies of 
the entity?
    If the answer to both questions is ``yes,'' then the entity would 
meet the definition of CHP. We proposed that an entity that meets the 
definition of CHP would be required to obtain a health plan identifier.
b. Subhealth Plan (SHP)
    We proposed that a SHP means a health plan whose business 
activities, actions, or policies are directed by a controlling health 
plan.
    We suggested that the following considerations may be helpful in 
determining whether an entity is a SHP:

[[Page 54668]]

     Does the entity meet the definition of health plan at 
Sec.  160.103?
     Does a CHP direct the business activities, actions, or 
policies of the health plan entity?
    If the answer to both questions is ``yes,'' then the entity meets 
the definition of SHP. We proposed that a SHP would not be required to 
obtain an HPID, but may choose to obtain an HPID, or its CHP may obtain 
an HPID on its behalf.
    Comment: We received a few comments on the proposed definitions of 
CHP and SHP. Some commenters liked the proposed definitions, believing 
they would aid health plans in determining the appropriate enumeration 
level. A few commenters suggested alternatives to either broaden or 
narrow the definition of CHP. Commenters that requested a broader 
definition were generally concerned that the definition was not 
sufficiently broad to encompass the legal structures utilized by 
various third party payors. As a result, ambiguity in the standard 
transactions occurs because of the numerous different ways in which 
health plans functions are performed by different entities and the 
numerous ways the term ``health plan'' is interpreted. These commenters 
suggested that HHS expand the definition of CHP to encompass any and 
all potential legal relationships between holding companies and their 
subsidiaries that hold health insurance licenses. These commenters also 
requested that after HHS broadens the definition of CHP, that the CHP 
be required to obtain a separate HPID for each of the health plans' 
subsidiaries involved in the healthcare delivery system, specifically 
for the entities that are involved as fiduciaries with legal 
responsibilities for paying claims, any administrator responsible for 
administering any aspect of the benefits, and any holder of the 
participation contract with the physicians or other health care 
providers. These commenters suggested that HHS revisit the definition 
of health plan at 45 CFR 160.103 to include each of the intermediaries 
involved in the multitude of transactions that occur in administering 
payment.
    Response: HHS was tasked with creating a unique health plan 
identifier. The term ``health plan'' is defined in section 1171(5) of 
the Act and at 45 CFR 160.103 of the regulations. We do not believe 
Congress intended to include in the definition of health plan entities 
that solely perform the functions of third party administrators or 
repricers. In addition, while we recognize that health plans and other 
entities that perform health plan functions may be identified in 
similar fields in the standard transactions, they are distinctly 
different organizations with different purposes. Furthermore, we 
proposed the adoption of a data element that will serve as the OEID 
discussed in section II.B. of this final rule to meet industry's need 
for a standard identifier for entities that do not meet the definition 
of health plan, but that perform related functions.
    Comment: A commenter suggested that HHS narrow the definition of a 
CHP so that it means ``a health plan that--(1) controls its own 
business activities, actions, and policies; or (2) (i) is controlled by 
an entity that is not a health plan; and (ii) if it has a subhealth 
plan(s) (as defined in this section), exercises sufficient control over 
the subhealth plan(s) to direct its/their business activities, actions, 
and policies.''
    Response: We believe that a narrow definition of CHP would not 
capture all of the ``parent'' organizations that should be required to 
obtain HPIDs for themselves and be authorized to obtain HPIDs for their 
subhealth plans, to accomplish the goals at this stage of 
standardization. We distinguish between CHPs and SHPs because health 
plans have different business structures and arrangements that 
determine how they are identified in the standard transactions. We 
recognize that different organizations may divide business 
responsibilities in various ways. For example, a ``parent'' 
organization that meets the definition of health plan may dictate some 
business activities, actions, or policies, but may not control all 
business activities, actions, or policies of entities that they own or 
operate that also meet the definition of health plan. Given the 
variations in structures and relationships, we used the word ``or'' 
rather than ``and'' to provide more flexibility to health plans and 
ensure that ``parent'' organizations are classified as CHPs and are 
required to obtain HPIDs.
    After consideration of the public comments received, we are 
finalizing the definitions of CHP and SHP without modification.
2. Use of the HPID
    In 45 CFR 162.510, we proposed that all covered entities would be 
required to use an HPID where a covered entity identifies a health plan 
in a covered transaction. We proposed further that, if a covered entity 
uses a business associate to conduct standard transactions on its 
behalf, the covered entity must require its business associate to use 
an HPID to identify a health plan where the business associate 
identifies a health plan in all covered transactions.
    We proposed in Sec.  162.506 that the HPID could also be used for 
any other lawful purpose, and provided some examples of permitted uses 
including the following:
     Health plans may use HPIDs in their internal files to 
facilitate processing of health care transactions.
     A health plan may use an HPID on a health insurance card.
     The HPID may be used as a cross-reference in health care 
fraud and abuse files and other program integrity files.
     Health care clearinghouses may use HPIDs in their internal 
files to create and process standard and nonstandard transactions and 
in communications with health plans and health care providers.
     HPIDs may be used in patient medical records to help 
specify patients' health care benefit package(s).
     HPIDs may be used to identify health plans in electronic 
health records (EHRs).
     HPIDs may be used to identify health plans in Health 
Information Exchanges (HIEs).
     HPIDs may be used to identify health plans in Federal and 
State health insurance exchanges.
     HPIDs may be used to identify health plans for public 
health data reporting purposes.
    Comment: Many commenters requested further clarification of the 
purpose, intent, and use of the HPID, specifically if and how the HPID 
should be used in the standard transactions. For instance, they 
suggested more guidance on if and where the HPID should be used in the 
standard transactions and on the ISA envelope.
    Response: We direct these commenters to the adopted transaction 
standards, the relevant implementation guides, and as appropriate, 
adopted operating rules, for direction on if and when to use the HPID. 
We note that the only required use of the HPID is that a covered entity 
must use an HPID to identify a health plan that has an HPID in the 
standard transactions where the covered entity is identifying a health 
plan in the standard transaction. This final rule does not require that 
health plans now be identified in the standard transactions if they 
were not identified before this rule. For instance, if a covered entity 
is currently identifying a health plan as the information source in the 
eligibility response transaction (271), Loop 2100A, Segment NM1--
information source name, the covered entity will be required to use an 
HPID to identify that health plan as the information source once the 
HPID is

[[Page 54669]]

required. If a covered entity is currently identifying a third party 
administrator as the information source, the covered entity can 
continue to identify that third party administrator as the information 
source using whatever identifier the third party administrator uses 
after the adoption of the HPID. We anticipate we will provide 
additional examples of how the HPID can be used in the standard 
transactions outside of this final rule.
    In their request for clarification, some of these commenters 
appeared confused regarding the affirmative obligation in 45 CFR 
162.510 for covered entities to use an HPID to identify a health plan 
in standard transactions, when a SHP may not have its own HPID. In 
those cases, covered entities would use the HPID that the SHP indicates 
should be used to identify that SHP, which may be the HPID of its 
controlling health plan. If an entity has in good faith sought to 
identify the HPID that should be used for a SHP that has no HPID and 
has been unsuccessful, then it obviously cannot use an HPID to identify 
that SHP. However, we would anticipate that those circumstances would 
be rare. Nevertheless, consistent with these commenters' request to 
clarify the requirement, we have inserted ``that has an HPID'' 
immediately after ``health plan'' in Sec.  162.510(a) and (b). We 
consider a health plan as ``having an HPID'' if that health plan 
communicates with its trading partners that it consistently uses a 
particular HPID, even if the HPID it uses is associated with another 
health plan, such as its controlling health plan.
    Comment: A few commenters stated that they saw the primary purpose 
of the HPID as a way to eliminate the ambiguity that currently exists 
in the covered transactions. They note that various nonhealth plans 
perform certain administrative functions currently performed by health 
plans.
    Response: These comments imply that the Department should expand 
the definition of ``health plan'' to include entities that are not 
health plans as defined by statute and regulation. Previously, we 
addressed why this rule does not expand the definition of health plan, 
and further, why we take an incremental approach in the adoption of the 
HPID and OEID. We seek to allow the industry time and flexibility for 
implementing these unique identifiers. We created the other entity 
identifier to provide standardization for these entities that do not 
meet the definition of health plan, for instance. While the use of the 
OEID is voluntary, its use can facilitate the standardization of 
electronic administrative and financial transactions.
    Comment: Some commenters expressed concern that the HPID 
requirements and provisions are not clearly defined for industry 
implementation. Commenters recommended that pilot testing occur prior 
to the adoption of the HPID, to ensure proper and consistent 
implementation. Some commenters suggested that the Department work with 
the NCVHS to determine if operating rules for the use of HPID are 
necessary to clarify any implementation issues that arise following 
HPID implementation.
    Response: We anticipate this rule serving as a first step in 
standardizing the way health plans are identified in the standard 
transactions. We note that the only required use of the HPID is to 
identify a health plan that has an HPID where a health plan is 
identified in the standard transactions. Health plans, except small 
health plans, have until 2 years after the effective date of this rule 
to obtain HPIDs. Small health plans have until 3 years after the 
effective date of this rule to obtain HPIDs. Covered entities are not 
required to use HPIDs in the standard transactions until 4 years after 
the effective date of this rule. (For further discussion of the HPID 
compliance date see section II.E. of this final rule.) The rule 
provides ample time for covered entities to develop their own 
implementation timelines, which we suggest could include pilot testing, 
and milestones to ensure they meet the compliance dates.
    As we explained in the April 2012 proposed rule, a health plan may 
need to be identified in different fields in the transactions and these 
fields may not always require the use of a health plan identifier. For 
instance, the information source, in the eligibility response 
transaction (271), Loop 2100A, Segment NM1, may be a health plan, or an 
other entity that performs health plan functions, like a third party 
administrator. So after the applicable compliance date of the HPID, if 
a covered entity is identifying a health plan as the information source 
in the eligibility response transaction (271), Loop 2100A, Segment NM1, 
then the covered entity will be required to use an HPID to identify 
that health plan in the standard transactions. However, if after the 
adoption of the HPID, the covered entity is identifying a third party 
administrator as the information source in the eligibility response 
transaction (271), Loop 2100A, Segment NM1, the covered entity can use 
whatever identifier it was using previously or an OEID to identify that 
third party administrator. This final rule does not impose any new 
requirement for when to identify a health plan that has an HPID in 
standard transactions. It merely requires the use of the HPID where the 
health plan is identified. We did provide an example of a use of the 
HPID in transaction standards in the April 2012 proposed rule (77 FR 
22961).
    Comment: Some commenters question what the HPID will actually 
accomplish.
    Response: The establishment of the HPID and the requirement to use 
it in the standard transactions to identify health plans is another 
step towards standardization. In standard transactions, the HPID will 
replace proprietary identifiers for health plans which have different 
lengths and formats. In addition, it will provide public access to 
information necessary to accurately identify health plans. This will 
save providers time when verifying a health plan's identity. 
Standardization of the health plan identifier is also expected to 
ameliorate some electronic transaction routing problems. The HPID and 
OEID will add consistency to identifiers, may provide for a higher 
level of automation, particularly for provider processing of the X12 
271 (eligibility response) and X12 835 (remittance advice). In the case 
of the X12 835, the HPID and OEID may allow reconciliation of claims 
with the claim payments to be automated at a higher level. While the 
implementation of HPID, in and of itself, may not immediately provide 
significant monetary savings for covered entities, it is expected to 
provide significant time savings by immediately resolving certain 
transaction routing problems.
    Comment: Commenters raised issues about whether the early use of 
the HPID in the standard transactions could result in denied or 
misrouted claims with the potential to cause privacy or security 
breaches.
    Response: We believe the HPID will reduce denied and misrouted 
claims once fully implemented, given that all HPIDs and information 
related to HPIDs will be available in one database. While we recognize 
that there is the potential for misrouted or denied claims during the 
transition to the HPID, we believe that privacy or security breaches 
can be avoided, particularly with prior implementation planning. We 
believe there is more than adequate time between the compliance date 
for when health plans obtain HPIDs and when covered entities are 
required to use HPIDs in the standard transactions, which will allow 
industry ample opportunity to make system changes and perform extensive 
testing with trading partners. This additional time

[[Page 54670]]

and phased-in approach to compliance should reduce denied or misrouted 
claims during the early use of the HPID.
    Comment: Some commenters requested more specific guidance about how 
the HPID should be used in business models, for instance in situations 
where one health plan may be adjudicating the claim and a separate 
health plan may hold the actual contract with the provider.
    Response: The implementation of the HPID does not require a change 
to health plans' business models. Changing a health plan's current 
identifiers to an HPID does not change the structural organization and/
or its contractual relationships with other entities, or whether it is 
identified in the standard transactions. For example, if the health 
plan that adjudicates the claim needs to be identified in a standard 
transaction, then the HPID of that health plan should be used. If the 
health plan that holds the actual contract with the provider needs to 
be identified in a standard transaction, then the HPID of that health 
plan should be used.
    Comment: Several commenters raised concerns about the use of the 
HPID on health plan members' ID cards. Commenters were split between 
making the use of the HPID on member ID cards mandatory or optional. 
Others raised concerns that the cost of re-issuing all member ID cards 
far outweighs any benefit.
    Response: In this rule, we only require the use of the HPID in the 
standard transactions. The HPID is permitted to be used for any other 
lawful purpose and inclusion of the HPID on health plan members' ID 
cards is just one example of an optional use of the HPID. While health 
plans are permitted to put the HPID on member ID cards, we do not 
require it, so the determination of whether to reissue cards, and the 
associated costs, lie with the health plans.
    Comment: Other commenters recommended that health plans be required 
to comply with the health plan ID card standards set forth in the 
Workgroup for Electronic Data Interchange (WEDI) Health ID Card 
Implementation Guide, Version 1.0 (November 30, 2007).
    Response: We did not address or propose the adoption of a standard 
format for a health plan identification card. The goal of this rule was 
to adopt a standard health plan identifier for use in the standard 
transactions. While the use of the HPID on a health plan ID card is a 
permitted use, we did not require it in this rule because further 
analysis and industry feedback is needed on standard identification 
cards after the implementation of the HPID.
    After consideration of the public comments, we are finalizing the 
required and permitted uses of the HPID with the minor clarifying 
modifications to Sec.  162.510(a) and (b), adding ``that has an HPID'' 
immediately after ``health plan.''
3. Health Plan Identifier Requirements
a. Requirements and Options for Obtaining an HPID
    This final rule discusses how CHPs and SHPs will obtain an HPID 
from the Enumeration System. In 45 CFR 162.512, we proposed to require 
a CHP to obtain an HPID for itself from the Enumeration System. In 
addition, we proposed that a CHP may obtain an HPID from the 
Enumeration System for its SHP, or direct a SHP to obtain an HPID from 
the Enumeration System. We proposed that any SHP would be able to 
obtain an HPID regardless of whether or not its CHP directed it to 
obtain an HPID. While a CHP could only obtain one HPID for itself, a 
CHP could use the HPID of its SHPs for any lawful purpose.
    While a CHP would be required to obtain an HPID, there would be 
different options available for the enumeration of SHPs based on a 
CHP's organizational structure and business needs. The CHP would 
analyze its organizational structure to determine if and which of its 
SHPs need an HPID based on whether the SHP needs to be identified in 
covered transactions. We encouraged CHPs and SHPs to coordinate their 
HPID applications to prevent duplication and possible confusion. See 
Table 1 for a comparison of requirements for obtaining an HPID.

     Table 1--Enumeration Requirements and Options for CHPs and SHPs
------------------------------------------------------------------------
                                   Enumeration
           Entity                 requirements       Enumeration options
------------------------------------------------------------------------
CHPs........................  Must obtain an HPID   May obtain an
                               for itself.           HPID(s) for its
                                                     SHP(s).
                                                    May direct its
                                                     SHP(s) to obtain an
                                                     HPID(s).
SHPs........................  Not required to       May obtain an HPID
                               obtain an HPID.       at the direction of
                                                     its CHP.
                                                    May obtain an HPID
                                                     on its own
                                                     initiative.
------------------------------------------------------------------------

    For further illustrations and examples of enumeration options to 
demonstrate the ways a CHP could choose to enumerate itself and its 
SHPs, see the April 2012 proposed rule (77 FR 22957 through 22962).
    In the proposed rule, we clarified that self-insured group health 
plans are included in the definition of health plan in Sec.  160.103 
and therefore will need to obtain a health plan identifier if they meet 
the definition of a CHP. We specifically mentioned self-insured group 
health plans as there was industry discussion about whether these 
health plans should be required to obtain HPIDs because they do not 
often need to be identified in the standard transactions. Some industry 
stakeholders noted that many self-insured group health plans contract 
with third party administrators or other entities to perform health 
plan functions on their behalf and those entities, not the self-insured 
group health plans, may be identified in the standard transactions. 
Therefore, many in the industry suggested not requiring self-insured 
group health plans to obtain HPIDs, while others recommended requiring 
these plans to obtain HPIDs because they are typically the financially 
responsible party. Given that self-insured group health plans are 
included in the definition of health plan and potentially need to be 
identified in the standard transactions, we proposed that they be 
required to obtain an HPID if they meet the definition of a CHP. We 
solicited comments on this issue.
b. Options for Enumeration of Health Plans
    As discussed previously in this final rule, stakeholders at the 
NCVHS hearings expressed differing viewpoints on the appropriate level 
of health plan enumeration. Some industry stakeholders encouraged 
health plan enumeration at a very high level (for example, at the level 
of the health plan's legal entity), while other stakeholders supported 
enumeration at the benefit package level. We analyzed and considered 
these viewpoints when we developed the policies associated with HPID 
adoption and implementation.

[[Page 54671]]

    In the April 2012 proposed rule, we considered multiple uses for 
the HPID. We determined that the primary purpose of the HPID was for 
use in standard transactions in order to identify health plans in the 
appropriate loops and segments and to provide a consistent standard 
identifier for covered entities to use when identifying health plans in 
standard transactions. We analyzed the transaction standards to 
determine the existing segments and loops where a health plan may need 
to be identified, what identifiers are currently used in those loops 
and segments to identify health plans, and what information a loop or 
segment conveys when a health plan is being identified. We also 
carefully considered the information that industry stakeholders 
reported was missing in covered transactions, such as information 
related to patient financial responsibility.
    We determined that much of the information testifiers wanted to 
obtain from the HPID might already be available in other parts of the 
transaction standards and associated operating rules. To illustrate 
this point, in the proposed rule, we discussed the CAQH CORE 154 
Eligibility and Benefits 270/271 Data Content Rule, which we adopted 
through an interim final rule with comment period in the July 8, 2011 
Federal Register (76 FR 40458). That operating rule is to be used with 
the ASC X12 Version 5010 Standard for Electronic Data Interchange 
Technical Report Type 3--Health Care Eligibility Benefit Inquiry and 
Response (270/271) (hereinafter referred to as the Version 5010 270/271 
eligibility inquiry/response standard. The operating rule requires 
certain additional information to be included in the Version 5010 270/
271 eligibility inquiry/response transaction standard, including 
information about a patient's health plan name, coinsurance, copayment, 
and deductibles including in-network and out-of-network, as well as 
remaining deductible amounts. Moreover, we believe that the transaction 
standards themselves could more appropriately address many of the other 
issues raised by stakeholders about the appropriate level of 
enumeration. Therefore, HPID does not need to provide the level of 
detail that some testifiers suggested.
    We discussed in the April 2012 proposed rule how requiring health 
plans to enumerate at a more granular level may prove burdensome to the 
industry as benefit package information and offerings change frequently 
and would require constant updates by health plans. For example, health 
care providers would need to update their software and systems 
frequently to ensure the accuracy of information. A failure of either 
health care providers or health plans to ensure that the HPIDs and the 
corresponding health plan information is up-to-date could result in 
increased time spent by health plan and health care provider staff to 
ensure the most accurate information is being used for eligibility 
determinations and claim payments.
    As discussed in the April 2012 proposed rule, we developed the 
policies associated with HPID adoption and implementation after 
considering stakeholder testimony, analyzing transaction standards' 
loops and segments where the health plan identifier will be used, and 
taking into account newer versions of the transaction standards and the 
adoption of associated operating rules.
    We received many comments on the enumeration requirements for CHPs 
and SHPs.
    Comment: Some commenters generally supported our proposal that a 
CHP be required to obtain an HPID, while a SHP would be eligible but 
not required to obtain one. These commenters supported the flexibility 
this approach provided to a health plan to determine the appropriate 
level of enumeration for its organization and enumerate itself in a way 
that supports its business needs.
    Response: We thank commenters for their support.
    Comment: Some commenters emphasized that it is critical that the 
approach in the proposed rule be finalized so that health plans have 
the flexibility to determine how the health plan chooses to enumerate 
itself for use in the standard transaction. For instance, whether it 
chooses to have one HPID for its entire organization or whether it 
chooses to obtain separate HPIDs for its subhealth plans. While these 
commenters supported the proposed enumeration requirements and required 
uses of the HPID, they expressed concerns that future rulemaking could 
result in requiring divisions within health plans to be enumerated.
    Response: While we appreciate the commenters' support for our 
proposed approach to establishing an HPID, we find the concerns 
expressed about future rulemaking to be outside the scope of this rule. 
Nevertheless, we anticipate that future changes in the requirements or 
prohibitions will be aligned with industry business needs and 
experience.
    Comment: A commenter expressed concern about limiting a health plan 
to a single HPID. This commenter was concerned that a single HPID may 
present issues from a routing perspective because a single health plan 
may use multiple processing systems or administrators. The commenter 
also noted that if a health plan were limited to being enumerated with 
a single HPID, there would need to be intelligence associated with the 
HPID, such as a data element to redirect incoming transactions from the 
single receiving site to the multiple processing sites. This commenter 
further suggested that a health plan be able to obtain and use 
subordinate identifiers for routing purposes.
    Response: This final rule limits CHPs to obtaining one HPID for 
themselves. Permitting a CHP to obtain multiple HPIDs would lead to 
unnecessary complexity and potential confusion for no discernible 
benefit. Any additional information necessary for the transaction 
should be included within the transaction standard, implementation 
specifications, or associated operating rule. However, we note that we 
do allow CHPs to obtain HPIDs for their subhealth plans based on their 
business needs and arrangements and allow CHPs to use the HPID of their 
SHPs in the standard transactions.
    Comment: Some commenters supported not enumerating at a more 
granular level of enumeration because certain information about patient 
eligibility or financial information can be provided in other data 
fields in the transactions. They stressed that a more granular approach 
would add significant administrative costs to the implementation of the 
HPID and would require the creation of a clearinghouse to maintain the 
various separate identifiers and this would not benefit vendors, health 
care providers or health plans.
    Response: We agree with these commenters that a greater level of 
granularity has the potential to be unnecessarily burdensome and 
expensive for all segments of industry. If the industry determines that 
additional information is needed for certain electronic transactions, 
changes to the transaction standards would likely be more appropriate.
    Comment: Commenters recommended that HHS work with the Operating 
Rules Authoring Entity for the applicable transactions if additional 
information is needed in the future.
    Response: The Affordable Care Act authorized the Secretary to 
establish a review committee to conduct hearings to evaluate and review 
the adopted standards and operating rules. The

[[Page 54672]]

review committee will provide recommendations for updating and 
improving such standards and operating rules. We believe that the 
industry will have sufficient opportunities to provide information 
about developing needs and ways to address those needs with possible 
changes to standards and operating rules.
    Comment: Some commenters suggested that HHS provide additional 
guidance on enumeration to support health plans in making informed 
decisions on the most appropriate approach for enumeration. These 
commenters cautioned that, without more guidance, the proposed 
enumeration approach would result in health plans enumerating their 
organizations in different ways and this lack of consistency across 
health plans would impact the industry.
    Response: We do not believe additional guidance on enumeration is 
needed at this time. This final rule seeks in large part to substitute 
the use of proprietary and other non-standard identifiers with a unique 
standard health plan identifier in HIPAA standard transactions. Covered 
entities nevertheless retain certain flexibility to use identifiers in 
ways that best serve their own business needs, even within standard 
transactions. As health plans are enumerated, HHS will monitor the 
industry and assess whether any clarification or guidance is necessary. 
More likely, the industry will quickly identify best practices for 
health plan enumeration and HHS will seek to facilitate the 
dissemination of this information.
    Comment: Commenters urged HHS to require a greater level of health 
plan enumeration granularity. For example, some commenters suggested 
that a patient-specific benefit plan ID is needed. They stated that an 
identifier should include this information because from the perspective 
of patients, physicians, and other health care providers, the patient-
specific benefit plan information is routinely necessary prior to the 
patient encounter. They also stated that while the current set of 
adopted operating rules will ensure additional information is 
available, they will not provide all the information associated with 
the patient-specific benefit plan the commenters believe is needed. 
They suggested that the need for a patient-specific benefit plan ID 
will only increase as the number of people purchasing coverage directly 
from Exchanges grows. According to these commenters, this information 
is needed at the point of service, on the eligibility response, and on 
the electronic remittance advice (ERA). Currently this information is 
only required to be provided on the ERA in text, which makes automation 
difficult. These commenters suggested that having specific benefit plan 
information associated with the HPID would improve automation.
    Response: Given our gradual approach to standardization, a patient-
specific benefit plan identifier is a more specific requirement than we 
believe would be appropriate to impose at this early stage. As other 
commenters have suggested, a more granular level of enumeration has the 
potential to cause ongoing administrative burden and would need to be 
continually updated by both the health plans and the providers to 
ensure accuracy. We understand that this first step of standardization 
for the identification of health plans is not going to achieve as much 
transparency initially as some commenters state is needed in the 
transactions. After experience with the implementation and use of the 
HPID, we will work with industry to explore next steps of enumeration 
that may include patient-specific benefit plan information. We also 
want to caution that we do not believe a standard identifier alone will 
be the final solution to all of the transparency challenges in standard 
transactions. The health plan identifier is foundational and will allow 
the gradual move towards greater utility.
    Comment: Some commenters emphasized the need to enumerate each SHP 
because there are situations where the specific benefit package of that 
health plan under which services were performed needs to be identified, 
such as with coordination of benefit transactions or laboratory 
services.
    Response: For this phase of implementation of HPID, we determined 
that it would not be necessary to require each SHP to obtain an HPID 
because health plans are essentially transitioning their multiple 
proprietary identifiers to HPIDs. We are not changing what is required 
to be identified in the standard transaction so if there are situations 
where the SHP may need to be identified, such as with laboratory 
services or coordination of benefit transactions, it will be up to the 
CHP within the limitations of this rule to determine how that SHP is 
identified in the standard transaction to ensure continuous flow of the 
transactions. We believe that at this stage of transition, it is wise 
to allow CHPs to make these decisions based on their business needs and 
structures.
    In a previous response, we provided clarification about the 
affirmative obligation in 45 CFR 162.510 for covered entities to use an 
HPID to identify a health plan in standard transactions, when a SHP may 
not have its own HPID, and we believe the discussion is applicable to 
this comment. As we explained previously, in those cases, covered 
entities would use the HPID that the SHP indicates should be used to 
identify that SHP, which may be the HPID of its controlling health 
plan. If an entity has in good faith sought to identify the HPID that 
should be used for a SHP that has no HPID and has been unsuccessful, 
then it obviously cannot use an HPID to identify that SHP. While we 
anticipate those circumstances would be rare, we have inserted ``that 
has an HPID'' immediately after ``health plan'' in Sec.  162.510(a) and 
(b). We consider a health plan as ``having an HPID'' if that health 
plan communicates with its trading partners that it consistently uses a 
particular HPID, even if the HPID it uses is associated with another 
health plan, such as its controlling health plan.
    Comment: It was also suggested by commenters that there be a 
national standard fee schedule identifier that is separate from the 
HPID. A payer-assigned fee schedule identifier and a mandate that each 
entity that serves as a contracting agent issue a unique fee schedule 
identifier in conformance with that standard for each separate fee 
schedule would allow physicians and other health care providers to 
automatically post and reconcile claims payments from multiple payers 
for multiple products.
    Response: For this rule, we decided to take a gradual approach 
towards standardization of the health plan identifier and not attempt 
to address all information needs that industry wants from the standard 
transactions with a health plan identifier. We understand that other 
types of identifiers, such as a payer-assigned fee schedule identifier 
may be useful in the future to move towards a system where health care 
providers can automatically post and reconcile payments. For some of 
the suggested identifiers, we may not have the necessary legal 
authority to adopt them, and regardless, we believe this final rule 
provides a foundation that can be built upon in the future.
    Comment: We received numerous comments on enumeration of self-
insured group health plans. Some commenters supported the requirement 
because self-insured group health plans may need to be identified as 
the financially responsible entity in the standard transactions. A 
majority of commenters recommended that only self-insured group health 
plans that are conducting the standard transactions directly should be 
required to be

[[Page 54673]]

enumerated since few self-insured group health plans directly conduct 
transactions. These commenters recommended that if business needs are 
identified that require the identification of a self-insured group 
health plan, changes to the standards or operating rules should be 
considered to address these issues.
    Response: The definition of health plan at 45 CFR 160.103 
specifically includes the self-insured group health plans. While self-
insured group health plans will be required to obtain an HPID to the 
extent they meet the definition of a CHP, the HPID of a self-insured 
group health plan will only need to be used by covered entities if that 
self-insured group health plan is identified in the standard 
transactions. While many commenters recommended that a self-insured 
group health plan only be required to obtain an HPID if it needs to be 
identified in the standard transactions, we believe it is important 
that the requirement to obtain an HPID extend to any entity that meets 
the definition of CHP. Therefore, we require self-insured group health 
plans to obtain an HPID to the extent they meet the definition of CHP.
    Comment: Some commenters also discussed operational challenges that 
health plans functioning as TPAs would encounter because of the 
requirement that self-insured group health plans obtain an HPID. These 
commenters stated that self-insured group health plans would need to 
enumerate on behalf of their plan sponsors so that they can be 
identified in the standard transactions.
    Response: We are not requiring that the HPID of the self-insured 
group health plan be used to identify that self-insured group health 
plan, if the transaction standard does not require it. For example, if 
a covered entity is identifying the self-insured group health plan in 
the standard transaction, then the covered entity must use the HPID of 
the self-insured group health plan. If, however, the covered entity was 
not identifying the self-insured group health plan prior to this final 
rule, because, for example, it was identifying either another health 
plan or an entity such as a TPA, then the covered entity would not be 
required to identify a self-insured group health plan. This rule does 
not require that a self-insured group health plan be identified in the 
standard transactions.
    Comment: Commenters also requested clarification about what 
identifier a health plan should use in the standard transaction if it 
is functioning as a third party administrator.
    Response: The primary purposes of this rule include adopting a 
unique health plan identifier and establishing the enumeration system 
for the HPID. While we recognize that health plans have various 
business structures and arrangements, health plans need to be 
identified with a unique identifier using a standardized format. HPIDs 
will therefore need to be used in standard transactions to identify 
health plans in accordance with the requirements of the implementation 
guides for the relevant transaction standards. We would also note that 
because health plans are eligible to obtain an HPID, they are 
ineligible to receive an OEID.
    Comment: A number of commenters requested additional guidance on 
enumeration for various business arrangements. A commenter specifically 
requested additional guidance on situations where the holding 
companies/controlling entities for multiple affiliated health plans do 
not meet the definition of health plan and consider allowing affiliated 
CHPs to share a single HPID in certain clearly defined circumstances.
    Response: While each CHP is required to obtain an HPID, these 
comments suggest it may be helpful and more efficient for affiliated 
CHPs to share an HPID in limited circumstances in the standard 
transactions based on their unique organizational structures and 
business arrangements. We appreciate these comments and will provide 
further guidance in the near future. We would note that the regulation 
text broadly states that a covered entity must use an HPID to identify 
a health plan that has an HPID.
    Under this latter requirement, we envision that a health plan would 
be considered to ``have an HPID'' if it communicates to its trading 
partners that it should be identified with a particular HPID of an 
entity with which it is associated, such as its CHP. A CHP for instance 
could direct its SHPs to use its own HPID for all HIPAA covered 
transactions. Presuming that the SHPs have communicated with their 
trading partners that they use their CHP's HPID, the SHPs would be 
considered to ``have an HPID'' which the trading partners must use to 
identify the SHPs.
    Comment: A few commenters stated that they already have health plan 
identifiers that are identical in format and are consistent with ISO 
7812, like the HPID and OEID. These identifiers had been assigned by a 
private firm. These commenters recommended that these existing 
identifiers be incorporated in the Enumeration System so they do not 
have to reissue health insurance cards.
    Response: We regret that entities may have already obtained 
identifiers from other parties that were not issued through the 
Enumeration System. However, this final rule requires that HPIDs only 
be obtained from the Enumeration System. This requirement ensures that 
HHS oversees the issuance of all HPIDs, that the HPIDs meet the 
requirements in this rule, and that necessary information about the 
health plan is available in the Enumeration System database. To 
grandfather in existing numbers could cause confusion among industry, a 
lack of integrity in the database, and disproportionate burden on 
health plans that do not have a current number that can be 
grandfathered in. While health plans are permitted to put the HPID on 
health insurance cards, we do not require it so the determination to 
reissue cards lies with the health plans.
    Comment: One commenter requested that expatriate health plans, 
which they defined as plans whose principal purpose is covering those 
lives outside their country of citizenship and their dependents, be 
exempted from complying with the HPID requirements. This commenter 
alleged that compliance would be an added burden on U.S.-based insurers 
of expatriate plans and would competitively disadvantage them vis-
[agrave]-vis their non-U.S. competitors.
    Response: As discussed previously, this rule adopts the HPID as the 
standard unique health plan identifier for all health plans covered by 
HIPAA. Section 162.504 provides that all health plans that are not 
small health plans have until 2 years after the effective date of this 
rule and small health plans have until 3 years after the effective date 
of this rule to obtain an HPID and comply with the other provisions of 
Sec.  162.512. To fully implement the HPID, all covered entities have 
until 4 years after the effective date of this rule to use an HPID to 
identify a health plan that has an HPID in standard transactions and 
comply with the other provisions of Sec.  162.510. (For more 
information regarding the HPID compliance dates, see section II.E. of 
this final rule.) We believe that these dates provide covered entities, 
including ``expatriate plans'' that are health plans covered by HIPAA, 
sufficient time to meet the requirements of this rule. Moreover, we 
note that if a category of health plans were exempted from obtaining an 
HPID, other covered entities needing to identify those health plans 
would be adversely affected when attempting to conduct standard 
transactions with such exempted entities. Furthermore, neither HIPAA 
nor the Affordable Care Act authorizes

[[Page 54674]]

HHS to exempt health plans from complying with these adopted 
regulations simply because those health plans also conduct certain 
financial and administrative transactions electronically outside of the 
United States or are also covering individuals that are not U.S. 
citizens.
c. Changes to a Health Plan's HPID in the Enumeration System
    In the April 2012 proposed rule, we proposed to require each health 
plan to disclose its HPID, upon request, to any entity that needs the 
HPID to identify that health plan in a standard transaction. We 
proposed to require each health plan to communicate changes (updates, 
corrections, etc.) to its own data to the Enumeration System within 30 
days of the date of the change. We proposed that a SHP would ultimately 
be responsible for submitting updates for its own data in the 
Enumeration System regardless of whether it obtained its HPID 
independently or the CHP obtained the HPID on its behalf.
    Comment: We received comments about CHP and SHP responsibilities 
for obtaining HPIDs and maintaining information related to the HPID in 
the Enumeration System. Some commenters suggested that HHS should 
clarify the respective obligations of CHPs and SHPs and that there 
should be a clear and defined responsible party for both the HPID 
application process and the HPID maintenance process to avoid the need 
for coordination. For instance, these commenters suggested that a CHP 
have responsibility for application and maintenance of HPIDs for itself 
and its SHPs. These commenters believe this would prevent duplicate 
numbers that could cause confusion and costly manual intervention in 
the claims process. Some commenters recommended that rather than have 
the SHP be responsible for updating its own information in the 
Enumeration System, the responsibility for updating information 
associated with an HPID should be left to the CHP and SHP to determine 
based on their business practices.
    Response: We allow a CHP or SHP to obtain the HPID for a SHP 
because we recognize there are different arrangements that impact what 
entity may control the business actions, activities, or policies of an 
organization. For example, a CHP may dictate or manage the data and 
information systems for all of its SHPs and choose to obtain HPIDs on 
behalf of their SHPs to ensure coordination. On the other hand, a CHP 
may instruct its SHPs to obtain HPIDs. While we wanted to ensure 
flexibility during the application process, we also wanted to be sure 
that the responsibility to update the information rested with one 
entity and was clearly delineated. We believe that the simplest way to 
ensure the integrity of the data is that each entity be responsible for 
updating the information linked to its HPID. We anticipate that 
entities may delegate the update responsibility to other entities, 
although the health plan identified by an HPID still retains the 
responsibility to update its required data elements in the Enumeration 
System.
    Comment: A few commenters recommended that changes to information 
associated with an identifier should be required within 5 days of the 
change, rather than the proposed 30 days. Another commenter recommended 
that an enumerated entity provide a minimum of 60 days' notice prior to 
the effective date of any change that would impact the HPID and OEID 
under which that entity is enumerated, which would be sufficient time 
to allow providers and their vendors or clearinghouses to make 
adjustments in their systems to avoid transaction rejections or 
failures.
    Response: We have considered the comments about notification of 
changes and believe that entities should be given up to 30 days to make 
changes during this initial implementation stage. We recognize the 
operational challenges often associated with organizational changes or 
restructuring, and believe that 30 days strikes a good balance between 
the need to update the information in the Enumeration System and the 
entity's competing operational responsibilities. With that said, we 
encourage entities to make any necessary changes in a shorter timeframe 
when possible.
    After consideration of the public comments, we are finalizing the 
policy regarding health plan requirements without modification.
4. HPID Standard Format
a. Introduction
    Per the NCVHS recommendations, which were based on stakeholder 
testimony from a wide range of potential HPID users, in the April 2012 
proposed rule, we proposed to adopt an HPID that is a 10-digit, all-
numeric identifier with a Luhn check-digit as the 10th digit. The Luhn 
check-digit is an algorithm used most often on credit cards as a check 
sum to validate that the card number issued is correct. We sought 
public and stakeholder comments on the feasibility and utility of this 
format for the HPID.
b. The International Organization for Standardization (ISO) Standard
    The International Organization for Standardization (ISO) is the 
world's largest developer and publisher of international standards. 
National standards institutes from 160 nations comprise the ISO. The 
ISO has published more than 16,500 standards for numerous industries 
such as agriculture, electrical engineering, and other information 
technology industries. For more information on the ISO, refer to the 
Web site at http://www.iso.org. Based on stakeholder testimony, the 
NCVHS recommendations, and our review, we proposed that the ISO 7812 
standard format, ISO/IEC 7812-1:2006 and ISO/IEC 7812-2:2007, which 
consists of a 10-digit, all-numeric identifier with a Luhn check-digit 
as the 10th digit, be adopted as the standard for the HPID. We proposed 
that the HPID format will essentially be an intelligence-free 
identifier, except that the start digit of the identifier would signal 
that the identifier is assigned to a health plan, as opposed to an 
``other entity'' or a health care provider, which each have a different 
start digit. In the proposed rule, we explained that the number of 
digits of the HPID will not exceed the number permitted for identifiers 
in the relevant data fields of the standard transactions.
    Comment: We received many comments regarding the proposed HPID 
format. The majority of the commenters supported the proposed format. A 
few commenters offered additional suggestions and questions, many of 
which were technical. One commenter responded to the following language 
in the proposed rule: ``that if additional capacity for HPIDs were 
needed in the future, the relevant data fields would permit additional 
numeric digits to be added at that time.'' (77 FR 22962). The commenter 
suggested that HHS adopt a format that would exceed capacity but was 
concerned that HHS would then expand the number of digits in the format 
identifier past 10 digits to increase capacity. Increasing the number 
of digits in the identifier though would not meet the Luhn check digit. 
This commenter emphasized that HHS should adopt a format with ample 
capacity in order to avoid the need to perform additional programming 
and testing of systems in the future.
    Response: In the proposed rule, we did not intend to suggest that 
we would be increasing the length of the identifier when we stated we 
would add additional numeric digits. Instead, we meant that we would 
increase capacity by introducing a new start digit that still

[[Page 54675]]

met the Luhn check digit logic; therefore, we believe that this 
commenter's concern has been adequately addressed.
    Comment: A commenter supported the rule's proposal to adopt the ISO 
Standard 7812 format for the HPID and OEID, similar to the NPI. The 
commenter suggested that it may be helpful to provide more information 
about the ISO Standard 7812. For instance, information that the full 
identifier number under the ISO 7812 Standard is a composite of the ISO 
80840 Issuer Identification Number (IIN), a number assigned by the 
holder of the IIN, and the Luhn modulus -10 check digit. The commenter 
stated this information is clearly provided in the NPI final rule.
    Response: We appreciate the comment regarding the importance of 
providing information about the ISO 7812 Standard. For those readers 
interested in more background on the ISO 7812 Standard, we recommend 
that they refer to the discussion in the NPI final rule (69 FR 3442).
    After consideration of the public comments received, we are 
finalizing the policy to adopt an HPID that is a 10-digit, all-numeric 
identifier with a Luhn check-digit as the 10th digit without 
modification.

B. Adoption of the Other Entity Identifier (OEID)

    In addition to proposing the adoption of an identifier for health 
plans, in the April 2012 proposed rule we proposed to adopt a data 
element that will serve as the OEID, which would be an identifier for 
other entities for use in standard transactions. We proposed that the 
OEID would be optional--other entities could choose to obtain one or 
not.
    Health plans often use the services of other entities to conduct 
certain financial and administrative transactions on their behalf. 
Rental networks, benefit managers, third party administrators, health 
care clearinghouses, repricers, and other third parties often perform 
functions similar to, or on behalf of, health plans. In many cases, 
these other entities are identified in standard transactions in the 
same fields and using the same type of identifiers as health plans. The 
NCVHS recommended that HHS consider allowing these entities to obtain 
HPIDs as they may be the actual recipients of eligibility queries or 
claims on behalf of the health insurance issuer or the entity 
ultimately responsible for payment. The NCVHS recommended that HHS 
consider making these entities eligible to obtain an HPID when there is 
a clear case for them to be enumerated. Based on the NCVHS 
recommendation, we found that a clear case does exist for these other 
entities to be enumerated.
    We proposed that the OEID would serve as an identifier for entities 
that are not health plans, health care providers, or individuals,\3\ 
yet need to be identified in standard transactions. We proposed that 
these other entities would not be required to obtain an OEID, but that 
they could obtain one from the Enumeration System and use it where they 
need to be identified in covered transactions. We proposed that the 
OEID could also be used for any other lawful purpose. If they obtained 
an OEID, other entities would be expected to disclose it upon request 
to entities that need to identify the other entities in covered 
transactions.
---------------------------------------------------------------------------

    \3\ Individual is defined at 45 CFR 160.103 as ``the person who 
is the subject of protected health information.''
---------------------------------------------------------------------------

    Offering the OEID as an adopted data element to identify other 
entities that need to be identified in covered transactions should 
reduce costs and improve efficiency for covered entities. Because other 
entities are identified in the transaction standards in a similar 
manner as health plans, we believe that establishing a data element to 
serve as an identifier for these entities will increase efficiency by 
encouraging the use of a uniform identifier and promote compliant use 
of the HPID for health plans. Like the standard for HPID we proposed to 
adopt, the OEID would also follow ISO standard 7812, and be a 10-digit, 
all-numeric identifier with a Luhn check-digit as the 10th digit. 
Consequently, entities would not need to significantly modify their 
information technology systems to accommodate the OEID since they would 
follow the same ISO standard as the HPID.
    We solicited industry and stakeholder comments on the enumeration 
of other entities and adoption of the OEID for use in the standard 
transactions.
    We received many comments on our proposal to adopt the OEID for use 
in the standard transactions.
    Comment: Commenters requested that we provide greater clarification 
about the definition of an OEID as it relates to the eligibility to 
obtain an OEID. For example, a few commenters questioned whether or not 
a non-individual health care provider qualifies for an OEID and whether 
non-covered entities, such as auto liability and workers compensation 
carriers, are able to obtain OEIDs. A few other commenters suggested 
that the definition of OEID be further limited to entities that perform 
functions of a health plan and should not include healthcare 
clearinghouses because they state the only place the health care 
clearinghouse could be identified independently in the existing 
transactions is on the ISA envelope.
    Response: The intent of the proposal for an OEID is to provide a 
mechanism that facilitates standardization to provide greater 
transparency in electronic transactions. Thus, we have proposed that 
the definition and eligibility for the OEID include a wide variety of 
entities, and have provided few limits on the types of entities that 
can obtain OEIDs. One limit is that it cannot be an individual. Another 
limit is that the entity cannot be eligible to obtain either an HPID or 
an NPI. The reason is to avoid having multiple and differing types of 
identifiers for the same entity. Therefore, if the non-individual 
health care provider is eligible for an NPI, it would not be eligible 
to obtain an OEID. On the other hand, HIPAA non-covered entities, such 
as auto liability and workers compensation carriers, would be eligible 
to obtain an OEID as long as they need to be identified in a HIPAA 
covered transaction. They are entities that are not individuals and not 
eligible to obtain an HPID or NPI. We included clearinghouses as an 
example in the proposed rule as our goal was to keep the definition 
broad so that use and requirements for the OEID in the standard 
transactions could be further developed in the future.
    Comment: A few commenters requested clarification about whether 
specific entities are eligible to obtain an OEID, specifically atypical 
providers, accountable care organizations (ACOs), and clearinghouses. 
Some commenters recommended that we state clearly whether atypical 
providers are eligible to obtain an OEID. A few of these commenters 
stated that if atypical providers obtained OEIDs, they should be 
required to disclose them and use them to identify themselves in all 
standard transactions. A commenter stated that the OEID should be 
available to any entity that performs the functions of a payer but acts 
as an independent third party.
    Response: We appreciate the comments about atypical providers. 
Atypical providers are individuals or organizations that furnish 
atypical or nontraditional services that are indirectly health-care 
related, such as taxi, home, and vehicle modification, insect control, 
habilitation, and respite services. We encourage entities to review the 
definition of health care provider in Sec.  160.103 and the discussion 
of atypical providers in the NPI final rule (69 FR 3437) in determining 
their

[[Page 54676]]

eligibility to obtain an OEID. We decided to place few requirements on 
entities that obtain an OEID, because we wanted to allow industry 
business needs to drive industry use of the OEID, presumably through 
contractual arrangements.
    A determination of eligibility for an OEID will be specific for 
each entity based on individual factors.
    Comment: A commenter cautioned that if atypical providers are 
eligible to obtain OEIDs, the Health Care Provider Taxonomy code should 
not be included as a data field in the OEID application. These 
commenters stated that if all atypical non-individual providers qualify 
for an OEID and taxonomy code(s) are included in the data elements for 
the OEID application, it will require adding new taxonomy codes for 
this purpose, which will create a potential problem due to the 
structure of the code set.
    Response: We are still developing the required data elements but do 
not anticipate using this taxonomy code.
    Comment: A number of commenters requested that we provide 
clarification on the use of the OEID in the standard transactions. A 
commenter requested clarification on whether the OEID could be used in 
the provider identifier field, in some instances.
    Response: We will provide further examples of potential ways the 
OEID can be used in the standard transactions outside of this final 
rule. In the meantime, we encourage those commenters and others to 
review the directions within the relevant implementation guides to 
determine the appropriateness of using an OEID in particular data 
fields.
    Comment: Some commenters requested that the Department work with 
the appropriate standard development organizations to determine where 
the OEID should be included in the standard transactions. They 
emphasized that it is important to specify that the OEID should be used 
in all places in the standard transactions where the HPID can be used 
to avoid confusion and inconsistency. Other commenters suggested that 
there should be a pilot test of the OEID to determine if and what 
changes are needed to the standard transactions and the operating rules 
to clarify OEID use and requirements.
    Response: We appreciate the commenters' interest in the development 
and use of the OEID. Our intent was to create a standard identifier and 
allow business needs and efficiencies to drive its adoption and uses. 
At this initial stage of implementation, we do not believe it is 
necessary yet to work with standards organizations to address this 
question or conduct independent pilot tests.
    Comment: We received many comments regarding our proposal that the 
OEID be voluntary. Some commenters supported that the OEID be 
voluntary, while others advocated that the OEID should be mandatory. 
Supporters of a voluntary OEID believed that business needs will drive 
the use of the OEID and industry can refine OEID requirements as 
experience with the OEID is gained. In addition, some commenters 
believed that if the OEID were required it may result in entities that 
have no current business need to use an OEID nevertheless obtaining an 
OEID. Those commenters in support of the OEID being mandated advocated 
that the OEID requirements match the HPID requirements to limit system 
requirement variability. They believed that this approach promotes 
administrative simplification and encourages a greater return on 
investment. They suggested that a voluntary OEID would result in 
additional changes to existing connections as some entities replace 
their current identifiers and thus would introduce another level of 
complexity. They added that a voluntary enumeration system would add 
just another identifier option for other entities to use in the 
standard transactions and would not necessarily lead to 
standardization. One commenter even suggested that the Tax 
Identification Number be required rather than create a new identifier.
    Response: We created the OEID based on industry input and NCVHS 
recommendations that it would be helpful to have a standard identifier 
for entities that need to be identified in the standard transactions 
but that do not meet the definition of a health plan. The value of the 
OEID would be to create greater standardization in the transaction so 
that all parties that needed to be identified in the transactions would 
have a standard identifier that would be listed in a publicly available 
searchable database. Because of the diversity of entity types that may 
need an OEID and potential new uses for the OEID, we believe it would 
be helpful to begin with a voluntary approach that allows for gradual 
implementation and improvised use based on industry needs and 
practices. We recognize this approach may have certain risks associated 
with it, but we believe the risk of harm to the industry is relatively 
low and the potential benefit quite high.
    Comment: A commenter suggested that the Secretary should require 
all covered entities to require any trading partner that would qualify 
for an OEID to be enumerated by contract, trading partner agreement, or 
business associate agreement to require that the identifier be used 
according to the transaction standards.
    Response: We reiterate that covered entities could require their 
trading partners and business associates to obtain and use an OEID, and 
we believe that entities will take advantage of that approach if it is 
appropriate for them.
    Comment: A few commenters suggested that other entities be able to 
obtain more than a single OEID for use in the standard transactions.
    Response: At this point, we believe this proposed approach has the 
potential to lead to significant confusion while undermining the goal 
of having one unique number tied to each entity.
    After consideration of the public comments received, we are 
finalizing the OEID requirements without modification.

C. Assignment of the HPID and OEID--The Enumeration System

    We proposed in 45 CFR 162.508, that the Enumeration System would 
assign unique HPIDs and OEIDs to eligible health plans and eligible 
other entities, respectively. Once operational, the Enumeration System 
will be a comprehensive system for uniquely identifying and enumerating 
all eligible health plans and other entities. It will collect and 
maintain certain identifying and administrative information about CHPs, 
SHPs, and other entities. The Enumeration System will also disseminate 
information through a publicly available searchable database or through 
downloadable files.
    HPIDs and OEIDs will be assigned by the Enumeration System through 
an online application process. A health plan or other entity, when 
applying online for an HPID or OEID, will be required to provide 
certain identifying and administrative information for verification and 
eligibility determinations during the application process. For 
assistance, a help desk or other applicant assistance functions will be 
available to assist with and troubleshoot the online application 
process.
    We proposed that the Enumeration System would also be able to 
deactivate or reactivate an HPID or OEID based on receipt of sufficient 
information to justify deactivation or reactivation. Deactivation of an 
HPID may occur in the event of fraudulent or unlawful use of the HPID 
by the health plan itself or another entity, the change of ownership of 
a health plan, or the restructuring of

[[Page 54677]]

a health plan's data processing systems such that the SHP determines 
that its HPID would no longer be needed. Deactivation of an OEID may 
also occur for the fraudulent or unlawful use of an OEID by itself or 
another entity, the change of ownership of the other entity, or if the 
other entity no longer exists. Reactivation of an HPID or OEID could 
occur, for example, if there were a change of ownership of a health 
plan or other entity, or for health plans if there were a restructuring 
of a health plan's data processing systems and a SHP determines that it 
again needs its HPID.
    With that said, upon further reviewing the proposed regulation text 
in the April 2012 proposed rule, we noticed that while we had discussed 
having the Enumeration System be able to reactivate a deactivated OEID 
or HPID in the preamble of the April 2012 proposed rule, we 
unintentionally omitted ``or OEID'' in the proposed Sec.  162.508(c) 
that would have enabled the Enumeration System to deactivate an OEID, 
as it would an HPID. Because this reflects a technical drafting error 
that was obviously inconsistent with the preamble discussion at (77 FR 
22963), and further, Sec.  162.508(d) clearly presupposes that the 
Enumeration System would have that authority, we are finalizing Sec.  
162.508(c) with ``or OEID'' inserted.
    We solicited stakeholder comment on our proposals regarding the 
enumeration system and process.
    Comment: We received numerous comments on the type of information 
to be collected in the Enumeration System. Some commenters recommended 
that HHS collect only ``minimally necessary'' information that does not 
include confidential business information in order to decrease burden. 
These commenters recommended collecting data elements, such, as name of 
health plan, tax identification number, address, EDI contact phone 
number, email address, other legacy identifiers, and the BIN/IIN or PCN 
number associated with that health plan. Other commenters suggested 
collecting a robust amount of information in the Enumeration System. 
These commenters suggested collecting routing and demographic 
information. For example, all demographic information related to that 
health plan and all information necessary to enroll with the health 
plan to send and receive standard transactions as well as transmit 
standard transactions to the correct destination. In addition, they 
recommended that the database include information to identify the 
health plan type, the health plan's relationship with any other entity 
serving in a health plan role, and if the health plan utilizes a 
different network of physicians through a rental network of the 
physician network by region. These commenters also suggested that 
specific routing information for each standard transaction for each 
mode of transaction (that is, nearly real-time batch) be included in 
the database. Many commenters stated they could not provide detailed 
feedback on the design and information collected in the Enumeration 
System because they were not in the proposed rule and they would like 
the opportunity to review and comment on this information.
    Response: We appreciate commenters' suggestions regarding the type 
of information to be collected in the Enumeration System. The purpose 
of the Enumeration System is to provide an identifier and collect only 
that amount of information that is necessary to uniquely identify a 
health plan and ensure that a link exists between a CHP and its SHPs. 
We have not at this point developed the data fields or identified the 
specific information we will need to collect to achieve the purpose of 
the Enumeration System. At this point, we believe that only minimally 
necessary information will be collected in the Enumeration System, 
based on the current limited purpose of the Enumeration System. When we 
develop the data fields, we will take into consideration the comments 
offered to the proposed rule and further consult industry. In the 
future, if and when the purpose and use of the Enumeration System 
expands, we will work with industry to identify other data elements 
that will need to be collected.
    Comment: A commenter requested specific guidance that would clarify 
when an HPID that has been issued for a health plan can continue to be 
used after that health plan has undergone a business merger or 
acquisition.
    Response: If a health plan wants to retain its HPID after a merger 
or acquisition, it should update its health-plan related data in the 
Enumeration System. If the health plan does not want to retain its 
HPID, it should deactivate its HPID. We anticipate that there will be 
more guidance available on operational questions, such as these, as the 
Enumeration System is implemented.
    Comment: Some commenters stressed the importance of the Enumeration 
System having both a look-up capability, similar to that for the NPI, 
and downloadable files to easily disseminate information about HPIDs 
and OEIDs.
    Response: We anticipate that both a look-up function and 
downloadable files will be available in the future.
    Comment: Some commenters asked when entities could apply for 
identifiers from the Enumeration System.
    Response: While we anticipate entities may access the system and 
learn more about the application process and Enumeration System on 
October 1, 2012, we anticipate providing additional information about 
the Enumeration System in the near future.
    Comment: A few commenters provided other suggestions about system 
design and specific system features. For instance, a commenter stated 
that all user activity should be conducted through an ``account'' and a 
user is granted access to the system by a system administrator. Through 
the establishment of an ``account'' in the system, the user would have 
the ability to apply for identifiers, maintain information associated 
with identifiers, download reports, establish users who could access or 
perform activities related to the account, transfer control over an 
identifier to another account, and upload batch files. The benefit of 
this ``account'' approach is that it would enable an administrator to 
access and manage all identifiers for itself and subordinate plans and 
other entities. It would also enable the Enumeration System 
administrator to deal with fewer entities, reduce phone calls, and 
increase accuracy and efficiency. Another commenter suggested that the 
Enumeration System have a listserv function so entities could be 
notified of any changes in identifier information. Another commenter 
suggested that the database have the capability to provide near real-
time updates and the ability to electronically ping databases from a 
practice management system or other provider administrative systems 
based on selected search criteria.
    Response: We are still in the process of collecting information and 
developing the Enumeration System and will take these comments into 
consideration in the process.
    After consideration of the public comments received, we are 
finalizing the Enumeration System policies without modification with 
the one minor exception of inserting ``or OEID'' in Sec.  162.508(c).

D. Other Considerations

1. Pharmacy Transactions
    In the April 2012 proposed rule, we noted that currently, the 
pharmacy industry utilizes two unique identifiers to identify entities 
responsible for administering claims in retail pharmacy

[[Page 54678]]

transactions, the Bank Identification Number/Issue Identification 
Number (BIN/IIN) and the Processor Control Number (PCN). These 
identifiers are programmed into the pharmacy's software and identify 
the route for processing the transaction from the pharmacy to the 
entity responsible for administering the claim, which could be the 
health plan or the pharmacy benefit manager. A pharmacy benefit manager 
is a third party administrator for prescription drug programs and is 
responsible for processing and paying claims on behalf of the health 
plan or drug plan sponsor. The BIN/IIN is a 6-digit number, requested 
by the pharmacies from either the American National Standards Institute 
(ANSI) or the National Council for Prescription Drug Programs (NCPDP), 
for use by retail pharmacies to route prescription drug claims to the 
entity responsible for processing the transaction, usually the pharmacy 
benefit manager. The PCN is an identifier of up to 10 characters that 
is assigned by pharmacy benefit claim processors if there is a need to 
further define benefits and routing. For instance, the Medicare Part D 
prescription drug benefit plan Coordination of Benefits (COB) 
contractor has unique requirements for processing Medicare Part D 
claims. To accommodate those requirements, many administrators or 
processors have created PCNs to further differentiate the Medicare Part 
D prescription drug plan benefit COB business from their other 
(commercial or Medicaid) COB business.
    The BIN/IIN and PCN identifiers are included in information from 
pharmacy benefit managers and/or health plans that are distributed to 
pharmacies to provide details on who will be processing the 
transaction, where to route the transaction and what rules are expected 
to be applied during transaction processing. We took note of the 
NCPDP's testimony from the July 20120 NCVHS Subcommittee on Standards 
meeting that the use of these two identifiers has been very effective 
in ensuring efficient, timely prescription claim processing.
    We also considered testimony from the July 2010 NCVHS meeting that 
the HPID, BIN/IIN and PCN identifiers convey different information and 
serve different purposes. The BIN/IIN and PCN identifiers cannot 
provide the information needed about the health plan, nor can the 
information in the HPID provide the information inherent in the BIN/IIN 
and PCN identifiers. We considered the claims that if the health plan 
identifier were required to replace the BIN/IIN and/or PCN, such a 
change would be extremely costly to the retail pharmacy industry and 
cards would need to be re-issued with the HPID, with no direct patient 
or pharmacy benefit.
    There was also testimony that an HPID-only requirement would 
require a substantive change to the NCPDP D.0. In Version D.0, the Plan 
ID field is either not used or its use is optional, meaning its use was 
intentionally not defined in the standard. However, the use of the BIN 
and PCN fields is mandatory.
    We reviewed the September 30, 2010 NCVHS recommendation letter to 
the Secretary, where the NCVHS observed that retail pharmacy 
transactions utilize the BIN/IIN and/or PCN identifier to facilitate 
their transaction processing, and that changing to another identifier 
would significantly affect existing data flows in the retail pharmacy 
industry that currently work effectively. As such, the pharmacy 
industry requested an exemption from the requirement to use only HPID 
in retail pharmacy transactions because of the current success with the 
BIN/IIN and PCN identifiers for routing purposes.
    We further considered the NCVHS recommendation that use of the HPID 
in place of the existing BIN/IIN and PCN identifier in retail pharmacy 
business transactions not be required, but that the use of HPID be 
required on the HIPAA-named standard transactions for retail pharmacy.
    In the April 2012 proposed rule, we did not propose any changes to 
the NCPDP Version D.0 standard. So where the D.0 calls for the BIN/IIN 
and PCN to be used, this final rule has no impact or effect because 
health plans are not being identified in those fields. We clarified 
that we do not believe that the HPID should be required in place of the 
existing BIN/IIN and PCN identifier in retail pharmacy transactions.
    We received a few comments regarding the use of the HPID in 
pharmacy transactions.
    Comment: Several commenters did not believe the HPID should be used 
in place of the BIN/IIN and PCN in pharmacy transactions, but that the 
HPID be required on the HIPAA-named standard transactions for retail 
pharmacy.
    Response: We thank commenters for their comments.
    After consideration of the public comments received, we are 
finalizing the policy regarding the use of the HPID in pharmacy 
transactions without modification.
2. Definition of Covered Health Care Provider
    We proposed to move the definition of ``covered health care 
provider'' from 45 CFR 162.402 to 45 CFR 162.103 because the term has a 
broader application beyond just Subpart D. We did not receive any 
comments on the proposal to move the definition of ``covered health 
care provider'' from 45 CFR 162.402 to 45 CFR 162.103, and therefore, 
we are finalizing this change as proposed.

E. Effective Date and Compliance Requirements for the HPID

    In section 1104(c)(1) of the Affordable Care Act, Congress 
specified that ``the Secretary shall establish a standard for a unique 
health plan identifier based on the input of the National Committee on 
Vital and Health Statistics.'' Congress further provided that the rule 
shall be ``effective'' not later than October 1, 2012. The effective 
date would mark the beginning of the implementation period for the 
HPID, which we indicated in the proposed rule is the day we expect 
would be the first day health plans could apply to obtain an HPID and 
the first day an entity could apply to obtain an OEID from the 
Enumeration System. We would like to clarify that entities will not be 
able to obtain identifiers on that date, but that they may begin to 
access the Enumeration System and learn more about the application 
process. We proposed that the compliance date for all covered entities, 
except small health plans, to use the HPID in standard transactions be 
2 years after the effective date of the final rule which, if the 
effective date is October 1, 2012 as we proposed, would be October 1, 
2014. The compliance date for small health plans would be October 1, 
2015. Neither small health plans nor other covered entities would be 
prohibited from using HPIDs in their transactions at any time before 
their respective compliance dates.
    In line with our previous interpretations, we have interpreted the 
``effective date'' of this rule to mean the date the Secretary adopts 
the HPID as the unique health plan identifier. In the NPI final rule, 
for instance, the effective date of the rule was the date the Secretary 
adopted a standard unique health identifier for health care providers, 
and the compliance date marked the date by which an entity had to 
obtain and use an NPI in the standard transactions. We consequently 
interpreted section of the 1104(c)(1) of the Affordable Care Act as 
specifying October 1, 2012 as the effective date of the final rule, the 
date on which the policies take effect and the implementation period 
for the HPID begins.
    We solicited comment on the effective and compliance dates for the 
HPID.

[[Page 54679]]

    Comment: We received extensive comments on the compliance dates and 
implementation requirements of HPID. The majority of commenters 
emphasized the need for additional time to test and implement HPID, and 
requested that we establish a date by which health plans should obtain 
their HPIDs in advance of the date by which covered entities are 
required to use the HPID in standard transactions. These commenters 
emphasized that health plans must obtain their identifiers and 
communicate them to all covered entities well in advance of the 
required use of the HPID in the standard transactions. This additional 
time would allow for internal system changes to accommodate the HPID 
and for extensive testing among trading partners. Commenters explained 
that ample time to perform system changes and testing is critical to 
the successful implementation of the HPID by all covered entities. 
Implied in many of these comments was that because covered transactions 
virtually always involve multiple parties, a single ``go-live'' date by 
which all covered entities must use the HPID should be established.
    Response: We have considered the significant operational challenges 
described by commenters that occur as a result of a single compliance 
date for both the health plans to obtain HPIDs and covered entities to 
use the HPIDs to identify health plans in the standard transactions. We 
agree that the successful implementation of HPID could be jeopardized. 
Therefore, in this final rule we are changing the approach to 
compliance with new implementation requirements shown in Chart 1.
    Comment: Commenters warned that if ICD-10 and the HPID have the 
same compliance date of October 1, 2014, it will be financially and 
administratively burdensome. In addition, commenters suggested that it 
would be difficult to determine the cause of any claim delays or 
problems with implementation.
    Response: We agree that implementation of these two initiatives at 
the same time could impose technical and operational problems, which 
would be difficult to diagnose and address.
    Comment: Some commenters suggested that there be a dual use period 
for implementation of HPID, during which time both legacy health plan 
identifiers and the new health plan ID is permitted in the 
transactions. These commenters suggested that the dual use period would 
assist industry during simultaneous compliance for both ICD-10 and 
HPID. A dual use period was allowed in the transition to NPI and this 
provided the ability to validate crosswalks and resolve any 
implementation issues prior to full transition. Finally, these 
commenters stated that a dual use period would allow CMS to monitor the 
rate of adoption and readiness of the industry through metric 
reporting.
    Response: While we believe that a period of dual usage would be 
helpful, we do not believe it necessary to mandate such a dual use 
period. The new HPID compliance dates will address many of the concerns 
raised by these commenters. The compliance date for HPID to be used in 
the standard transaction, which we are now referring to as the full 
implementation date, is no longer the same date as for ICD-10. In 
addition, in contrast to the single compliance date for NPI, the new 
phased-in approach for HPIDs, where there is lag time between when 
health plans are required to obtain an HPID and when covered entities 
are required to begin using HPIDs in the standard transactions, will 
allow the opportunity for dual use and sufficient time for a successful 
transition. The additional time will allow industry the opportunity to 
perform extensive testing of the HPID prior to full implementation.
    Comment: Commenters recommended that large and small health plans 
have the same full implementation date by which all covered entities 
must use the HPID should be established.
    Response: Based on the comments above regarding the compliance 
dates for HPID, the following changes have been made to the 
implementation requirements to ensure a smooth transition to the HPID. 
The effective date of this final rule is 60 days after the publication 
date of this rule. Compliance with the implementation specifications 
for obtaining the HPID will be 2 years after the effective date of this 
rule, except for small health plans, which will have 3 years after the 
effective date of this rule. Full implementation of the HPID--or the 
date by which all covered entities must use HPIDs to identify health 
plans that have an HPID--will be 4 years after the effective date of 
this rule. To reflect our intention of having a single date by which 
all covered entities must have fully implemented the HPID, we are 
referring to 4 years after the effective date of this rule) as the full 
implementation date for the HPID. We determined that 2 years after the 
time health plans (other than small health plans) are required to have 
obtained their HPIDs and 1 year after the time when small health plans 
are required to have obtained their HPIDs provides more than sufficient 
time for all covered entities to make any necessary system changes 
prior to the full implementation date of 4 years after the effective 
date of this rule. In Chart 1, we provide the actual HPID compliance 
and implementations dates based on the timeframes discussed in this 
section of the final rule. These dates are also reflected in the DATES 
section of this final rule.

                                          Chart 1--HPID Implementation
----------------------------------------------------------------------------------------------------------------
                                                                            Full implementation date-- for using
           Entity type               Compliance date for obtaining HPID        HPID in standard transactions
----------------------------------------------------------------------------------------------------------------
Health Plans, except small health  November 5, 2014......................  November 7, 2016.
 plans.
Small Health Plans...............  November 5, 2015......................  November 7, 2016.
Healthcare Clearinghouses........  N/A...................................  November 7, 2016.
Healthcare Providers.............  N/A...................................  November 7, 2016.
----------------------------------------------------------------------------------------------------------------

    After consideration of the public comments received, we are 
modifying the compliance requirements of the HPID and have made changes 
to the regulation text to reflect these new dates. We have revised 
Sec.  162.504(a) to reflect the new policy that all covered entities 
are required to use HPIDs in the standard transaction by 4 years after 
the effective date of this rule and removed references to compliance 
dates for covered health care providers and health care clearinghouses 
that are no longer necessary.

[[Page 54680]]

III. Addition to the National Provider Identifier Requirements

A. Background

    As discussed in section I of this final rule, the final rule 
adopting the NPI as the standard unique health identifier for health 
care providers was published on January 23, 2004 (69 FR 3434) (``2004 
NPI final rule''). While the 2004 NPI final rule requires covered 
health care providers to obtain NPIs for themselves and certain 
subparts and use them in standard transactions, it does not require a 
health care provider who is not a covered entity to obtain an NPI. Even 
if a noncovered health care provider chooses to obtain an NPI, the 
provider is not required to comply with certain NPI requirements, which 
means the provider does not have to disclose its NPI to entities who 
may need it for standard transactions. When a noncovered health care 
provider does not obtain an NPI or does not disclose it, certain 
problems arise for entities that need to identify that noncovered 
health care provider in standard transactions. We proposed an addition 
to the requirements in the NPI regulations to address such problems.
    The 2004 NPI final rule (69 FR 3445) recognized that, 
``[s]ituations exist in which a standard transaction must identify a 
health care provider that is not a covered entity * * *. A noncovered 
health care provider may or may not have applied for and received an 
NPI. In the latter case, * * * an NPI would not be available for use in 
the standard transaction. We encourage every health care provider to 
apply for an NPI, and encourage all health care providers to disclose 
their NPIs to any entity that needs that health care provider's NPI for 
use in a standard transaction. Obtaining NPIs and disclosing them to 
entities so they can be used by those entities in standard transactions 
will greatly enhance the efficiency of health care transactions 
throughout the health care industry * * *. The absence of NPIs when 
required in * * * claims by the implementation specifications may delay 
preparation or processing of those claims, or both. Therefore, we 
strongly encourage health care providers that need to be identified in 
standard transactions to obtain NPIs and make them available to 
entities that need to use them in those transactions.''
    The 2004 NPI final rule (69 FR 3445) provided the following example 
of a situation when a health care provider is not a covered entity but 
its NPI is needed for a standard transaction: ``A pharmacy claim that 
is a standard transaction must include the identifier (which, as of the 
compliance date, would be the NPI) of the prescriber. Therefore, the 
pharmacy needs to know the NPI of the prescriber in order to submit the 
pharmacy claim. The prescriber may be a physician or other practitioner 
who does not conduct standard transactions. The prescriber is 
encouraged to obtain an NPI so it can be furnished to the pharmacy for 
the pharmacy to use on the standard pharmacy claim.''
    Within just a few months after implementation of the 2004 NPI final 
rule, this issue had been raised so frequently to HHS that, on 
September 23, 2008, it published a Frequently Asked Question to address 
questions about pharmacy claims rejected by payers for lack of an 
individual prescriber NPI (Answer ID 9419) (https://
questions.cms.hhs.gov/app/answers/detail/a--id/9419/~/does-the-
national-provider-identifier-(npi)-final-rule-require-individual).
    Due to recurring issues, we believe this scenario described in the 
2004 NPI final rule needs to be addressed. Pharmacies are encountering 
situations where the NPI of a prescribing health care provider needs to 
be included in the pharmacy claim, but the prescribing health care 
provider does not have an NPI or has not disclosed it. This situation 
has become particularly problematic in the Medicare Part D program, as 
we explain more fully later in this final rule.
    By way of background, every prescriber has at least one identifier 
that may be submitted on a pharmacy claim. These identifiers include 
the NPI, Drug Enforcement Administration (DEA) number, uniform provider 
identification number (UPIN), or State license number. The Medicare 
Part D program is an optional prescription drug benefit for all 
Medicare beneficiaries. Medicare Part D contracts with private 
companies, called plan sponsors, to administer the benefit through Part 
D drug plans. In the Medicare Part D program, plan sponsors must submit 
a prescription drug event (PDE) record to Medicare Part D every time a 
beneficiary's prescription is filled under the program. Plan sponsors 
use information from the claim generated by the pharmacy to complete 
the PDE record, which contains summary information. These PDE records, 
which currently must contain a prescriber identifier, are necessary to 
support accurate payments to plan sponsors by Medicare Part D.
    The use of multiple and invalid prescriber identifiers in the 
Medicare Part D program has been identified as a concern. In a June 
2010 report titled, ``Invalid Prescriber Identifiers on Medicare Part D 
Drug Claims'' (``June 2010 report''), the HHS Office of the Inspector 
General (OIG) reported the findings of its review of prescriber 
identifiers on 2007 Part D PDE records. The OIG reported finding 18.4 
million PDE records that contained 527,749 invalid identifiers, 
including invalid NPIs, DEA registration numbers, and UPINs. Payments 
by Part D drug plans and enrollees for prescriptions associated with 
these PDE records totaled $1.2 billion. Prescriber identifiers are 
valuable Part D program safeguards. These identifiers are the only data 
on Part D drug claims to represent that licensed practitioners have 
written prescriptions for Medicare enrollees. Although invalid 
prescriber identifiers are not an automatic indication of erroneous or 
fraudulent prescriptions or pharmacy claims, the lack of valid 
prescriber identifiers on Part D drug claims hampers Medicare's program 
integrity efforts.
    To address these concerns raised by the June 2010 report, in the 
``Medicare Program; Changes to the Medicare Advantage and the Medicare 
Prescription Drug Benefit Programs for Contract Year 2013 and Other 
Changes'' final rule (which was published in the April 12, 2012 Federal 
Register (77 FR 22072) and is hereinafter referred to as the April 2012 
final rule), CMS requires Part D sponsors to include an active and 
valid prescriber NPI on prescription drug event records (PDEs) that 
they submit to CMS beginning January 1, 2013. This change will assist 
the Federal government in fighting possible fraudulent activity in the 
Part D program, because prescribers will be consistently and uniformly 
identified. This policy will not interfere with beneficiary access to 
needed medications because Part D sponsors must validate the NPI at 
point of sale, and if this is not possible, permit the prescription to 
be dispensed by paying the claim and obtaining the valid NPI afterwards 
(77 FR 22075).
    Pharmacies that contract with Part D sponsors may be involved in 
obtaining a prescriber's NPI depending on the agreement between the 
pharmacies and Part D sponsors. However, Part D sponsors and pharmacies 
generally have no regulatory leverage or other recourse over 
prescribers who do not have NPIs or do not disclose them. In the latter 
case, the sponsors and pharmacies must resort to using provider 
information databases to determine if a prescriber has an NPI, or 
contact the prescriber if known. If a Part D sponsor or network 
pharmacy is unable to obtain a prescriber NPI for use on the claim and 
PDE, the reimbursement from Medicare

[[Page 54681]]

Part D to the sponsor (or alternatively, from the sponsor to the 
pharmacy depending on the agreement between the parties), could be 
negatively affected. This final rule addresses the problems that are 
presented by prescribers who do not have NPIs or do not disclose them, 
by proposing an additional requirement in the NPI regulations.

B. Provisions for a Requirement To Obtain and Use NPIs

    We proposed an additional requirement for organization covered 
health care providers that have as a member, employ, or contract with, 
an individual health care provider who is not a covered entity and is a 
prescriber. Organization health care providers are health care 
providers that are not individuals. Our proposal would require an 
organization to require such a prescriber to: (1) Obtain an NPI; and 
(2) to the extent the prescriber writes a prescription while acting 
within the scope of the prescriber's relationship with the 
organization, disclose the NPI upon request to any entity that needs it 
to identify the prescriber in a standard transaction.
    Organization covered health care providers would be required to 
implement the requirement within 180 days after the effective date of 
the final rule, which we proposed would be reflected in 45 CFR 
162.404(a)(2) with regulation text stating that an organization covered 
health care provider must comply with the implementation specifications 
in 45 CFR 162.410(b). For example, if the final rule was effective on 
October 1, 2012, covered organization health care providers would have 
to meet the requirement by April 7, 2013.
    We proposed that the requirement would be reflected in the 
regulation text in 45 CFR 162.410(b) by adding the following new 
language. ``An organization covered health care provider that has as a 
member, employs, or contracts with an individual health care provider 
who is not a covered entity and is a prescriber, must require such 
health care provider to: (1) Obtain an NPI from the National Plan and 
Provider Enumeration System (NPPES) and (2) to the extent the 
prescriber writes a prescription while acting within the scope of the 
prescriber's relationship with the organization, disclose the NPI upon 
request to any entity that needs it to identify the prescriber in a 
standard transaction.''
    This requirement represents a narrow exception to the position we 
took in the 2004 NPI final rule. In the 2004 NPI final rule (69 FR 
3440), we stated ``[w]e do not consider individuals who are health care 
providers * * * and who are members or employees of an organization 
health care provider to be ``subparts'' of those organization health 
care providers, as described earlier in this section. Individuals who 
are health care providers are legal entities in their own right. The 
eligibility for an ``Entity type code 1'' NPI of an individual who is a 
health care provider and a member or an employee of an organization 
health care provider is not dependent on a decision by the organization 
health care provider as to whether or not an NPI should be obtained 
for, or by, that individual. The eligibility for an ``Entity type code 
1'' NPI of a health care provider who is an individual is separate and 
apart from that individual's membership or employment by an 
organization health care provider.''
    We still do not consider noncovered health care providers that are 
prescribers to be subparts of organization health care providers, and 
we did not propose that they would not be legal entities in their own 
right. This final rule closes a gap in the NPI rule by virtue of the 
types of relationships that covered organization health care providers 
have with noncovered individual health care providers.
    The providers we intend to reach are prescribers who are not 
required to obtain and disclose an individual NPI under the current NPI 
regulations. To the best of our understanding, these prescribers are 
largely hospital-based providers who staff clinics and emergency 
departments, or otherwise provide on-site medical services, such as 
medical residents and interns, as well as prescribers in group 
practices, whose services are billed under a group, or ``Entity type 
code 2'', NPI regardless of whether they have obtained an individual, 
or ``Entity type code 1,'' NPI. These prescribers are using the 
``Entity type code 2'' to identify themselves on prescriptions, which 
does not identify them as individuals, or are using no identifier.
    We believe this final rule describes the various relationships that 
organization health care providers have with such prescribers, and that 
the relationship is one in which organizations can exercise control 
over these prescribers and require them to do something. For instance, 
a physician or dentist who prescribes may be a member of a group 
practice. As noted in the 2004 NPI final rule (69 FR 3439 and 3440), 
``group health care providers are entities composed of one or more 
individuals (members), generally created to provide coverage of 
patients' needs in terms of office hours, professional backup and 
support, or range of services resulting in specific billing or payment 
arrangements. For purposes of this rule, we consider group health care 
providers to be organization health care providers.'' By virtue of the 
contractual or other relationship between a group and a member, a group 
can require the member to do certain things, such as work certain on-
call hours. Likewise, a resident or nurse practitioner who performs 
medical services at a hospital can be required to do certain things, 
such as to abide by medical staff by-laws and hospital policies and 
procedures, as a hospital employee or contractor.
    This final rule does not specify how organization covered health 
care providers should impose the requirement to obtain an NPI and 
disclose it on prescribers. Organization covered health care providers 
may have a number of alternatives by which they may accomplish this, 
for example, through a written agreement, an employment contract, or a 
directive to abide by the organization health care provider's policies 
and procedures.
    We proposed that the requirement for a prescriber to disclose his 
or her NPI would apply for prescriptions written pursuant to the 
prescriber's relationship with the covered health care organization 
provider. For example, if a physician works for two group practices, A 
and B, group practice A would have to require the physician to disclose 
his or her NPI for pharmacy claims that are for prescriptions written 
by the prescriber for a patient of group practice A, and group practice 
B would be required to do the same for pharmacy claims for 
prescriptions written by the prescriber for a patient of that group 
practice.
    We considered expanding our proposal to organization covered health 
care providers that grant clinical privileges to individual health care 
providers who are not covered entities and are prescribers, so that we 
would be certain to encompass hospital residents and interns under our 
proposal (to the extent they are not otherwise required to obtain Type 
1 NPIs). However, it is our belief such prescribers will be encompassed 
under this final rule, as we believe it encompass virtually all 
prescribers who are not currently required to obtain and disclose an 
individual NPI. Very limited exceptions may include, by way of example, 
a self-employed physician who does not bill insurance plans and does 
not have a member, employee or contractual relationship with an 
organization covered health care provider (or has one

[[Page 54682]]

with a noncovered organization health care provider), such as a 
psychiatrist or plastic surgeon who only accepts cash-paying patients. 
Even with respect to these prescribers, we hope this final rule 
highlights the importance of voluntarily obtaining NPIs to facilitate 
their patients' access to prescribed items.
    We believe this final rule furthers several goals and purposes 
identified in the Act. First, the statutory purpose of the 
Administrative Simplification provisions of HIPAA (see section 261 of 
the Act (42 U.S.C. 1320d note)) is to improve the Medicare program 
under title XVIII of the Act, the Medicaid program under title XIX of 
such Act, and the efficiency and effectiveness of the health care 
system, by encouraging the development of a health information system 
through the establishment of uniform standards and requirements for the 
electronic transmission of certain health information and to reduce the 
clerical burden on patients, health care providers, and health plans. 
In accord with this statutory purpose, this final rule will improve the 
Medicare program by virtually ensuring the availability of an NPI as a 
prescriber identifier on pharmacy claims in the Part D program, because 
virtually all prescribers would have to obtain an NPI and disclose it 
to entities that need it for use in standard transactions. This, in 
turn, would support program integrity efforts described in the April 
2012 final rule which requires Part D sponsors to submit PDEs that 
contain only individual NPIs as prescriber identifiers, effective 
January 1, 2013.
    As noted in the April 2012 final rule, ``[w]hen multiple prescriber 
identifiers, not to mention dummy or invalid identifiers, are used, 
authorities must take an additional step in their data analysis before 
even achieving a refined data set to use for further analysis to 
identify possible fraud. For example, having to cross-reference 
multiple databases that update on different schedules to be certain of 
the precise prescribers involved when multiple identifiers were used, 
would necessitate several additional steps of data pre-analysis and 
also would introduce potential errors in correctly matching prescribers 
among databases.'' Invalid identifiers are generally those that do not 
appear as current in any prescriber identifier registry. Dummy or 
default identifiers have never appeared in any prescriber identifier 
registry but have been used successfully on pharmacy claims in place of 
valid prescriber identifiers (for instance, when the prescriber's NPI 
was not available), because they met the length and format requirements 
of a prescriber identifier. Dummy and default identifiers present 
additional challenges to authorities, since the actual prescription 
must be researched to identify the prescriber.
    Valid prescriber identifiers are essential to conducting claims 
analyses to identify aberrant claims prescribing patterns that may 
indicate fraudulent activity, such as drug diversion schemes or billing 
for prescription drugs not provided, which includes circumstances with 
active prescriber participation and those involving forged 
prescriptions. Improving the accuracy and dependability of the 
prescriber identifier on Part D claims and PDEs, improves the ability 
to identify fraud and, in turn, protects and improves the Medicare 
program.
    This final rule further improves the Medicare program by nearly 
eliminating the instances in which Part D sponsors' reimbursement (or 
possibly their network pharmacies' reimbursement, depending on the 
contractual relationship between the sponsors and the pharmacies) would 
be negatively impacted due to the actions of prescribers with whom they 
may have no business relationship. Part D sponsors would be expected to 
price any measurable expectation of financial risk, if any, due to 
nonreimbursement by CMS into their Part D bids, thus possibly 
increasing premiums and subsidies paid under the program. This final 
rule makes such action by Part D sponsors unnecessary by virtually 
ensuring the availability of prescriber NPIs for PDEs.
    This final rule also accords with the purpose of HIPAA as amended 
by the Affordable Care Act. Section 1104(a)(2) of the Affordable Care 
Act revised the statutory purpose of HIPAA Administrative 
Simplification by adding, at the end, that its purpose is to ``reduce 
the clerical burden on patients, health care providers, and health 
plans.'' To the extent pharmacies only have to accept one identifier--
the NPI--rather than four possible identifiers from prescribers for the 
majority of their claims, the administrative burden on all parties 
involved in the processing and payment of these claims is lessened. 
Pharmacies and payers should no longer have to cross-check provider 
identifier databases to determine if the prescriber has an NPI when an 
alternate identifier was used, or contact the prescriber. Moreover, 
pharmacies and prescribers should no longer have to respond to 
inquiries from payers regarding the existence of an NPI because an 
alternate prescriber identifier is used.
    The final rule is also supported by section 1173(a)(3) of the Act, 
which requires the transaction standards adopted by the Secretary to 
accommodate the needs of different types of health care providers. This 
final rule accommodates the needs of pharmacies, a type of health care 
provider, by ensuring that a prescriber NPI is available to them when 
needed for their claims and reducing the instances in which they must 
cross-reference provider information databases or research a 
prescription. Similarly, section 1173(b)(1) of the Act states that,

    [t]he Secretary shall adopt standards providing for a standard 
unique health identifier for each individual, employer, health plan, 
and health care provider for use in the health care system. In 
carrying out [this requirement] for each health plan and health care 
provider, the Secretary shall take into account multiple uses for 
identifiers and multiple locations and specialty classifications for 
health care providers.

This final rule takes into account the particular needs of pharmacies 
for an NPI.
    While some prescribers will have to apply to obtain an NPI under 
this requirement, the NPI is free of charge and requires only the 
completion of a three-page application form that primarily seeks 
identifying and location information. Thus, we believe the reduction in 
administrative burden that will be achieved by this final rule 
outweighs the minimal burden placed on prescribers who will have to 
obtain NPIs.
    The 2004 NPI final rule, as noted previously, foretold the issues 
that could arise if noncovered health care providers did not obtain 
NPIs, and therefore encouraged them to do so. The preamble of the 2004 
NPI final rule stated that disclosing NPIs to entities for use in 
standard transactions will greatly enhance the efficiency of health 
care transactions throughout the health care industry, and that the 
absence of NPIs when required in those claims by the implementation 
specifications may delay preparation or processing of those claims, or 
both. Health care providers responded by obtaining NPIs in large 
numbers, even when not required to, and we believe the vast majority of 
prescribers already have NPIs. CMS data shows that approximately 90 
percent of Medicare Part D claims as reported in PDEs submitted through 
January 2012 contained valid prescriber NPIs even though alternate 
prescriber IDs are currently permitted. Less than 1 percent of PDEs 
were submitted without a valid identifier. Nevertheless, while the vast 
majority of Medicare Part D claims contain individual NPIs, 10 percent 
do not. We note that this submission rate increased incrementally 
through the

[[Page 54683]]

latter months of 2011, likely due to the issuance of the CY 2012 Part D 
final call letter on April 4, 2011, signaling that CMS was considering 
only accepting individual prescriber NPIs on PDEs for CY2013, the 
subsequent CMS outreach to sponsors and pharmacies, and the CMS April 
12, 2012 final rule requiring individual prescriber NPIs be submitted 
with PDEs. This final rule, coupled with the CMS April 12, 2012 final 
rule, will help ensure this last 10 percent is addressed.
    After discussions with representatives of the provider data 
industry in the fall of 2011, we estimated at that time that there were 
approximately 1.4 million active prescribers in the United States, of 
which approximately 160,000 did not have an NPI. It is these 
prescribers who will have to obtain an NPI under this final rule.
    Comment: A national and a state hospital association, several 
health care provider associations, a standards organization and a 
company offering connectivity solutions to health care providers, 
supported our proposal. The state hospital association stated that it 
was aware of patients being unable to fill pharmacy prescriptions 
because the prescriber NPIs were not available and had already 
encouraged its members to obtain NPIs for interns, residents and other 
prescribers. One provider association specifically acknowledged that 
our proposal would improve coordination of patient care, increase anti-
fraud detection capabilities, and is in line with the goal of 
modernizing and reforming the health system at large. The company 
agreed with our statement that, because there are few health care 
providers who do not already have an individual NPI, our proposal would 
have little impact on health care providers and the industry at large.
    Response: We appreciate and agree with these comments. We are 
concerned about any pharmacy claims being denied for lack of a 
prescriber NPI, for instance, because the payer requires an individual 
NPI to be submitted on the pharmacy claim, especially when the payer is 
not required to pay the claim and obtain the NPI later. We believe this 
final rule will address this issue.
    Comment: Two prescription health plans/pharmacy benefit managers 
supported the proposal, but encouraged us to go further and require all 
prescribers to obtain and disclose individual NPIs. Another commenter, 
a hospital association, echoed the idea that all prescribers be 
required to obtain and disclose individual NPIs. A third commenter 
recommended expanding the requirement to all individual referring, 
ordering, and rendering providers. In the alternative, one of the 
commenters expressed the hope that our rule would highlight the 
importance of health care providers voluntarily obtaining individual 
NPIs to facilitate their patients' access to prescribed items.
    Response: We appreciate the support for our proposal and also hope 
that all health care providers who do not currently have an individual 
NPI will voluntarily obtain them and not wait to be directed to do so 
by an organization covered health care provider of whom they are a 
member, are employed by, or with whom they have a contractual 
relationship. We note that HIPAA does not give us direct authority over 
health care providers who are not covered entities.
    In addition, our proposal was intended to address specific problems 
that are presented by prescribers who do not have NPIs or do not 
disclose them. Therefore, our proposal was designed in consideration of 
our authority under HIPAA and narrowly tailored to address these 
specific problems.
    Comment: A commenter, expressed concern about the compliance burden 
placed on hospitals, stating that significant staff time would be 
required to mandate, track and disclose NPIs for all prescribers who 
are a member, employee, or contract with a hospital, because it would 
necessitate the maintenance of a central database that would have to 
provide 24-hour staffing to disclose these NPIs to retail pharmacies. 
Another commenter, urged us not to underestimate the impact of this 
final rule on software vendors and their customers, especially those in 
the hospital systems market, without providing any specific details 
about the concerns. However, another commenter agreed with our 
statement that organization covered health care providers may have 
several alternatives for compliance.
    Response: The proposed rule did not specify how organization 
covered health care providers should impose the requirement on 
individual health care providers who are prescribers. We tried to be 
very clear in the preamble of the proposed rule that organization 
health care providers may have a number of alternatives for doing so, 
for example through a written agreement, an employment contract, or a 
directive to abide by the organization health care provider's policies 
and procedures. Organization covered health care providers may choose a 
proactive approach to ensure the requirement it imposes upon individual 
prescribers is followed by the prescribers. Other organizations may 
choose to take action upon any inquiries or complaints that a 
prescriber does not have an NPI or has not disclosed it on 
prescriptions, for instance. With respect to the latter, organization 
covered health care providers may want to also voluntarily impose an 
additional requirement on prescribers to proactively disclose their 
individual NPIs, so the organization covered health care provider 
receives as few inquiries or complaints as possible. In addition, we 
note that pharmacies and payers have access to prescriber NPI databases 
which are routinely consulted at point-of-sale, to which the additional 
NPIs that must be obtained under this final rule will be added. In this 
regard, we fully expect that prescribers will abide by an organization 
covered health care provider's requirement to obtain an NPI, if they 
have not already done so voluntarily. We do not expect hospitals to 
respond to NPI inquiries on a 24-hour basis, but rather, to respond in 
a reasonable timeframe to what we believe will be infrequent inquiries 
about prescriber NPIs, or virtually no inquiries, if the prescribers 
proactively disclose them on the prescriptions they write. We note that 
such action by prescribers will assist their patients in obtaining the 
medications they have prescribed for them.
    With respect to hospital computer updates, we note that individual 
NPIs are already obtained by prescribers, who are members of, employed 
by, or contracted with, hospitals, and disclosed to pharmacies. Our 
proposal merely marginally expands the pool of prescribers who will be 
required, by virtue of certain relationships with organization covered 
health care providers, to obtain individual NPIs and disclose them. 
While some hospitals may desire to implement computer updates to 
prevent the use of an alternate prescriber identifier on a 
prescription, it is not required by this final rule. Thus, we do not 
believe compliance with this new requirement will necessarily be 
burdensome.
    Comment: A commenter responded to our specific request for comments 
on whether our proposal would reach residents and interns by stating 
that it would. Another commenter expressed concerns about our 
proposal's applicability to residents, interns and medical students, 
stating that residents and interns are not in full control of what is 
ordered and are typically acting upon an attending physician's 
directive, and that medical students would not order or prescribe 
without counter signature. This commenter suggested that residents 
obtain an NPI for use during their training tenure and later, a 
different one for actual practice. A third

[[Page 54684]]

commenter requested that we require residents, medical students, and 
prescribers coming from abroad to obtain their NPIs before they leave 
training/school and before they enter the United States, respectively.
    Response: With respect to the concerns expressed about the 
applicability of our proposal to resident, interns, and medical 
students, and what their authority is to prescribe, our proposal 
applies to all health care providers who are prescribers. Thus, to the 
extent a resident, for example, is a prescriber under applicable state 
law, and is reached by this new NPI requirement by virtue of his or her 
relationship with an organization covered health care provider, such 
resident will have to obtain and disclose his or her individual NPI. 
While there is currently no NPI type that identifies a person as being 
in his or her residency, for purposes of data analysis, a physician can 
identify the period of time during which they are/were a resident with 
certainty in any outlier analysis. In addition, the NPI is intended to 
be a lasting identifier for the health care provider to which or whom 
it has been assigned. In the 2004 NPI final rule (69 FR 3441), we 
stated that, ``[f]or health care providers with an `Entity type code' 
of 1, the NPI will be a permanent identifier, assigned for life, unless 
circumstances justify deactivation.'' Residents and other health care 
providers en route to this country should be reached by this final rule 
by virtue of their relationships with the organization covered health 
care providers pursuant to which they are prescribers. If they are not 
prescribers, they will not be reached by this final rule.
    Comment: A commenter suggested that we replace ``NPI'' in the 
regulation text with ``Type 1 NPI.'' The commenter also suggested that, 
in order to be more precise as to our intent, we add the word 
``proactively'' before ``disclose'' in Sec.  162.410(b)(2) so that the 
regulation would read ``To the extent the prescriber writes a 
prescription while acting within the scope of the prescriber's 
relationship with the organization, proactively disclose the NPI * * 
*''
    Response: We disagree with the commenter about the suggestion to 
add ``Type 1'' to the regulations text. Only individuals may obtain a 
Type 1 NPI, so adding ``Type 1'' to the regulation text as the 
commenter suggested would be redundant. With respect to the comment 
that urges us to add the term ``proactively'' to the regulation, we do 
not require other covered health care providers to proactively disclose 
their NPIs, and we do not believe it would be appropriate to single out 
individual prescriber health care providers to do so. We did not 
propose such a change, but we do encourage organization covered health 
care providers to require prescribers who are members, employees, or 
with whom they have a contractual relationship, to proactively disclose 
their Type 1 NPIs on the prescriptions they write, so the pharmacy has 
it for the claim and there will be no need for additional follow-up by 
the pharmacy or payer.
    Comment: A commenter stated that there appears to be a loophole in 
the regulation text, when a provider who is not contracted (for 
example, out of network), but who bills a health plan, would not need 
to obtain an individual NPI.
    Response: We believe the commenter misunderstands the applicability 
of our proposal. Our proposal applies to organization covered health 
care providers. Health plans are not organization covered health care 
providers. In addition, to the extent a health care provider bills a 
health plan, such health care provider, if a covered health care 
provider, would be required to obtain an NPI under HIPAA. If the 
prescriber is not a covered health care provider but is, for example, a 
member of a group practice that does bill health plans, this final rule 
will reach that prescriber by virtue of his or her relationship with 
the group practice.
    Comment: A few commenters made a number of suggestions concerning 
data enhancements to the NPPES data base and NPI registry.
    Response: Our proposal was very limited. We consider these 
comments, suggesting the creation of new types of NPI numbers and data 
base enhancements, to be beyond the scope of our proposal, although we 
appreciate suggestions for future improvements.
    After consideration of the public comments received, we are 
finalizing these provisions as proposed

C. Effective and Compliance Dates

    We proposed that the date by which an organization covered health 
care provider must comply is 180 days after the effective date of the 
final rule. In other words, if the final rule is effective 60 days 
after the date of publication; then 180 days after the effective date, 
organization covered health care providers that have a prescriber as a 
member, employ, or contract with a prescriber who is not a covered 
entity must require him or her to: (1) obtain an NPI and; (2) to the 
extent the prescriber writes a prescription while acting within the 
scope of the prescriber's relationship with the organization, disclose 
the NPI upon request to any entity that needs it to identify the 
prescriber in a standard transaction.
    Comment: A commenter stated that the NPI implementation date of 
October 1, 2013 is not attainable. Other commenters requested that the 
compliance deadline be delayed until 1 year after the publication of 
the final rule so that organization covered health care providers have 
sufficient time to implement the requirement.
    Response: We are not certain why the other commenter is referring 
to a compliance date of October 1, 2013. We proposed that the 
compliance date for the modification to the NPI rule would be 180 days 
after the effective date of the final rule. This final rule is 
effective on 60 days after the date of publication, which means that 
the compliance date is 180 days after the effective date of this final 
rule. In other words, by 180 days after the effective date of this 
final rule, a organization covered health care provider that has a 
member, employs, or contracts with, an individual health care provider 
who is not a covered entity and is a prescriber, must require such 
health care provider to obtain an NPI from NPPES and, to the extent the 
prescriber writes a prescription while acting within the scope of the 
prescriber's relationship with the organization, disclose the NPI upon 
request to any entity that needs it to identify the prescriber in a 
standard transaction.
    Comment: A few commenters requested that CMS align the compliance 
date of this NPI requirement with the compliance date in the Medicare 
Part D program requirement that PDEs be submitted with individual NPIs 
beginning January 1, 2013.
    Response: The Medicare Part D Program PDE requirement that PDEs 
must include a valid and active NPI is effective on January 1, 2013. In 
order to align the compliance date of the Part D requirement with the 
NPI requirement adopted in this final rule, CMS would have to delay the 
new requirement for PDEs or we would have to provide a compliance date 
for the NPI requirement that is substantially shorter than 180 days. We 
are not willing to shorten the 180-day compliance date in order to give 
covered organization health care providers sufficient time to comply 
with this final rule. Further, the CMS Medicare Part D program 
requirement is not within the scope of this regulation. Therefore, we 
cannot accept the commenter's suggestion.
    After consideration of the public comments received, we are 
finalizing these provisions as proposed.

[[Page 54685]]

IV. Change to the Compliance Date for ICD-10-CM and ICD-10-PCS

A. Background

    As discussed in section I. of this final rule, the final rule 
adopting ICD-10-CM and ICD-10-PCS (collectively, ``ICD-10'') as HIPAA 
standard medical data code sets was published in the Federal Register 
on January 16, 2009 (74 FR 3328) (the ``2009 ICD-10 final rule''). The 
2009 ICD-10 final rule requires covered entities to use ICD-10 
beginning October 1, 2013.
    In late 2011 and early 2012, three issues emerged that led the 
Secretary to reconsider the compliance date for ICD-10: (1) The 
industry transition to Version 5010 did not proceed as effectively as 
expected; (2) providers expressed concern that other statutory 
initiatives are stretching their resources; and (3) surveys and polls 
indicated a lack of readiness for the ICD-10 transition.
1. The Transition to Version 5010 and Its Effect on ICD-10 Readiness
    Concurrent with the publication of the 2009 ICD-10 final rule, HHS 
published in the Federal Register the Modifications final rule which 
set January 1, 2012 as the compliance date for Version 5010 (74 FR 
3296). As the industry approached the January 1, 2012 Version 5010 
compliance date, a number of implementation problems emerged, some of 
which were unexpected. These included--
     Trading partners were not ready to test the Version 5010 
standards due to vendor delays in delivering and installing Version 
5010-compliant software to their provider clients;
     Version 5010 errata were issued to correct typographical 
mistakes and other maintenance issues were discovered as the industry 
began its internal testing of the standards, which delayed vendor 
delivery of compliant products and external testing;
     Differences between address requirements in the ``provider 
billing address'' and ``pay to'' address fields adversely affected 
crossover claims processing;
     Inconsistent payer interpretation of standard requirements 
at the front ends of systems resulted in rejection of claims, as well 
as other technical and standard misinterpretation issues;
     Edits made in test mode were later changed when claims 
went into production without adequate notice of the change to claim 
submitters; and
     Insufficient end to end testing with the full scope of 
edits and business rules in place to ensure a smooth transition to full 
production.
    Given concerns that industry would not be compliant with the 
Version 5010 standards by the January 1, 2012 compliance date, we 
announced on November 17, 2011 that we would not initiate any 
enforcement action against any covered entity that was not in 
compliance with Version 5010 until March 31, 2012, to enable industry 
adequate time to complete its testing and software installation 
activities. On March 15, 2012, this date was extended an additional 3 
months, until June 30, 2012.
    The 2009 ICD-10 final rule set October 1, 2013 as the compliance 
date, citing industry testimony presented to NCVHS and many of the over 
3,000 industry comments received on the 2009 ICD-10 final rule. The 
analysis in the 2009 ICD-10 final rule with regard to setting a 
compliance date emphasized the interdependency between implementation 
of ICD-10 and Version 5010, and the need to balance the benefits of 
ICD-10 with the need to ensure adequate time for preparation and 
testing before implementation. As noted in the 2009 ICD-10 final rule 
(74 FR 3334), ``[w]e cannot consider a compliance date for ICD-10 
without considering the dependencies between implementing Version 5010 
and ICD-10. We recognize that any delay in attaining compliance with 
Version 5010 would negatively impact ICD-10 implementation and 
compliance.'' Based on NCVHS recommendations and industry feedback 
received on the 2009 ICD-10 final rule (74 FR 3334), we determined that 
``24 months (2 years) is the minimum amount of time that the industry 
needs to achieve compliance with ICD-10 once Version 5010 has moved 
into external (Level 2) testing.'' In the 2009 ICD-10 final rule, we 
concluded that the October 2013 date provided the industry adequate 
time to change and test systems given the 5010 compliance date of 
January 1, 2012.
    As implementation of ICD-10 is predicated on the successful 
transition of industry to Version 5010, we are concerned that the 
delays encountered in the implementation of Version 5010 have affected 
ICD-10 planning and transition timelines.
2. Providers' Concerns That Other Statutory Initiatives Are Stretching 
Their Resources
    Since publication of the 2009 ICD-10 and Modifications final rules, 
a number of other statutory initiatives were enacted, requiring health 
care provider compliance and reporting. Providers are concerned about 
their ability to expend limited resources to implement and participate 
in the following initiatives that all have similar compliance 
timeframes.
    The EHR Incentive Program was established under the Health 
Information Technology for Economic and Clinical Health (HITECH) Act, a 
part of the American Recovery and Reinvestment Act of 2009 (ARRA) (Pub. 
L. 111-5). Medicare and Medicaid incentive payments are available to 
eligible professionals and hospitals for adopting EHR technology and 
demonstrating meaningful use of such technology. Eligible professionals 
and hospitals that fail to meaningfully use EHR technology could be 
subject to Medicare payment adjustments beginning in FY 2015. The 
Physician Quality Reporting System (PQRS) is currently a voluntary 
reporting program that provides incentive payments to eligible 
professionals and group practices that satisfactorily report data on 
quality measures for covered Physician Fee Schedule services furnished 
to Medicare Part B fee-for-service beneficiaries. However, eligible 
professionals and group practices who do not meet the reporting 
requirements will start receiving penalties in 2015. The Electronic 
Prescribing (eRx) Incentive Program is a reporting program that uses a 
combination of incentive payments and payment adjustments to encourage 
electronic prescribing by eligible professionals. Beginning in 2012 
through 2014, eligible professionals who are not successful electronic 
prescribers are subject to a payment adjustment. Finally, section 1104 
of the Affordable Care Act imposes additional HIPAA Administrative 
Simplification requirements on covered entities, shown in Chart 2.

[[Page 54686]]

      Chart 2--HIPAA Compliance Dates From the Affordable Care Act
------------------------------------------------------------------------
                                         HIPAA Requirements from the
  Covered entity  compliance date            Affordable Care Act
------------------------------------------------------------------------
January 1, 2013...................   Operating rules for
                                     eligibility for a health plan and
                                     health care claim status
                                     transactions.
December 31, 2013.................   Health plan compliance
                                     certification requirements for
                                     health care electronic funds
                                     transfers (EFT) and remittance
                                     advice, eligibility for a health
                                     plan, and health care claim status
                                     transactions.
January 1, 2014...................   Standards and operating
                                     rules for health care electronic
                                     funds transfers (EFT) and
                                     remittance advice transactions.
December 31, 2015.................   Health plan compliance
                                     certification requirements for
                                     health care claims or equivalent
                                     encounter information, enrollment
                                     and disenrollment in a health plan,
                                     health plan premium payments,
                                     health care claims attachments, and
                                     referral certification and
                                     authorization transactions.
January 1, 2016...................   Standard for health care
                                     claims attachments.
                                     Operating rules for health
                                     care claims or equivalent encounter
                                     information, enrollment and
                                     disenrollment in a health plan,
                                     health plan premium payments,
                                     referral certification and
                                     authorization transactions.
4 years from effective date of       Unique health plan
 this rule (For more information     identifier.
 see section II.E. of this final
 rule.).
------------------------------------------------------------------------

3. Current State of Industry Readiness for ICD-10
    It is crucial that all segments of the health care industry 
transition to ICD-10 at the same time because the failure of any one 
industry segment to successfully implement ICD-10 has the potential to 
affect all other industry segments. Ultimately, such failure could 
result in returned claims and provider payment delays that disrupt 
provider operations and negatively impact patient access to care.
    In early 2012, it became evident that sectors of the health care 
industry would not be prepared for the October 1, 2013 ICD-10 
compliance date. Providers in particular voiced concerns about their 
ability to meet the ICD-10 compliance date as a result of a number of 
factors, including obstacles they experienced in transitioning to 
Version 5010 and the other initiatives that stretch their resources. A 
CMS survey conducted in November and December 2011 (hereinafter 
referred to as the CMS readiness survey) found that 26 percent of 
providers surveyed indicated that they are at risk for not meeting the 
October 1, 2013 compliance date.\4\
---------------------------------------------------------------------------

    \4\ ``Version 5010 and ICD-10 Readiness Assessment: Conducted 
among Health Care Providers, payers, and Vendors for the Centers for 
Medicare & Medicaid Services (CMS),'' December, 2011, Prepared by 
CMS. Survey responses received from 404 health care providers, 101 
payers, and 90 vendors.
---------------------------------------------------------------------------

    In February 2012, the Workgroup for Electronic Data Interchange 
(WEDI) conducted a survey on ICD-10 readiness, hereinafter referred to 
as the WEDI readiness survey.\5\ WEDI received responses from more than 
2,600 providers, health plans, and vendors showing that the industry is 
uncertain about its ability to meet ICD-10 compliance milestones. Data 
from the WEDI survey indicated that nearly 50 percent of the provider 
respondents did not know when they would complete their impact 
assessment.\6\ In addition, the survey found that approximately 33 
percent of providers did not expect to begin external testing in 2013, 
while approximately 50 percent of providers did not know when testing 
would occur.\7\
---------------------------------------------------------------------------

    \5\ ``Survey: ICD-10 Brief Progress,'' February 2012, conducted 
by the Workgroup for Electronic Data Interchange (WEDI).
    \6\ An impact assessment for ICD-10 is performed by a covered 
entity to determine business areas, policies, processes and systems, 
and trading partners that will be affected by the transition to ICD-
10. An impact assessment is a tool to aid in planning for 
implementation.
    \7\ For providers, the CMS ICD-10 Implementation Guide 
recommends that they complete their impact assessments by Winter 
2012 and begin external testing in the Fall of 2012. CMS provides 
implementation guides for providers, payers, and vendors to assist 
with the transition from ICD-9 to ICD-10 codes. It is a resource for 
covered entities providing detailed information for planning and 
executing the ICD-10 transition process. CMS recommends industry use 
the guide as a reference.
---------------------------------------------------------------------------

    Other segments of the industry, such as health plans and software 
vendors, also reported that they would benefit from additional time for 
implementation. While the CMS ICD-10 Implementation Guide recommends 
that payers begin external testing in the fall of 2012, the WEDI 
readiness survey found that most health plans do not expect to begin 
external testing until 2013. In addition, about 50 percent of vendors 
are not yet halfway through development of ICD-10 products. Vendor 
delays in product development can result in provider and payer delays 
in implementing ICD-10.
    Given the evidence that segments of the health care industry will 
likely not meet the October 1, 2013 compliance date, the reasons for 
that likelihood, and the likelihood that a compliance date delay would 
significantly improve the successful and concurrent implementation of 
ICD-10 across the health care industry, we proposed to extend the 
compliance date for ICD-10.

B. Public Comments on the 1-Year Delay of ICD-10

    Faced with growing evidence that a group of providers would not be 
ready to transition to ICD-10 on October 1, 2013, and the possibility 
that payment for millions of health care claims would be delayed, we 
considered the following options before proposing a 1-year delay of the 
compliance date in the April 2012 proposed rule:

Option 1: Maintain October 1, 2013 deadline
Option 2: Maintain the October 1, 2013 compliance date for ICD-10-PCS 
(procedure codes) and only delay the compliance date for ICD-10-CM 
(diagnosis codes)
Option 3: Forgo ICD-10 and wait for ICD-11
Option 4: Mandate a uniform delay of the compliance date for ICD-10

    We proposed Option 4, mandate a uniform delay for 1 year of the 
ICD-10 compliance date, because we believed it would be the most 
effective way to mitigate the significant systemic disruptions and 
payment delays that could result if a large percentage of providers are 
not ready to implement ICD-10 on October 1, 2013. In addition, as the 
Regulatory Impact Analysis (RIA) in this final rule indicates, Option 4 
is most likely to minimize the costs of delay and to maximize the 
benefits to providers who need more time to implement.
    Of the more than 500 public comments submitted, there was some 
support for each of the options considered. The compliance date of 
October 1, 2014, as proposed in the April 2012 proposed rule, was 
supported by the highest number of public comments in comparison to the 
other options. We summarize the

[[Page 54687]]

options from the April 2012 proposed rule below, present the public 
comments related to them, and provide our responses. We also summarize 
and respond to additional options and suggestions commenters presented 
that were not considered in the April 2012 proposed rule. Finally, we 
summarize some of the comments that address issues outside the scope of 
this regulation.
1. Option 1: Maintain October 1, 2013 Deadline
    Segments of the health care industry expressed support for staying 
the course regarding the October 2013 compliance date. Many health 
plans, large hospitals, physician practices, and IT vendors have 
already made large investments upgrading systems, hiring personnel for 
the transition, and making other preparations for implementation. There 
is a financial and psychological momentum toward implementing ICD-10 
that may be disrupted by a delay. According to the Edifecs poll, ``a 
potential delay of the ICD-10 compliance deadline could have far 
reaching--and highly negative--impact to the health care industry's 
effort to implement the mandate.'' \8\
---------------------------------------------------------------------------

    \8\ See ``Survey: Industry Reaction to Potential Delay of ICD-
10--A Delay will be Costly, but Manageable * * * Unless it's more 
than a Year,'' Edifecs, February 27, 2012: http://www.edifecs.com/downloads/EdifecsSurvey-ICD10Delay.pdf.
---------------------------------------------------------------------------

    Comment: Some commenters recommended maintaining the October 1, 
2013 deadline. Some commenters argued that considerable expense has 
been expended by many entities in order to meet the October 1, 2013 
deadline, and any delay will be costly. Another commenter described the 
investment of time and resources that has been spent on education, 
outreach, and policy discussions in order to meet the October 1, 2013 
compliance date. Some commenters noted the costs that would be incurred 
by coders, students, teaching institutions, and training programs if 
the compliance date were delayed. Students and teaching programs have 
invested much in training geared toward an October 1, 2013 compliance 
date.
    One commenter noted that, among the downsides to delaying 
implementation of ICD-10, if we continue to use current codes, the 
ability to progress population-based healthcare and improve patient 
care will be limited. Commenters suggested that a delay prolongs the 
period until industry can use the improved code sets that support the 
improvement of quality and outcomes data, cost-effective approaches to 
delivering care, and information for better research.
    Another commenter urged no delay, noting that the U.S. health care 
industry has known for at least 15 years that ICD-10 would be adopted 
as a replacement for the severely outdated and broken ICD-9. The 
commenter stated that the industry has had 3 years to prepare, since 
the publication of the ICD-10 final rule, and, therefore, it does not 
seem likely that the provision of more time, by itself, will be 
sufficient to ensure those lagging in ICD-10 will be ready by a delayed 
compliance date.
    Other commenters recommended that if a delay is necessary, that it 
be for less than 1 year, citing similar reasons to those already 
described.
    One commenter suggested that maintaining the October 1, 2013 
compliance date would be difficult because the ICD-10 project timelines 
for both physicians and vendors--on which physicians are often 
dependent--were affected by the obstacles associated with the 
implementation of Version 5010. Another commenter argued that the 
survey results used in the RIA that indicated that 25 percent of 
physicians did not think they were prepared for IC-10 may well 
overestimate the percentage of physicians who would be well-prepared 
for an October 1, 2013 compliance date, and that maintaining the 
October 1, 2013 date would be ill-advised.
    Response: We recognize that many individual entities that were on 
target to meet the October 1, 2013 deadline will be financially 
impacted by a delay. We also recognize that there are opportunity costs 
associated with a delay, such as a delay in taking advantage of the 
improved code sets that support the improvement of quality and outcomes 
data, cost-effective approaches to delivering care, and information for 
better research. But we believe that the risk of a major disruption in 
physicians' reimbursements nationwide and the possible effects on 
patient care outweighs those costs.
    As we indicated in the April 2012 proposed rule, it is clear to us 
that a significant number of health care entities will not be prepared 
to meet an October 1, 2013 compliance date. Reasons for this include 
that entities may not have altered their systems, thoroughly analyzed 
their processes, changed their forms, prepared for training their 
personnel, begun testing their internal systems, or are not in a 
financial position to begin these preparations.
    While we cannot project precisely what percentage of certain 
sectors of the health care industry would not be prepared for an 
October 1, 2013 deadline, the studies we have used in the RIA of this 
final rule reflect that the numbers are significant enough to cause a 
disruption in health care claim payments. We project a number of 
quantifiable negative consequences of such a disruption in the RIA and 
believe that there may be a number of unanticipated costs as well, 
including possible indirect economic impacts on related industries and 
the economy at large.
    It is also likely that health care entities have stopped or slowed 
their preparations for an October 1, 2013 deadline since the Secretary 
announced in February 2012 that a delay would be considered through 
rulemaking. Because of this, there may be more entities that would be 
unprepared for an October 1, 2013 deadline than what we predicted in 
the April 2012 proposed rule.
    We believe a delay of the ICD-10 compliance date will increase the 
readiness of the industry at large, and thus avoid a large disruption 
in health care claim payments. Entities that were not on schedule to be 
ready by October 1, 2013 can use the time to become prepared, and 
entities that are on schedule can use the delay to conduct more 
thorough testing and work with their trading partners to decrease the 
possibility of unforeseen obstacles to implementation and increase the 
possibility of a smooth transition.
    We recognize that the 1-year delay in compliance date does not 
guarantee that entities will use the time to become better prepared to 
meet the original compliance date of October 1, 2013. However, 
additional activities are planned to mitigate this risk. During the 1-
year delay, we expect to increase education and outreach events and to 
work with industry on improvements to the overall standards 
implementation process.
2. Option 2: Maintain the October 2013 Compliance Date for ICD-10-PCS 
(Procedure Codes) and Only Delay the Compliance Date for ICD-10-CM 
(Diagnosis Codes)
    In the April 2012 proposed rule, we considered a split 
implementation alternative: Maintaining the compliance date for ICD-10-
PCS, which is used for inpatient hospital procedure coding, at October 
1, 2013, while delaying the compliance date for ICD-10-CM, the 
diagnosis codes used by physicians, to some later date, for example 
October 1, 2015. The rationale for this option was that hospitals, with 
their greater access to resources, would be in a better position to 
move forward with ICD-10-

[[Page 54688]]

PCS, which would result in at least partial compliance with the October 
1, 2013 date. This option would also afford small providers additional 
time to become compliant with the ICD-10-CM diagnosis codes.
    Comment: Some commenters believed that a split implementation of 
the ICD-10 procedure versus diagnosis codes would be an appropriate 
approach. Moving first to adopt ICD-10-PCS for the inpatient setting, 
commenters stated, would permit HHS and the industry to evaluate the 
impact on a defined part of the health care system and better inform 
challenges and solutions before moving the broader health care industry 
to ICD-10-CM codes.
    One commenter noted that moving to adopt ICD-10-PCS for the 
inpatient setting first would alleviate the issue of the lack of 
granular coding for inpatient procedures, a concern vocalized by both 
hospitals and device manufacturers.
    Other commenters argued against mandating different compliance 
dates for procedure and diagnosis codes. One commenter stated that a 
split approach would result in significant increases in costs to 
vendors because they would have to support dual systems. These costs 
would then be passed on to clients. Another commenter noted that a 
split approach would be costly with regard to the coordination of 
concurrent payer rules for ICD-9 and ICD-10 as applied to adjudication, 
duplicate claims checking, and fraud and abuse. The same commenter 
stated that there would be added complexities for clearinghouses 
because they would be running dual systems.
    Other commenters argued that splitting the compliance date could 
confuse certain providers because of the overlap of hospitals and 
ambulatory sites of services in some contexts. Another commenter argued 
that splitting the implementation date would have three consequences: 
Added cost to support dual coding systems and the analyses, coding, and 
testing that each of the two code sets would require before 
implementation; increased provider confusion because the industry is 
supporting both code sets; and the need for a complete rewrite of CMS' 
diagnostic related groups (DRGs). This would eventually have an impact 
on revenue neutrality, the commenter suggested. Staggered 
implementation would also make interpretation of data difficult, the 
commenter added.
    Response: We agree with commenters that argue against a phased-in 
approach to implementation of ICD-10-PCS followed at a later date by 
ICD-10-CM. We believe that different compliance dates for diagnostic 
and procedure codes would burden the health care industry with a 
substantially greater cost than a uniform implementation because many 
sectors of the health care industry would have to run dual systems. 
This option would also place considerably more burden on hospitals 
because they would effectively have to implement ICD-10 twice: once in 
2013 for ICD-10-PCS and then again at a later date for ICD-10-CM, 
increasing their implementation costs.
    Further, there is a risk that a split implementation of procedure 
and diagnostic codes would render an operationally difficult 
implementation of the new code set even more difficult. These 
operational complexities would translate into added costs for all 
parties. Also, where a split-compliance approach contributes its own 
implementation challenges--that is, complexities in terms of dual 
processing and dual payer rules--we do not believe that HHS would 
easily be able to derive useful lessons that could applied to a 
successive implementation of ICD-10-CM.
    Given that the costs of such an approach would be greater than a 
uniform delay of ICD-10-PCS and ICD-10-CM, and that the experience of a 
phased approach would yield few beneficial lessons that could be 
applied to implementation of ICD-10-CM for the broader industry, we do 
not support such an approach.
    Comment: Some commenters suggested a related option of adopting 
ICD-10-PCS and ICD-10-CM both, but only in the inpatient setting. One 
commenter stated that this would mirror the approach taken by other 
nations, and would capture much of the nation's public health data. 
Commenters noted that moving to ICD-10-CM in the inpatient setting 
would provide data that would inform a decision whether to move to ICD-
10-CM in outpatient settings.
    One commenter suggested implementing a small ``subset'' of ICD-10-
CM in the outpatient setting and excluding certain providers from 
detailed requirements. The commenter referred to Germany's approach in 
this regard.
    Response: Both these approaches would appear to have the same costs 
and involve the same complexities as implementing ICD-10-PCS first and 
ICD-10-CM later: (1) Many entities would be required to maintain dual 
processing, which is costly and adds complexity; (2) there would be 
confusion among providers that are in settings where there is overlap 
between inpatient and outpatient environments or environments where 
ICD-9 and the small subset of ICD-10-CM would be used; and (3) 
concurrent sets of payer rules would have to be followed.
    The suggestion that data could be garnered from using ICD-10 in the 
inpatient setting to inform a decision whether to move the code set to 
outpatient settings, implies that the decision to mandate ICD-10-CM in 
outpatient settings has not yet been made, but could be made based on 
the experience of implementing ICD-10 in the inpatient setting only. 
This is incorrect. The decision to require ICD-10 to be used by covered 
entities has already been made, and it was based on years of industry 
discussions, consensus building, and government rulemaking. Before 
publishing the proposed rule that proposed to require covered entities 
to implement ICD-10-CM and ICD-10-PCS, the Secretary considered 
recommendations of the NCVHS, as well as input from Federal and State 
agencies, private and professional organizations, and industry 
stakeholders, including organizations representing providers, health 
plans, clearinghouses, and vendors. For a history of the adoption of 
ICD-10, see the proposed rule titled ``HIPAA Administrative 
Simplification: Modification to Medical Data Code Set Standards to 
Adopt ICD-10-CM and ICD-10-PCS'', published on August 22, 2008 (73 FR 
49796) (hereinafter referred to as the August 2008 ICD-10 proposed 
rule). After the August 2008 ICD-10 proposed rule was published, HHS 
considered over 3,000 public comments on the proposed mandate. (See the 
January 16, 2009 final rule titled ``HIPAA Administrative 
Simplification Modifications to Medical Data Code Set Standards to 
Adopt ICD-10-CM and ICD-10-PCS'' (74 FR 3328).)
3. Option 3: Forgo ICD-10 and Wait for ICD-11
    The option to forego a transition from ICD-9 to ICD-10, and instead 
wait for ICD-11, was another alternative that was considered. This 
option was eliminated from consideration because the World Health 
Organization (WHO), which creates the basic version of the medical data 
code set from which all countries create their own specialized 
versions, is not expected to release the basic ICD-11 medical data code 
set until 2015 at the earliest.
    From the time of that release, subject matter experts state that 
the transition from ICD-9 directly to ICD-11 would be more difficult 
for industry and it would take anywhere from 5 to 7 years for the

[[Page 54689]]

United States to develop its own ICD-11-CM and ICD-11-PCS versions.\9\
---------------------------------------------------------------------------

    \9\ Rhonda Butler, ``Why we can't skip ICD-10 and go straight to 
ICD-11,'' Healthcare Finance News, March 29, 2012; Carl Natale, 
``Why we're not ready to plan ICD-11 implementation,'' ICD10Watch, 
February 20, 2012, http://www.icd10watch.com/, ``ICD-10 Frequently 
Asked Questions,'' American Health Information Management 
Association (AHIMA), http://www.ahima.org/ICD10/faqsall.aspx#36.
---------------------------------------------------------------------------

    Comment: A number of commenters referred to an article titled 
``There are Important Reasons for Delaying Implementation of the New 
ICD-10 Coding System,'' published in Health Affairs in May 2012, using 
it to support their opinion that the United States should forgo ICD-10 
and wait for ICD-11.\10\ Commenters noted a number of highlights from 
the article, including the following:
---------------------------------------------------------------------------

    \10\ C. Chute, S. Huff, J. Ferguson, J. Walker, and J. Halamka, 
``There are Important Reasons for Delaying Implementation of the New 
ICD-10 Coding System,'' Health Affairs, May 2012, Vol. 31, No. 5.
---------------------------------------------------------------------------

     Reference to a study that found that ICD-10 codes failed 
to outperform ICD-9 codes in capturing clinical data.
     Reference to an analysis of ICD-10 codes that found a 
lower percent of codes dedicated to diseases, compared to ICD-9 codes.
     Deficiencies in the ICD-10 code set, including a lack of 
genomic information such as family history.
     Reasons why SNOMED-CT, on which ICD-11 is based, is a 
superior clinical coding language.
     Reasons why ICD-10 is nearing obsolescence.
    One commenter pointed out that, if ICD-11, as scheduled for release 
by the WHO, should be accepted without further modifications as the 
reporting standard for the U.S., ICD-11 could be ready for adoption 
before the 2020-2022 date estimated in the April 2012 proposed rule. 
Another commenter argued that we should forgo ICD-10 because 
implementing ICD-10 in 2013 or 2014 would delay the eventual adoption 
of ICD-11 given the time it takes for code sets to be implemented in 
the U.S. This would again put us behind the rest of the world because 
we would be using an obsolete code set--ICD-10--for 13+ years after the 
WHO adopts ICD-11.
    One commenter recommended moving to ICD-11 in the same timeframe as 
the rest of the world in order not to defeat the primary purpose of 
having the interoperability to exchange the most accurate health care 
data.
    Other commenters argued against waiting for ICD-11 and argued for 
preceding with ICD-10 as mandated. Some of these commenters quoted an 
article that was published in the July 2012 Journal of AHIMA that 
rebutted the article Chute et.al. point by point. (One commenter 
submitted the entire article as her comment.) \11\ Some commenters 
argued against waiting for ICD-11 because the current code set, ICD-9-
CM, is not adequate to support health information and data needs. ICD-9 
does not allow for clinically relevant or robust data, commenters 
wrote, and its continued use reduces physicians' ability to assess 
patient outcomes, track public health risks, and exchange meaningful 
data with other health care organizations and reporting entities. It 
could also slow the adoption of value-based purchasing and other 
payment reform models, according to the commenter.
---------------------------------------------------------------------------

    \11\ R. Averill and S. Bowman, ``There are critical reasons for 
not further delaying the Implementation of the new ICD-10 coding 
system,'' Journal of AHIMA, vol. 83, no. 7, July 2012.
---------------------------------------------------------------------------

    Some commenters noted that the structure of ICD-10 was designed to 
allow for the eventual changeover to ICD-11, and that failure to have 
this structure in place for ICD-11 would result in retrofitting many 
more health care systems at catastrophic costs. One commenter noted 
that, while ICD-11 may hold great promise, the commenter believed that 
claims about ICD-11's benefits were speculative, at best, because so 
much of it had yet to be developed.
    Another commenter noted that, despite the appeal of putting off the 
cost and disruption of transitioning to a new code set indefinitely, 
the disruption and costs of transitioning to ICD-11 are highly unlikely 
to be less those of transitioning to ICD-10.
    Response: We recognize that there is a debate within the health 
care industry as to the value of ICD-10 compared to ICD-11. We do not 
participate in this debate in this rule, except to say that we are 
convinced of the benefit of ICD-10 to health care delivery in this 
country. One of our responsibilities is to consider costs and benefits. 
We can make some rough calculations as to the investment that would be 
lost if we were to forgo ICD-10. In the RIA, we estimate the cost of a 
1-year delay to be $1 to $6.6 billion. This represents what we believe 
to be approximately 10 to 30 percent what has been invested or 
budgeted, to date, into implementation of ICD-10. Forgoing ICD-10 
translates into a loss of up to $22 billion for the U.S. health care 
industry. This does not take into account the projected fiscal and 
public health benefits that would be lost every additional year that we 
use ICD-9.
    Given the considerable financial investment made by entities in 
preparation for ICD-10, and the timelines and uncertainties regarding a 
possible adoption of ICD-11, we cannot forgo ICD-10 in the hopes that a 
future, more effective code set will be adopted.
    Comment: One commenter recommended that October 1, 2014 remain the 
compliance date for ICD-10-PCS since this is the area that has run out 
of ICD-9 procedure codes. HHS should then set October 1, 2016 as the 
compliance date for ICD-11 diagnosis codes, using ICD-11 as established 
by the WHO without the clinical modification. This would allow the 
industry to spend the time prior to October 1, 2016 preparing for ICD-
11.
    Response: This approach appears to require the processing of three 
different code sets over a 2-year period: ICD-10-PCS and ICD-9-CM from 
October 1, 2014 to October 1, 2016; ICD-10-PCS and ICD-11 from October 
1, 2016 on. It is unlikely that any version of ICD-11 would be adopted 
in the timeframes suggested and, as we have noted, dual processing is a 
more costly and complex approach than a uniform implementation. We do 
not believe that this is an appropriate approach.
4. Option 4: Mandate a Uniform Delay of the Compliance Date for ICD-10
    The fourth option considered was a uniform delay of the compliance 
date for both ICD-10-CM and ICD-10-PCS. The advantage to an across-the-
board delay is that it will yield a single compliance date among all 
industry segments. Contemplating such an option gave rise to a 
secondary question--what length of delay would be appropriate?
    In the proposed rule, we considered a 1-year and a 2-year delay of 
the compliance date. We believed a 1-year delay achieves a balance 
between the needs of those who have already taken the initiative to 
plan for one-time compliance with ICD-10 and the need for other 
entities to have additional time to become ICD-10 compliant. While not 
without additional costs, a 1-year delay, to October 1, 2014, 
represents what we consider to be a reasonable compromise. Short of 
maintaining the October 1, 2013 date, delaying ICD-10-CM and ICD-10-PCS 
by one year does the least to disrupt existing implementation efforts, 
while affording the small provider community an additional year to 
become compliant.
a. 2-Year Delay
    Comment: Some commenters suggested extending the ICD-10 compliance 
date 2 years, until October 1, 2015, or beyond. In general, these

[[Page 54690]]

commenters stated that an additional 2 years is needed to perform 
system testing, staff training, further analysis, and outreach and 
education by both the federal government and the private sector to 
those entities that experience difficulty implementing ICD-10.
    One commenter suggested that 2 years would be preferable in order 
for front line care providers to ``buy into'' the change and integrate 
ICD-10 into their day-to-day operations. One commenter suggested that, 
given the interdependency between implementing Version 5010 and 
implementing ICD-10, HHS should monitor the implementation of Version 
5010 carefully, as an additional delay in its implementation may 
require a delay longer than one year for ICD-10.
    One commenter noted that its state Medicaid program would incur 
substantial costs if the delay was 1 year instead of 2 years due to the 
schedule in which it Medicaid Management Information System MMIS would 
be updated.
    Another commenter stated that the uncertainty over the compliance 
date had caused resource planning challenges because organizations have 
put on hold their partially complete planning and implementation 
efforts. A 2-year delay would allow organizations to more effectively 
re-plan their efforts. One commenter noted that a 2-year delay would 
better align resources and spread costs out over time.
    One commenter noted that a 2-year delay is necessary because 
federal mandates and independent business initiatives were straining 
already constrained resources in health services delivery and health 
plan administration. The commenter's organization had committed 
significant resources in EHR development, Meaningful Use certification, 
PQRS creation and ACO design and development. Two years would also give 
the commenter's entity time to implement significant business model 
changes in 2013 to accommodate provisions of the Affordable Care Act.
    One commenter argued that a 2-year delay would give worker's 
compensation (WC) and third party liability (TPL) insurances time to 
implement ICD-10 voluntarily because of industry pressure to do so. The 
commenter further argued that a 2-year delay would enable further study 
demonstrating the positive impact of ICD-10 for providers who have yet 
to be convinced.
    Some commenters suggested that a delay longer than 2 years was 
necessary, citing some of the same reasons given for a 2-year delay.
    Many commenters agreed with the assumption that implementation 
costs would increase with every year of a delay, while there were no 
commenters that argued otherwise. Commenters reported that a 2-year 
delay would increase costs to maintain implementation efforts, staff 
training, and systems changes. One commenter stated that a delay in 
ICD-10 beyond 1 year would result in higher implementation costs for 
insurers and ultimately for customers. They stated that a delay beyond 
1 year would require costly and time-consuming work, including 
conducting systems inventories that will have become outdated and would 
need to be completely reassessed.
    Some commenters noted that each year of delay prevents the industry 
from realizing the anticipated benefits of implementing ICD-10.
    Some commenters also suggested that any delay beyond 1 year would 
result in the industry losing momentum in implementation efforts, which 
could ultimately jeopardize the implementation of ICD-10. One commenter 
argued that, in the case of a 2-year delay, the staffing and financial 
resources that were dedicated to the implementation would likely be 
diverted elsewhere. Some commenters expressed concern about the system 
implications of moving to ICD-10 the same year some may implement Stage 
2 of Meaningful Use.
    A commenter stated that our analysis did not include some 
categories of additional costs of a 2-year delay associated with the 
ICD-9-CM code set, including ``inaccurate diagnosis and clinical 
decisions, administrative inefficiencies due to manual processes, 
coding errors due to outdated codes, worsening imprecision of the ICD-
9-CM code (due to stasis if the code freeze is not lifted), and ongoing 
maintenance of both ICD-9-CM and ICD-10-CM/PCS code sets.''
    Response: Based upon the methodology and baseline estimates from 
the RIA that follows, we estimate it will cost health plans up to an 
additional 30 percent of their current ICD-10 implementation budgets 
for a 1-year delay. Therefore, we can assume that a 2-year delay would 
be at least double the cost.
    An informal survey of State Medicaid programs also indicated that 
an October 1, 2015 compliance date may be problematic for some states 
that are undergoing IT-intensive MMIS transitions that same year.
    Extending the ICD-10 compliance date to October 1, 2015 would 
likely result in having to lift the current code set freeze, as the 
industry could not wait an additional 2 years for maintenance updates 
to the medical data code sets. A code set freeze is a suspension of 
updates to code sets, in this case, the existing and outdated ICD-9 
medical code set. Updates to code sets are usually necessary on an 
annual basis in order to encompass new diagnosis and procedure codes 
that capture new technologies or diseases. Lifting the code set freeze 
would result in the release of potentially thousands of changes to the 
ICD-10-CM and ICD-10-PCS code sets, all of which would have to be re-
programmed into systems in order to be ready for an October 1, 2015 
compliance date, at considerable industry cost. The Medicare fee-for-
service health plan estimated that the cost for re-programming just one 
of its systems due to a code set freeze lift would result in, at 
minimum, $1 million in additional expense. If each of the nation's 
approximately 1,887 health plans incurred a similar cost, it would 
translate into a minimum additional expense of nearly $2 billion.
    A 2-year delay in the ICD-10 compliance date could also signal a 
lack of HHS' commitment to ICD-10, potentially engendering industry 
fear that there could be another delay in, or complete abandonment of, 
ICD-10 implementation, with subsequent heavy financial losses 
attributable to ICD-10 investments already made.
    We agree that a 2-year delay would provide more time for entities 
to coordinate implementation with other federal mandates and programs 
and would give the entire industry more time to conduct system testing, 
training, further analysis and outreach and education. However, as 
illustrated in the RIA and as reflected in many of the comments, every 
year carries considerable costs for those that have already invested 
resources in order to meet an October 1, 2013 deadline. As well, the 
entire health care industry will suffer the opportunity costs of not 
moving to a more effective code set. We also believe there is a risk 
that ICD-10 could be abandoned altogether if a 2-year delay was 
established. We do not believe the benefits of more time outweigh the 
costs and risks of a 2-year delay.
b. 1-Year Delay
    Comment: Of all the options, the highest number of commenters 
supported the proposed 1-year delay of ICD-10. Commenters supported the 
proposed delay for a number of reasons. Some stated they would benefit 
from the additional time for implementation given that they are in the 
process of

[[Page 54691]]

implementing numerous other competing priorities during the same time 
frame. Some commenters believed a 1-year delay would ensure that all 
industry segments had ample time to transition to ICD-10 and would be 
ready to do so on the same date.
    One commenter supported the 1-year delay because it would allow 
additional time for planning, testing, training, and price negotiation 
with vendors, the opportunity for additional business impact 
assessments, and implementation of appropriate workflow changes, 
additional time for vendor and payer readiness, and alignment with 
other health system-wide initiatives.
    Some commenters supported the proposed 1-year delay because of the 
financial advantages. One commenter noted that the 1-year delay would 
be helpful in order to recover from the cash outlay that was made in 
order to transition to Version 5010. Some commenters argued in support 
of the 1-year delay because they believed that their organizations 
could not support the financial investment necessary to make the ICD-10 
transition by the original compliance date.
    One commenter supported a 1-year delay because the delay 
effectively balances the interests and current implementation status of 
multiple stakeholders. The commenter described the range of opinions 
and readiness of physicians in the commenter's state, noting that some 
physicians preferred a longer delay due to competing initiatives, lack 
of resources, and other mitigating factors, while others preferred no 
delay because of their early investment in staff and resources to 
support the effort.
    Many commenters did not agree that a 1-year delay was a reasonable 
approach, arguing for one of the other options or arguing for options 
that we did not consider in the proposed rule. We have included their 
arguments under those options.
    Response: We agree with commenters that believe a 1-year delay 
would be helpful operationally, financially, and in terms of planning 
and coordinating with other initiatives. We agree that a delay beyond 
one year carries costs and risks that do not outweigh the benefit of a 
longer delay.
5. Options Not Considered in the April 2012 Proposed Rule
    Comment: Some commenters suggested a staggered approach to 
implementation based on covered entity type. These commenters 
recommended that clearinghouses and health plans should comply with 
ICD-10 first and then providers should comply at least 12 months later. 
Commenters argued that implementation by health plans must be 
thoroughly vetted before involving providers in the implementation. 
They believed this would allow providers to fully test with trading 
partners before their compliance date. These commenters stated that 
separate compliance dates would minimize the disruption to health care 
delivery and claims payment processes.
    One commenter recommended against any dual implementation period 
for ICD-10. The commenter argued that such an approach would be nearly 
impossible to implement from an operational perspective and would cause 
great challenges both in the development of health plan and provider 
contracts as well as the implementation of quality improvement strategy 
reporting, which depends on ICD-10 diagnostic and procedure codes. It 
would also add significant costs and marketplace confusion to the 
implementation of ICD-10.
    Response: With respect to health plans, all analysis, design and 
development has been done according to the initial requirement of a 
cutover implementation. This means health plans have not prepared for 
processing both ICD-9 and ICD-10 code values on initial claims with 
dates of service received after the cutover date, as would be expected 
if health plans were required to be ICD-10 compliant before providers. 
The strategy to require ICD-10 codes as of a specific date of service 
has been reinforced in industry outreach and education by HHS, and 
vendor contracts have been based on this strategy. Some entities have 
recently indicated a change in this foundational requirement would 
effectively require them to start over, which would cause a multiyear 
delay. We assume that the same would be true for many entities were we 
to change approaches.
    A specific compliance date for health plans, followed by another 
date a year later for providers' compliance, is effectively a 2-year 
delay of the date when the health care industry as a whole ``goes 
live'' with ICD-10. In practice, therefore, an argument for a different 
compliance date for providers and health plans/clearinghouses is an 
argument for a 2-year delay of the compliance date. We have estimated 
that a 2-year delay of the compliance date of ICD-10 carries with it 
considerable costs. We do not believe that the benefits of a 2-year 
compliance delay would be worth the costs.
    Comment: Some commenters made suggestions that went beyond 
consideration of a delay in compliance date of ICD-10 and questioned 
the implementation of ICD-10 in general. Commenters stated that the 
initiative should be abandoned completely because it represents an 
enormous burden on medical practices with no benefit to patients or no 
improvement to quality of care. Another commenter argued that ICD-10 
will not enhance the process of reporting medical claims.
    Response: Beyond stating the basic thesis that there is no benefit 
to implementing ICD-10, the commenters did not provide detail as to how 
they arrived at this conclusion. We respectfully disagree with these 
commenters' conclusion. Although the benefits of ICD-10 have been 
reiterated in many studies and articles, we emphasize a number of the 
benefits here: standardized medical data for research, accessing and 
interpolating global health data in any language, drug discovery for 
complex diseases, individualized medicine (both predictive and 
preventative), clinical decision support, improved patient outcomes, 
optimized billing, and accurate insurance administration, leading to 
lower health care costs. ICD-10 will allow for better monitoring of 
patients with chronic conditions such as asthma, diabetes, and sickle 
cell disease, and will permit better tracking of injuries that can lead 
to improved preventive and safety measures. For a comprehensive 
discussion of the expected benefits of ICD-10, and the reasons why we 
adopted it, see the ICD-10 proposed and final rules (August 22, 2008 
(73 FR 49796) and January 16, 2009 (74 FR 3328), respectively.)
6. Other Suggestions From Commenters on How Best To Implement ICD-10
(a) Increased Education and Outreach
    Comment: Many commenters urged increased education and outreach on 
ICD-10, both from the federal government and from industry resources 
and organizations. One commenter urged HHS to continue to engage the 
30+ organizations that are working on ICD-10 education and to leverage 
their tools and resources. One commenter noted that industry surveys 
continue to show the lack of awareness of ICD-10 among providers and 
that education and outreach might mitigate this. Another commenter 
suggested that HHS educate providers on the synergies between 
Meaningful Use and ICD-10. The commenter suggested that private sector 
firms and entrepreneurs should be engaged in education and outreach 
tasks. One commenter suggested that HHS reach out to health care 
professions and trade organizations to

[[Page 54692]]

assist the health care industry, including local and state providers, 
plans, and payers--governmental and private.
    One commenter suggested that HHS create an education plan and 
conduct education in a wide range of formats, including webinars, 
handouts, podcasts, frequently asked questions, and a variety of other 
formats.
    Some commenters suggested that HHS develop and publish specific 
milestones or benchmarks on the implementation of ICD-10 so that 
industry could measure its own progress toward ICD-10 readinesss.
    One commenter stated that, while large providers many not need 
assistance, small providers will need assistance to determine if their 
current documentation practices will enable the selection of an 
appropriate ICD-10 code.
    Response: We will continue to work with industry to provide 
outreach and education. We will continue to engage stakeholders on a 
wide variety of ICD-10 implementation issues, including reduction of 
burden on physicians and other healthcare segments.
    Comment: One commenter urged HHS to engage a national Coding 
Authority to provide a recognized source of accurate and timely coding 
information. The Coding Authority for ICD-10, such as the Cooperating 
Parties, would provide the needed awareness and timely answers for ICD-
10 transition questions.
    Response: We note that the Cooperating Parties, which includes CMS, 
the Centers for Disease Control and Prevention (CDC), the American 
Hospital Association (AHA) and the American Health Information 
Management Association (AHIMA), serve as the national coding 
authorities on both the ICD-10 and the ICD-9-CM code sets. CMS has the 
lead on ICD-9-CM and ICD-10-PCS procedure code maintenance. CDC has the 
lead on ICD-9-CM and ICD-10-CM diagnosis maintenance. AHA has 
established a Central Office on ICD-9-CM coding and will continue that 
role with ICD-10. The AHA's Editorial Advisory Board for Coding Clinic 
is already addressing ICD-10 coding issues for inclusion in their 
publication Coding Clinic for ICD-9-CM. All of the Cooperating Parties 
serve on the Editorial Advisory Board. We are confident in the 
Cooperating Parties continuing role as the national authorities on both 
ICD-9-CM and ICD-10.
(b) Code Freeze
    Comment: Some commenters suggested the ICD-10 code freeze be 
extended an additional year or until October 1, 2015. One commenter 
requested clarification on when the code freeze would be lifted.
    Response: The issue of the partial code freeze was discussed over 
several meetings of the ICD-9-CM Coordination and Maintenance 
Committee. Based on these discussions it was decided to make the last 
regular update to ICD-9-CM and ICD-10 codes on October 1, 2011. 
Beginning on October 1, 2012, only codes for new technologies and new 
diseases would be considered for code updates. The committee decided 
that, 1 year after the initial compliance date of October 1, 2013, 
regular updates to ICD-10 would begin and no further updates to ICD-9-
CM would occur upon the implementation of ICD-10. The Committee is the 
public forum for discussions on the maintenance and updates to both 
ICD-9-CM and ICD-10 code sets and will therefore be the source of 
discussion and any decisions on the implementation of any further code 
freeze based on the provisions of this final rule.
(c) Crosswalks
    Comment: One commenter argued that, even with a delayed compliance 
date, the lack of a single forward crosswalk from ICD-9-CM to ICD-10-CM 
and a single backward crosswalk from ICD-10-CM to ICD-9-CM that is more 
specific than the General Equivalence Mappings (GEMs) will hamper 
implementation. According to the commenter, the GEMs are not actual 
crosswalks that are sufficiently specific to be useful for forward or 
backward cross-walking in automated billing systems. The commenter 
suggested that HHS establish true forward and backward crosswalks that 
eliminate the ambiguity of the GEMs for billing and reimbursement 
purposes while providing a single authoritative standard for the 
industry.
    Another commenter urged that HHS not endorse a single crosswalk 
that enhances GEMs with one-to-one mapping forward and backward. ICD-10 
creates many-to-many mappings, the commenter noted, and, in contrast to 
relying on national crosswalks established by HHS, health plans should 
build rules and medical policy and ensure their use of ICD-10 supports 
that policy. Another commenter urged that HHS take a lesson from the 
Canadian transition to ICD-10: ``don't crosswalk.''
    Response: We are aware that there is not an exact one-to-one match 
in the forward or backward translation between ICD-9 and ICD-10. 
However, we believe that our General Equivalency Mapping (GEMs) is a 
useful tool to assist with transitioning between ICD-9 and ICD-10. 
Furthermore, we believe that the training materials posted to the CMS 
Web site, as well as the scheduled outreach and educational 
opportunities which are periodically provided by CMS, suffice for 
training and technical support.
(d) Implementation and Testing Plan and Certification
    Comment: Some commenters recommended that HHS develop an 
implementation and testing plan that expands outreach and education, 
ensures adequate testing, and develops milestones/timelines to ensure 
the new compliance date is met. Some commenters discussed the need for 
HHS to apply lessons learned from Version 5010 implementation when 
designing a testing plan. Many commenters suggested that there was a 
false sense of readiness with regard to the transition to Version 5010. 
True readiness could only be realized through adequate testing.
    One commenter suggested that a consistent testing approach be 
applied by all stakeholders. Another commenter suggested that an ICD-10 
Pilot Test could include a representative number of covered entities 
that, after testing, could establish regional solution centers that 
would identify best practices on problem solving, obstacles to avoid, 
and concrete solutions in the implementation of ICD-10. The commenter 
also recommended standardizing the ICD-10 testing process, which should 
also include end-to-end testing, so that a national approach could be 
used for each particular category of entity.
    Another commenter suggested we work with NCVHS to develop an ICD-10 
testing and implementation plan. The plan should include milestones and 
metrics that would provide a better understanding of the state of the 
industry.
    Another commenter suggested we tap the Workgroup for Electronic 
Data Interchange (WEDI), to identify and coordinate pilot participants, 
liaise with CMS, and work with the agency to disseminate the results to 
industry.
    One commenter suggested that, along with certification, HHS should 
survey and publish the expected downstream costs that health plans, 
clearinghouses, Medicare Intermediaries, and Medicare Advantage 
contractors intend to transfer to their internal and external 
customers.
    One commenter argued against the development of a certification 
program, and urged HHS to leverage and adopt existing best practice 
guides and schedules.
    One commenter suggested HHS require the certification of all health 
plans and clearinghouses to be able to

[[Page 54693]]

accept ICD-10 codes. The commenter suggested that provider management 
systems (PMS) and billing systems should be certified by a private 
entity. Certification of these products, the commenter stated, would 
greatly assist physician practices in identifying the software 
necessary to comply with federal mandates and in taking advantage of 
the various administrative simplification initiatives. The commenter 
added that certification can also drive implementation by standardizing 
software requirements and leveraging market forces to ensure practices 
can meet federal requirements.
    Response: We agree that implementation and testing plans are 
essential for a successful transition to ICD-10. We recognize the need 
for a shared, industry-wide definition and understanding of 
``readiness'' based on testing. We are evaluating methods to establish 
that common understanding and will issue guidance and offer general 
assistance on timelines and testing protocols through education and 
outreach.
(E) PM and Billing Software Vendors
    Comment: Some commenters emphasized the integral role PMS and 
billing software vendors play in covered entities' abilities to meet 
compliance dates. Commenters noted that vendors needed to provide ICD-
10 products and services in a timely manner in order to achieve timely 
compliance and functionality for all ICD-10 processes. Some commenters 
therefore suggested that there be compliance tracking and testing of 
practice management and billing software vendors.
    One commenter agreed that software vendors played an important 
role, but urged that vendors self-report readiness to implement ICD-10. 
The commenter believed that the self-reporting approach affords an 
organization more time than a full-blown certification process that 
will likely increase the cost of implementation for providers and 
vendors. One commenter suggested that HHS aggressively educate and 
monitor billing software vendors for the reasons given above.
    Response: We agree with commenters that software vendor readiness 
impacts covered entities' ability to meet compliance dates. While 
certification of software vendors is not within our authority in this 
rule, we will issue guidance on expected deliverables and timelines for 
vendors, and work to establish effective communication, education and 
outreach for vendor support in realizing these objectives.
(f) Coordinating With Other CMS and Federal Initiatives
    Comment: Some commenters emphasized the need for CMS to expedite 
the availability of a mainframe version of the DRG grouper.
    One commenter urged CMS to provide specific guidance on how Durable 
Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) should 
approach claim submission and medical necessity documentation, 
specifically when an initial claim is made in ICD-9 and subsequent 
claims are made in ICD-10.
    One commenter recommended that CMS evaluate and alleviate the 
financial impact of implementation on state Medicaid programs. The 
short-term and long-term financial cost associated with ICD-10 will 
place excessive stress on safety net payer systems that are already 
under duress, the commenter said.
    Some commenters argued that CMS should modify the Medical Loss 
Ratio (MLR) rule. According to the commenters, in the MLR final rule 
published on December 7, 2011, CMS recognized that ICD-10 conversion 
implementation costs are quality improvement activities, and the rule 
``proposed to limit the amount of ICD-10 conversion costs to only those 
incurred in 2012 and 2013. The commenter suggested that the MLR final 
rule should adjust the 0.3 percent cap on ICD-10 costs to reflect the 
proposed changes' costs and extend the ability to take costs into 
account beyond 2013 into 2013.
    One commenter requested that all references within the Meaningful 
Use Stage 2 regulations from both CMS and the Office of the National 
Coordinator (ONC) be adjusted to align with the ultimate decision on 
the timing of ICD-10 compliance, including the availability of and 
flexibility in certification to clinical quality measure specifications 
that reference ICD-10.
    Another commenter suggested that ONC require that all certified 
EHRs be required to include the capabilities necessary for the use of 
ICD-10-CM and ICD-10-PCS in the 2014 certification requirements.
    Another commenter suggested that CMS use its Quality Improvement 
Organizations to assist providers in the implementation and testing of 
ICD-10.
    Another commenter brought forward a number of concerns about ICD-10 
and CMS' policies regarding the payment system and classification 
criteria for inpatient rehabilitation units of general hospitals (IRH/
Us) and access to care for the patients they serve.
    One commenter suggested leveraging existing programs, such as 
Regional Extension Centers, to enhance provider outreach and education 
(ONC has implemented a set of Regional Extension Centers (RECs), which 
are defined as organizations that receive funding under the Health 
Information Technology for Economic and Clinical Health Act to assist 
health care providers with the selection and implementation of 
electronic health records). The commenter suggested that we work with 
ONC to create and disseminate educational and operational programs, 
tools, and other ICD-10 resources.
    Other commenters addressed specific impacts of ICD-10 on other CMS 
programs and requested guidance or changes to the policies of those 
programs based on a delay of ICD-10 implementation.
    Some commenters urged that HHS harmonize federal programs with 
regard to ICD-10. Lack of a coordination of multiple overlapping 
initiatives could threaten ICD-10 implementation, one commenter stated. 
Another commenter stated that it was critical that we align the ICD-10 
deadline with any dependencies built into all other federal and state 
programs, such as those involving clinical quality measures that 
reference ICD-10 codes. Another commenter stated that existing federal 
health information technology mandates on physicians, such as 
meaningful use, e-prescribing and quality reporting, must be evaluated 
in the context of the enormous burden and cost of ICD-10.
    Response: We appreciate these observations and suggestions. 
However, these programs, regulations, and initiatives are the purview 
of the CMS and other federal agencies and are, therefore, outside of 
the scope of this regulation. We cannot represent CMS' policy decisions 
or the programs of other federal agencies.
    Comment: Some commenters suggested that HHS review upcoming 
administrative simplification deadlines and other federal deadlines to 
see if some of them should be adjusted. One commenter suggested that 
HHS work with the NCVHS to determine if the compliance dates for 
operating rules related to the electronic remittance advice, electronic 
funds transfers, and future operating rules related to enrollment, 
authorizations, and referrals, and claims should be adjusted. One 
commenter stated that the HPID compliance date being on the same date 
as the compliance date of ICD-10 (October 1, 2014) would create a 
potentially difficult situation in the industry.
    Response: We appreciate these observations. We are working to

[[Page 54694]]

improve future regulatory alignment, timetables and scheduled 
deliverables within the limits of our authority. For instance, with 
HPID, we believe we accommodated some commenters' concerns about the 
timeframe for compliance by mandating in this final rule that October 
1, 2016 be the date by which covered entities must use HPID in standard 
transactions.
    Comment: One commenter recommended that the ICD-10 mandate be 
extended to noncovered entities, such as workman's compensation and 
auto insurance, to eliminate the duplicity of administrative processes 
and systems for health care providers. Otherwise, health care providers 
will have to maintain dual processes and system capabilities to perform 
transactions using ICD-9 and ICD-10, which will result in increased 
administrative burden for providers.
    Response: We agree with commenters that some noncovered entities 
create duplicate processes for health care providers. For purposes of 
this rule, however, workman's compensation and auto insurance companies 
are not required to implement ICD-10.
    Comment: Commenters urged that, once the final rule is published, 
HHS not introduce any further delays to ICD-10 implementation, 
including ``discretionary enforcement periods'' like those used after 
the Version 5010 compliance date. Further delays would impact other 
areas of health care such as the successful implementation of 
electronic health records and reporting that will be required as part 
of state based exchanges. One commenter noted that further changes in 
the compliance date would cause significant costs for health plans and 
ultimately for their customers at a time when the industry will be 
preparing for the implementation of health insurance exchanges and 
other Affordable Care Act-mandated changes. This is because systems 
naturally evolve for a number of reasons over time and an extended 
delay will require an extension of testing activities and prolonged 
maintenance of the testing environment.
    Other commenters suggested that, as the delayed compliance date 
draws closer, HHS assess industry readiness and, if necessary, postpone 
compliance further. One commenter suggested establishing a delay, but 
delaying still further at a later date if the industry continues to 
struggle with Version 5010.
    Response: We agree with commenters that further delay of the ICD-10 
compliance date would be costly to the industry at large. We do not 
expect any further delays of the ICD-10 compliance date.
(g) Further Analysis
    Comment: One commenter suggested that an analysis of the costs of 
ICD-10 implementation for providers should be conducted by HHS, 
including how those costs would contribute to the cost of total health 
care delivery. The commenter wanted the study to include an analysis of 
whether the ``costs have any benefit to the nation's health,'' and 
stated that, once the study was conducted, HHS should consider whether 
implementation of ICD-10 was still in the best interests of the country 
or if alternatives or an extended timetable for further study would 
achieve the best results.
    Some commenters suggested additional studies and analysis be 
undertaken before HHS mandate any compliance date for providers. For 
one, commenters suggested that, as an interim step, HHS fully examine 
the current ICD-9-CM code development allocation process and make the 
necessary changes to permit the full utilization of the current code 
set and the rapid assignment of necessary codes.
    Some commenters suggested an analysis be conducted that compared 
the costs to industry of using ICD-9 for another few years before 
transitioning to ICD-11 to the industry costs of using ICD-10 for those 
years. Commenters suggested HHS conduct a further analysis of the cost 
of requiring two code conversions--to ICD-10 then to ICD-11--over the 
next 15 years. These analyses, commenters stated, are necessary in 
order to make a better-informed decision (ostensibly about whether to 
implement ICD-10).
    Some commenters urged that HHS complete a comprehensive cost-
benefit analysis to determine the impact of ICD-10 implementation on 
each health care industry sector before mandating ICD-10. The 
commenters stated that this analysis should include consultations with 
appropriate provider organizations and HHS advisory groups, and a final 
report should be issued that includes the benefits to physician 
practices and other sectors. The commenters suggested that the analysis 
include costs for information system changes, rate negotiations, 
recalculation of reimbursement methodologies, training, and changes to 
forms. Further, the analysis should consider the timing of the 
transition, including the impact of timing options on costs and 
benefits, potential return on investment, and interaction with other 
major health information investment tasks, including participation in 
other CMS HIT and quality initiatives. The commenters stated that the 
analysis should identify immediate and future costs and benefits on 
physician practices and others of improved data for, but not limited 
to, patient safety, outcomes analysis, reimbursement, disease 
management, utilization review and health statistics.
    Response: A common assumption of these suggestions is that, after a 
particular analysis, HHS would consider the merits of implementing ICD-
10 and whether to mandate its use or not. In terms of this assumption, 
we make the following observations:
     The decision to mandate ICD-10 for covered entities has 
already been made, and it was based on years of industry discussions, 
consensus building, and government rulemaking. Before publishing the 
proposed rule that proposed to require covered entities to implement 
ICD-10-CM and ICD-10-PCS, the Secretary considered recommendations of 
the NCVHS as well as input from federal and state agencies, private and 
professional organizations, and industry stakeholders, including 
organizations representing providers, health plans, clearinghouses, and 
vendors. For a history of the adoption of ICD-10, see the ICD-10 
proposed rule and final rules (August 22, 2008 (73 FR 49796) and 
January 16, 2009 (74 FR 3328), respectively).
     A number of studies have been conducted with regard to the 
costs and benefits of ICD-10. The April 2012 proposed rule listed a 
number of analyses in this regard. A robust analysis of the cost and 
benefits of ICD-10 was provided in the August 2008 ICD-10 proposed 
rule, and public comments on the analysis were subsequently 
incorporated or responded to in the January 2009 ICD-10 final rule. As 
well, there have been numerous other academic studies, analysis, and 
articles related to ICD-10. All of these studies have demonstrated 
costs and benefits with implementation.
    Given these points, there is little evidence that another study 
would, itself, convince HHS to overturn years of rulemaking (or, in the 
likelihood of it approximately concurring with the results of previous 
studies, serve any use whatsoever). However, it is clear that further 
analysis or study means more delay and uncertainty for the health care 
industry. Because ICD-10 has been mandated, many entities have invested 
considerable resources to comply. As our RIA--and many of the comments 
we received--illustrate: Every day that we delay--or create uncertainty 
around--the implementation of what has been mandated translates to 
considerable cost to the health care industry.

[[Page 54695]]

    We do not believe that further analysis of ICD-9 or ICD-10 would be 
a responsible use of stakeholders' and the federal government's 
resources.
    Comment: Another commenter suggested that a 2-year delay would 
provide us with the time to analyze the costs and benefits of 
implementing ICD1-10 on physician practices. The commenter suggested 
that, at the same time, we should engage all stakeholders to assess 
whether an alternative code set approach is more appropriate than the 
full implementation of ICD-10. The commenter noted that other countries 
implemented ICD-10 with a modified version of the code set. The 
commenter argued that stakeholders should reach consensus on the 
question of costs, scope, and whether a modified version is appropriate 
within the 2-year delay; otherwise, the industry should not implement 
ICD-10.
    Response: We reiterate that further analysis of the costs and 
benefits of ICD-10 is probably not a responsible approach given the 
substantial rulemaking and analysis conducted to date and the fact that 
a significant proportion of the health care industry has already spent 
resources implementing ICD-10. While we appreciate the suggestion that 
this analysis take place within a limited time; that is, a 2-year 
period, and that the analysis is narrowed only to the impact on 
physician practices, we do not believe the health care industry would 
participate in a cost/benefit analysis on the current version of ICD-10 
while at the same time participating in a decision on whether to create 
a modified version, as the commenter suggests. This would send 
contradictory messages to the industry as to what is being proposed or 
mandated and, again, the delay and uncertainty would be costly, 
whatever the outcome of these discussions.
    It is unclear from the commenters' comments how the concept of 
consensus is defined and whether consensus refers to stakeholder 
agreement on the costs of ICD-10 on physicians, stakeholder agreement 
on the decision to modify ICD-10, or stakeholder agreement on a 
suggested modified version itself. Regardless, it is questionable 
whether some defined methodology for achieving consensus would be a 
valid or appropriate mechanism for agreeing on cost estimates or a 
decision to modify ICD-10, and whether such a process could or should 
override years of industry input and government rulemaking that has 
been used to arrive at the current mandate.
    Given the obstacles and uncertainties that we envision 2 years of 
analysis and decision-making would engender, it is unlikely that any 
consensus could be made with regard to costs or a proposed modification 
of ICD-10 within 2 years. For reasons stated earlier, however, it is 
clear that there would be tremendous costs for the both government and 
commercial entities.
7. Summary
    After analysis and consideration of these comments, we are 
finalizing the policy to delay the ICD-10 compliance date by 1 year to 
October 1, 2014.

IV. Provisions of the Final Rule

    For the most part, this final rule incorporates the provisions of 
the proposed rule. Those provisions of this final rule that differ from 
the proposed rule are as follows:
     In 162.504, we have revised the term ``dates'' to read 
``requirements''.
     In 162. 504(a), we have revised the term 
``specifications'' to read ``requirements''.
     In 162.504(a), we have revised the term ``Covered health 
care providers'' to read ``Covered entities''.
     In 162.504(a), we have revised the year ``2014'' to read 
``2016''.
     In 162.504(b), we have removed the reference to 
``162.510''.
     In 162.504, we have deleted paragraph (c).
     In 162.508 (c), we have inserted ``or OEID'' after the 
phrase ``deactivate an HPID''.
     In 162.510, we have inserted the term ``Full'' before 
implementation and revised the term ``specifications'' to read 
``requirements''.
     In 162.510(a), we have inserted ``that has an HPID'' 
immediately after ``health plan''.
     In 162.510(b), we inserted the phrase ``that has an HPID'' 
immediately after ``health plan''.

V. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995 (PRA), agencies are 
required to provide a 60-day notice in the Federal Register and solicit 
public comment on a collection of information requirement submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the PRA requires that we 
solicited comment on the following issues:
     Whether the information collection is necessary and useful 
to carry out the proper functions of the agency.
     The accuracy of the agency's estimate of the information 
collection burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.

A. Information Collection Requirements (ICRs) Regarding HPID/OEID on 
Health Plan and Other Entities (Sec.  162.512 and Sec.  162.514)

    In order to apply for an HPID or OEID, there is an initial one-time 
requirement for information from health plans that seek to obtain an 
HPID and other entities that elect to obtain an OEID. In addition, 
health plans and other entities may need to provide updates to 
information.
    With respect to the collection of information requirements for the 
HPID, it is important to bear in mind that: (1) Systems modifications 
necessary to implement the HPID/OEID may overlap with the other systems 
modifications needed to implement other Affordable Care Act standards; 
(2) some modifications may be made by contractors such as practice 
management vendors, in a single effort for a multitude of affected 
entities; and (3) identifier fields are already in place and HPID/OEID 
will, in many instances, simply replace the multiple identifiers 
currently in use.
    Under this final rule, a CHP, as defined in 45 CFR 162.103, will 
have to obtain an HPID from a centralized electronic Enumeration 
System. A SHP, as defined in 45 CFR 162.103, would be eligible but not 
required to obtain an HPID. If a SHP seeks to obtain an HPID, it would 
apply either directly to the Enumeration System or its CHP would apply 
to the Enumeration System on its behalf. Other entities may apply to 
obtain an OEID from the Enumeration System. Health plans that obtain an 
HPID would have to communicate any changes to their information to the 
Enumeration System within 30 days of the change. A covered entity must 
use an HPID to identify a health plan that has an HPID in a standard 
transaction.
    We estimate that there will be up to 15,000 entities that will be 
required to, or will elect to, obtain an HPID or OEID. We based this 
number on the following data in Chart 3.

[[Page 54696]]

  Chart 3--Number and Type of Entities That May Obtain an HPID or OEID
------------------------------------------------------------------------
                                                             Number of
                     Type of entity                          entities
------------------------------------------------------------------------
Self insured group health plans.........................        * 12,000
Health insurance issuers, individuals and group health          ** 1,827
 markets, HMOs, including companies offering Medicaid
 managed care...........................................
Medicare, Veterans Health Administration (VHA), Indian                60
 Health Service (IHS), TRICARE, and State Medicaid
 programs...............................................
Clearinghouses and Transaction Vendors..................         *** 162
Third Party Administrators..............................        **** 750
                                                         ---------------
    Total...............................................         ~15,000
------------------------------------------------------------------------
* ``Report to Congress: Annual Report on Self-Insured Group Health
  Plans,'' by Hilda L. Solis, Secretary of Labor, March 2011.
** ``Patient Protection and Affordable Care Act; Standards Related to
  Reinsurance, Risk Corridors, and Risk Adjustment, 2011 Federal
  Register (Vol. 76), July, 2011,'' referencing data from
  www.healthcare.gov.
*** Health Insurance Reform; Modifications to the Health Insurance
  Portability and Accountability Act (HIPAA) Electronic Transaction
  Standards; Proposed Rule http://edocket.access.gpo.gov/2008/pdf/E8-19296.pdf, based on a study by Gartner.
**** Summary of Benefits and Coverage and the Uniform Glossary; Notice
  of Proposed Rulemaking http://www.gpo.gov/fdsys/pkg/FR-2011-08-22/pdf/2011-21193.pdf.

    Note that the number of health plans that will be required, or have 
the option, to obtain an HPID is considerably larger than the number of 
health plans which we used in the calculations in section V. of this 
final rule. This is because self-insured group health plans are 
required to obtain HPIDs if they meet the requirements of a CHP under 
this final rule. However, we assume that very few self-insured group 
health plans conduct standard transactions themselves; rather, they 
typically contract with TPAs or insurance issuers to administer the 
plans. Therefore, there will be significantly fewer health plans that 
use HPIDs in standard transactions than health plans that are required 
to obtain HPIDs, and only health plans that use the HPIDs in standard 
transactions will have direct costs and benefits.
    To comply with these requirements, health plans and other entities 
will complete the appropriate application/update form online through 
the Enumeration System. This online form serves two purposes: applying 
for an identifier and updating information in the Enumeration System.
    Most health plans and other entities will not have to furnish 
updates in a given year. However, lacking any available data on rate of 
change, we elected to base our assumptions on information in the 
Medicare program that approximately 12.6 percent of health care 
providers provide updates in a calendar year. We anticipate this figure 
would be on the high end for health plans and other entities. Applying 
this assumption, we can expect that 1,764 health plans will need to 
complete and submit the HPID application update form in a given year.
    Applying for an HPID or OEID is a one-time burden, although we 
anticipate health plans will need to update any information changes in 
the Enumeration System. In future years, the burden to apply for HPIDs 
and OEIDs will impact only new health plans and other entities that 
choose to obtain an OEID as described in the section V of this final 
rule. While health plans will need to update their information in the 
Enumeration System, we anticipate the burden associated with this 
requirement will be negligible as health plans will already have access 
to the Enumeration System and the information collected about the 
health plan is minimal so little information will need to be updated on 
a regular basis. From 2013 to 2018, industry trends indicate that the 
number of health plans will remain constant, or even decrease.\12\ We 
assume that the number of new health plans will be small, and that the 
costs for application and update of information in the Enumeration 
System will be negligible. Therefore, our calculations reflect that 
there will be no statistically significant growth in the number of 
health plans or other entities and we calculate zero growth in new 
applications.
---------------------------------------------------------------------------

    \12\ See Robinson, James C., ``Consolidation and the 
Transformation of Competition in Health Insurance,'' Health Affairs, 
23, no.6 (2004):11-24; ``Private Health insurance: Research on 
Competition in the Insurance Industry,'' U.S. Government 
Accountability Office (GAO), July 31, 2009 (GAO-09-864R); American 
Medical Association, ``Competition in Health Insurance: A 
Comprehensive Study of US Markets,'' 2008 and 2009.
---------------------------------------------------------------------------

    We estimate it will take 30 minutes to complete the application 
form and use an hourly labor rate of approximately $23/hour, the 
average wage reported for professional and business and services 
sector, based on data from the Department of Labor, Bureau of Labor 
Statistics, June 2011, ``Average hourly and weekly earnings of 
production and nonsupervisory employees (1) on private nonfarm 
payrolls.'' (ftp://ftp.bls.gov/pub/suppl/empsit.ceseeb11.txt). This 
represents a unit cost of $11.50 per application for both HPID and 
OEID.
    Because our initial estimate for the number of applications for 
OEID is small (162 Clearinghouses and Transaction Vendors + 750 TPAs = 
912) and the costs negligible, we do not include separate calculations. 
We have elected instead to offer the unit cost figure as a baseline if 
commenters demonstrate that the universe of applications for OEID is 
likely to expand significantly.
    To further reduce burden and plan for compliance with the 
Government Paperwork Elimination Act, we proposed accepting electronic 
applications and updates over the internet. We explicitly solicited 
comment on how we might conduct this activity in the most efficient and 
effective manner, while ensuring the integrity, authenticity, privacy, 
and security of health plan and other entity information.
    We did not receive any comments on these [requirements?] and we are 
finalizing these provisions as proposed.

B. ICRs Regarding Implementation Specifications: Health Care Providers 
(Sec.  162.410)

    We proposed to put an additional requirement on covered 
organization health care providers that employ, have as members, or 
have contracts with individual health care providers who are not 
covered entities but who are prescribers. By 180 days after the 
effective date of the final rule, such organizations must require such 
health care providers: (1) To obtain, by application if necessary, an 
NPI from the National Plan and Provider Enumeration System (NPPES); (2) 
to the extent the prescriber writes a prescription while acting within 
the scope of the prescriber's relationship with the organization, 
disclose his or her NPI, upon request, to any entity that

[[Page 54697]]

needs the NPI to identify the prescriber in a standard transaction.
    The burden associated with the addition to the requirements of 
Sec.  162.410 as discussed in this final rule is the one-time 
application burden, and later update burden as necessary, on 
prescribers who do not already have an NPI, who have a relationship 
with a covered health care provider, and who must be identified in a 
standard transaction. We estimate that as of the fall of 2011 there 
were approximately 1.4 million prescribers in the United States, of 
which approximately 160,000 did not have an NPI. It is these 
prescribers who would have to obtain an NPI. Based on the estimations 
in the NPI final rule, we estimate that it will take 20 minutes to 
complete an application for an NPI and use an hourly labor rate of 
approximately $23/hour, the average wage reported for professional and 
business and services sector, based on data from the Department of 
Labor, Bureau of Labor Statistics, June 2011, ``Average hourly and 
weekly earnings of production and nonsupervisory employees (1) on 
private nonfarm payrolls.'' (ftp://ftp.bls.gov/pub/suppl/empsit.ceseeb11.txt). Additionally, we have calculated an increase of 3 
percent for labor costs for each of the years 2013 through 2016 for an 
hour rate of approximately $24/hour for year 2013. Table 2 shows the 
estimated annualized burden for the HPID and NPI PRA in hours.
    We did not receive any comments and we are finalizing these 
provisions as proposed.

                                                     Table 2--Total Information Collection Burden *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                      Hourly
                                                                                 Burden    Total    labor cost               Total capital/
       Regulation section        OMB Control No.    Respondents    Responses      per      annual       of      Total labor    maintenance    Total cost
                                                                                response   burden   reporting       cost        costs ($)        ($)
                                                                                (hours)                ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sec.   162.410.................  0938-New.......         160,000      160,000       0.33   52,800           24    1,267,200               0    1,267,200
Sec.   160.512.................  0938-New.......          15,000       15,000       0.50    7,500           24      180,000               0      180,000
                                ------------------------------------------------------------------------------------------------------------------------
    Total......................  ...............         175,000      175,000  .........   60,300  ...........  ...........  ..............    1,447,200
--------------------------------------------------------------------------------------------------------------------------------------------------------
* 2013 dollars.

    To obtain copies of the supporting statement and any related forms 
for the paperwork collections referenced previously, access our Web 
Site address at http://www.cms.hhs.gov/PaperworkReductionActof1995, or 
Email your request, including your address, phone number, OMB number, 
and CMS document identifier, to Paperwork@cms.hhs.gov, or call the 
Reports Clearance Office on (410) 786-1326. If you comment on these 
information collection and recordkeeping requirements, please do either 
of the following:
    1. Submit your comments electronically as specified in the 
ADDRESSES section of this final rule; or
    2. Submit your comments to the Office of Information and Regulatory 
Affairs, Office of Management and Budget, Attention: CMS Desk Officer, 
CMS-0040-F; Fax: (202) 395-6974; or Email: OIRA_submission@omb.eop.gov.

VI. Regulatory Impact Statement (or Analysis)

A. Statement of Need

1. NPI for Non-Covered Health Care Providers
    The compliance date for use of the NPI by health care providers was 
May 23, 2007. As of the fall of 2011, we believe there were 160,000 
prescribing health care providers who do not already have an NPI. For 
these health care providers, obtaining an NPI is not a burdensome 
endeavor, as it is free of charge and takes approximately 20 minutes to 
file an application to obtain one. However, the availability of these 
additional prescriber NPIs will greatly assist entities who need them 
for use in standard transactions, including for the Medicare Part D 
program, as described previously. See section V.B. of this final rule 
specifically for a summary of the time costs associated with obtaining 
an NPI. We have included the costs associated with obtaining an NPI 
detailed in section V.B. of this final rule and in the summary Tables 
20 and 21 of the RIA.
2. HPID
    As noted in section I of this final rule, health plans, and other 
payers are identified in a number of different ways in covered 
transactions by the health care industry. Health plan identifiers are 
currently used to facilitate routing of covered transactions or, in 
other words, ``to determine either where the standard electronic 
transactions are to be sent if the receiver is [a] health plan or from 
where they came from if the sender is a health plan.'' \13\ The primary 
function of the HPID in this rule is to create a standard for covered 
entities to identify health plans in HIPAA covered transactions.
---------------------------------------------------------------------------

    \13\ J. Daley, ``Testimony before the NCVHS Subcommittee on 
Standards on the National Health Plan Identifier on behalf of 
America's Health Insurance Plans and the Blue Cross and Blue Shield 
Association,'' July 19, 2010, http://www.ncvhs.hhs.gov.
---------------------------------------------------------------------------

    Different segments in each HIPAA standard transaction require an 
identifier to identify the payer or sender/recipient of a particular 
transaction. (See Table 1 in the April 2012 proposed rule for a list of 
HIPAA standard transactions, and Table 2 for an example of a segment 
that requires a payer identifier.) Currently, when a covered entity, 
for business reasons, inputs an identifier that identifies a health 
plan into a transaction segment, the identifier is proprietary or based 
on the NAIC code, EIN, or TIN of the health plan or other entity. Some 
health plans use multiple identifiers to identify themselves in 
transactions.
    Standardization of the health plan identifier is expected to 
ameliorate some routing issues. It is expected to clarify, to some 
extent, the sender or recipient of standard transactions, when the 
sender or recipient is a health plan. For instance, a health plan that 
uses different identifiers to identify itself in covered transactions 
creates inefficiencies and potential confusion among its trading 
partners. Participating health care providers that are its trading 
partners, for instance, could be required to use different identifiers 
for different transactions, even to identify the same health plan. With 
the adoption of the HPID, such a health plan will likely use one 
identifier, thereby making it easier for the covered health care 
provider to

[[Page 54698]]

identify the health plan as the sender or recipient of the standard 
transaction.
    By ameliorating routing issues, the HPID and OEID will add 
consistency to identifiers, which will provide for a higher level of 
automation, particularly for provider processing of the X12 271 
(eligibility response) and X12 835 (remittance advice). In the case of 
the X12 835, the HPID and OEID will allow reconciliation of claims with 
the claim payments to be automated at a higher level.
    However, according to testimony and industry studies, the most 
significant value of the HPID and the OEID is that they will serve as 
foundations for other regulatory and industry initiatives. The 
implementation of HPID, in and of itself, may not provide significant 
monetary savings for covered entities, with the exception of providing 
time savings by immediately solving certain routing issues. Instead, 
financial benefits are expected to be realized mostly downstream, when 
the HPID is used in coordination with other regulatory and industrial 
administrative simplification initiatives. Testimony from the July 19, 
2010 NCVHS hearing reinforced this idea.
    As an analogy, the standardization of the width of railroad tracks 
does not, in and of itself, result in monetary savings. However, such 
standardization has ensured connectivity between diverse railroad 
systems that has resulted in time and cost savings in the movement of 
freight across the country. In a like manner, standardization of a 
single data element in health care transactions does not, in and of 
itself, produce substantial time or cost savings. However, the diverse 
identifiers currently used by multiple health plans are akin to the 
different track widths used by various railroad systems. Like the 
standardization of railroad track widths, the HPID serves as a 
foundation for more efficient and cost effective transmission of health 
care information.
    In an industry white paper, one health care provider association 
echoed the foundational importance of the HPID and stated that a 
standard identifier for health plans is ``viewed by many as a crucial 
step toward one-stop, automated billing.'' \14\ In the same paper, that 
association stated that, in order to begin the movement toward 
automated billing, standard identifiers were needed for more entities 
with ``payer'' function than just ``health plans,'' including entities 
with primary financial responsibility for paying a particular claim, 
entities responsible for administering a claim, entities that have the 
direct contract with the health care provider, and secondary or 
tertiary payers for the claim.\15\ The association went on to contend 
that fee schedules and plan and product types would need to be 
identified with this health plan identifier.
---------------------------------------------------------------------------

    \14\ ``National Health Plan Identifier White Paper,'' prepared 
by the American Medical Association (AMA) Practice Management Center 
(PMC), September 22, 2009.
    \15\ Ibid.
---------------------------------------------------------------------------

    We did not propose that the HPID or the OEID contain intelligence 
that would include fee schedules or benefit plans or product types. 
However, we view the adoption of the HPID and the OEID as foundations 
for the ``one-stop, automated billing'' that this professional 
association advocated.
    This impact analysis will take these foundational benefits of HPID 
and, for the sake of illustration, attribute some of the monetary 
savings from the downstream results to implementation and use of the 
HPID. It is important to view these estimates as an attempt to 
illustrate the foundational effect of the HPID rather than as a precise 
budgetary prediction.
3. Need for a Delay in Implementation of ICD-10, and General Impact of 
Implementation
    The ICD-10 final rule requires covered entities to comply with ICD-
10 on October 1, 2013. The provisions of this final rule changes the 
compliance date to October 1, 2014.
    The process of transitioning from ICD-9 to ICD-10, if not carefully 
coordinated, poses significant risk to provider reimbursement. Should 
health care entities' infrastructure not be ready or thoroughly tested, 
providers may experience returned claims and delayed payment for the 
health care services they render to patients. There has been mounting 
evidence that a significant percentage of providers believe they do not 
have sufficient resources or time to be ready to meet the October 1, 
2013 ICD-10 compliance deadline.
    Two distinct types of issues are implicated by a transition of this 
magnitude, and the costs associated with both might be avoided if the 
ICD-10 compliance date is delayed. First, there may be entities that 
have not readied their systems, personnel, or processes to achieve 
compliance by October 1, 2013. For example, vendor practice management 
and/or other software must be updated to process claims with ICD-10 
codes, then installed and tested internally. Likewise, staff needs to 
be trained and systems and forms prepared for the new code set. In a 
CMS survey conducted in November and December 2011 (hereinafter 
referred to as the CMS readiness survey), 25 percent of providers 
surveyed indicated that they are at risk for not meeting the October 1, 
2013 compliance date.\16\ In February 2012, the Workgroup for 
Electronic Data Interchange (WEDI) conducted a survey on ICD-10 
readiness (WEDI readiness survey) that indicated that nearly 50 percent 
of the 2,140 provider respondents did not know when they would complete 
their impact assessment.\17\ An illustration of what could occur if 
elements of industry are not prepared for the transition to ICD-10 can 
be seen by the January 1, 2012 transition to Version 5010, where we 
have heard from several provider organizations reporting that numerous 
practices were not paid for long periods due to the Version 5010 
transition.
---------------------------------------------------------------------------

    \16\ ``Version 5010 and ID-10 Readiness Assessment: Conducted 
among Health Care Providers, payers, and Vendors for the Centers for 
Medicare & Medicaid Services (CMS),'' December, 2011, Prepared by 
CMS.
    \17\ ``Survey: ICD-10 Brief Progress,'' February 2012, conducted 
by the Workgroup for Electronic Data Interchange (WEDI).
---------------------------------------------------------------------------

    Second, beyond ``readiness'' and ``compliance,'' there are issues 
that will arise if trading partners have not thoroughly tested ICD-10. 
``Readiness'' is only a self-reported indicator of the potential 
success of an ICD-10 transition and can be unreliable; we know this 
from similar industry surveys done for Version 5010 that indicated high 
levels of readiness only to find multiple issues once claims were 
submitted in production mode. The other indicator of success is the 
quality and robustness of testing. Clearinghouses cannot assist in the 
ICD-10 transition as they are unable to correct coding issues without 
viewing the underlying documentation, which is not a typical 
clearinghouse role. In general, only a provider can change/modify a 
code, so it is incumbent upon providers to ensure a successful ICD-10 
conversion. In many cases, providers' success will be predicated upon 
timely vendor delivery of ICD-10-compliant software, and coordination 
must be developed with payer systems and new fee schedules. Providers' 
practice management systems (PMS) must be programmed to process ICD-10 
codes, and, with many providers transitioning to EHRs, there needs to 
be a well-tested interface between electronic health records and the 
PMS.
    In an informal poll conducted by Edifecs (hereinafter referred to 
as the Edifecs poll), a health care IT company, with responses from 50 
senior health care officials representing a wide range

[[Page 54699]]

of organizations, 37 percent of respondents stated that a 1-year delay 
would be beneficial for them.\18\ According to the Edifecs analysis, 
``For those organizations that have the determination to keep moving 
forward as if the delay had never been announced, it may end up being a 
true gift on the testing front.'' \19\
---------------------------------------------------------------------------

    \18\ ``Survey: Industry Reaction to Potential Delay of ICD-10--A 
Delay will be Costly, but Manageable * * * Unless it's more than a 
Year,'' February 27, 2012, conducted by Edifecs. The survey's 
participants included commercial payers (25%), Blue Cross Blue 
Shield plans (25%), healthcare providers (18%), government entities 
such as State Medicaid (9%), medical claim clearinghouses (6%), and 
other healthcare industry organizations (17%).
    \19\ Ibid.
---------------------------------------------------------------------------

    In the CMS readiness survey, 75 percent of providers surveyed cited 
the lack of time and/or staff as a barrier to implementing ICD-10 on 
time. The survey also indicated that given just 3 additional months, an 
additional 14 percent of providers would be able to achieve compliance 
by December 31, 2013. This indicates that a delay would be helpful in 
overcoming one of the major obstacles to compliance--lack of time--and 
that a delay of a year would enable providers to achieve not only 
``readiness'' in terms of system interoperability, but also give the 
time for more thorough testing of ICD-10.

B. Introduction

    We have examined the impacts of this final rule as required by 
Executive Order 12866 on Regulatory Planning and Review (September 30, 
1993, as further amended), Executive Order 13563 on Improving 
Regulation and Regulatory Review (January 18, 2011), the Regulatory 
Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354) (as amended 
by the Small Business Regulatory Enforcement Fairness Act of 1996, Pub. 
L. 104-121), section 1102(b) of the Social Security Act, section 202 of 
the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), Executive 
Order 13132 on Federalism (August 4, 1999), and the Congressional 
Review Act (5 U.S.C. 804(2)).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. Executive Order 13563 also directs agencies not only to 
engage the public and provide an opportunity to comment on all 
regulations, but also calls for greater communication across all 
agencies to eliminate redundancy, inconsistency, and overlapping, as 
well as outlines processes for improving regulation and regulatory 
review.
    A Regulatory Impact Analysis must be prepared for major rules with 
economically significant effects ($100 million in 1995 dollars or more 
in any 1-year). Because of the impact on the health care industry of 
the adoption, implementation, and use of the HPID and the delay in the 
compliance date for ICD-10, this rule has been designated an 
``economically'' significant regulatory action, under section 3(f)(1) 
of Executive Order 12866 as it will have an impact of over $100 million 
on the economy in any 1 year.
    The impacts of implementing the HPID and delaying the compliance 
date for transition to ICD-10 are quite different, and, because of 
their respective impacts, both provisions of the final rule would be 
considered economically significant. Accordingly, we have prepared two 
independent RIAs: One analysis of the impact of the adoption and use of 
the HPID and one for the impact associated with the delay of the 
compliance date for transition to ICD-10. These RIAs, to the best of 
our ability, present the costs and benefits of this final rule, which 
has been reviewed by the Office of Management and Budget.
    The RIA on the delay of ICD-10 follows the RIA on the 
implementation and use of the HPID.
    We anticipate that the adoption of the HPID and the OEID and the 
additional requirement for organization covered health care providers 
to require certain non-covered individuals who are prescribers to 
obtain and use an NPI would result in benefits that outweigh the costs 
to providers and health plans. We believe that the delay of ICD-10 will 
have costs to health plans and clearinghouses, though it will be 
beneficial to a group of providers.
    In addition, under section 205 of the UMRA (2 U.S.C. 1535), having 
considered at least three alternatives for the HPID that are referenced 
in the section VI.C. of this final rule, HHS has concluded that the 
provisions in this rule are the most cost effective alternative for 
implementing HHS' statutory requirements concerning administrative 
simplification.
    We did not consider alternatives to the addition to the NPI 
requirements that are in this rule. The NPI is the standard identifier 
for health care providers under HIPAA. Based on ongoing industry 
feedback, prescriber NPIs are not always available. Therefore, we 
believe a regulatory requirement closing the prescriber loophole in the 
NPI rule is necessary to ensure that the remaining prescribers without 
an NPI obtain one. We estimate that the addition will have little 
financial impact on industry and is therefore cost effective in its own 
right.
    Similarly, we have considered four alternatives for delaying ICD-10 
compliance, and considered comments regarding those alternatives. The 
summary of the alternatives, the comments, and our responses to the 
comments are included in the preamble and will not be repeated for the 
RIA.
    The Regulatory Flexibility Act (RFA), as amended, requires agencies 
to analyze options for regulatory relief of small businesses if a rule 
has a significant impact on a substantial number of small entities. For 
purposes of the RFA, small entities include small businesses, nonprofit 
organizations, and small government jurisdictions. Small businesses are 
those with sizes below thresholds established by the Small Business 
Administration (SBA). Individuals and States are not included in the 
definition of a small entity.
    For purposes of the RFA, most physician practices, hospitals and 
other health care providers are small entities, either by nonprofit 
status or by having revenues less than $10 million for physician 
practices and less than $34.5 million for hospitals in any 1 year.
    We have determined that the adoption of the HPID in this final rule 
will have an impact on a substantial number of small entities and that 
a regulatory flexibility analysis, an analysis on the impact of this 
final rule on small entities, is required. The regulatory flexibility 
analysis on the impact of the adoption of HPID will come after the RIA. 
The regulatory flexibility analysis for HPID concludes that, although a 
significant number of small entities may be affected by this final 
rule, the economic impact on small entities will not be significant.
    We have also determined that the delay of the compliance date for 
the use of the ICD-10 medical code set will have an impact on a 
substantial number of small entities and this regulatory flexibility 
analysis will follow the RIA for the delay of ICD-10. The regulatory 
flexibility analysis for the delay of ICD-10 concludes that small 
entities will be positively impacted economically by the compliance 
date delay and that there will be no significant burden.
    In addition, section 1102(b) of the Act requires a regulatory 
impact analysis for ``any rule or regulation proposed under

[[Page 54700]]

title XVIII, title XIX, or part B of [the Act] that may have a 
significant impact on the operations of a substantial number of small 
rural hospitals.'' This final rule, with regard to the HPID, ICD-10, 
and NPI provisions, is being finalized under title XI, part C, 
``Administrative Simplification,'' of the Act, and, therefore, does not 
apply. However, we assume that the impact to small rural hospitals will 
be similar to that of other small providers in terms of the HPID, NPI, 
and ICD-10 provisions; that is, implementation of the provisions will 
either not have a significant economic impact, in the case of HPID and 
NPI provisions. Or, in the case of the ICD-10 provision, there will be 
a positive impact.
    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1-year of $100 
million in 1995 dollars, updated annually for inflation. In 2012, that 
threshold is approximately $139 million. This final rule contains 
mandates that would likely impose spending costs on State governments 
and the private sector, of more than $139 million. We will therefore 
illustrate the costs of adoption of the HPID to the State governments, 
specifically the impact to State Medicaid programs, and to the private 
sector in our consideration of costs to health plans in the RIA. We 
will also illustrate the costs of the delay of ICD-10 to State Medicaid 
programs and to the private sector in our consideration of costs to 
health plans in the RIA that addresses costs and benefits of the delay 
of compliance of ICD-10.
    As to the addition to the NPI requirements, again, since the method 
for compliance by covered organization health care providers is 
discretionary and could vary, for example, from a verbal directive to 
prescribers whom they employ or with whom they contract, to updating 
employment or contracting agreements, we believe there is no mandate 
which imposes spending costs on State government or the private sector 
in any 1 year of $139 million or more.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a final rule that imposes 
substantial direct requirement costs on State and local governments, 
preempts State laws, or otherwise has Federalism implications. The 
adoption of the HPID in this final rule will not have a substantial 
direct effect on State or local governments, does not preempt States, 
or otherwise have Federalism implications. The delay of compliance with 
ICD-10 in this final rule will not have a substantial direct effect on 
State or local governments, does not preempt States, or otherwise have 
Federalism implications.
    In the RIA for implementation of the HPID in the April 2012 
proposed rule, we used the proposed provision that the HPID would be 
implemented for use starting in October 2013. In that RIA, we used data 
projected for 2013 as our baseline, and 2014 as the first year when 
benefits attributable to use of the HPID would begin. We also assumed 
that 2013 would be the year in which most of the costs would be 
incurred, with 2014 and 2015 as the years in which transition costs 
would be incurred. We projected those benefits and costs out until 
2023.
    Because this final rule has established a date 4 years from 
effective date of this rule as the date by which all covered entities 
will be required to use HPIDs to identify health plans in the standard 
transactions, we have changed the year that we will use as a baseline 
from 2013 to 2016. (See section II.E. of this final rule for more 
information regarding effective and compliance dates.) For the RIA in 
this final rule, we assume, as we did in the proposed rule, that 
benefits from the use of the HPID will occur over a ten-year period 
beginning the first full year covered entities are required to use the 
HPID in standard transactions. That 10-year period will begin in 2017 
and continue through 10 years (that is, through 2026) and transition 
costs will be incurred in the years 2017 through 2018.
    Because we have shifted our costs and savings forward three years, 
our conclusions on costs and benefits are different from those in the 
RIA of the April 2012 proposed rule.

B. Consideration of Public Comments Regarding the Impact Analysis

    In the April 2012 proposed rule, we solicited additional data that 
would help us determine more accurately the impact on the various 
categories of entities affected by the April 2012 proposed rule. We 
received numerous comments on our analysis of the costs and benefits of 
implementing the HPID and the delay in the compliance date of ICD-10. 
We have provided summaries of those comments and our responses.
    Some of our assumptions in the April 2012 proposed rule have 
changed because of new information we received through public comments. 
However, the assumptions that we changed were based on comments that 
were qualitative or anecdotal. The comments did not contain new data or 
estimates that would impact the quantitative estimates with regard to 
the impact of implementation of HPID and delay of ICD-10 that were made 
in the April 2012 proposed rule. Therefore, none of the comments we 
received required us to change the calculations and conclusions of the 
RIA that we provided in the April 2012 proposed rule with regard to 
both the HPID and ICD-10 provisions.
    We will summarize those comments and the changes we made to the 
assumptions.
    We have maintained or summarized sections of the RIA that we 
provided in the April 2012 proposed rule in which comments were made or 
new information was provided within the comments. We removed or 
summarized sections of the RIA where we received no comments.
    Although we have not changed any of the calculations or conclusions 
of the RIA that we provided in the April 2012 proposed rule with regard 
to the ICD-10 provisions of that rule, we have duplicated the summary 
tables from the April 2012 proposed rule that illustrate those 
calculations for reference.

C.

    In deciding to adopt the HPID as the format for the national unique 
health plan identifier, we considered a number of alternatives, on 
which we solicited public and stakeholder comments. As noted, we did 
not consider alternatives to the addition to the NPI requirements.
    We did not receive comments with regard to the alternatives 
considered in the April 2012 proposed rule regarding the HPID and the 
NPI. For more detail about the alternatives we considered, please refer 
to the April 2012 proposed rule. Having received no comments meriting a 
change in policy, we are finalizing the policy to adopt an HPID that is 
a 10-digit, all-numeric identifier with a Luhn check-digit as the 10th 
digit.

D. Impacted Entities--HPID and NPI

    All HIPAA covered entities may be affected by the HPID standard as 
detailed in this final rule although, as we estimate, only a segment of 
covered entities will have substantive cost or benefits associated with 
the adoption of the HPID. Impacted HIPAA covered entities include all 
health plans, health care clearinghouses, and health care providers 
that transmit health information in electronic form in connection with 
a transaction for which the Secretary has adopted a standard.
    Table 3 outlines the estimated number of entities that may be 
affected by the

[[Page 54701]]

HPID and OEID, along with the sources of those data.

                                 Table 3--Types and Numbers of Affected Entities
----------------------------------------------------------------------------------------------------------------
                      Type                           Number                          Source
----------------------------------------------------------------------------------------------------------------
Health Care Providers--Offices of Physicians          234,222  Health Insurance Reform; Modifications to the
 (includes offices of mental health specialists                 Health Insurance Portability and Accountability
 and substance use treatment practitioners).                    Act (HIPAA) Electronic Transaction Standards;
                                                                Proposed Rule http://edocket.access.gpo.gov/2008/pdf/E8-19296.pdf
                                                               (based on AMA statistics)
Health Care Providers--Hospitals................        5,764  Health Insurance Reform; Modifications to the
                                                                Health Insurance Portability and Accountability
                                                                Act (HIPAA) Electronic Transaction Standards;
                                                                Proposed Rule http://edocket.access.gpo.gov/2008/pdf/E8-19296.pdf
Health Care Providers--Nursing and residential         66,464  2007 Economic Census Data--Health Care and Social
 Care Facilities not associated with a hospital.                Assistance (sector 62) using the number of
                                                                establishments
                                                               ~NAICS code 623: Nursing Homes & Residential Care
                                                                Facilities n=76,395 x 87 percent (percent of
                                                                nursing and residential care facilities not
                                                                associated with a hospital) = 66,464
Other Health Care Providers--Offices of               384,192  2007 Economic Census Data--Health Care and Social
 dentists, chiropractors, optometrists, mental                  Assistance (sector 62) using the number of
 health practitioners, substance use treatment                  establishments.:
 practitioners, speech and physical therapists,                ~NAICS code 621: All ambulatory health care
 podiatrists, outpatient care centers, medical                  services (excluding offices of physicians) =
 and diagnostic laboratories, home health care                  313,339 (547,561 total - 234,222 offices of
 services, and other ambulatory health care                     physicians)
 services, resale of health care and social                    ~NAICS code 62-39600 product code): Durable
 assistance merchandise (durable medical                        medical equipment =70,853
 equipment).
Health Plans--Commercial: Impacted commercial           1,827  This number represents the most recent number as
 health plans considered in this RIA are health                 referenced in ``Patient Protection and
 insurance issuers; that is, insurance                          Affordable Care Act; Standards Related to
 companies, services, or organizations,                         Reinsurance, Risk Corridors, and Risk
 including HMOs, that are required to be                        Adjustment,'' Proposed Rule, 2011 Federal
 licensed to engage in the business of insurance                Register (76 FR 41930), July 15, 2011,'' from
 in a State..                                                   http://federalregister.gov/a/2011[dash]17609
Health Plans--Government........................           60  Represents the 56 State Medicaid programs,
                                                                Medicare, the Veteran's Administration (VHA),
                                                                and Indian Health Service (IHS), TRICARE
Health Plans--All...............................        1,887  Insurance issuers (n=1,827) + Medicaid agencies +
                                                                Medicare, VHA, TRICARE, and IHS (n=60)= 1,887
                                                                total health plans
Third Party Administrators......................          750  Summary of Benefits and Coverage and the Uniform
                                                                Glossary; Notice of Proposed Rulemaking http://
                                                                www.gpo.gov/fdsys/pkg/FR[dash]2011-08-22/pdf/
                                                                2011-21193.pdf
Transaction Vendors and Clearinghouses..........          162  Health Insurance Reform; Modifications to the
                                                                Health Insurance Portability and Accountability
                                                                Act (HIPAA) Electronic Transaction Standards;
                                                                Proposed Rule http://edocket.access.gpo.gov/2008/
                                                                pdf/E8[dash]19296.pdf, based on a study by
                                                                Gartner.
Pharmacy Benefit Managers (PBMs)................           60  National Council for Prescription Drug Programs
                                                                (NCPDP) May 17, 2012 letter to Centers for
                                                                Medicare & Medicaid Services, Re: CMS-0040-P.
----------------------------------------------------------------------------------------------------------------

E. Scope and Methodology of the Impact Analysis for the HPID and NPI

    This impact analysis estimates the costs and benefits that will be 
realized through the implementation and use of the HPID. We do not 
analyze the costs and benefits of the addition to the NPI requirements, 
apart from the costs associated with applying for an NPI that are 
already addressed in section V.B. of this final rule concerning the 
collection of information requirements. Aside from the time necessary 
to apply, we do not anticipate any financial impact as a result of the 
addition to the NPI requirements. We asked for comments on this 
approach.
    Comment: A commenter expressed concerns about the burden placed on 
hospitals that would be incurred in order to meet the addition to the 
NPI requirements. The commenter noted that NPI requirements would 
require hospitals and other organization health care providers to 
maintain a central location where prescribers' NPIs would be tracked as 
well as provide 24-hour staffing to provide pharmacies with these NPIs.
    Response: The preamble makes clear that the rule does not specify 
how organization covered health care providers should impose the 
requirement on individual health care providers and that they may have 
a number of alternatives to do so, for example, through a written 
agreement, an employment contract, or a directive to abide by the 
organization health care provider's policies and procedures. Thus, we 
do not believe compliance with this new requirement will necessarily be 
burdensome.
    In this RIA, we do not analyze the impact of implementation and use 
of the OEID. The OEID, as finalized herein, is a data element that 
could be voluntarily used by entities other than health plans. These 
other entities may include, for example, health care clearinghouses, 
transaction vendors, and third party administrators that provide 
administration or management for self-insured group health plans. The 
range of total entities that may apply for and use an OEID is from zero 
to approximately 1,000 entities (750 Third party administrators + 169 
transaction vendors + 60 Pharmacy Benefit Managers). Therefore, using 
the methodology employed in this RIA, the cost for implementation of 
the OEID for other entities ranges from no cost to over $500 million, 
depending on choices made by those entities. Because of the uncertainty 
inherent in this range of cost, based on the number of entities that 
may apply for the OEID we will not attempt to quantify the impact of

[[Page 54702]]

applying for or using an OEID beyond this limited analysis. Nor will we 
include this range of costs in our summary of this RIA. However, we can 
assume that implementing and using an OEID would be accompanied by a 
proportional range of costs and benefits akin to the cost and benefits 
estimated for health plans in this RIA. In the proposed rule, we 
welcomed stakeholder comment on the number and kind of entities that 
may apply for and use an OEID.
    Comment: A commenter noted that he was unable to ascertain whether 
Pharmacy Benefit Managers (PBMs), TPAs, transaction vendors and other 
entities that might want to obtain OEIDs were included in the RIA.
    Response: We limited our RIA to the analysis of costs and benefits 
in relation to the HPID, and not the costs or benefits of the OEID. We 
concluded that there was no way of projecting how many other entities 
would ultimately obtain and use an OEID as it is a voluntary 
enumeration. As such, we did not consider costs or benefits to entities 
that might want to obtain OEID.
    However, we assume that there will be some impact to PBMs, just as 
we assume that there will be some impact to other entities that may 
obtain and use an OEID. We have included PBMs in Table 3 as a category 
of impacted entities, even as we are unable to quantify the impact on 
PBMs.
    We estimate the cost of the Enumeration System to be $1.5 million. 
The Federal Government will bear the costs associated with the 
Enumeration System that will enumerate health plans and other entities 
and maintain their HPID and enumeration information. These include the 
costs of enumerating health plans and other entities, the cost of 
maintaining health plan and other entity information in the Enumeration 
System, and the costs of disseminating HPID and OEID data to the health 
care industry and others, as appropriate. HHS will develop the 
Enumeration System, and conduct the application, updating, and data 
dissemination activities. We will not provide any further analysis of 
this cost within the narrative of the RIA.
    The costs to health plans of applying for an HPID and updating and 
maintaining the information in the Enumeration System are detailed in 
section III. of this final rule. We will reflect these costs in the 
summary of the costs to health plans in this RIA.
    While we assume that adoption of the HPID will affect a broad range 
of health care providers, as illustrated in Table 3, we only examine 
the costs and benefits of implementation and use of the HPID on two 
types of health care providers: hospitals and physician practices. We 
did not analyze the impact to nursing and residential care facilities, 
dentists, or suppliers of durable medical equipment.
    There are two reasons for narrowing the scope of this analysis to 
only two categories of health care providers: First, we have very 
little data on the usage of EDI among dentists, suppliers of durable 
medical equipment, nursing homes, and residential care facilities. The 
lack of data for these types of health care providers has been noted in 
other studies on administrative simplification.\20\ Second, we assume 
that the greatest benefits will be gained by hospitals and physician 
practices as they conduct the majority of standard transactions. In our 
proposed rule, we welcomed comment from industry and the public as to 
our assumptions.
---------------------------------------------------------------------------

    \20\ ``Excess Billing and Insurance-Related Administrative 
Costs,'' by James Kahn, in The Healthcare Imperative; Lowering Costs 
and Improving Outcomes: Workshop Series Summary, edited by Pierre L. 
Yong, Robert S. Saunders, and Leigh Anne Olsen, Institute of 
Medicine of the National Academies, the National Academies Press, 
Washington, DC: 2010.
---------------------------------------------------------------------------

    We did not include an analysis of the impact on pharmacies because 
the HPID will not be used extensively in electronic transactions by the 
pharmacy industry. Therefore, we assume no impact of the HPID on 
pharmacies.
    Comment: A commenter disagreed with the assumption that there would 
be no impact to pharmacies with regard to implementing and using the 
HPID. The commenter noted that the HPID/OEID would be used in other 
areas as defined by the NCPDP and ASC X12. The commenter noted that the 
pharmacy industry has presented recommendations to NCVHS on specific 
fields in the NCPDP Telecommunication VD.0 Standard and ASC X12 5010 in 
which the HPID/OEID might be used, and the commenter included a list of 
recommendations for where and under what circumstances an HPID might be 
required to be used.
    Response: While the commenter's recommendations of where and under 
what circumstances the HPID might be used in future ASC X12 and NCPDP 
standards appear reasonable, they were not considered in the context of 
the RIA because they went beyond the provisions of the April 2012 
proposed rule, and, subsequently, this final rule with regard to 
required use of the HPID. The commenter did not argue that the pharmacy 
industry would use the HPID in the manner in which it is required in 
the provisions of this final rule. Therefore, we did not change the 
assumption we made regarding the pharmacy industry's use of the HPID as 
noted in the April 2012 proposed rule: ``[T]he HPID will not be used 
extensively in electronic transactions by the pharmacy industry'' (77 
FR 22979).
    With respect to health care providers, only health care providers 
that transmit health information in electronic form in connection with 
a transaction for which the Secretary has adopted a HIPAA transaction 
standard are considered covered entities under HIPAA.
    We assumed that the HPID may be used to identify health plans in 
nonelectronic transactions as well, but, as this standard is only 
required for use in HIPAA standard transactions, we have not tried to 
measure the impact on nonelectronic transactions. The costs and 
benefits included in this analysis do not include infrastructure or 
software costs for health care providers who are equipping their 
practices for the transmittal of electronic transactions for the first 
time. The costs in this impact analysis include only those that are 
necessary to implement the HPID.
    We include health care clearinghouses and transaction vendors as 
affected entities in Table 3. Transaction vendors are entities that 
process claims or payments for other entities, which may include health 
plans. Transaction vendors may not meet the HIPAA definition of health 
care clearinghouse, but as used in this context, health care 
clearinghouses would constitute a subset of transaction vendors. 
Payment vendors are a type of transaction vendor--a transaction vendor 
that ``associates'' or ``reassociates'' health care claim payments with 
the payments' remittance advice for either a health plan or provider. 
For our purposes here, transaction vendors do not include developers or 
retailers of computer software, or entities that are involved in 
installing, programming or maintaining computer software. Health care 
clearinghouses and transaction vendors may be impacted because their 
systems would have to accommodate the adoption of the new standards 
such as the HPID to identify health plans in standard transactions. 
However, we did not calculate costs and benefits to health care 
clearinghouses and transaction vendors in this cost analysis because we 
assume that any associated costs and benefits will be passed on to the 
health plans or providers, and will be included in the costs and 
benefits we apply to health plans or providers.
    We used the total number of health insurance issuers as the number 
of commercial health plans that will be affected by this final rule, 
and used this

[[Page 54703]]

number in our impact analysis. A health insurance issuer is an 
insurance company, insurance service, or insurance organization, 
including an HMO, that is required to be licensed to engage in the 
business of insurance in a State, and that is subject to State law that 
regulates insurance. Although this number is specific to the individual 
and small group markets, we assume that many health insurance issuers 
in the large group market are included in this number because they are 
likely to market to individuals and small groups as well. While the 
category or ``health insurance issuers'' represents a larger number of 
health plans than those included in the NAICs codes for ``Direct Health 
and Medical Insurance Carriers'' (897 firms), we believe the category 
of health insurance issuers is a more accurate representation of 
companies conducting HIPAA transactions. Companies that provide 
Medicaid managed care plans are included in the category of commercial 
health plans.
    Although self-insured group health plans meet the HIPAA definition 
of ``health plan,'' we did not include them in this impact analysis. 
While self-insured group health plans will be required to obtain the 
HPID, we assumed that, with a few exceptions, such plans do not send or 
receive HIPAA electronic transactions because most are not involved in 
the day-to-day activities of a health plan and outsource those services 
to third party administrators or transaction vendors. Because they do 
not meet the definition of ``health plans,'' TPAs and transactions 
vendors are not required to obtain or use an HPID, though they may 
elect to obtain and use an OEID. The costs and benefits associated with 
the HPID are applicable only to entities that are directly involved in 
sending or receiving standard transactions, though we recognize that 
some of the cost and benefits will trickle down to employers and their 
employees.
    The projection of costs in this RIA is based on the number of 
health plans that will use the HPID in standard transactions. However, 
we do not have data concerning how many health plans are actually 
identified in standard transactions, as opposed to ``other entities'' 
that are identified in their stead. Therefore, we have no assurance of 
how many health plans will use the HPID in standard transactions. We 
base our cost estimates on the highest number of entities that would 
likely use the HPID in standard transactions. The number of health 
plans is used as a factor in our calculation of costs, but not in our 
calculation for savings. Therefore, we took a conservative approach to 
the costs to health plans which we believe is warranted given the 
uncertainties in our estimates. In our proposed rule, we solicited 
industry and stakeholder comments on our assumptions.
    Comment: We received a number of comments that expressed concern 
regarding the validity of the RIA for the HPID because the commenters 
believed that the purpose and the use of the HPID was unclear.
    Response: We cannot project how individual health care entities 
might implement and use the HPID given their specific business 
organization and needs. We also believe that, to the extent that the 
HPID will be used to facilitate transactions in ways that are beyond 
what is required by the provisions of this final rule, it is not clear 
what all the downstream effects of adopting a national health plan 
identifier may be. We believe that the HPID may be used within and 
outside of the transactions in ways that we have not required or 
envisioned. However, the required use of the HPID was specified in the 
preamble of the April 2012 proposed rule. The only required use of the 
HPID in this final rule is that if a health plan is identified in the 
standard transactions, a covered entity must identify a health plan 
using a HPID.
    The RIA put forward in the April 2012 proposed rule is based on the 
HPID being used as required by the provisions of this final rule. We 
agree that there is uncertainty in projecting and estimating the 
benefits and costs, even given this specific usage. We emphasize that 
the RIA is based on the premise that the HPID is a foundational 
standard that will facilitate the routing of all standardized 
transactions, but not necessarily directly related to specific 
benefits. We deliberately did not claim in the April 2012 proposed rule 
that the HPID would be directly responsible for cost savings due to its 
required use in the standard transactions, with the exception of 
attributing some cost benefit to time savings in routing certain 
transactions. The cost savings, we believe, are derived from an 
efficiency in routing transactions which, in turn, will incentivize 
more health care entities to use those transactions.
    Comment: A commenter stated that the cost savings outlined in the 
April 2012 proposed rule was conducted prior to the implementation of 
Version 5010 and projected savings are therefore questionable.
    Response: While much of the RIA in the April 2012 proposed rule was 
developed before the January 1, 2012 implementation of Version 5010, 
some of the baseline assumptions and data were based on the cost and 
savings estimates of Version 5010 as included in the RIA of the 
Modifications final rule. The RIA was also written under the assumption 
that the HPID would be used in Version 5010 standard transactions. That 
being said, the benefits of the HPID are only tangentially related to 
the benefits of Version 5010, and we do not believe the implementation 
of Version 5010 has a direct affect on the savings or costs of 
implementing and using HPID.
    Comment: A commenter suggested that we only move forward to adopt 
the HPID when the savings to be realized from its use exceeded the cost 
of its implementation.
    Response: As illustrated in Table 12, our analysis concludes that 
the savings outweighs the cost, so it is reasonable to assume that we 
should move forward to adopt the HPID. We reiterate that we based many 
of our calculations on the assumption that the HPID is a foundational 
standard that will enable other initiatives and efficiencies to be 
built off of it. HPID cannot be viewed as an individual band-aid that 
fixes a specific problem. Instead, HPID is part of a broader picture of 
standardizing billing and insurance-related transactions and tasks.

F. Costs Associated with HPID and NPI

1. Costs of HPID to Health Plans
    Health plans will bear most of the cost of implementing the HPID. 
We estimate the cost to health plans to implement and use an HPID will 
be 25 percent of the costs that the impact analysis in the 
Modifications final rule calculated in order for industry to implement 
Version 5010 of the standard transactions. As noted previously, 
implementation of the HPID will be analogous to--yet significantly less 
than--implementation of Version 5010 because the same systems will be 
affected, and, in both cases, there are both implementation and 
transition costs.
    For more detail on the justification for using 25 percent of the 
cost estimates in the Modifications final rule, please refer to the 
April 2012 proposed rule.
    The estimate that HPID implementation and transition will be 25 
percent of the cost of Version 5010 is a conservative estimate, we 
believe, and it is probable that the costs will be much less. However, 
by estimating HPID implementation at 25 percent of the cost of Version 
5010, we are able to reflect the uncertainty in our calculations 
because our calculations maintain the range of minimum and maximum 
costs from the Modifications final rule.

[[Page 54704]]

    In addition, the cost estimates from the Modifications final rule 
have been adjusted down because we estimate there will be fewer health 
plans impacted by this rule than are impacted by the Modifications 
final rule. For costs associated with applying for and obtaining an 
HPID, see section V.A. of this final rule. In our proposed rule, we 
solicited comments and data from the industry and other stakeholders on 
this assumption, but received no substantive comments in this regard.
    While we expect these costs will accrue between the time the final 
rule is published and the date the HPID is fully implemented, for 
purposes of simplification we have placed all system implementation 
costs--including those for small health plans--in 2016. Transition 
costs will occur from 2017 through 2018.

                                             Table 4--HPID Cost for Commercial and Government Health Plans*
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                              Minimum         Maximum
                                                                           Minimum cost    Maximum cost                   estimated cost  estimated cost
                                                                           estimate per    estimate per       Applied           of              of
                                                    Cost category          modifications   modifications    percentage     implementing    implementing
                                                                             rule (in        rule (in                        HPID (in        HPID (in
                                                                             millions)       millions)                       millions)       millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Commercial Health Plans **................  System Implementation.......         $1935.0         $3870.5             25%         $483.76         $967.63
                                           -------------------------------------------------------------------------------------------------------------
                                            Transition (Year 2 and 3)...           341.5           683.0             25%           85.37          170.76
--------------------------------------------------------------------------------------------------------------------------------------------------------
Government Health Plans (Medicare,          System Implementation.......           281.0           537.8             25%           70.25          134.45
 Medicaid, VHS, TRICARE, IHS).
                                           -------------------------------------------------------------------------------------------------------------
                                            Transition (Year 2 and 3)...            49.6            94.9             25%           12.40           23.73
--------------------------------------------------------------------------------------------------------------------------------------------------------
All Health Plans..........................  Enrollment and Updates ***..  ..............  ..............  ..............            0.18            0.18
                                           -------------------------------------------------------------------------------------------------------------
                                            System Implementation.......  ..............  ..............  ..............          554.19         1102.26
                                           -------------------------------------------------------------------------------------------------------------
                                            Transition (Year 2 and 3)...  ..............  ..............  ..............           97.77          194.48
                                           -------------------------------------------------------------------------------------------------------------
    Total.................................  ............................  ..............  ..............  ..............          651.95         1296.74
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Based on 2012 dollars
** Minimum and maximum cost estimates per Modifications Rule for commercial health plans is adjusted to account for a lesser number of health plans
  considered than is estimated in the Modifications Rule.
*** See section V.A of this final rule; Collection of Information Requirements, for calculations on enrollment to HPID enumeration system.

2. Costs of HPID for Physician Practices and Hospitals
    Covered physician practices and hospitals will be required to use 
the HPID in standard transactions. Health care providers that do not 
conduct covered transactions electronically (for example, by submitting 
a paper claim that the health plan subsequently transmits 
electronically to a secondary payer) could also use the HPID, but would 
not be required to do so. Implementation costs for covered physician 
practices and hospitals depend on whether they generate claims directly 
or use a health care clearinghouse or transaction vendor.
    If covered physician practices and hospitals submit claims 
directly, they would incur implementation costs in converting their 
systems to accommodate the HPID. Some covered health care providers may 
choose to use the services of software system vendors, billing 
companies, transaction vendors, and/or health care clearinghouses to 
facilitate the transition to the HPID. These health care providers 
would incur costs in the form of potential fee increases from billing 
agents or health care clearinghouses. For example, if a health care 
provider pays a fee to a billing agent or health care clearinghouse to 
process its health care transactions, the billing agent or health care 
clearinghouse might increase the cost to perform this service for the 
health care provider.
    Table 5 illustrates the costs to covered hospitals and physician 
practices. Again, the costs are 25 percent of the costs estimated in 
the Modifications proposed and final rules. In our proposed rule, we 
invited stakeholder comment on our assumptions and method for 
estimating the implementation costs, but received no comments in this 
regard.

                                           Table 5--HPID Costs to Covered Hospitals and Physician Practices *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                     I                                   II                     III             IV               V              VI              VII
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                              Maximum
                                                                           Minimum cost    Maximum cost                   Estimated cost  estimated cost
                                                                           estimate per    estimate per       Applied           of              of
                                                    Cost category          modifications   modifications    percentage     implementing    implementing
                                                                             rule  (in       rule  (in                       HPID (in        HPID  (in
                                                                             millions)       millions)                       millions)       millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hospitals.................................  System Implementation.......         $1042.5         $2085.9             25%         $260.63         $521.48
                                           -------------------------------------------------------------------------------------------------------------
                                            Transition (Year 2 and 3)...           184.0           368.1             25%           45.99           92.03
                                           -------------------------------------------------------------------------------------------------------------
Physician Practices.......................  System Implementation.......           486.8           973.6             25%          121.70          243.40
                                           -------------------------------------------------------------------------------------------------------------

[[Page 54705]]

 
                                            Transition (Year 2 and 3)...            85.9           171.8             25%           21.48           42.95
                                           -------------------------------------------------------------------------------------------------------------
All Providers (Total).....................  System Implementation.......          1529.3          3059.5             25%          382.33          764.88
                                           -------------------------------------------------------------------------------------------------------------
                                            Transition (Year 2 and 3)...           269.9           539.9             25%           67.47          134.98
                                           -------------------------------------------------------------------------------------------------------------
    Total.................................  ............................  ..............  ..............  ..............          449.80          899.86
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Based on 2012 dollars

G. Savings Associated With HPID and NPI

1. Savings to Health Plans
    In our proposed rule, we identified two areas in which health plans 
will experience savings due to the adoption of HPID: a reduction in the 
number of pended claims and an increased use of electronic health care 
transactions.
    Comment: A commenter disagreed with the savings analysis stating 
that the savings to be realized are from Version 5010 implementation 
and not due to use of the HPID.
    Response: The savings and benefits associated with the HPID are not 
the same as the savings that were calculated in the Modifications final 
rule, although we derive the costs associated with the HPID by using 
the Modification final rule costs as a baseline.
    The savings associated with the HPID are derived from an increase 
in three transactions and from the number of pended claims that we have 
projected will be decreased on account of better routing through use of 
the HPID . In contrast, the savings associated with Version 5010 
implementation are based on benefits in three areas: Better standards 
or savings due to improved claims standards, cost savings due to new 
users of claims standards, and operational savings or savings due to 
increased auxiliary standards usage.
    In both this final rule and the Modifications final rule, some of 
the cost savings are based on an increase in electronic transactions. 
However, the specific electronic transactions that will be affected are 
different in the two rules, and the calculations used to link savings 
to the increase are different.
2. Pended Claims
    Pended claims are claims that necessitate a manual review by the 
health plan. Pended claims are more expensive than ``clean'' claims, 
which do not require a manual review or additional information in order 
to be processed. We are projecting a 5 to 10 percent annual reduction 
of pended claims as attributable to implementation of the HPID. We have 
calculated the savings that would come from this estimated projection 
as resulting from: data about claims receipts from the trade 
association America's Health Insurance Plans (AHIP),\21\ information 
about eligibility transactions from the Oregon Provider and Payer 
Survey,\22\ and data from the Modifications proposed and final rules.
---------------------------------------------------------------------------

    \21\ ``An Updated Survey of Health Care Claims Receipt and 
Processing Times, May 2006,'' America's Health Insurance Plans 
(AHIP) Center for Policy and Research.
    \22\ A comprehensive survey of 55 percent of Oregon's hospitals 
and 225 of the State's ambulatory clinics. http://www.oregon.gov/OHPPR/HEALTHREFORM/AdminSimplification/Docs/FinalReport_AdminSimp_6.3.10.pdf.
---------------------------------------------------------------------------

    One of the main goals of the use of the HPID is to have a 
consistent identifier for each health plan for use in standard 
transactions. This lack of a single identifier has resulted in the need 
for manual intervention to resolve eligibility questions and billing 
and payment issues when there are inconsistent approaches for 
identifying health plans. Covered health care providers would no longer 
have to keep track of and use multiple identifiers for a single health 
plan. After the initial outlay for changes to their systems, health 
care providers would be able to consistently identify the health plan 
to which they must submit claims.
    According to AHIP, 14 percent of all claims were pended by health 
plans.\23\ Assuming 6.8 billion claims will be submitted in 2017, as is 
projected in the Modifications proposed rule, this calculates to about 
950 million pended claims (Table 6, Column 2).
---------------------------------------------------------------------------

    \23\ AHIP, 2006.
---------------------------------------------------------------------------

    We assumed that pended claims will decrease by a minimum of 5 
percent to a maximum of 10 percent annually attributable to use of the 
HPID (Table 6, Columns 4 and 6). This estimate is based on an AHIP 
survey entitled, ``An Updated Survey of Health Care Claim Receipt and 
Processing Times.'' The survey concluded that 35 percent of all claims 
are pended because they are duplicate claims (or assumed to be 
duplicate claims), 12 percent are pended because of the lack of 
necessary information, 5 percent because of coordination of benefits 
(COB), and 1 percent because of invalid codes.\24\ The HPID may help 
alleviate these particular pended claims issues by enabling the 
automation of the COB process \25\ and providing for more accurate 
routing of claims to the correct payer. This conclusion presumes that 
providing an HPID will lead to a measurable reduction of duplicate 
claims and/or claims pended because of a lack of necessary information. 
There is a large measure of uncertainty in this assumption and, as 
noted, the HPID would be foundational for subsequent activities such as 
the automation of the COB process. By itself, though, the HPID does not 
automate any processes. To reflect the uncertainty, we apply a range of 
percentages to the assumption.
---------------------------------------------------------------------------

    \24\ ``An Updated Survey of Health Care Claims Receipt and 
Processing Times, May 2006,'' America's Health Insurance Plans 
(AHIP) Center for Policy and Research.
    \25\ ``National Health Plan Identifier White Paper,'' prepared 
by the American Medical Association (AMA) Practice Management Center 
(PMC), September 22, 2009.
---------------------------------------------------------------------------

    According to AHIP, it costs a health plan $0.85 to reply 
electronically to a ``clean'' claim submission and $2.05 to reply to 
claims that ``necessitate manual or other review cost.'' Therefore, a 
health plan could save $1.20 per claim by automating a claim otherwise 
needing manual review (Table 6, Column 3). In order to calculate the 
savings from a 5 to 10 percent decrease in pended claims due to 
implementation of the HPID, we

[[Page 54706]]

multiply the projected number of pended claims (Table 6, Column 2) 
times 5 percent for the low estimate and 10 percent for the high 
estimate. We then multiplied the high and low range of numbers of 
pended claims that will be avoided due to use of HPID times the $1.20 
per claim that can be saved.
    In considering how to project this cost avoidance, we decided that 
the 5 to 10 percent savings should continue each year over the 10 years 
starting the first full year the HPID is required for use in standard 
transactions, 2017, resulting in a savings of approximately $776 
million to $1.6 billion. As stated previously, we consider the HPID 
standard adopted in this final rule to be foundational standards that 
will be built upon by future operating rules and regulations over the 
next decade.

                                        Table 6--Annual Savings to Health Plans Due to Decrease in Pended Claims
                                                                     [In millions]*
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                    LOW number of                      HIGH number of
                                                                                    pended claims   LOW total annual    pended claims      HIGH total
                                              Number of pended                     (5%) that will    savings through   (10%) that will   annual savings
                    Year                       claims annually  Cost to review a     be avoided       reduction in       be avoided          through
                                               (in millions)**   pended claim***   attributable to    pended claims    attributable to    reduction in
                                                                                      HPID (in        (in millions)       HPID (in        pended claims
                                                                                      millions)                           millions)       (in millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
(Col. 2)                                              (Col. 3)          (Col. 4)          (Col. 5)          (Col. 6)          (Col. 1)          (Col. 7)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2017........................................             952.0             $1.35              47.6             $64.3              95.2            $128.5
2018........................................             994.0              1.35              49.7              67.1              99.4             134.2
2019........................................            1036.0              1.35              51.8              69.9             103.6             139.9
2020........................................            1077.4              1.35              53.9              72.7             107.7             145.5
2021........................................            1120.5              1.35              56.0              75.6             112.1             151.3
2022........................................            1165.4              1.35              58.3              78.7             116.5             157.3
2023........................................            1212.0              1.35              60.6              81.8             121.2             163.6
2024........................................            1260.5              1.35              63.0              85.1             126.0             170.2
2025........................................            1310.9              1.35              65.5              88.5             131.1             177.0
2026........................................            1363.3              1.35              68.2              92.0             136.3             184.0
                                             -----------------------------------------------------------------------------------------------------------
    Total...................................  ................  ................  ................               776  ................             1,551
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Based on 2012 dollars
** Based on 14% of total number of annual claims as projected in Modifications proposed rule.
*** AHIP, 2006, adjusted to 2012 dollars.

    Comment: A commenter stated that the 5 to 10 percent reduction in 
pended claims was a gross overestimate. The commenter, representing a 
health plan, stated that the health plan has a front end clearinghouse 
that verifies eligibility and then routes transactions or rejects them. 
The commenter stated that they anticipate no reduction in pended claims 
volume.
    Response: We appreciate the commenter's perspective, although we 
have no certitude as to how widespread this way of filtering claims may 
be among health plans. We received no other comments about our 
calculations or assumptions with regard to our estimate on decreased 
pended claims. Therefore, we are maintaining the estimates and 
calculations on our assumptions in this regard.
    Comment: A commenter expressed concerned that the cost savings 
analysis did not reflect the efficiency gained by the HPID as proposed 
by the April 2012 proposed rule and adopted by this final rule. The 
commenter stated that the time and cost savings as stated in the April 
2012 proposed rule could only be achieved if the health plan was 
enumerated down to the product level. Another commenter stated 
similarly that the cost savings estimated in the proposed rule could 
not be realized without the adoption of an HPID that was much more 
granular; that is, an HPID that identified the entity that holds the 
participation contract with the physician, an identification of the 
patient-specific benefit plan, and the claim specific fee schedule 
identifier.
    Response: The provisions in the April 2012 proposed rule and this 
final rule do not require health plans to enumerate to the product 
level. However, we do believe that, even at the level in which health 
plans must enumerate as per this final rule, there will be the savings 
that we estimate herein. One of the above-referenced commenters noted 
that, if health plans were enumerated at a more granular level than 
that which we have adopted in this final rule, then the need for manual 
processes in 80 to 85 percent of the transactions could be eliminated. 
The estimated cost savings in this final rule, derived from use of the 
HPID as it is adopted, is based, partly, on a decrease in a particular 
manual process--the process that stems from processing pended claims. 
However, the decrease in this manual process is substantially less than 
what the commenter envisioned were health plans to enumerate at a lower 
level.
    We estimated a 5 to 10 percent decrease in total pended claims 
based on the reasoning that a standard HPID used in the standard 
transactions would improve routing and so decrease a small number of 
pended claims. We do not presume to infer that the HPID, as it is 
adopted, will decrease a large proportion of manual processes related 
to eligibility and claim submissions.
    In this final rule, we maintain the range of savings, as presented 
in the April 2012 proposed rule that is possible through implementation 
of the HPID.
3. Increase in Electronic Transmittal of Three Standard Transactions
    The implementation of all administrative simplification initiatives 
mandated by the Affordable Care Act are expected to streamline HIPAA 
electronic transactions, make them more consistent, and decrease the 
dependence on manual intervention in the transmission of health care 
and payment information. This, in turn, will drive more health care 
providers and health plans to utilize electronic transactions in their 
operations. Each transaction that moves from a nonelectronic, manual 
transmission of information to an electronic transaction, brings with 
it material and time cost

[[Page 54707]]

savings by virtue of reducing or eliminating the paper, postage, and 
equipment and additional staff time required to conduct paper-based 
transactions.
    We estimate an annual increase of 1 (LOW) to 2 (HIGH) percent in 
the use of the eligibility for a health plan transaction and the health 
care claim status transaction attributable to the implementation of the 
HPID from 2017 through 2026 as illustrated in Table 7. We estimate an 
annual increase of 2 (LOW) to 3 (HIGH) percent in the use of the 
electronic remittance advice transaction resulting from the adoption of 
the HPID. These are not annual increases in percentage points, but 
rather percent increases in the use of electronic transactions from the 
year before. The impact of the HPID on the electronic health care 
payment and remittance advice transaction is more than the impact on 
the other two transactions because NCVHS testimony supported the notion 
that the greatest impact of a standardized health plan identifier would 
be on the payment process.\26\
---------------------------------------------------------------------------

    \26\ Tammy Banks, Director, Practice Management Center and 
Payment Advocacy, ``Testimony By The American Medical Association,'' 
National Committee on Vital and Health Statistics Subcommittee on 
Standards, July 19, 2010.
---------------------------------------------------------------------------

    For more detail regarding our assumptions and calculations in this 
regard, please refer to the April 2012 proposed rule.
    We estimate that the savings to health plans because of increased 
usage in three transactions will be at least $850 million within 10 
years of HPID use in transactions. Health plan savings are summarized 
in Table 7.
    The results of this calculation are higher in cost savings than the 
results of the same calculation in the April 2012 proposed rule. We 
have projected that the number of overall health care information 
transactions--electronic and nonelectronic--increases with every year. 
The overall number of health care information transactions is a primary 
factor in our projection of savings derived from an increase in 
electronic transactions. Because the cost savings begins in 2017 in 
this final rule, in contrast to 2014 as was assumed in the April 2012 
proposed rule, there is an increase in the cost savings of this rule 
when compared to the April 2012 proposed rule.

                   Table 7--Annual Cost Savings for Health Plans From Increase Due to HPID in Volume of Three Electronic Transacions *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                   I                            II                III                 IV                 V                  VI                VII
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                        Savings from increase in eligibility
                                            for a health plan transaction
                                                attributable to HPID
                                        Savings from increase in health care
                                              claim status transaction
                                                attributable to HPID
                                        Savings from increase in health care
                                            payment and remittance advice
                                          transaction attributable to HPID
                                              (remittance advice only)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                 Year                    LOW annual cost    HIGH annual cost   LOW annual cost    HIGH annual cost   LOW annual cost    HIGH annual cost
                                             savings            savings            savings            savings            savings            savings
                                         attributable to    attributable to    attributable to    attributable to    attributable to    attributable to
                                             HPID (in           HPID (in           HPID (in           HPID (in           HPID (in           HPID (in
                                            millions)          millions)          millions)          millions)          millions)          millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2017..................................              $41.5              $72.2               $7.4              $12.3               $9.2              $23.0
2018..................................               44.8               83.0                8.1               14.7               11.0               27.6
2019..................................               48.4               89.7                8.9               16.2               12.4               33.1
2020..................................               52.3               96.8                9.8               17.8               13.8               37.1
2021..................................               56.5              104.6               10.8               19.6               15.5               41.5
2022..................................               61.0              113.0               11.9               21.6               17.4               46.5
2023..................................               63.4              122.0               12.5               23.8               19.5               52.1
2024..................................               66.0              126.9               13.1               24.9               20.6               58.4
2025..................................               68.6              131.9               13.7               26.2               21.9               61.9
2026..................................               71.4              137.2               14.4               27.5               23.2               65.6
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cumulative Annual Cost Savings:
 LOW: $849 million.
 HIGH: $1,728 million.
* Based on 2012 dollars.

                                          Table 8--Total Savings for Commercial and Governmental Health Plans *
                                                                      [In millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
            I                        II                        III                       IV                        V                        VI
--------------------------------------------------------------------------------------------------------------------------------------------------------
Savings from decrease in penSavings from increase in usage of EDI in three
                                             transactions
                                    Total savings for health plans
--------------------------------------------------------------------------------------------------------------------------------------------------------
                 LOW                      HIGH                       LOW                      HIGH                       LOW                     HIGH
                $776                    $1,551                      $849                    $1,729                    $1,625                   $3,280
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Based on 2012 dollars.

4. Savings to Health Care Providers
    We have quantified two areas of savings for health care providers. 
First, time and money will be saved at an administrative-level because 
of a decrease in claims issues that require manual intervention. 
Medical practices will experience these administrative savings by 
virtue of decreased time spent interacting with health plans. Second, 
material savings will be derived because of an increase in the number 
of

[[Page 54708]]

transactions that are conducted electronically, as we explained in our 
discussion of the potential impact of this rule on health plans.
a. Time Savings for Health Care Providers
    One of the main goals of the use of the HPID is to have a 
consistent identifier for each health plan for use in standard 
transactions. The lack of a single identifier has resulted in the need 
for manual intervention to resolve eligibility questions and billing 
and payment issues when there are inconsistent approaches for 
identifying health plans. Covered health care providers would no longer 
have to keep track of and use multiple identifiers for a single 
controlling health plan. After the initial outlay for changes to their 
systems, health care providers would be able to simplify their billing 
systems and processes and reduce administrative expenses.
    The HPID would also assist and simplify coordination of benefits. 
Health plans that have sole or shared fiduciary responsibilities for 
payment would be more readily identified, and the movement of 
information among these entities would be enhanced. According to a 2009 
study published in Health Affairs, approximately 60 hours per physician 
per week are spent on average interacting with health plans when the 
time spent by the single physician, the staff, and the physician 
practice's administration are totaled.\27\ Of the time spent 
interacting with health plans, 88 percent was spent on authorizations 
and claims/billing issues.
---------------------------------------------------------------------------

    \27\ Lawrence P. Casalino, S. Nicholson, D.N. Gans, T. Hammons, 
D. Morra, T. Karrison and W. Levinson, ``What does it cost physician 
practices to interact with health insurance plans?'' Health Affairs, 
28(4)(2009):w533-w543.
---------------------------------------------------------------------------

    We believe the implementation of an HPID will eliminate some of the 
manual intervention that is required when there are questions or errors 
identifying the entity responsible for eligibility of a patient or the 
payment of a claim. We estimate that the implementation and use of an 
HPID by health plans would save a physician's practice a number of 
phone calls and emails otherwise required to investigate or verify the 
identifier needed for the health plan or to manually investigate claims 
that have been rejected by health plans. Of the 60 hours reported 
previously, our estimate would be that 15 minutes to 30 minutes per 
week--or .4 to .8 percent of the total time spent interacting with 
health plans--could be eliminated if the HPID were implemented.
    In our proposed rule, we solicited stakeholder input on our basic 
assumptions, but we received no comments in this regard. Therefore, we 
have retained those basic assumptions. For more details on our 
assumptions and calculations, please refer to the April 2012 proposed 
rule.
    As a result of use of the HPID in the standard transactions, we 
anticipate that the time physicians in physician practices will spend 
per week interacting with health plans will slightly decrease, 
resulting in a cost avoidance of approximately $1.4 to $2.8 billion.
    The estimated range of cost avoidance represent an increase in the 
estimates that were made in the April 2012 proposed rule because the 
savings in this rule are calculated starting in 2017 while the savings 
in the proposed rule started in 2014. Due to an increase in the 
anticipated number of physicians, the cost avoidance is higher in this 
final rule than it was in the April 2012 proposed rule (Table 9).
    Due to a lack of baseline data regarding other providers and 
physicians working in hospitals, we have not calculated any similar 
anticipated decrease in time for other providers and physicians working 
in hospitals. We assume, though, that hospitals, because they typically 
consolidate their billing functions, will have analogous savings to 
physicians in physician practices, albeit less on a ``per physician'' 
basis.

                                    Table 9--Physician Savings Through Decrease in Time Interacting With Health Plans
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                           I                  II                III           IV             V            VI                VII
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               Total
                                      Hours spent   LOW to HIGH percent of  annual cost       LOW          HIGH
                                        per week    time interacting with    per single  reduction in  reduction in                  LOW to HIGH total
                                          per        health plans (Col I)    physician     cost per      cost per     Number of      savings per year
                Year                   physician      saved per week per    to interact    year per      year per     physicians   attributable to HPID
                                      interacting   physician attributable  with health    physician     physician                     (in millions)
                                      with health     to HPID (15 to 30      insurance   attributable  attributable
                                         plans             minutes)            plans        to HPID       to HPID
--------------------------------------------------------------------------------------------------------------------------------------------------------
2017................................           60  0.4 to 0.8%............      $81,523         $ 340          $679      352,103  $120 to $239.2
2018................................           60  0.4 to 0.8%............       83,969           350           700      355,568  $124 to $248.8
2019................................           60  0.4 to 0.8%............       86,488           360           721      359,033  $129 to $258.8
2020................................           60  0.4 to 0.8%............       89,082           371           742      362,498  $135 to $269.1
2021................................           60  0.4 to 0.8%............       91,755           382           765      366,561  $140 to $280.3
2022................................           60  0.4 to 0.8%............       94,507           394           788      370,625  $146 to $291.9
2023................................           60  0.4 to 0.8%............       97,343           389           779      374,688  $146 to $292
2024................................           60  0.4 to 0.8%............      100,263           401           802      378,752  $152 to $304
2025................................           60  0.4 to 0.8%............      103,271           413           826      382,815  $158 to $316
2026................................           60  0.4 to 0.8%............      106,369           425           851      382,815  $163 to $326
                                     -------------------------------------------------------------------------------------------------------------------
    Total...........................  ...........  .......................  ...........  ............  ............  ...........  $1,413 to $2,826
--------------------------------------------------------------------------------------------------------------------------------------------------------
* In 2012 dollars.

b. Increase in Three Transactions
    The second area of savings for health care providers is the per 
transaction savings of moving from nonelectronic to electronic 
transactions. We used the same assumptions on the number and rate of 
increase of three electronic transactions methodology as illustrated 
for health plans in Table 7. However, the savings per transaction for 
health care providers differ from the savings that health plans will 
realize, as reflected in Table 14. We estimate an annual increase of 1 
(LOW) to 2 (HIGH) percent in the use of the eligibility for a health 
plan transaction and the health care claim status transaction 
attributable to implementation of the HPID over the

[[Page 54709]]

next 10 years as illustrated in Table 10. We estimate an annual 
increase of 1 (LOW) to 3 (HIGH) percent in the use of the electronic 
health care payment and remittance advice transaction (in the health 
care electronic funds transfers (EFT) remittance advice transaction). 
The savings in each column are a product of the number increase in each 
transaction, with high and low ranges, multiplied by the cost savings 
of each move to an electronic transaction.
    For a more detailed description of the basic assumptions and 
calculations we used to arrive at the savings associated with these 
three transactions, please see the April 2012 proposed rule.

                   Table 10--Annual Cost Savings for Providers From Increase Due to HPID in Volume of Three Electronic Transactions *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                   I                            II                III                 IV                 V                  VI                VII
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                        Savings from increase in eligibility
                                            for a health plan transaction
                                                attributable to HPID
                                        Savings from increase in health care
                                              claim status transaction
                                                attributable to HPID
                                        Savings from increase in health care
                                            payment and remittance advice
                                          transaction attributable to HPID/
                                            OEID (remittance advice only)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                 Year                    LOW annual cost    HIGH annual cost   LOW annual cost    HIGH annual cost   LOW annual cost    HIGH annual cost
                                             savings            savings            savings            savings            savings            savings
                                         attributable to    attributable to    attributable to    attributable to    attributable to    Attributable to
                                             HPID (in           HPID (in           HPID (in           HPID (in           HPID (in           HPID (in
                                            millions)          millions)          millions)          millions)          millions)          millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2017..................................             $26.62             $46.30              $4.72              $7.87              $3.36              $8.41
2018..................................              28.75              53.24               5.19               9.44               4.04              10.09
2019..................................              31.05              57.50               5.71              10.39               4.52              12.11
2020..................................              33.53              62.10               6.28              11.42               5.06              13.56
2021..................................              36.22              67.07               6.91              12.57               5.67              15.19
2022..................................              39.11              72.43               7.60              13.82               6.35              17.01
2023..................................              40.68              78.23               7.98              15.21               7.11              19.05
2024..................................              42.31              81.36               8.38              15.97               7.54              21.34
2025..................................              44.00              84.61               8.80              16.77               7.99              22.62
2026..................................              45.76              88.00               9.24              17.60               8.47              23.98
--------------------------------------------------------------------------------------------------------------------------------------------------------
Cumulative Annual Cost Savings:
 LOW: $499 million.
 HIGH: $985 million.
* Based on 2012 dollars.

    To summarize health care provider savings, providers can expect 
savings from two indirect consequences of the implementation of a 
health plan identifier, as demonstrated in Table 11: the cost avoidance 
of a decrease in administrative time spent by physician practices 
interacting with health plans, and a cost savings for physician 
practices and hospitals for every transaction that moves from a manual 
transaction to an electronic transaction.

                                                   Table 11--Total Health Care Provider HPID Savings *
                                                                      [In millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
            I                        II                        III                       IV                        V                        VI
--------------------------------------------------------------------------------------------------------------------------------------------------------
Savings from decrease in provider time spent
     interacting with healthSavings from increase in usage of EDI in three
                                             transactions
                                      Total savings for providers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                 LOW                      HIGH                       LOW                      HIGH                       LOW                     HIGH
              $1,413                    $2,826                      $499                      $985                    $1,912                   $3,811
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Based on 2012 dollars.

H. Summary for the HPID and NPI

                                                  Table 12--HPID Summary Table for Health Care Industry
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 I              II              III             IV               V              VI
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               Savings (in millions)
                                                                Costs (in millions)
                                                           Range of return on investment
                                                                   (in millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                LOW            HIGH             LOW            HIGH          LOW (low       HIGH (high
                                                                                                                           savings/high     savings/low
                                                                                                                              costs)          costs)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Commercial and Governmental Health Plans................          $1,625          $3,280            $652          $1,297            $328          $2,628
Health Care Providers...................................           1,912           3,811             451             901           1,011           3,360
                                                         -----------------------------------------------------------------------------------------------

[[Page 54710]]

 
    Total...............................................           3,537           7,091           1,103           2,198           1,339           5,988
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Calculated in 2012 dollars.

I. Regulatory Flexibility Analysis of the HPID and NPI

    The Regulatory Flexibility Act (RFA) of 1980 (Pub. L. 96-354) 
requires agencies to describe and analyze the impact of the final rule 
on small entities unless the Secretary can certify that the regulation 
will not have a significant impact on a substantial number of small 
entities.
    In the April 2012 proposed rule, we used a baseline threshold of 3 
percent of revenues to determine if a rule would have a significant 
economic impact on affected small entities (Table 13).
    Table 13, Column II shows the number of small entities as discussed 
in the April 2012 proposed rule. Table 13, Column III shows revenues 
that were reported for 2009 in the Survey of Annual Services (http://www.census.gov/services/sas_data.html). Table 13, Column IV shows the 
costs to health care providers for implementation of the HPID, as 
described in the RIA. The estimated high range of costs was used. Table 
13, Column V shows the percent of the small entity share of 
implementation costs as a percent of the small entity revenues.
    In the April 2012 proposed rule we concluded that the anticipated 
economic effect of this rule on small entities would not exceed or even 
come close to meeting the threshold of 3 percent of revenues.
    We did not receive any comments regarding the RFA in the April 2012 
proposed rule, therefore we make no changes to the assumptions, 
calculations, and conclusions to that analysis. Based on that analysis, 
we certify that the HPID provision of this final rule would not have a 
significant economic impact on a substantial number of small entities.

             Table 13--Analysis of the Burden of Implementation of HPID on Small Covered Entities *
----------------------------------------------------------------------------------------------------------------
                  I                           II                III                 IV                 V
----------------------------------------------------------------------------------------------------------------
                                                                             Maximum cost of     Implementation
                                       Total number of      Revenues or     implementation of     cost revenue
              Entities                  small entities      receipts (in         HPID (in           receipts
                                                             millions)          millions)          (percent)
----------------------------------------------------------------------------------------------------------------
Physician practices.................            220,100           $359,853               $288            0.0014
Hospitals...........................              6,500            729,870                645            0.00033
----------------------------------------------------------------------------------------------------------------
* In 2012 dollars.

J. Alternatives Considered for the ICD-10

    Faced with growing evidence that a group of providers would not be 
ready for the transition to ICD-10 by October 1, 2013, and the 
possibility that payment for millions of health care claims would be 
delayed, we considered a number of options before proposing a 1-year 
delay in the compliance date in the April, 2012 proposed rule. We list 
these options in the preamble and summarize the public comments we 
received concerning them. Our responses are included in the preamble.
    We decided that Option 4 was the most effective in mitigating the 
significant systemic disruption and payment delays that could have 
resulted from a large percentage of providers who might not have been 
ready to implement ICD-10 this October 1; and, in addition, as the RIA 
in this final rule suggests, Options 4 is most likely to minimize the 
costs of delay and to maximize the benefits to providers who need more 
time to implement.

K. Impacted Entities--ICD-10

    All HIPAA covered entities may be affected by a delay in the 
compliance date of ICD-10 in this rule. Covered entities include all 
health plans, health care clearinghouses, and health care providers 
that transmit health information in electronic form in connection with 
a transaction for which the Secretary has adopted a standard.
    Table 4 outlines the number of covered entities that may be 
affected by a delay in ICD-10, along with the sources of those data. 
These are the same entities that will be affected by HPID.
    While covered entities are required to transition to ICD-10, many 
other entities not required to abide by HIPAA (such as workers' 
compensation programs and automobile and personal liability insurers) 
currently use ICD-9 for a variety of purposes. Because their 
operational and business needs often intersect with covered entities, 
for practical and business purposes these other entities may 
voluntarily transition to ICD-10 alongside HIPAA covered entities. The 
ICD codes are used in nearly every sector of the medical and health 
industry.
    Comment: A commenter noted that it was inaccurate to state that 
workers' compensation programs and automobile and personal liability 
insurers are not required to abide by HIPAA but may voluntarily do so. 
The association noted that Medicare has mandatory Medicare Secondary 
Payer reporting requirements for non group health plans (NGHPs) for 
liability insurance, no-fault insurance, and workers' compensation. 
Included in these required data elements for NGHP is the appropriate 
ICD-9 for the reported injury with mandated transition to ICD-10 when 
it is implemented.
    Response: We agree with the commenter and refine our language to 
recognize that, while many health care entities are not required by 
HIPAA to comply with the code sets, standards and operating rules 
therein, these same health care entities may be required by other state 
and federal laws or trade agreements to use ICD codes, as is the case 
with Medicare's reporting requirements.

L. Scope and Methodology of the Impact Analysis for ICD-10

    This impact analysis estimates the costs and benefits of a delay in 
compliance with ICD-10. We are analyzing only the impact of a delay, 
not the impact of ICD-10 implementation, which we addressed in the 2008 
ICD-10 proposed rule (73 FR

[[Page 54711]]

49476) and the January 2009 ICD-10 final rule (74 FR 3328).
    Despite the broad utilization of ICD codes that extends beyond 
covered entities, with one exception our analysis is restricted only to 
those entities as only they fall under the auspices of this final rule. 
With respect to health care providers, only health care providers that 
transmit health information in electronic form in connection with a 
transaction for which the Secretary has adopted a HIPAA transaction 
standard are covered entities. The one area for which we provide 
additional analysis is the cost to educational institutions to educate 
students being trained in ICD-10 coding because such training costs 
have been of particular concern to industry and have been included in 
the previous Federal Register ICD-10 rules cost analyses.
    Moreover, while we assume that a delay in the implementation of 
ICD-10 will affect a broad range of health care providers, as 
illustrated in Table 4, we only examine the costs and benefits of a 
delay on two types of health care providers--hospitals and physician 
practices. We do not analyze the impact on other industry sectors, 
including, but not limited to, nursing and residential care facilities, 
dentists, durable medical equipment (DME) suppliers, or pharmacies for 
various reasons. Consistent with our previous impact analysis in the 
2008 ICD-10 proposed rule, we continue to have very little data on the 
use of EDI among dentists, DME suppliers, nursing homes, and 
residential care facilities. The lack of data for these types of health 
care providers has been noted in other studies on administrative 
simplification.\28\ We assume that the greatest benefits will be gained 
by hospitals and physician practices as they conduct the majority of 
standard transactions, although it cannot be assumed that the costs 
will necessarily be borne by physician practices and hospitals only. We 
have not included an analysis of the impact on pharmacies because 
pharmacies typically do not use ICD codes in their routine course of 
business so we assume there is no impact on pharmacies.
---------------------------------------------------------------------------

    \28\ ``Excess Billing and Insurance-Related Administrative 
Costs,'' by James Kahn, in The Healthcare Imperative; Lowering Costs 
and Improving Outcomes: Workshop Series Summary, edited by Pierre L. 
Yong, Robert S. Saunders, and Leigh Anne Olsen, Institute of 
Medicine of the National Academies, the National Academies Press, 
Washington, DC: 2010.
---------------------------------------------------------------------------

    We include health care clearinghouses and transaction vendors as 
affected entities in Table 4. Transaction vendors are entities that 
process claims or payments for other entities such as health plans. 
Transaction vendors may not meet the HIPAA definition of health care 
clearinghouse, but, as used in this context, health care clearinghouses 
would constitute a subset of transaction vendors. Payment vendors also 
would be a type of transaction vendor--a transaction vendor that 
``associates'' or ``reassociates'' health care claim payments with the 
payments' remittance advice for either a health plan or provider. For 
our purposes, transaction vendors do not include developers or 
retailers of computer software, or entities that are involved in 
installing, programming or maintaining computer software. Health care 
clearinghouses and transaction vendors will be impacted because they 
will need to transition their systems to accept ICD-10 codes. However, 
we did not calculate costs and benefits to health care clearinghouses 
and transaction vendors in this cost analysis because, as in our 
previous impact analysis in the August 2008 ICD-10 proposed rule, we 
assume that any associated costs and benefits will be passed on to the 
health plans or providers and will be included in the costs and 
benefits we apply to health plans or providers.
    Although self-insured group health plans meet the HIPAA definition 
of ``health plan,'' we did not include them in this impact analysis. 
While self-insured group health plans will be required to implement 
ICD-10, we assume that, with a few exceptions, such plans do not send 
or receive HIPAA electronic transactions because most are not involved 
in the day-to-day activities of a health plan and outsource those 
services to TPAs or transaction vendors.
    However, we do include TPAs in this RIA. Although TPAs do not meet 
the definition of ``health plans'' and therefore are not required by 
HIPAA to use code sets such as ICD-10, as a practical matter they will 
be required to make the transition in order to continue to conduct 
electronic transactions on the part of self-insured group health plans. 
However, the impact of a delay of the compliance date of ICD-10 on TPAs 
will be similar to the commercial insurer cost/benefit impact profile 
since they serve a similar function and will have to implement and test 
their systems in the same manner as health plans. Therefore, when we 
refer to ``commercial health plans'' in this RIA we will be including 
TPAs, and we include all TPAs in the category of ``small health plans'' 
in the RFA.
    In the proposed rule, we stated that ``Software vendors will incur 
considerable responsibility and cost with respect to ICD-10 
implementation, but we do not analyze the cost of delay to software 
vendors as they ultimately pass their costs to their clients'' (77 FR 
22991).
    Comment: A commenter disagreed with our assumption that software 
vendors will pass on any incurred costs to their clients. The commenter 
noted that his organization had incurred costs nearing $1 billion and 
that further costs would be incurred with a delay. The commenter stated 
that the update to ICD-10 is part of the normal regulatory update 
process and that no conversion costs are passed on to the health plans 
or providers. Another commenter made a similar statement with regard to 
software vendors, but added that there are clearinghouses as well that 
make regulatory changes to their software without costs to their 
clients. Both commenters suggested including the costs to 
clearinghouses and vendors in the cost analysis.
    Response: After consideration of the public comment received, we 
are revising our assumption with regard to software vendors and 
clearinghouses passing their costs of ICD-10 changes on to their 
clients, and recognize that there will be substantial costs associated 
with any delay for software vendors and clearinghouses in and of 
themselves. However, beyond anecdotal evidence, we do not have data on 
the numbers of software vendors or clearinghouses who will be affected 
or what the financial burden or benefit will be for software vendors or 
clearinghouses as a group. Therefore, we will not attempt to quantify 
the impact to software vendors or clearinghouses in this RIA.

M. Cost Avoidance of a 1-Year Delay in the ICD-10 for the Health Care 
Industry

    Our analysis of industry benefit is based on cost avoidance. That 
is, we anticipate that there will be greater costs associated with the 
compliance date of October 1, 2013 than if the compliance date were to 
be delayed 1 year. Therefore, our analysis will demonstrate the costs 
associated with the current compliance date of October 2013, and apply 
those as savings or benefits attributable to a delayed compliance date.
    The assumption behind these savings is that a specific number of 
physicians and hospitals will not be prepared to use ICD-10 by October 
1, 2013. This lack of readiness would engender a number of costly 
consequences.
    Estimates on the benefit of a 1-year delay are subject to 
considerable variation. A delay in the ICD-10 compliance date increases 
the

[[Page 54712]]

opportunity for a successful, timely transition and provides an 
opportunity to reduce disruptions in health care delivery and payment. 
A basic assumption in this projection of a benefit is that entities 
will take the 1-year delay to become compliant and to conduct robust 
testing as discussed previously. This is possible, but by no means 
inevitable, even if a vigorous public/private campaign is undertaken to 
promote and assist with compliance and testing.
    Based on the CMS readiness survey, we will use the percentage of 
providers who believed they would not be compliant by October 1, 2013 
(26 percent) as our high estimate and the percentage of providers who 
believed they would not be compliant by December 31, 2013 (12 percent) 
as our low estimate. We based our estimates of the cost of not delaying 
the compliance date of ICD-10 on the projection that 12 to 26 percent 
of providers will not be ready or will not have appropriately tested 
for implementation of ICD-10 by October 1, 2013.
    We recognize that the survey does not represent a statistically 
valid sample of providers, but we have no other recent data with which 
to base our readiness estimates.
    The total savings attributable to the 1-year compliance date delay 
is based on the premise that providers who are not ready for ICD-10 
will submit claims to payers that will be automatically returned 
beginning on the October 1, 2013 compliance date. We calculate the cost 
avoidance of a 1-year delay in the compliance date of ICD-10 based on 
two probable scenarios: Returned claims will: (1) cause expensive 
manual intervention on the part of both providers and health plans in 
order for the ``not ready'' providers to be paid; and (2) financially 
impact providers by potentially requiring them to take out loans or 
apply for lines of credit to be able to continue to provide health care 
in the face of delayed payments. We apply calculations to each of these 
scenarios in the analysis that follows. Although the cost to manually 
process returned claims will ostensibly occur from, roughly, October 1, 
2013 through March, 2014, for simplicity sake our calculations reflect 
a cost avoidance that is calculated for 1 year only--the year 2014.
    A halt to the payment process for 12 to 26 percent of all providers 
has a greater effect than requiring manual intervention and requiring 
business loans or lines of credit. In some cases, a payment delay may 
pose a serious threat to the continued operation of some providers. For 
example, many health care safety net clinics operate with no more than 
30 to 60 days of cash on hand, so any prolonged delay would threaten 
such entities' viability.
    We also anticipated that health care services for a great number of 
patients will be adversely affected or interrupted because providers 
will need to spend more time to obtain health care claim payments 
leaving less time to render health care services.
    We received no substantive comments with regard to our calculations 
and estimates of the cost avoidance of a 1-year delay in the compliance 
date of ICD-10 as described in the April 2012 final rule. We have 
provided the estimates and results of our calculations in the summary 
Table 17.
    While there is a high level of uncertainty in terms of all of our 
assumptions, we believe it illustrative to make the calculation in 
order to demonstrate the affect that a delay in payments will have on 
small physician practices.
    Comment: A commenter noted that the cost avoidance calculations are 
based on the assumption that certain costs will be completely avoided 
if the compliance date is delayed for 1 year. However, the commenter 
also noted that if providers are not prepared a year later, then all 
that will occur will be a delay of these costs, not an avoidance.
    Response: We agree that if the delay is not used by the industry to 
be better prepared for the ICD-10 transition, then there will be no 
cost avoided by the delay. While there is no guarantee that the delay 
will translate into better preparation on the part of all health care 
entities, we anticipate that additional testing, outreach and education 
efforts will be targeted to help endangered segments, such as small 
providers, to achieve

N. Costs of a 1-Year Delay of Implementation of ICD-10 for Health Plans

1. Cost for Commercial Health Plans and TPAs
    Health plans are a varied group in terms of size, and the cost of a 
delay is calculated using a range that reflects this variance. We 
assume that system costs for health plans to transition to ICD-10 have 
already been budgeted and funds already spent. A delay of a year for 
ICD-10 compliance primarily will allow entities more time to thoroughly 
test, but the testing and the continued maintenance of contracts and 
personnel required for the transition will be 1 year longer than was 
originally budgeted. In fact, one of the main issues for entities that 
argue against a delay is the concern that their companies would divert 
funds currently dedicated to the transition to ICD-10 to other 
priorities.
    Table 14 illustrates the calculation of 10 to 30 percent of the 
total costs of health plans' ICD-10 system implementation and training 
as the range of costs for a 1-year delay. For simplicity sake, we have 
calculated all costs as if they occurred in the calendar year 2014.

                                                           Table 14--Cost in 2014 of a 1-Year Delay in the Compliance Date of ICD-10*
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                        Col. 1       Col. 2       Col. 3         Col. 4           Col. 5         Col. 6       Col. 7       Col. 8       Col. 9
                                                                    ----------------------------------------------------------------------------------------------------------------------------
                                                                                                               LOW total        HIGH total
                                                                                   LOW total    HIGH total  implementation/  implementation/  LOW percent      HIGH         LOW          HIGH
                     Health insurer categories                        Number of     cost per     cost per     training for     training for     of total    percent of  estimate of  estimate of
                                                                        health    health plan  health plan     all health       all health     cost for a   total cost  1[dash]year  1[dash]year
                                                                        plans         (in          (in          plans in         plans in     1[dash]year      for       delay (in    delay (in
                                                                                   millions)    millions)    category (col.   category (col.     delay     1[dash]year   millions)    millions)
                                                                                                               1 * col 2)      1 * col. 3)                    delay
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
National...........................................................            6       $50.40      $100.80        $302.40          $604.80             10           30       $30.24         $181
Multi Regional.....................................................            6        24.00        40.32         144.00           241.92             10           30        14.40           73
Large..............................................................           75        14.40        24.19        1080.00          1814.40             10           30       108.00          544
Mid[dash]Sized.....................................................          325         3.60         6.05        1170.00          1965.60             10           30       117.00          589
TPAs and Small Health Plans........................................         2166         1.20         2.02        2599.20          4366.66             10           30       259.92         1310
                                                                    ----------------------------------------------------------------------------------------------------------------------------
    Total..........................................................  ...........  ...........  ...........  ...............  ...............  ...........  ...........          530        2,698
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
* Calculated in 2012 Dollars.

[[Page 54713]]

2. Cost of a 1-Year Delay for CMS Health Plans
    The Medicare program reports that it is prepared to be ICD-10 
compliant on October 1, 2013. The CMS components affected by an ICD-10 
transition delay estimate that there will be additional costs for 
extending contracts for systems programming and testing work and 
extended staff training and associated development costs. It is 
estimated that a 1-year delay in ICD-10 compliance would be reflected 
by additional work at an estimated total cost of $5 to $10 million in 
addition to funding already requested for the coming fiscal years.
3. Cost of a 1-Year Delay in the Compliance Date of ICD-10 for State 
Medicaid Agencies
    State Medicaid Agencies (SMAs) were queried informally during 
routine status update calls in February 2012 regarding potential 
mitigation strategies for ICD-10 implementation. Thirty-nine SMAs 
responded, representing all regions of the country from predominantly 
rural to densely populated States. We have extrapolated from these 
responses as best we could to present a quantitative assessment of 
costs and benefits.
    In Table 15, we calculate the cost to SMAs of a 1-year delay in the 
compliance date of ICD-10. We use the following assumptions:
     Based on the informal poll of SMAs, we assume that 37 
percent or 20 SMAs would be ready for the October 1, 2013 compliance 
date. Therefore, the assumption is that 21 SMAs would be affected 
negatively by a delay.
     We assume that $4 million is the low estimate for a cost 
increase, as exemplified by the rural State that provided that 
estimate, while $7 million is the high estimate for a cost increase, as 
reported by an SMA. The high estimate is derived from a SMA that 
anecdotally described its costs per year of delay. For simplicity sake, 
we have calculated all costs as occurring in calendar year 2014. One 
State Medicaid program commented that a 1-year delay in the compliance 
date would add $5 million to the overall cost of implementation, and 
this supports our assumption of high and low costs.

      Table 15--Cost in 2014 to State Medicaid Agencies of a 1-Year Delay in the Compliance Date of ICD-10*
----------------------------------------------------------------------------------------------------------------
                                                                             LOW cost of a      HIGH cost of a
                                     LOW cost of a      HIGH cost of a     1[dash]year delay   1[dash]year delay
 of State Medicaid that   1[dash]year delay   1[dash]year delay     for Medicaid        for Medicaid
  would be negatively affected     per state agency    per state agency      agencies  (in       agencies (in
                                     (in millions)       (in millions)         millions)           millions)
----------------------------------------------------------------------------------------------------------------
21..............................                 $4                  $7                 $83                $145
----------------------------------------------------------------------------------------------------------------
* In 2012 dollars.

2. Cost of a 1-Year Delay for Providers
    We expect that many, if not most, hospitals and large provider 
organizations have already spent funds in preparation for the ICD-10 
transition. As with health plans, any delay in compliance date will add 
costs because large providers must maintain the personnel and 
renegotiate contracts necessary to lengthen preparations an extra year. 
Likewise, large providers must maintain technological resources for an 
extra year.
    Because the October 1, 2013 compliance date is more than a year 
out, it is likely that few small physician practices have invested a 
modest amount of money and resources into the implementation of and 
training for ICD-10, although they may have begun planning and 
budgeting for the transition and may have contracts in place with 
vendors to purchase tools to manage the transition. While we recognize 
that there will be costs, we assume that these costs are negligible and 
that the extra time to prepare for the transition, as will be possible 
with a 1 year compliance date delay, will be more beneficial than 
costly for small providers. Therefore, we will not include small 
providers (under 50 physicians) in the cost analysis for providers.
    Table 16 illustrates the calculations for the cost to hospitals and 
large physician practices.

               Table 16*--Cost to Hospitals and Large Physician Practices in 2014 for 1-Year Delay in the Compliance Date of ICD-10 \***\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                           LOW cost for    HIGH cost of
                                                                                  Large       Mid sized                      1[dash]Yr       1[dash]Yr
                                        Hospitals:   Hospitals:    Hospitals:   physician     physician    Total cost of   delay (10% of   delay (30% of
                                       400 or more  100[dash]400   Fewer than   practices      groups         ICD-10          current         current
                                           beds         beds        100 beds    (over 100   (50[dash]100  implementation  implementation  implementation
                                                                               physicians)   physicians)   (in millions)    costs) (in      costs) (in
                                                                                                                             millions)       millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of entities...................          521          2486         2757          393           590
LOW Cost Per Entity (in millions)....        $1.85         $0.62        $0.12        $2.46          $0.5
HIGH Cost Per Entity (in millions)...        $6.16         $1.85        $0.31        $7.39         $1.48
                                      ------------------------------------------------------------------------------------------------------------------
    Total LOW (in millions)..........         $963        $1,531         $339         $968          $291         $4,093            $409          $1,227
                                      ------------------------------------------------------------------------------------------------------------------
    Total HIGH (in millions).........        $3209        $4,594         $850       $2,905       $872.17        $12,429          $1,243          $3,728
--------------------------------------------------------------------------------------------------------------------------------------------------------
\*\ Numbers are rounded, so totals may not reflect sum of numbers shown.
\**\ Adjusted to 2012 dollars.
\***\ High and low ranges from Nolan 2003, adjusted to 2012 dollars.

[[Page 54714]]

    Comment: A commenter took issue with assumptions that we derived 
from the Edifecs poll. The commenter noted that the conclusions of the 
poll were based on a small sample of representatives from the various 
categories of health care entities, specifically providers.
    Response: We agree with the commenter about the Edifecs poll. 
However, it is the only information we have, however scant, that 
specifically addresses the question of a delay and its costs. We used 
the Edifecs poll to arrive at one assumption in this RIA of the impact 
of a 1-year delay in the compliance date of ICD-10: A 1-year delay will 
cost an additional 10 to 30 percent of what commercial health plans and 
large providers have already budgeted on the ICD-10 transition to date.
    Comment: Some commenters questioned the total cost to health care 
entities of transitioning to ICD-10 that we used as an assumption to 
calculate the cost of a 1-year delay. One commenter noted that our 
costs were higher than what was calculated in the January 16, 2009 ICD-
10 final rule, and a number of commenters suggested that we conduct a 
robust survey of how much the transition is actually costing by polling 
health care entities that are in preparation for the transition. Other 
commenters also suggested conducting different kind of studies and 
further analyses in order to better make a decision on an ICD-10 
compliance date. For example, one commenter suggested that a full 
examination be made of ICD-9-CM code development and allocation process 
and that necessary codes to that code set be assigned quickly.
    Response: While we recognize that more robust data and further 
analysis could better substantiate a cost analysis--and, thus, better 
inform policy decisions- the purpose of this impact analysis was to 
help inform whether the health care industry necessitated a delay in 
the ICD-10 compliance date and, if so, to inform a policy as to the 
length of that delay. However, a great many of the comments insisted 
that the regulations that would adopt a compliance date be published as 
soon as possible in order that unreasonable costs and obstacles not be 
created while the rule itself was being developed. Thus, it was not 
deemed prudent to conduct a robust survey in order to obtain what is 
truly budgeted for the implementation of ICD-10.
    We received no data or substantive arguments during the public 
comment period that our estimated cost of implementation was either too 
much or too little; only observations and anecdotes that the 
calculations were less accurate than they could be and based on surveys 
and polls that had questionable validity. We received some data from 
commenters on the cost of implementation from specific organizations: 
One commenter noted that it had dedicated $40 million to date on 
preparing for the ICD-10 transition. This is considerably above our 
estimates. Another commenter stated that, although they had started 
planning and dedicating resources to the transition, they had not 
expended any funds with regard to training or technical modifications. 
This is considerably less than our estimates. In light of the fact that 
there were no substantive arguments--or contradictory data--offered 
through public comment against our calculations, we continue to rely 
upon them in this final rule.

O. Summary for ICD-10

    Our RIA confirms the need for a delay in the compliance date of 
ICD-10. In spite of the lack of conclusive data with regard to the 
overall status of the health care industry's preparation for the 
transition and the variables inherent in making projections on such a 
transition, it is apparent that a significant number of providers would 
not be ready for the original October 1, 2013 compliance date. If a 
significant number of providers would not be ready, it follows that 
there could be delays in the payment of health care claims and risk 
that disrupted cash flow to providers could affect access to health 
services. We have attempted to quantify a number of the consequences of 
such a disruption in this RIA, but possible disruptions in patient care 
are not quantifiable.
    Given the risk of disruption in health care claim payments, we 
sought to measure the negative effects of a delay in the compliance 
date in this RIA. Although all the data we cite may not be 
statistically valid, there is a cost to every day that the date of ICD-
10 compliance is delayed for entities that have already invested 
significant resources preparing for the transition. It is also likely 
that the consequences of a delay would affect entities and industries 
beyond the HIPAA covered entities that are required to use the code 
set. The cost to students and educational institutions in the RIA are 
but one example of this.
    Weighing the risks and consequences of a disruption to health care 
claim payments with an apparent increased cost of delay to the 
estimated 75 percent of covered entities who would be able to comply 
October 1, 2013, we believe that a one-year delay in the implementation 
date strikes the best regulatory balance. It is our best judgment that, 
to go forward with the original compliance date would risk disruptions 
on many levels, while a delay of any more than a year would incur costs 
that could not be justified in the name of avoiding risk.
    We summarize the low and high estimates of a 1-year delay in the 
compliance date for ICD-10 in Table 17.
    The total costs and cost avoidance of a delay in the compliance 
date will likely be incurred over a 12-month period; however, due to 
the range in impacted entities, including educational institutions, 
those 12 months may span different dates and different budget periods. 
Given the diversity of budgeting in the industry, there is no precise 
way of calculating how much of the cost and cost avoidance falls 
outside of the October 1, 2013 to October 1, 2014 delay in compliance 
date. For simplicity sake, we calculate all cost avoidance and costs of 
a delay in the compliance date for ICD-10 as occurring in the calendar 
year 2014.
    In Table 17, the net cost avoidance is illustrated with a--
     Low net estimate that reflects the low estimate of cost 
avoidance less the high estimate of costs;
     High net estimate that reflects the high estimate of cost 
avoidance less the low estimate of costs; and
     Medium net cost avoidance that reflects the average cost 
avoidance less the average cost.

 Table 17--Summary of Cost Avoidance and Costs in 2014 of A 1-Year Delay
                  in the Compliance Date of ICD-10 \*\
------------------------------------------------------------------------
                                                                 MEAN
                                     LOW (in      HIGH (in    (average)
                                    millions)    millions)       (in
                                                              millions)
------------------------------------------------------------------------
Cost Avoidance for Providers            $1,385       $3,001       $2,193
 (manual submission of claims)...
Cost Avoidance for Providers             1,446        3,134        2,290
 (cost of loan interest).........

[[Page 54715]]

 
Cost Avoidance for Health Plans            804        1,742        1,273
 (manual submission of claims)...
                                  --------------------------------------
    TOTAL COST AVOIDANCE FROM A          3,635        7,877        5,756
     1[dash]YEAR DELAY IN THE
     COMPLIANCE DATE OF
     ICD[dash]10.................
------------------------------------------------------------------------
Cost to Commercial Health plans..          530        2,698        1,614
Cost to Medicare.................            5           10            8
Cost to State Medicaid Agencies..           83          145          114
Cost to Large Providers..........          409        3,728        2,069
Cost to Students.................            4            4            4
                                  --------------------------------------
    TOTAL COST OF A 1[dash]YEAR          1,031        6,586        3,808
     DELAY IN THE COMPLIANCE DATE
     OF ICD-10...................
------------------------------------------------------------------------
\*\ Calculated in 2012 dollars.

    Table 18--Cost Avoidance Less Cost (Net) of A 1-Year Delay in the
                        Compliance Date of ICD-10
                            [In millions] \*\
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Low Net Estimate (Low Cost Avoidance with High Costs).           -$2,950
High Net Estimate (High Cost Avoidance with Low Costs).            6,846
Mean Net Cost Avoidance (average)..........................        1,948
------------------------------------------------------------------------
\*\ Calculated in 2012 dollars.

P. Regulatory Flexibility Analysis: Impact on Small Entities of a Delay 
in the Compliance Date of ICD-10

    The Regulatory Flexibility Act (RFA) of 1980 (Pub. L. 96-354) 
requires agencies to describe and analyze the impact of the final rule 
on small entities unless the Secretary can certify that the regulation 
will not have a significant impact on a substantial number of small 
entities. According to the Small Business Administration's size 
standards, a small entity is defined as follows according to health 
care categories: Offices of Physicians are defined as small entities if 
they have revenues of $10 million or less; most other health care 
providers (dentists, chiropractors, optometrists, mental health 
specialists) are small entities if they have revenues of $7 million or 
less; hospitals are small entities if they have revenues of $34.5 
million or less. (For details, see the SBA's Web site at http://www.sba.gov/sites/default/files/Size_Standards_Table.pdf Refer to 
Sector 62--Health Care and Social Assistance).
    We stated in the April 2012 proposed rule that there were a number 
of health maintenance organizations (HMOs) that are small entities by 
virtue of their nonprofit status even though few if any of them are 
small by SBA size standards. There are approximately one hundred such 
HMOs. We also assumed, for purposes of the RFA, that all physician 
practices and hospitals were small entities. Accordingly, we found in 
the April 2012 proposed rule that a one-year delay in implementation of 
the ICD-10 will affect a ''substantial number'' of small entities.
    However, as illustrated in Tables 19 and20, we concluded in the 
April 2012 proposed rule that the 1-year delay in the compliance date 
of ICD-10 will be more beneficial to small and nonprofit entities than 
it will be burdensome. Based on that analysis, we certify that the 
provisions related to ICD-10 in this final rule would not have a 
significant economic impact on a substantial number of small entities.
    Comment: One commenter stated that it was impossible to see how we 
could arrive at the conclusion that the final rule would not affect 
small entities when the cost to implement ICD-10 is so high. The 
commenter noted that it was rather falsehearted for us to state, as we 
did in the April 2012 proposed rule, that we were only analyzing the 
impact of the delay, not the impact of the ICD-10 implementation that 
we addressed in the August 2008 proposed rule. Instead, our latest cost 
estimates of implementing ICD-10--that the commenter viewed as 
improperly documented and misleading--should have triggered a re-review 
of the RIA conducted in the August 2008 proposed rule.
    Response: The RIA of the April 2012 proposed rule, and this final 
rule, are focused on the impact of the provision of the proposed and 
final rule; that is, a delay in the compliance date of ICD-10. As noted 
in this RFA, a delay will be beneficial for small entities, otherwise 
there is no reason to go forward with a delay. We cannot revisit cost/
benefits of implementing ICD-10, at least to the extent it was done so 
in the August 2008 proposed rule, because this rule does not mandate 
ICD-10; it delays it. As for our estimates on costs and cost avoidance 
of a delay in the compliance date of ICD-10, we believe that we have 
been transparent in admitting that our calculations are based on some 
studies and polls that lack statistical validity. Weighing industry's 
need for clarity on the ICD-10 compliance date and the need to meet 
high standards of analysis by conducting a comprehensive study or poll, 
we believed that an expedient answer on the compliance date would be 
more beneficial to industry's financial and business needs.

                             Table 19--Costs and Benefits in 2014 of a Delay in the Compliance Date of ICD-10 for Providers
                                                                  [Small Entities] \*\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Physician    Physician    Physician
                                                                practices    practices    practices    Hospitals    Hospitals    Hospitals
                                                                with less    with 50 to   with more    with less   with 100 to   with more      Totals
                                                                 than 50        100        than 100     than 100    400 beds.     than 400
                                                                physicians   physicians   physicians      beds                      beds
--------------------------------------------------------------------------------------------------------------------------------------------------------
Number of Entities...........................................      233,239          590          393        2,757        2,486          521      239,986
LOW Costs (in millions)......................................         $.00       $29.07          $97          $34         $153          $96         $409
HIGH Costs (in millions).....................................         $.00      $261.65         $871         $255       $1,378         $963       $3,728

[[Page 54716]]

 
LOW Cost Avoidance (in millions).............................       $1,446         $.00         $.00         $.00         $.00          .00       $1,446
HIGH Cost Avoidance (in millions)............................       $3,134         $.00         $.00         $.00         $.00          .00       $3,134
--------------------------------------------------------------------------------------------------------------------------------------------------------
\*\ Both cost and cost avoidance occur in 2014. In 2012 dollars.

Table 20--Costs and Cost Avoidance in 2014 for Non-Profit Health Plans for A 1-Year Delay of the Compliance Date
                                                 for ICD-10 \*\
----------------------------------------------------------------------------------------------------------------
                                                  Number of     LOW COST    HIGH COST     LOW COST    HIGH COST
                                                  non profit   per health   per health   AVOIDANCE    AVOIDANCE
                                                    health      plan (in     plan (in       (in          (in
                                                    plans      millions)    millions)    millions)    millions)
----------------------------------------------------------------------------------------------------------------
Blue Cross Blue Shield.........................           38        $1.44        $7.26       $88.26      $122.21
HMO............................................          100          .12          .60         4.02         5.57
                                                ----------------------------------------------------------------
Total..........................................         $.00        $1.56         7.86        92.28       127.77
----------------------------------------------------------------------------------------------------------------
\*\ Both cost and cost avoidance occur in 2014. In 2012 dollars.

Q. Summary and Accounting Statement for HPID, NPI and ICD-10

    Table 21 summarizes the impacts of this final rule, including the 
costs and benefits of implementation of the HPID and the costs and cost 
avoidance of a 1-year delay in the compliance date of ICD-10. The costs 
and benefits of implementation of the HPID are calculated over an 11-
year period, 2016 through 2026, while the cost avoidance and costs of 
the delay of the compliance date of ICD-10 will all occur in 2014.

Table 21--Summary of Costs and Savings/Cost Avoidance, of Implementation
    of HPID, NPI and a 1-Year Delay in the Compliance Date of ICD-10
                             [In millions]*
------------------------------------------------------------------------
                                       LOW          HIGH         MEAN
------------------------------------------------------------------------
Total Savings/Cost Avoidance.....       $7,172      $14,968      $11,070
Total Costs......................        2,134        8,784        5,459
------------------------------------------------------------------------
* Costs and savings of HPID are calculated over 11 years, 2016 through
  2026. Costs and cost avoidance of a delay in the compliance date of
  ICD-10 are calculated over 1 year, 2014. In 2012 dollars.

    In Table 22, the LOW estimate Net Savings/Cost Avoidance is 
calculated using the LOW Savings/Cost Avoidance minus the HIGH 
estimated Costs; that is, the worst case scenario in terms of low 
benefits and high costs. The HIGH estimate Net Savings/Cost Avoidance 
is estimated using the HIGH Savings/Cost Avoidance minus the LOW 
estimated Costs; that is, the best case scenario in terms of high 
benefits and low costs. The Mean Net Savings/Cost Avoidance is the 
average of the best case scenario and the worst case scenario.

  Table 22--Summary of Net Cost Avoidance/Savings of Implementation of
     HPID, NPI, and a 1-Year Delay in the Compliance Date of ICD-10
                            [In 2012 dollars]
------------------------------------------------------------------------
                                     LOW NET      HIGH NET
                                     SAVINGS      SAVINGS
                                      (cost        (cost       MEAN NET
                                    avoidance/   avoidance/    SAVINGS
                                     savings      savings        (in
                                    less HIGH     less LOW    millions)
                                   costs)  (in  costs)  (in
                                    millions)    millions)
------------------------------------------------------------------------
Net Savings/Cost Avoidance.......      -$1,612      $12,834       $5,611
------------------------------------------------------------------------

[[Page 54717]]

    As required by OMB Circular A-4,\29\ Tables 23, 24, and 25 are 
accounting statements showing the classification of the expenditures 
associated with the provisions of this final rule. Table 23 provides 
our best estimate of the costs and benefits associated with the 
implementation and use of the HPID. Table 24 provides our best 
estimates of the costs and benefits associated with a 1-year delay in 
the compliance date of ICD-10. Table 25 provides a combined estimate of 
the costs and benefits associated with implementation and use of HPID 
and a 1-year delay in the compliance date of ICD-10.
---------------------------------------------------------------------------

    \29\ ``Circular A-4,'' September 17, 2003, Office of Management 
and Budget (OMB), http://www.whitehouse.gov/omb/circulars_a004_a-4/.

 Table 23--Accounting Statement for HPID Implementation: Classification of Estimated Expenditures, From FY 2016
                                                   to FY 2026
                                          [In millions of 2012 dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                                Source citation
            Category                Primary estimate      Minimum estimate   Maximum estimate   (RIA, preamble,
                                       (millions)            (millions)         (millions)           etc.)
----------------------------------------------------------------------------------------------------------------
BENEFITS:
    Annualized Monetized
     benefits:
        7% Discount............  $348..................  $246.............  $525.............  RIA.
        3% Discount............  329...................  246..............  506..............  RIA.
        Qualitative              HPID: Environmental
         (un[dash]quantified)     (electronic over
         benefits.                paper), patient
                                  benefits (more staff
                                  time), benefits from
                                  a decrease in time
                                  interacting with
                                  health plans for
                                  hospitals, dentists,
                                  suppliers of durable
                                  medical equipment,
                                  nursing homes, and
                                  residential care
                                  facilities, and
                                  providers other than
                                  physician practices.
COSTS:
    Annualized Monetized costs:
        7% Discount............  $203..................  $135.............  $270.............  RIA and
                                                                                                Collection of
                                                                                                Information.
        3% Discount............  172...................  115..............  229..............  RIA and
                                                                                                Collection of
                                                                                                Information.
        Qualitative              HPID: Cost for system   None.............  None.............
         (unquantified) costs.    changes for dentists,
                                  suppliers of durable
                                  medical equipment,
                                  nursing homes,
                                  residential care
                                  facilities, and
                                  providers other than
                                  physician practices
                                  and hospitals.
TRANSFERS:
    Annualized monetized         N/A...................  N/A..............  N/A..............
     transfers: ``on budget''.
    From whom to whom?.........  N/A...................  N/A..............  N/A..............
    Annualized monetized         N/A...................  N/A..............  N/A..............
     transfers:
     ``off[dash]budget''.
----------------------------------------------------------------------------------------------------------------

 Table 24--Accounting Statement: Classification of Estimated Expenditures for 1-Year Delay of ICD-10 Compliance
                                                  Date for 2014
                                          [In millions of 2012 dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                                Source citation
            Category                Primary estimate      Minimum estimate   Maximum estimate   (RIA, preamble,
                                       (millions)            (millions)         (millions)           etc.)
----------------------------------------------------------------------------------------------------------------
BENEFITS:
    Annualized Monetized
     benefits:
        7% Discount............  $5,756................  $3,635...........  $7,874...........  RIA.
        3% Discount............  5,756.................  3,635............  7,874............  RIA.
        Qualitative              Avoidance of returned
         (unquantified)           health care claims.
         benefits.
COSTS:
    Annualized Monetized costs:
        7% Discount............  $3,808................  $1,031...........  $6,586...........  RIA and
                                                                                                Collection of
                                                                                                Information.
        3% Discount............  3,808.................  1,031............  6,586............  RIA and
                                                                                                Collection of
                                                                                                Information.
        Qualitative              Downstream costs of a   None.............  None.............
         (unquantified) costs.    delayed return on
                                  investment for
                                  covered entities.
TRANSFERS:

[[Page 54718]]

 
    Annualized monetized         N/A...................  N/A..............  N/A..............
     transfers: ``on budget''.
    From whom to whom?.........  N/A...................  N/A..............  N/A..............
    Annualized monetized         N/A...................  N/A..............  N/A..............
     transfers:
     ``off[dash]budget''.
----------------------------------------------------------------------------------------------------------------

   Table 25--Accounting Statement: Classification of Estimated Expenditures for HPID Implementation and 1-Year
                            Delay of ICD-10 Compliance Date, From FY 2014 to FY 2026
                                          [In millions of 2012 dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                                Source citation
            Category                Primary estimate      Minimum estimate   Maximum estimate   (RIA, preamble,
                                       (millions)            (millions)         (millions)           etc.)
----------------------------------------------------------------------------------------------------------------
BENEFITS:
    Annualized Monetized
     benefits:
        7% Discount............  $916..................  $613.............  $1,292...........  RIA.
        3% Discount............  795...................  540..............  1,134............  RIA.
        Qualitative              HPID: Environmental
         (unquantified)           (electronic over
         benefits.                paper), patient
                                  benefits (more staff
                                  time), benefits from
                                  a decrease in time
                                  interacting with
                                  health plans for
                                  hospitals, dentists,
                                  suppliers of durable
                                  medical equipment,
                                  nursing homes, and
                                  residential care
                                  facilities, and
                                  providers other than
                                  physician practices.
                                 DELAY IN COMPLIANCE
                                  DATE FOR ICD[dash]10:
                                  Avoidance of returned
                                  health care claims.
COSTS:
    Annualized Monetized costs:
        7% Discount............  $596..................  $229.............  $963.............  RIA and
                                                                                                Collection of
                                                                                                Information.
        3% Discount............  493...................  191..............  795..............  RIA and
                                                                                                Collection of
                                                                                                Information.
        Qualitative              HPID: Cost for system
         (unquantified) costs.    changes for dentists,
                                  suppliers of durable
                                  medical equipment,
                                  nursing homes,
                                  residential care
                                  facilities, and
                                  providers other than
                                  physician practices
                                  and hospitals.
                                 DELAY IN COMPLIANCE     None.............  None.............
                                  DATE OF ICD-10:
                                  Downstream costs of a
                                  delayed return on
                                  investment for
                                  covered entities.
TRANSFERS:
    Annualized monetized         N/A...................  N/A..............  N/A..............
     transfers: ``on budget''.
    From whom to whom?.........  N/A...................  N/A..............  N/A..............
    Annualized monetized         N/A...................  N/A..............  N/A..............
     transfers:
     ``off[dash]budget''.
----------------------------------------------------------------------------------------------------------------

List of Subjects in 45 CFR Part 162

    Administrative practice and procedures, electronic transactions, 
health facilities, health insurance, hospitals, incorporation by 
reference, Medicaid, Medicare, Reporting and recordkeeping 
requirements.

    For the reasons set forth in this preamble, the Department of 
Health and Human Services amends 45 CFR part 162 to read as follows:

PART 162--ADMINISTRATIVE REQUIREMENTS

0
1. The authority citation for part 162 continues to read as follows:

    Authority:  Secs. 1171 through 1180 of the Social Security Act 
(42 U.S.C. 1320d-1320d-9), as added by sec. 262 of Pub. L. 104-191, 
110 Stat 2021-2031, sec. 105 of Pub. L. 110-233, 122 Stat. 881-922, 
and sec. 264 of Pub. L. 104-191, 110 Stat 2033-2034 (42 U.S.C. 
1320d-2(note)), and secs. 1104 and 10109 of Pub L. 111-148, 124 Stat 
146-154 and 915-917.

[[Page 54719]]

Subpart A--General Provisions

0
2. Section 162.103 is amended by adding the definitions of 
``Controlling health plan (CHP),'' ``Covered health care provider,'' 
and ``Subhealth plan (SHP)'' to read as follows:

Sec.  162.103  Definitions.

* * * * *
    Controlling health plan (CHP) means a health plan that--
    (1) Controls its own business activities, actions, or policies; or
    (2)(i) Is controlled by an entity that is not a health plan; and
    (ii) If it has a subhealth plan(s) (as defined in this section), 
exercises sufficient control over the subhealth plan(s) to direct its/
their business activities, actions, or policies.
    Covered health care provider means a health care provider that 
meets the definition at paragraph (3) of the definition of ``covered 
entity'' at Sec.  160.103.
* * * * *
    Subhealth plan (SHP) means a health plan whose business activities, 
actions, or policies are directed by a controlling health plan.

Subpart D--Standard Unique Health Identifier for Health Care 
Providers

Sec.  162.402  [Removed and Reserved]

0
3. Section 162.402 is removed and reserved.

0
4. Section 162.404 is amended as follows:
0
A. Redesignating paragraph (a) as paragraph (a)(1).
0
B. Adding paragraph (a)(2).
    The addition reads as follows:

Sec.  162.404  Compliance dates of the implementation of the standard 
unique health identifier for health care providers.

    (a) * * *
    (2) An organization covered health care provider must comply with 
the implementation specifications in Sec.  162.410(b) by May 6, 2013.
* * * * *

0
5. Section 162.410 is amended as follows:
0
A. Redesignating paragraph (b) as paragraph (c).
0
B. Adding a new paragraph (b).
    The addition reads as follows:

Sec.  162.410  Implementation specifications: Health care providers.

* * * * *
    (b) An organization covered health care provider that has as a 
member, employs, or contracts with, an individual health care provider 
who is not a covered entity and is a prescriber, must require such 
health care provider to--
    (1) Obtain an NPI from the National Plan and Provider Enumeration 
System (NPPES); and
    (2) To the extent the prescriber writes a prescription while acting 
within the scope of the prescriber's relationship with the 
organization, disclose the NPI upon request to any entity that needs it 
to identify the prescriber in a standard transaction.
* * * * *

0
6. Part 162 is amended by adding subpart E to read as follows:
Subpart E--Standard Unique Health Identifier for Health Plans
Sec.
162.502 [Reserved]
162.504 Compliance requirements for the implementation of the 
standard unique health plan identifier.
162.506 Standard unique health plan identifier.
162.508 Enumeration System.
162.510 Full implementation requirements: Covered entities.
162.512 Implementation specifications: Health plans.
162.514 Other entity identifier.

Subpart E--Standard Unique Health Identifier for Health Plans

Sec.  162.502  [Reserved]

Sec.  162.504  Compliance requirements for the implementation of the 
standard unique health plan identifier.

    (a) Covered entities. A covered entity must comply with the 
implementation requirements in Sec.  162.510 no later than November 5, 
2014.
    (b) Health plans. A health plan must comply with the implementation 
specifications in Sec.  162.512 no later than one of the following 
dates:
    (1) A health plan that November 5, 2014.
    (2) A health plan that is a small health plan-
    November 5, 2014.

Sec.  162.506  Standard unique health plan identifier.

    (a) Standard. The standard unique health plan identifier is the 
Health Plan Identifier (HPID) that is assigned by the Enumeration 
System identified in Sec.  162.508.
    (b) Required and permitted uses for the HPID. (1) The HPID must be 
used as specified in Sec.  162.510 and Sec.  162.512.
    (2) The HPID may be used for any other lawful purpose.

Sec.  162.508  Enumeration System.

    The Enumeration System must do all of the following:
    (a) Assign a single, unique--
    (1) HPID to a health plan, provided that the Secretary has 
sufficient information to permit the assignment to be made; or
    (2) OEID to an entity eligible to receive one under Sec.  
162.514(a), provided that the Secretary has sufficient information to 
permit the assignment to be made.
    (b) Collect and maintain information about each health plan that 
applies for or has been assigned an HPID and each entity that applies 
for or has been assigned an OEID, and perform tasks necessary to update 
that information.
    (c) If appropriate, deactivate an HPID or OEID upon receipt of 
sufficient information concerning circumstances justifying 
deactivation.
    (d) If appropriate, reactivate a deactivated HPID or OEID upon 
receipt of sufficient information justifying reactivation.
    (e) Not assign a deactivated HPID to any other health plan or OEID 
to any other entity.
    (f) Disseminate Enumeration System information upon approved 
requests.

Sec.  162.510  Full implementation requirements: Covered entities.

    (a) A covered entity must use an HPID to identify a health plan 
that has an HPID when a covered entity identifies a health plan in a 
transaction for which the Secretary has adopted a standard under this 
part.
    (b) If a covered entity uses one or more business associates to 
conduct standard transactions on its behalf, it must require its 
business associate(s) to use an HPID to identify a health plan that has 
an HPID when the business associate(s) identifies a health plan in a 
transaction for which the Secretary has adopted a standard under this 
part.

Sec.  162.512  Implementation specifications: Health plans.

    (a) A controlling health plan must do all of the following:
    (1) Obtain an HPID from the Enumeration System for itself.
    (2) Disclose its HPID, when requested, to any entity that needs the 
HPID to identify the health plan in a standard transaction.
    (3) Communicate to the Enumeration System any changes in its 
required data elements in the Enumeration System within 30 days of the 
change.
    (b) A controlling health plan may do the following:
    (1) Obtain an HPID from the Enumeration System for a subhealth plan 
of the controlling health plan.
    (2) Direct a subhealth plan of the controlling health plan to 
obtain an HPID from the Enumeration System.

[[Page 54720]]

    (c) A subhealth plan may obtain an HPID from the Enumeration 
System.
    (d) A subhealth plan that is assigned an HPID from the Enumeration 
System must comply with the requirements that apply to a controlling 
health plan in paragraphs (a)(2) and (a)(3) of this section.

Sec.  162.514  Other entity identifier.

    (a) An entity may obtain an Other Entity Identifier (OEID) to 
identify itself if the entity meets all of the following:
    (1) Needs to be identified in a transaction for which the Secretary 
has adopted a standard under this part.
    (2) Is not eligible to obtain an HPID.
    (3) Is not eligible to obtain an NPI.
    (4) Is not an individual.
    (b) An OEID must be obtained from the Enumeration System identified 
in Sec.  162.508.
    (c) Uses for the OEID. (1) An other entity may use the OEID it 
obtained from the Enumeration System to identify itself or have itself 
identified on all covered transactions in which it needs to be 
identified.
    (2) The OEID may be used for any other lawful purpose.

0
7. Section 162.1002 is amended by revising paragraph (b) introductory 
text and paragraph (c) introductory text to read as follows:

Sec.  162.1002  Medical data code sets.

* * * * *
    (b) For the period on and after October 16, 2003 through September 
30, 2014:
* * * * *
    (c) For the period on and after October 1, 2014:
* * * * *

    Dated: August 21, 2012.
Marilyn Tavenner,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Dated: August 22, 2012.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2012-21238 Filed 8-24-12; 12:00 pm]
BILLING CODE 4120-01-P
```