Vol. 77 Friday, 

No. 155 August 10, 2012 

Part III 

Department of Health and Human Services 

Office of the Secretary 

45 CFR Part 162 

Administrative Simplification: Adoption of Operating Rules for Health Care 

Electronic Funds Transfers (EFT) and Remittance Advice Transactions; 

Final Rule 


tkelley on DSK3SPTVN1PROD with RULES2
48008 Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Rules and Regulations 

1 Keehan, S.P.; Sisko, A.M.; Truffer, C.J.; Poisal, 

J.A.; Cuckler, G.A.; Madison, A.J. ; Lizonitz, J.M.; & 

Smith, S.D.; ‘‘National Health Spending Projections 

Through 2020: Economic Recovery and Reform 

drive faster Spending Growth,’’ Health Affairs 

30,(8): doi:10.1377/hlthaff.2011.0662, 2011. 

2 ‘‘Technological Change and the Growth of 

Health Care Spending,’’ A CBO Paper, 

Congressional Budget Office, January 2008, pg.4, 

http://www.cbo.gov/ftpdocs/89xx/doc8947/01-31- 

TechHealth.pdf. 

3Morra, D., Nicholson, S., Levinson, W., Gans, D. 

N., Hammons, T., & Casalino, L.P. ‘‘U.S. Physician 

Practices versus Canadians: Spending Nearly Four 

Times as Much Money Interacting with Payers,’’ 

Health Affairs: 30(8):1443–1450, 2011. 

Blanchfield, Bonnie B., James L. Hefferman, 

Bradford Osgood, Rosemary R. Sheehan, and Gregg 

S. Meyer, ‘‘Saving Billions of Dollars—and 

Physician’s Time—by Streamlining Billing 

Practices,’’ Health Affairs: 29(6):1248–1254, 2010. 

4Casalino, L.P., Nicholson, S., Gans, D.N., 

Hammons, T., Morra, D., Karrison, T., & Levinson, 

W., ‘‘What does it cost physician practices to 

interact with health insurance plans?’’ Health 

Affairs: 28(4) (2009): w533–w543). 

5Sakowski, J.A., Kahn, J.G., Kronick, R.G., 

Newman, J.M., & Luft, H.S., ‘‘Peering into the black 

box: Billing and insurance activities in a medical 

group,’’ Health Affairs: 28(4): w544–w554, 2009. 

6 Ibid, p. w547. 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Office of the Secretary 

45 CFR Part 162 

RIN 0938–AR01 

Administrative Simplification: 

Adoption of Operating Rules for Health 

Care Electronic Funds Transfers (EFT) 

and Remittance Advice Transactions 

AGENCY: Office of the Secretary, HHS. 

ACTION: Interim final rule with comment 

period. 

SUMMARY: This interim final rule with 

comment period implements parts of 

section 1104 of the Affordable Care Act 

which requires the adoption of 

operating rules for the health care 

electronic funds transfers (EFT) and 

remittance advice transaction. 

DATES: Effective Date: These regulations 

are effective on August 10, 2012. The 

incorporation by reference of the 

publications listed in this interim final 

rule with comment period is approved 

by the Director of the Office of the 

Federal Register August 10, 2012. 

Compliance Date: The compliance 

date for operating rules for the health 

care electronic funds transfers (EFT) and 

remittance advice transaction is January 

1, 2014. 

Comment Date: To be assured 

consideration, comments must be 

received at one of the addresses 

provided in the ADDRESSES section of 

this interim final rule with comment 

period on or before October 9, 2012. 

ADDRESSES: In commenting, please refer 

to file code CMS–0028–IFC. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (please choose only one of the 

ways listed) 

1. Electronically. You may submit 

electronic comments on this regulation 

to http://www.regulations.gov. Follow 

the ‘‘Submit a comment’’ instructions. 

2. By regular mail. You may mail 

written comments to the following 

address ONLY: Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, Attention: 

CMS–0028–IFC, P.O. Box 8013, 

Baltimore, MD 21244–8013. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments to the 

following address ONLY: Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services, Attention: CMS–0028–IFC, 

Mail Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

4. By hand or courier. Alternatively, 

you may deliver (by hand or courier) 

your written comments ONLY to the 

following addresses prior to the close of 

the comment period: 

a. For delivery in Washington, DC— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Room 445–G, Hubert 

H. Humphrey Building, 200 

Independence Avenue SW., 

Washington, DC 20201. 

(Because access to the interior of the 

Hubert H. Humphrey Building is not 

readily available to persons without 

Federal government identification, 

commenters are encouraged to leave 

their comments in the CMS drop slots 

located in the main lobby of the 

building. A stamp-in clock is available 

for persons wishing to retain a proof of 

filing by stamping in and retaining an 

extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

If you intend to deliver your 

comments to the Baltimore address, call 

telephone number (410) 786–1066 in 

advance to schedule your arrival with 

one of our staff members. 

Comments erroneously mailed to the 

addresses indicated as appropriate for 

hand or courier delivery may be delayed 

and received after the comment period. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

Matthew Albright (410) 786–2546. 

Denise Buenning (410) 786–6711. 

SUPPLEMENTARY INFORMATION: 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following Web 

site as soon as possible after they have 

been received: http://regulations.gov. 

Follow the search instructions on that 

Web site to view public comments. 

Comments received timely will also 

be available for public inspection as 

they are received, generally beginning 

approximately 3 weeks after publication 

of a document, at the headquarters of 

the Centers for Medicare & Medicaid 

Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday 

through Friday of each week from 8:30 

a.m. to 4 p.m. To schedule an 

appointment to view public comments, 

phone 1–800–743–3951. 

I. Executive Summary 

A. Purpose of the Regulatory Action 

Health care spending in the United 

States constitutes nearly 18 percent of 

the U.S. Gross Domestic Product (GDP) 

and costs an average of $9,000 per 

person annually.1 Many factors 

contribute to the high cost of health care 

in the United States, but studies point 

to administrative costs as having a 

substantial impact on the growth of 

spending 2 and an area of costs that 

could likely be reduced.3

One area of administrative burden 

that can be lessened for health care 

providers is the time and labor spent 

interacting with multiple health 

insurance plans, called billing and 

insurance related (BIR) tasks. The 

average physician spends a cumulative 

total of 3 weeks a year on BIR tasks 

according to one study,4 and, in a 

physician’s office, two-thirds of a fulltime employee per physician is 

necessary to conduct BIR tasks.5

The tasks and costs of activities 

directly related to collecting payments 

is a category of BIR tasks. Nearly 40 

percent of nonclinical staff time spent 

on BIR tasks in a physician practice is 

dedicated to activities directly related to 

collecting payments.6 According to 

estimates that are discussed more 

broadly in the Regulatory Impact 

Analysis (RIA), most health care 

providers collect and deposit paper 


tkelley on DSK3SPTVN1PROD with RULES2
Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Rules and Regulations 48009 

7Estimates for the percentage of EFT are taken 

from the interim final rule ‘‘Administrative 

Simplification: Adoption of Standards for the 

Health Care Electronic Funds Transfers (EFT) and 

Remittance Advice’’ published in the January 10, 

2012 Federal Register (77 FR 1556). Estimates for 

the percentage of ERA are taken from the proposed 

rule ‘‘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,’’ published in the April 17, 2012 Federal 

Register (77 FR 22950). The calculations from these 

two rules are explained in more detail in the 

Regulatory Impact Analysis of this rule. 

8 ‘‘CAQH CORE Phase I Measures of Success 

Final Report, July 7, 2009,’’ PowerPoint 

presentation; and ‘‘CORE Certification and testing: 

A Step-by-Step Overview,’’ February 17, 2011, 

CAQH and Edifecs Webinar. 

checks, and manually post and 

reconcile the health care claim 

payments in their accounting systems. 

By automating some of these tasks, time 

and labor spent on the collection of 

payments can be decreased. Automation 

can be achieved through the electronic 

transfer of information or electronic data 

interchange (EDI). Through the use of 

electronic funds transfers (EFT) for 

health care claim payments and the use 

of electronic remittance advice (ERA) 

that describes adjustments to the 

payments, BIR costs can be decreased. 

The benefits of EFT have been 

realized in many other industries. The 

benefits include material cost savings, 

fraud control, and improved cash flow 

and cash forecasting. The benefits of 

ERA have also been demonstrated in 

terms of cost savings in paper and 

mailings. By receiving remittance advice 

electronically, providers can use 

electronic denial management tools that 

dramatically improve payment recovery 

and reconciliation. Despite these 

advantages, an estimated 70 percent of 

health care claim payments continue to 

be in paper check form and an estimated 

75 percent of remittance advice is sent 

through the mail in paper form.7

There is evidence that the use of 

operating rules for specific electronic 

health care transactions results in higher 

use of EDI by health care providers.8 We 

expect usage of EFT and ERA by the 

health care industry will increase and 

administrative savings will be realized 

when industry implements the 

operating rules for those transactions. 

B. Legal Authority for the Regulatory 

Action 

The legal authority for the adoption of 

operating rules rests in section 1173(g) 

of the Social Security Act (the Act). 

Section 1173(g) of the Act was added by 

section 1104(b)(2) of the Patient 

Protection and Affordable Care Act (Pub 

L. 111–148), enacted on March 23, 2010, 

as amended by the Health Care and 

Education Reconciliation Act of 2010 

(Pub. L. 111–152), enacted on March 30, 

2010 (collectively known as and 

hereinafter referred to as the Affordable 

Care Act). 

C. Summary of the Major Provisions of 

the Regulatory Action 

In this interim final rule with 

comment period (IFC), we are adopting 

the Phase III Council for Affordable 

Quality Healthcare (CAQH) Committee 

on Operating Rules for Information 

Exchange (CORE) EFT & ERA Operating 

Rule Set, including the CORE v5010 

Master Companion Guide Template, for 

the health care EFT and remittance 

advice transaction (hereinafter referred 

to as the EFT & ERA Operating Rule 

Set), with one exception: We are not 

adopting Requirement 4.2, titled 

‘‘Health Care Claim Payment/Advice 

Batch Acknowledgement 

Requirements,’’ of the Phase III CORE 

350 Health Care Claim Payment/Advice 

(835) Infrastructure Rule because that 

requirement requires the use of the 

Accredited Standards Committee (ASC) 

X12 999 acknowledgement standard, 

and the Secretary has not adopted 

standards for acknowledgements. 

Covered entities must be in 

compliance with the EFT & ERA 

Operating Rule Set by January 1, 2014. 

D. Costs and Benefits 

Both costs and benefits are analyzed 

by examining the costs and cost savings 

of implementing and using the EFT & 

ERA Operating Rule Set adopted in this 

IFC in the following four areas of 

administrative tasks— 

• Provider enrollment in EFT and 

ERA; 

• Implementing infrastructure and 

communication networks between 

trading partners; 

• Reassociation of the payment 

information with the remittance 

information; and 

• Posting payment adjustments and 

claim denials. 

To a large extent, the costs of 

implementing the EFT & ERA Operating 

Rule Set will be borne by the health 

plans, with much of the benefits 

accruing to providers. Many health 

plans actively participated in the 

development of these rules, and the 

requirements they put on themselves 

were carefully deliberated. In the RIA of 

this IFC, we estimate that the cost to 

implement the EFT & ERA Operating 

Rule Set is $1.2 to $2.7 billion for 

government and commercial health 

plans, including third party 

administrators (TPAs), hospitals, and 

physician offices. The savings from and 

cost benefit of using the EFT & ERA 

Operating Rule Set is $3 to $4.5 billion 

for government and commercial health 

plans, hospitals, and physician offices. 

The net savings derived from using the 

EFT & ERA Operating Rule Set over 10 

years ranges from approximately $300 

million to $3.3 billion. 

II. Background 

A. Statutory and Regulatory Background 

1. The Health Insurance Portability and 

Accountability Act of 1996 (HIPAA) 

Congress addressed the need for a 

consistent framework for electronic 

health care transactions and other 

administrative simplification issues 

through the Health Insurance Portability 

and Accountability Act of 1996 

(HIPAA), (Pub.L. 104–191), enacted on 

August 21, 1996. HIPAA amended the 

Act by adding Part C—Administrative 

Simplification—to Title XI of the Act, 

requiring the Secretary of the 

Department of Health and Human 

Services (HHS) (the Secretary) to adopt 

standards for certain transactions to 

enable health information to be 

exchanged more efficiently and to 

achieve greater uniformity in the 

transmission of health information. 

In the August 17, 2000 Federal 

Register (65 FR 50312), we published a 

final rule titled ‘‘Health Insurance 

Reform: Standards for Electronic 

Transactions’’ (hereinafter referred to as 

the Transactions and Code Sets final 

rule). That rule implemented some of 

the HIPAA Administrative 

Simplification requirements by adopting 

standards for electronic health care 

transactions developed by standard 

setting organizations (SSOs) and 

medical data code sets to be used in 

those transactions. We adopted the ASC 

X12 Version 4010 standards and the 

National Council for Prescription Drug 

Programs (NCPDP) Telecommunication 

Version 5.1 standard. 

Section 1172(a) of the Act states 

that— 

Any standard adopted under [HIPAA] shall 

apply, in whole or in part, to * * * 

(1) A health plan. 

(2) A health care clearinghouse. 

(3) A health care provider who transmits 

any health information in electronic form in 

connection with a [HIPAA transaction]. 

These entities are referred to as covered 

entities. 

In the January 16, 2009 Federal 

Register (74 FR 3296), we published a 

final rule titled, ‘‘Health Insurance 

Reform; Modifications to the Health 

Insurance Portability and 

Accountability Act (HIPAA) Electronic 

Transaction Standards’’ (hereinafter 

referred to as the Modifications final 

rule). Among other things, the 


tkelley on DSK3SPTVN1PROD with RULES2
48010 Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Rules and Regulations 

Modifications final rule adopted 

updated versions of the standards, ASC 

X12 Version 5010 (hereinafter referred 

to as Version 5010) and NCPDP 

Telecommunication Standard 

Implementation Guide Version D.0 

(hereinafter referred to as Version D.0) 

and equivalent Batch Standard 

Implementation Guide, Version 1, 

Release 2 (hereinafter referred to as 

Version 1.2) for the electronic health 

care transactions, which are specified at 

45 CFR part 162, Subparts I through R. 

Covered entities were required to 

comply with Version 5010 and Version 

D.0 on January 1, 2012. We also adopted 

a standard for the Medicaid pharmacy 

subrogation standard, NCPDP Version 

3.0, in the Modifications final rule, 

specified at 45 CFR part 162, Subpart S, 

with which covered entities were 

required to comply on January 1, 2012, 

except small health plans, which have 

until January 1, 2013. 

As January 1, 2012 approached, we 

became aware that there were still a 

number of outstanding issues and 

challenges impeding full 

implementation of Version 5010 and 

Version D.0. Therefore, we announced 

two consecutive 90-day periods during 

which we would not initiate 

enforcement action against any covered 

entity through June 30, 2012. 

Table 1 summarizes the full set of 

transaction standards adopted in the 

Transactions and Code Sets final rule 

and as modified in the Modifications 

final rule. 

TABLE 1—CURRENT ADOPTED STANDARDS FOR HIPAA TRANSACTIONS

Transaction Standard 

Health care claims or equivalent encounter information—Dental.ASC X12 Standards for Electronic Data Interchange Technical Report Type 3—Health Care Claim: 

Dental (837), May 2006, ASC X12N/005010X224, and Type 1 Errata to Health Care Claim: Dental 

(837), ASC X12 Standards for Electronic Data Interchange Technical Report Type 3, October 2007, 

ASC X12N/005010X224A1. 

Health care claims or equivalent encounter information—Professional.ASC X12 Standards for Electronic Data Interchange Technical Report Type 3—Health Care Claim: 

Professional (837), May 2006, ASC X12N/005010X222. 

Health care claims or equivalent encounter information—Institutional.ASC X12 Standards for Electronic Data Interchange Technical Report Type 3—Health Care Claim: 

Institutional (837), May 2006, ASC X12/N005010X223, and Type 1 Errata to Health Care Claim: Institutional (837), ASC X12 Standards for Electronic Data Interchange Technical Report Type 3, October 2007, ASC X12N/005010X223A1. 

Health care claims or equivalent encounter information—Retail pharmacy.Telecommunication Standard Implementation Guide, Version D, Release 0 (Version D.0), August 

2007 and equivalent Batch Standard Implementation Guide, Version 1, Release 2 (Version 1.2), 

National Council for Prescription Drug Programs. 

Health care claims or equivalent encounter information—Retail pharmacy supplies and professional services.Telecommunication Standard, Implementation Guide Version 5, Release 1, September 1999; The 

Telecommunication Standard Implementation Guide, Version D, Release 0 (Version D.0), August 

2007, and equivalent Batch Standard Implementation Guide, Version 1, Release 2 (Version 1.2), 

National Council for Prescription Drug Programs; and ASC X12 Standards for Electronic Data Interchange Technical Report Type 3—Health Care Claim: Professional (837), May 2006, ASC X12N/ 

005010X222. 

Coordination of Benefits—Retail pharmacy drugs.Telecommunication Standard Implementation Guide, Version D, Release 0 (Version D.0), August 

2007, and equivalent Batch Standard Implementation Guide, Version 1, Release 2 (Version 1.2), 

National Council for Prescription Drug Programs. 

Coordination of Benefits—Dental ............ ASC X12 Standards for Electronic Data Interchange Technical Report Type 3—Health Care Claim: 

Dental (837), May 2006, ASC X12N/005010X224, and Type 1 Errata to Health Care Claim: Dental 

(837), ASC X12 Standards for Electronic Data Interchange Technical Report Type 3, October 2007, 

ASC X12N/005010X224A1. 

Coordination of Benefits—Professional ... ASC X12 Standards for Electronic Data Interchange Technical Report Type 3—Health Care Claim: 

Professional (837), May 2006, ASC X12, 005010X222. 

Coordination of Benefits—Institutional .... ASC X12 Standards for Electronic Data Interchange Technical Report Type 3—Health Care Claim: 

Institutional (837), May 2006, ASC X12/N005010X223, and Type 1 Errata to Health Care Claim: Institutional (837), ASC X12 Standards for Electronic Data Interchange Technical Report Type 3, October 2007, ASC X12N/005010X223A1. 

Eligibility for a health plan (request and 

response)—Dental, professional, and 

institutional.

ASC X12 Standards for Electronic Data Interchange Technical Report Type 3—Health Care Eligibility Benefit Inquiry and Response (270/271), April 2008, ASC X12N/005010X279. 

Eligibility for a health plan (request and 

response)—Retail pharmacy drugs.

Telecommunication Standard Implementation Guide, Version D, Release 0 (Version D.0), August 

2007, and equivalent Batch Standard Implementation Guide, Version 1, Release 2 (Version 1.2), 

National Council for Prescription Drug Programs. 

Health care claim status (request and response).ASC X12 Standards for Electronic Data Interchange Technical Report Type 3—Health Care Claim 

Status Request and Response (276/277), August 2006, ASC X12N/005010X212, and Errata to 

Health Care Claim Status Request and Response (276/277), ASC X12 Standards for Electronic 

Data Interchange Technical Report Type 3, April 2008, ASC X12N/005010X212E1. 

Enrollment and disenrollment in a health 

plan.

ASC X12 Standards for Electronic Data Interchange Technical Report Type 3—Benefit Enrollment 

and Maintenance (834), August 2006, ASC X12N/005010X220. 

Health care payment and remittance advice.ASC X12 Standards for Electronic Data Interchange Technical Report Type 3—Health Care Claim 

Payment/Advice (835), April 2006, ASC X12N/005010X221. 

Health plan premium payments .............. ASC X12 Standards for Electronic Data Interchange Technical Report Type 3—Payroll Deducted 

and Other Group Premium Payment for Insurance Products (820), February 2007, ASC X12N/ 

005010X218. 

Referral certification and authorization 

(request and response)—Dental, professional, and institutional.

ASC X12 Standards for Electronic Data Interchange Technical Report Type 3—Health Care Services Review—Request for Review and Response (278), May 2006, ASC X12N/005010X217, and 

Errata to Health Care Services Review—Request for Review and Response (278), ASC X12 

Standards for Electronic Data Interchange Technical Report Type 3, April 2008, ASC X12N/ 

005010X217E1. 


tkelley on DSK3SPTVN1PROD with RULES2
Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Rules and Regulations 48011 

9 ‘‘The Tenth Report to Congress on the 

Implementation of the Administrative 

Simplification Provisions of the Health Insurance 

Portability and Accountability Act (HIPAA) of 1996 

(As Required by the Health Insurance Portability 

and Accountability Act, Public Law 104–191, 

Section 263),’’ submitted to the Senate Committee 

on Finance and Committee on Health, Education, 

Labor and Pensions, House Committee on Ways and 

Means, Committee on Education and Labor and 

Committee on Energy and Commerce by the 

National Committee on Vital and Health Statistics, 

December, 2011, p. 1. 

10 Ibid, p. 1. 

11 Ibid, p. 2. 

12 ‘‘CAQH CORE Phase I Measures of Success 

Final Report,,’’(presentation), July 7, 2009. 

TABLE 1—CURRENT ADOPTED STANDARDS FOR HIPAA TRANSACTIONS—Continued 

Transaction Standard 

Referral certification and authorization 

(request and response)—Retail pharmacy drugs.

Telecommunication Standard Implementation Guide, Version D, Release 0 (Version D.0), August 

2007, and equivalent Batch Standard Implementation Guide, Version 1, Release 2 (Version 1.2), 

National Council for Prescription Drug Programs. 

Medicaid pharmacy subrogation ............. Batch Standard Medicaid Subrogation Implementation Guide, Version 3, Release 0 (Version 3.0), 

July 2007, National Council for Prescription Drug Programs. 

In general, the HIPAA transaction 

standards enable electronic data 

interchange using a common 

interchange structure, thus minimizing 

the industry’s reliance on multiple data 

transmission formats. According to a 

recent report to Congress by the 

National Committee on Vital and Health 

Statistics (NCVHS), ‘‘[t]he HIPAA 

electronic data requirements for 

standardized formats and content were 

intended to move the health care 

industry from a manual to an electronic 

system to improve security, lower costs, 

and lower the error rate.’’ 9

However, according to the NCVHS 

report, ‘‘the speed of adoption [of 

electronic transactions] across industry 

has been disappointing.’’ 10 The NCVHS 

report continues, ‘‘The achievement of 

the vision of seamless electronic flow of 

information in a confidential and secure 

manner has been slow.’’ 11

2. The Introduction of Operating Rules 

in the Affordable Care Act 

The use of operating rules is 

widespread and varied among other 

industries. For example, uniform 

operating rules for the exchange of 

Automated Clearing House (ACH) EFT 

payments among financial institutions 

are used in accordance with U.S. 

Federal Reserve regulations (12 CFR 

Part 370) and maintained by the Federal 

Reserve and NACHA—The Electronic 

Payments Association (known as 

NACHA). Additionally, credit card 

issuers employ detailed operating rules 

(for example, Cirrus Worldwide 

Operating Rules) describing things such 

as types of members, their 

responsibilities and obligations, and 

licensing and display of service marks. 

Before the passage of the Affordable 

Care Act, States enacted various laws 

that were analogous to operating rules, 

in that they established business rules 

directed toward more efficient and 

effective transmission of electronic 

health care transactions. Similarly, the 

CAQH Committee on Operating Rules 

for Information Exchange (CORE), a 

nonprofit alliance of health care 

stakeholders, developed voluntary 

operating rules for the health care 

industry. CAQH CORE’s operating rules 

include business rules that require 

common platform standards, establish 

companion guide formats, define the 

rights and responsibilities of all parties 

in a transaction, establish response 

times and error resolution, require 

specific acknowledgement standards 

and data content, remove optionality 

from specific data content, and establish 

business rules directed at efficient and 

effective business practices. Voluntary 

agreements among health care industry 

stakeholders to use operating rules were 

shown to reduce costs and 

administrative complexities.12

Through the Affordable Care Act, 

Congress sought to promote 

implementation of electronic 

transactions and achieve cost reduction 

and efficiency improvements by 

creating more uniformity in the 

implementation of standard 

transactions. This was done by 

mandating the adoption of a set of 

operating rules for each of the HIPAA 

transactions. Section 1173(g)(1) of the 

Act, as added by section 1104(b)(2)(C) of 

the Affordable Care Act, requires the 

Secretary to ‘‘adopt a single set of 

operating rules for each transaction 

* * * with the goal of creating as much 

uniformity in the implementation of the 

electronic standards as possible.’’ The 

Affordable Care Act defines operating 

rules and specifies the role of operating 

rules in relation to the standards. 

Operating rules are defined by section 

1171(9) of the Act (as added by section 

1104(b)(1) of the Affordable Care Act) as 

‘‘the necessary business rules and 

guidelines for the electronic exchange of 

information that are not defined by a 

standard or its implementation 

specifications as adopted for purposes 

of this part.’’ Additionally, section 

1173(a)(4)(A) of the Act (as added by 

section 1104(b)(2)(B) of the Affordable 

Care Act) requires that— 

The standards and associated operating 

rules adopted by the Secretary shall— 

(i) To the extent feasible and appropriate, 

enable determination of an individual’s 

eligibility and financial responsibility for 

specific services prior to or at the point of 

care; 

(ii) Be comprehensive, requiring minimal 

augmentation by paper or other 

communications; 

(iii) Provide for timely acknowledgment, 

response, and status reporting that supports 

a transparent claims and denial management 

process (including adjudication and appeals); 

and 

(iv) Describe all data elements (including 

reason and remark codes) in unambiguous 

terms, require that such data elements be 

required or conditioned upon set values in 

other fields, and prohibit additional 

conditions (except where necessary to 

implement State or Federal law, or to protect 

against fraud and abuse). 

Further, section 1104(b)(2) of the 

Affordable Care Act amended section 

1173 of the Act by adding new 

subsection (a)(4)(B), which states that 

‘‘[i]n adopting standards and operating 

rules for the transactions * * *, the 

Secretary shall seek to reduce the 

number and complexity of forms 

(including paper and electronic forms) 

and data entry required by patients and 

providers.’’ 

Section 1104(b)(2) of the Affordable 

Care Act added section 1173(g)(1) to the 

Act, which states that ‘‘[s]uch operating 

rules shall be consensus-based and 

reflect the necessary business rules 

affecting health plans and health care 

providers and the manner in which they 

operate pursuant to standards issued 

under Health Insurance Portability and 

Accountability Act of 1996.’’ 

New sections 1173(g)(2)(D), (g)(3)(C), 

and (g)(3)(D) of the Act also clarify the 

scope of operating rules. They provide 

that— 

(2) Operating Rules Development.— In 

adopting operating rules under this 

subsection, the Secretary shall consider 

recommendations for operating rules 

developed by a qualified nonprofit entity that 

meets the following requirements * * * 


tkelley on DSK3SPTVN1PROD with RULES2
48012 Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Rules and Regulations 

(D) The entity builds on the transactions 

standards issued under Health Insurance 

Portability and Accountability Act of 1996. 

* * * 

(3) Review and recommendations.— The 

National Committee on Vital and Health 

Statistics shall * * * 

(C) Determine whether such operating 

rules represent a consensus view of the 

health care stakeholders and are consistent 

with and do not conflict with other existing 

standards; 

(D) Evaluate whether such operating rules 

are consistent with electronic standards 

adopted for health information technology. 

3. Adoption of Operating Rules for 

Eligibility for a Health Plan and Health 

Care Claim Status Transactions 

In the July 8, 2011 Federal Register 

(76 FR 40458), we published an IFC 

titled, ‘‘Administrative Simplification: 

Adoption of Operating Rules for 

Eligibility for a Health Plan and Health 

Care Claim Status Transactions’’ 

(hereinafter referred to as the Eligibility 

and Claim Status Operating Rules IFC). 

That rule adopted operating rules for 

two HIPAA transactions: (1) Eligibility 

for a health plan; and (2) health care 

claim status. The Eligibility and Claim 

Status Operating Rules IFC also added 

the definition of operating rules to 45 

CFR 162.103 and describes their 

relationship to standards. For details on 

operating rules and their relationship to 

standards, please see the Eligibility and 

Claim Status Operating Rules IFC (76 FR 

40458). 

4. Affordable Care Act: Standards and 

Operating Rules for Electronic Funds 

Transfers (EFT) and Remittance Advice 

Transactions 

Section 1104(b)(2)(A) of the 

Affordable Care Act amended section 

1173(a)(2) of the Act by adding the EFT 

transaction to the list of electronic 

health care transactions for which the 

Secretary must adopt a standard under 

HIPAA. Section 1104(c)(2) of the 

Affordable Care Act required the 

Secretary to promulgate a final rule to 

establish an EFT standard, and 

authorized the Secretary to do so by an 

interim final rule. That section further 

required the standard to be adopted by 

January 1, 2012, in a manner ensuring 

that it is effective by January 1, 2014. 

Section 1104(b)(2)(C) of the 

Affordable Care Act also added a 

requirement, at section 1173(g)(4)(B)(ii) 

of the Act, for the Secretary to adopt a 

set of operating rules for electronic 

funds transfers (EFT) transactions and 

health care payment and remittance 

advice transactions that shall ‘‘(I) allow 

for automated reconciliation of the 

electronic payment with the remittance 

advice; and (II) be adopted not later than 

July 1, 2012, in a manner ensuring that 

such operating rules are effective not 

later than January 1, 2014.’’ 

Section 1104(b)(2)(C) of the 

Affordable Care Act also amended 

section 1173 of the Act by adding 

section 1173(g)(4)(C) of the Act, which 

provides that ‘‘[t]he Secretary shall 

promulgate an interim final rule 

applying any standard or operating rule 

recommended by the [NCVHS] pursuant 

to paragraph (3). The Secretary shall 

accept and consider public comments 

on any interim final rule published 

under this subparagraph for 60 days 

after the date of such publication.’’ 

To better explain the context in which 

a standard for EFT was adopted, we 

review below how the health care 

electronic funds transfers (EFT) and 

remittance advice transaction is used to 

transmit health care claim payments. 

5. Payment of Health Care Claims via 

EFT and ERA 

In the January 10, 2012 Federal 

Register (77 FR 1556), we published an 

IFC titled, ‘‘Administrative 

Simplification: Adoption of Standards 

for the Health Care Electronic Funds 

Transfers (EFT) and Remittance Advice’’ 

(hereinafter referred to as the Health 

Care EFT Standards IFC). In the Health 

Care EFT Standards IFC, we defined the 

health care electronic funds transfers 

(EFT) and remittance advice transaction, 

found in 45 CFR 162.1601, as the 

transmission of either of the following 

for health care: 

• The transmission of any of the 

following from a health plan to a health 

care provider: 

++ Payment. 

++ Information about the transfer of 

funds. 

++ Payment processing information. 

• The transmission of either of the 

following from a health plan to a health 

care provider: 

++ Explanation of benefits. 

++ Remittance advice. 

The transmission described in 

§ 162.1601(a), hereinafter referred to as 

a health care EFT, is primarily a 

financial transmission, and the data 

content is payment information. 

Traditionally, health care payments 

were in the form of paper checks sent 

through the mail, and use of EFT for 

health care claim payments remains 

low. When an EFT is used, the payment 

is generally transmitted through the 

ACH Network, the same network that 

transmits salary payments via Direct 

Deposit, though there are instances 

when other networks are used, such as 

Fedwire. 

The transmission described in 

§ 162.1601(b) is the ERA. A health plan 

rarely pays a provider the exact amount 

a provider bills the health plan for 

health care claims. A health plan adjusts 

the claim charges based on contract 

agreements, secondary payers, benefit 

coverage, expected copays and coinsurance, and other factors. These 

adjustments are described in the ERA 

through the use of four codes: Claim 

Adjustment Reason Codes (CARCs), 

Remittance Advice Remark Codes 

(RARCs), Claim Adjustment Group 

Codes (CAGCs), and NCPDP External 

Code List Reject Codes (NCPDP Reject 

Codes). 

CARCs identify reasons why the claim 

or services are not being paid as 

charged. For instance, ‘‘163’’ means 

‘‘attached references on the claim was 

not received.’’ RARCs provide 

additional information about the 

adjustment. For instance, ‘‘M30’’ means 

‘‘missing pathology report.’’ CAGCs 

categorize CARCs by financial liability. 

For instance, ‘‘PR’’ means ‘‘patient 

responsibility.’’ NCPDP Reject Codes 

identify reasons why a retail pharmacy 

claim was rejected. For instance, ‘‘73’’ 

means ‘‘refills are not covered.’’ 

With few exceptions, the ERA and the 

health care EFT are sent in different 

electronic formats through different 

networks, contain different data that 

have different business uses, and are 

often received by the health care 

provider at different times. The health 

care EFT is transmitted from the health 

plan’s treasury system. It is then 

processed by financial institutions, and 

ultimately entered into the health care 

provider’s treasury system. The path of 

the health care EFT through the ACH 

Network from health plan to provider is 

represented in Illustration A by the 

solid arrow. 

In contrast, the ERA is traditionally 

sent from the health plan’s claims 

processing system and processed 

through the provider’s billing and 

collections system. The path of the ERA 

from health plan to provider is 

represented in Illustration A by the 

arrow with dashes. 

When both the health care EFT and 

the ERA to which it corresponds arrive 

at the health care provider (often at 

different times), the two transmissions 

must be matched back together or 

‘‘reassociated’’ by the provider; that is, 

the provider must associate the ERA 

with the payment that it describes. This 

process is referred to as ‘‘reassociation.’’ 

Providers receive many payments 

from different health plans, often 

separated from the ERA or paper 

remittance advice by days or even 

weeks. This makes reassociation of the 

payment with the remittance advice a 

slow burdensome task, especially when 


tkelley on DSK3SPTVN1PROD with RULES2
Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Rules and Regulations 48013 

13For agenda and testimony, see http:// 

www.ncvhs.hhs.gov. 

the two cannot be associated by 

matching identical data elements. In 

order to realize the greatest level of 

time- and cost-savings, reassociation of 

the ERA with the health care EFT 

should be automated through the 

provider’s practice management system. 

Reassociation can only be automated if 

there are data elements in the ERA that 

can be matched with data elements in 

the EFT. 

6. Adoption of Standards for the Health 

Care Electronic Funds Transfers (EFT) 

and Remittance Advice Transaction 

The Health Care EFT Standards IFC 

adopted standards for the format and 

the data content for the electronic 

transmission that a health plan sends to 

its financial institution in order to 

initiate a health care claim payment to 

a health care provider via the ACH 

Network. 

One of the goals of the Health Care 

EFT Standards IFC was to adopt 

standards for the format and data 

content of the health care EFT that 

would ensure that the provider could 

reassociate the health care EFT with the 

ERA by matching identical data 

elements between the two. The Health 

Care EFT Standards IFC requires that a 

specific ACH file format be used with 

specific data content when health plans 

originate a health care EFT with their 

financial institutions to transmit 

through the ACH Network. 

Specifically, the Health Care EFT 

Standards IFC adopts the ACH Network 

format known as the Corporate Credit or 

Deposit Entry (CCD) with Addenda 

Record (CCD+Addenda) as the standard 

that health plans must use to originate 

an EFT for health care payments made 

through the ACH Network. The data 

content of the Addenda Record is also 

standardized by the Health Care EFT 

Standards IFC: Health plans must 

include the TRN Segment, an ASC X12 

data segment the implementation 

specifications of which are found in the 

ASC X12 835 TR3 (hereinafter referred 

to as the X12 835 TR3) in the Addenda 

Record of the CCD+Addenda. No 

protected health information (PHI) is to 

be included in the health care EFT 

transaction according to the standards 

adopted in the Health Care EFT 

Standards IFC. For a comprehensive 

description of the EFT transmission 

through the ACH Network, please see 

the Health Care EFT Standards IFC (77 

FR 1556). 

The standard for the ERA is the X12 

835 TR3, adopted in the Transactions 

and Code Sets final rule. An updated 

version of the X12 835 TR3, Version 

5010, was adopted in the Modifications 

final rule. 

By requiring health plans to use the 

same format to originate a health care 

EFT as that used by financial 

institutions to transmit an EFT through 

the ACH Network, there will be one less 

step in formatting/translating the data in 

the overall transaction and, therefore, a 

decrease in the risk that an error or 

omission will be made in that 

translation. Consistent format and data 

elements in the file format used by 

health plans to originate an EFT through 

the ACH Network will make it more 

likely that the provider will be able to 

reassociate the health care EFT with the 

ERA because of identical data elements 

contained in both. 

B. The National Committee on Vital and 

Health Statistics (NCVHS) December 

2010 Hearings on EFT 

The NCVHS was established by 

Congress to serve as an advisory body to 

the Secretary on health data, statistics, 

and national health information policy, 

and has been assigned a significant role 

in the Secretary’s adoption of standards, 

code sets, and operating rules under 

HIPAA. 

Per the Affordable Care Act, the 

Health Care EFT Standards IFC was 

based on recommendations from the 

NCVHS after a hearing the NCVHS 

Subcommittee on Standards held on 

December 3, 2010 on standards and 

operating rules for the health care 

payment and remittance advice 

transaction. During the December 2010 

hearing titled ‘‘Administrative 

Simplification under the Patient 

Protection and Affordable Care Act 

Standards and Operating Rules for 

Electronic Funds Transfer (EFT) and 

Remittance Advice (RA),’’ 13 the NCVHS 

subcommittee conducted a 

comprehensive review of potential 

standards and operating rules for the 

health care electronic funds transfers 

(EFT) and remittance advice transaction. 


tkelley on DSK3SPTVN1PROD with RULES2ER10AU12.000</GPH>
48014 Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Rules and Regulations 

14February 17, 2011 Letter to Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services, from the National Committee on Vital and 

Health Statistics (NCVHS), p. 6. 

15March 23, 2011 letter to Kathleen Sebelius, 

Secretary of the Department of Health and Human 

Services, from Justine M. Carr, Chairperson, 

National Committee on Vital and Health Statistics, 

Affordable Care Act (ACA), Administrative 

Simplification: Recommendation for entity to 

submit proposed operating rules to support the 

Standards for Health Care Electronic Funds 

Transfers and Health Care Payment and Remittance 

Advice, pp. 4–5, http://www.ncvhs.hhs.gov/ 

110323lt.pdf. 

16August 1, 2011 letter to Walter Suarez and 

Judith Warren, Co-Chairs of the National Committee 

on Vital Health Statistics (NCVHS) Subcommittee 

on Standards from Gwendolyn Lohse, Deputy 

Director CAQH and Managing Director of CORE and 

Janet Estep, President and CEO, NACHA (p. 2). 

17August 1, 2011 letter to Walter Suarez and 

Judith Warren, Co-Chairs of the National Committee 

on Vital Health Statistics (NCVHS) Subcommittee 

on Standards from Gwendolyn Lohse, Deputy 

Director CAQH and Managing Director of CORE and 

Janet Estep, President and CEO, NACHA (pgp. 1). 

18August 1, 2011 letter to Walter Suarez and 

Judith Warren, Co-Chairs of the National Committee 

on Vital Health Statistics (NCVHS) Subcommittee 

on Standards from Gwendolyn Lohse, Deputy 

Director CAQH and Managing Director of CORE and 

Janet Estep, President and CEO, NACHA (p. 1). 

The December 2010 hearing also 

included a review of standard setting 

organizations and operating rule 

authoring entities, for purposes of 

making a recommendation to the 

Secretary as to whether such standards 

and operating rules should be adopted. 

The NCVHS hearing consisted of a full 

day of public testimony with 

participation by stakeholders 

representing a cross-section of the 

health care industry, including health 

plans, health care provider 

organizations, health care 

clearinghouses, retail pharmacy 

industry representatives, standards 

developers, professional associations, 

representatives of Federal and State 

health plans, the Workgroup for 

Electronic Data Interchange (WEDI), the 

banking industry, and potential 

standard setting organizations (also 

known as standards development 

organizations or SDOs) for EFT 

standards and authoring entities for 

operating rules, including CAQH CORE, 

ASC X12, the NACHA, and the NCPDP. 

The testimony, both written and 

verbal, described many aspects and 

issues of the health care electronic 

funds transfers (EFT) and remittance 

advice transaction. Testifiers described 

the advantages to using EFT to pay 

health care claims. The savings in time 

and money for health plans and health 

care providers that EFT affords was 

paramount amongst these advantages. 

Testifiers presented a number of case 

studies to illustrate these benefits as 

well as a number of obstacles to greater 

EFT use in health care. We refer the 

reader to the testimonies posted to the 

NCVHS Web site at http:// 

www.ncvhs.hhs.gov for a more 

comprehensive discussion of the issues. 

During the December 2010 NCVHS 

hearing, it became evident that no 

operating rules for the heath care 

electronic funds transfers (EFT) and 

remittance advice transaction had yet 

been written by any entity. On February 

17, 2011, following the December 2010 

NCVHS Subcommittee on Standards 

hearing, the NCVHS sent a letter to the 

Secretary stating that ‘‘NCVHS has 

formally requested potential operating 

rules authoring entities to develop and 

present their applications to be 

authoring entities for operating rules for 

the health care EFT standard and ERA 

standard. These will be reviewed by 

NCVHS after they are received, and 

further recommendations will be 

considered.’’ 14

After the February 17, 2011 letter was 

sent, three entities applied to be the 

authoring entity for the EFT and ERA 

operating rules: ASC X12 (for 

nonpharmacy ERA transactions); 

NCPDP (for pharmacy ERA 

transactions); and CAQH CORE (for all 

EFT and ERA transactions). The NCVHS 

evaluated the applications from the 

three potential authoring entities. Each 

application was evaluated based on the 

statutory requirements including: (1) 

Focus on administrative simplification; 

(2) having a multistakeholder and 

consensus-based process for 

development of operating rules; (3) 

building on the transaction standards 

issued under HIPAA; and (4) plans to 

develop operating rules that meet the 

functional requirements defined in the 

statute. 

On March 23, 2011 the NCVHS sent 

a letter to the Secretary recommending 

that CAQH CORE, in collaboration with 

NACHA–The Electronic Payments 

Association, be named as the ‘‘candidate 

authoring entity for operating rules for 

all health care EFT and ERA 

transactions, with the provision that this 

entity submit to NCVHS fully vetted 

operating rules for consideration by the 

committee, by August 1, 2011.’’ 15 The 

letter noted that the proposed operating 

rules would be reviewed by NCVHS and 

further recommendations would be 

considered, including that the operating 

rules submitted may or may not be 

deemed acceptable for a 

recommendation for adoption. 

C. CAQH CORE Operating Rules for the 

Health Care Electronic Funds Transfers 

(EFT) and Remittance Advice 

Transaction 

Between March and August 2011, 

CAQH CORE held more than 30 open 

calls and over 15 straw polls with 

industry and government 

representatives to discuss, debate, and 

develop operating rules for EFT and 

ERA. Over 80 health care entities, 

including health plans, clearinghouses, 

providers, and financial institutions, 

were represented at weekly meetings 

and spent hundreds of hours of 

analyzing, reviewing, and consensusbuilding on the operating rules.16

CAQH CORE collaborated with the 

medical, pharmacy, and financial 

services industries in the following 

ways in order to draft the operating 

rules: 

• Conducted research, for example, 

reviewed over 100 EFT and ERA 

enrollment forms to identify gaps in 

data collection. 

• Held open calls and shared draft 

documentation with a wide range of 

constituents, many of which in turn 

forwarded copies of the drafts to their 

affiliates. 

• Vetted the complete draft CAQH 

CORE operating rules through the 

weekly call process, open update calls, 

surveys, and straw polls, and shared 

updates on the CAQH CORE and 

NACHA Web sites. 

On August 1, 2011 CAQH CORE and 

NACHA–The Electronic Payments 

Association, submitted five separate 

draft EFT and ERA operating rules to 

the NCVHS for consideration 17: 

• Draft Phase III CORE ERA 

Infrastructure (835) Rule 

• Draft Phase III CORE EFT 

Enrollment Data Rule 

• Draft Phase III CORE ERA 

Enrollment Data Rule 

• Draft Phase III CORE EFT & ERA 

Reassociation (CCD+/835) Rule 

• Draft Phase III CORE Uniform Use 

of CARCs and RARCs (835) Rule; 

includes Draft CORE-required Code 

Combinations for CORE-defined 

Business Scenarios. 

In its August 1, 2011 letter to the 

NCVHS, CAQH CORE urged the NCVHS 

to consider the rules as draft: ‘‘Further 

vetting is underway to finalize the rules 

per the CAQH CORE process or to 

identify further dialogue that should 

occur within the industry.’’ 18

On October 10, 2011, CORE produced 

another draft of the EFT & ERA 

Operating Rule Set in which the five 

rules were packaged as a set, titled: 

‘‘Draft Phase III CORE EFT & ERA 

Operating Rule Set.’’ Hereinafter, we 

will refer to the complete set of Draft 

Phase III CORE EFT & ERA Operating 

Rules as of October 10, 2011 as the EFT 

& ERA Draft Operating Rule Set. 


tkelley on DSK3SPTVN1PROD with RULES2
Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Rules and Regulations 48015 

19 December 7, 2011 letter to Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services, ‘‘Re: Affordable Care Act (ACA), 

Administrative Simplification: Recommenation to 

adopt operating rules to support the Standards for 

Health Care Electronic Funds Transfers and Health 

Care Payment and Remittance Advice,’’ from 

Justine M. Carr, Chairperson, National Committee 

on Vital and Health Statistics, pp. 5. 

20 Ibid, pp. 5–6. 

D. The December 2011 NCVHS 

Recommendation to the Secretary 

On December 7, 2011, the NCVHS 

sent a letter to the Secretary 

recommending that the EFT & ERA Draft 

Operating Rule Set be adopted, 

conditional on the authoring entities 

making certain revisions to the 

proposed operating rules 

(recommendations 1.1 and 1.2), 

including the following: 

• All references to the CORE 

certification requirement are removed 

from any documents that are adopted as 

mandatory by HHS, and that the CAQH 

CORE Web site be similarly updated 

and amended. The NCVHS noted that 

one of the items specifically excluded in 

the Eligibility and Claim Status 

Operating Rules IFC is the requirement 

that all entities (providers, health plans 

and clearinghouses) using the operating 

rules be CORE certified, and stated that 

the ‘‘language in the operating rules that 

requires CORE certification specifically 

can be misleading.’’ 19

• ‘‘The Secretary worked with CAQH 

CORE to develop a naming convention 

that consistently and easily identifies 

the transaction to which the rule 

applies.’’ 20 CORE currently names its 

operating rules using the term ‘‘Phase’’ 

in each one. The NCVHS letter observed 

that certain operating rules were 

common to all operating rules 

(‘‘technical rules’’) while other 

operating rules applied only to the 

specific transactions (‘‘business rules’’). 

The NCVHS suggested that the technical 

rules could be more appropriately 

maintained in a separate set of ‘‘base 

infrastructure’’ operating rules. Industry 

users could apply the technical rules 

across all transactions and use separate 

documents for individual transactions 

to implement the business rules for that 

specific transaction. 

Subsequent to the December 7, 2011 

NCVHS letter, CORE edited the Draft 

EFT & ERA Operating Rule Set per the 

NCVHS recommendation that references 

to the CORE certification be removed. 

The final version, published by CAQH 

CORE on June 27, 2012, is titled the 

Phase III CORE EFT & ERA Operating 

Rule Set (June 27, 2012). 

Discussions are underway between 

the Secretary and CORE as to NCVHS’ 

second recommendation that a different 

naming convention be developed for 

operating rules. However, it was not 

possible to develop a new naming 

convention in the period between the 

December, 2011 recommendation from 

NCVHS and the publication of this IFC. 

III. Provisions of the Interim Final Rule 

with Comment Period 

A. Adoption of Phase III CORE EFT & 

ERA Operating Rule Set (§ 162.1603) 

In 45 CFR 162.1603, we adopt CAQH 

CORE Phase III CORE EFT & ERA 

Operating Rule Set (Approved June 

2012), hereinafter referred to as the EFT 

& ERA Operating Rule Set, for the health 

care EFT and remittance advice 

transaction, with one exception noted 

later in this section of the IFC. In 

§ 162.920, we list the EFT & ERA 

Operating Rule Set as being 

incorporated by reference. 

The EFT & ERA Operating Rule Set 

includes the following rules: (1) Phase 

III CORE 380 EFT Enrollment Data Rule; 

(2) Phase III CORE 382 ERA Enrollment 

Data Rule; (3) Phase III Core 360 

Uniform Use of Claim Adjustment 

Reason Codes and Remittance Advice 

Remark Codes (835) Rule; (4) CORErequired Code Combinations for COREdefined Business Scenarios for the 

Phase III Core Uniform Use of Claim 

Adjustment Reason Codes and 

Remittance Advice Remark Codes (835) 

Rule; (5) Phase III CORE 370 EFT & ERA 

Reassociation (CCD+/835) Rule; and (6) 

Phase III CORE 350 Health Care Claim 

Payment/Advice (835) Infrastructure 

Rule. 

The Phase III CORE 350 Health Care 

Claim Payment/Advice (835) 

Infrastructure Rule includes a 

requirement, at 4.4.1, that entities’ 

companion guides must follow the 

format/flow as defined in the CORE v 

5010 Master Companion Guide 

Template, so we are also adopting the 

CORE v 5010 Master Companion Guide 

Template. 

We exclude the Phase III CORE 350 

Health Care Claim Payment/Advice 

(835) Infrastructure Rule Requirement 

4.2 in § 162.1603(a)(6). We are not 

adopting the Phase III CORE 350 Health 

Care Claim Payment/Advice (835) 

Infrastructure Rule Requirement 4.2, 

titled ‘‘Health Care Claim Payment/ 

Advice Batch Acknowledgement 

Requirements’’ because that 

requirement requires the use of the ASC 

X12 999 acknowledgement standard, 

and the Secretary has not adopted 

standards for acknowledgement 

transactions. 

Table 2 summarizes the high level 

requirements of the EFT & ERA 

Operating Rule Set. Table 2 does not 

include all aspects of the EFT & ERA 

Operating Rule Set, and readers are 

advised to refer to the EFT & ERA 

Operating Rule Set itself. 

TABLE 2—SUMMARY OF THE PHASE III CORE EFT & ERA OPERATING RULE SET ADOPTED IN THIS IFC 

Rule High level requirements 

Phase III CORE 380 

EFT Enrollment Data 

Rule.

1. Requirement 4.2: Identifies a maximum set of standard data elements that health plans can request from providers 

for enrollment to receive EFT. 

2. Requirement 4.2: Applies a ‘‘controlled vocabulary’’—predefined and authorized terms—for health plans to use 

when referring to the same data element. For instance, ‘‘Financial Institution Routing Number’’ is to be used instead 

of, for example, ‘‘Routing Number’’ or ‘‘Bank Routing Number.’’ 

3. Requirements 4.3.1 and 4.3.2: Require standard data elements to appear on paper enrollment forms in a standard 

format and flow, using Master Templates for paper-based and electronic enrollment. 

4. Requirement 4.3.1: Requires health plans to give specific information or instruction to providers to assist in manual 

paper-based EFT enrollment. For instance, for paper-based enrollment, health plans are required to inform the provider that it must contact its financial institution to arrange for the delivery of the data elements in the EFT required 

for reassociation of the payment and the ERA. 

5. Requirement 4.4: Requires that a health plan offer electronic EFT enrollment. (It does not require health plans to 

discontinue manual or paper-based methods of enrollment, but that electronic EFT enrollment be made available by 

a health plan if requested by a trading partner.) 

6. Requirement 4.5: Requires health plans to convert all their paper-based enrollment forms to comply with this rule 

no later than six months after the compliance date specified in this IFC. 


tkelley on DSK3SPTVN1PROD with RULES2
48016 Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Rules and Regulations 

TABLE 2—SUMMARY OF THE PHASE III CORE EFT & ERA OPERATING RULE SET ADOPTED IN THIS IFC—Continued 

Rule High level requirements 

Phase III CORE 382 

ERA Enrollment Data 

Rule.

1. Requirement 4.2: Identifies a maximum set of standard data elements that health plans can request from providers 

for enrollment to receive ERA. 

2. Requirement 4.2: Applies a ‘‘controlled vocabulary’’—predefined and authorized terms—for health plans to use 

when referring to the same data element. For instance, ‘‘Provider Name’’ is to be used instead of ‘‘Provider’’ or 

‘‘Name.’’ 

3. Requirements 4.3.1 and 4.3.2: Require standard data elements to appear on paper enrollment forms in a standard 

format and flow, using Master Templates for paper-based and electronic enrollment. 

4. Requirement 4.3.1: Requires health plans to give specific information or instruction to providers to assist in manual 

paper-based ERA enrollment. For instance, for paper-based enrollment, health plans are required to provide specific information regarding the enrollment form, a fax number and/or address to send it to, and contact information 

for provider questions. 

5. Requirement 4.4: Requires that a health plan offer electronic ERA enrollment. (It does not require health plans to 

discontinue manual or paper-based methods of enrollment, but that electronic ERA enrollment be made available 

by a health plan if requested by a trading partner.) 

6. Requirement 4.5: Requires health plans to convert all their paper-based enrollment forms to comply with this rule 

no later than six months after the compliance date specified in this IFC. 

Phase III CORE 360 

Uniform Use of 

CARCs and RARCs 

(835) Rule, including 

CORE-required Code 

Combinations for 

CORE-defined Business Scenarios.

Requirements 4.1.1 and 4.1.3: Identify four business scenarios with a maximum set of CARCs/RARCs/CAGCs/ 

NCPDP Reject Codes combinations that can be applied to convey details of the claim denial or payment adjustment to the provider. Health plans can only use the CARC/RARC/CAGC/NCPDP Reject Code combinations specified in the ‘‘CORE-required Code Combinations for CORE-defined Business Scenarios’’ document except that new 

or adjusted combinations can be used if the code committees responsible for maintaining the codes create a new 

code or adjust an existing code. The four business scenarios are the minimum set of business scenarios; health 

plans may develop additional ones. The four business scenarios include: 

1. Additional Information Required—Missing/Invalid/Incomplete Documentation. 

2. Additional Information Required—Missing/Invalid/Incomplete Data from Submitted Claim. 

3. Billed Service Not Covered by Health Plan. 

4. Benefit for Billed Service Not Separately Payable. 

Phase III CORE 370 

EFT& ERA Reassociation (CCD+/ 

835) Rule.

1. Requirement 4.1: Requires that providers must proactively contact their financial institutions to arrange for the delivery of the CORE-required Minimum CCD+ Data Elements necessary for successful reassociation of the EFT with 

the ERA. The five (plus one situational) CORE-required Minimum CCD+ Data Elements are: 

a. Effective Entry Date. 

b. Amount. 

c. Trace Type Code. 

d. Reference Identification (EFT Trace Number). 

e. Originating Company Identifier (Payer Identifier). 

f. Reference Identification (Originating Company Supplemental Code), which is only required in some situations. 

2. Requirements 4.2: Requires health plans to transmit the EFT within three days of the transmission of the ERA. 

3. Requirement 4.2.1 For retail pharmacy, the health plan may release the ERA anytime before the EFT is released, 

but must release the ERA within three days after the EFT is released. 

4. Requirement 4.3: Outlines requirements for resolving late or missing EFT and ERA transmissions. 

Phase III CORE 350 

Health Care Claim 

Payment/Advice (835) 

Infrastructure Rule.

1. Requirement 4.1: Requires covered entities to implement HTTP/S Version 1.1 over the public Internet as a transport method for the health care electronic funds transfers (EFT) and remittance advice transaction. The requirements are designed to provide a ‘‘safe harbor’’ that application vendors, providers, and health plans (or other information sources) can be assured will be supported by all covered entities. The rule does not require that all CORE 

trading partners remove existing connections that do not match the rule, nor is it intended to require that covered 

entities must use this method for all new connections. The connectivity safe harbor also includes requirements for a 

minimum set of metadata outside the ASC x12 payload and aspects of connectivity/security such as response 

times, acknowledgements and errors. As part of this, two envelope standards are to be used. 

2. Requirement 4.3: Requires health plans that issue proprietary paper claim remittance advices to continue to offer 

paper remittance advice for a minimum of 31 days from the implementation of ERA. 

3. Requirement 4.4.1: Requires the use of the CORE Master Companion Guide Template for the flow and format of 

companion guides. This is the same CORE Master Companion Guide Template that was adopted in the Eligibility 

and Claim Status Operating Rules IFC. 

B. Summary of Reasons for Adopting 

the EFT & ERA Operating Rule Set 

As is demonstrated in the RIA of this 

IFC, the EFT & ERA Operating Rule Set 

will bring efficiencies to four areas of 

administrative tasks and, in so doing, 

will incentivize more health care 

entities to utilize electronic 

transactions. The four areas of 

administrative tasks that EFT & ERA 

Operating Rule Set will streamline 

include: 

• Provider enrollment in EFT and 

ERA: As detailed in Table 2, the EFT & 

ERA Operating Rule Set includes 

requirements for health plans to use 

common format, flow, and vocabulary 

in their enrollment forms for EFT and 

ERA, as well as a maximum set of data 

elements that can be used in the 

enrollment forms and shared between 

the EFT and ERA enrollment forms. 

These requirements make EFT and ERA 

enrollment easier from the perspective 

of providers because all health plan 

enrollment forms will be similar, and a 

provider will be able to identify and 

collect all the required data for the 

multiple health plan forms 

simultaneously. 

• Setting up initial trading partner 

connectivity and processes between 


tkelley on DSK3SPTVN1PROD with RULES2
Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Rules and Regulations 48017 

21September 22, 2011 letter to the Honorable 

Kathleen Sebelius, Secretary, Department of Health 

and Human Services, from the National Committee 

on Vital and Health Statistics, ‘‘Re: Observations 

and Recommendations on the Adoption of a 

Standard for Electronic Acknowledgment 

Transactions.’’ 

22 Ibid., pp 3. 

23 Ibid., pp. 4 

providers, clearinghouses and health 

plans: The connectivity or ‘‘safe harbor’’ 

requirements of the Phase III CORE 350 

Health Care Claim Payment/Advice 

(835) Infrastructure Rule allow for quick 

initial connectivity between new trading 

partners. The connectivity requirements 

set up ‘‘ground rules’’ between trading 

partners with regard to connectivity 

over the public Internet. Although 

trading partners are not required to 

remove existing connections, providers 

and other trading partners can be 

assured that this connectivity can be 

used for transactions, that is, providers 

and other trading partners will find that 

this connectivity over the public 

Internet is always available to them, 

should they want to use it (safe harbor). 

The Phase III CORE 350 Health Care 

Claim Payment/Advice (835) 

Infrastructure Rule also requires health 

plans to format their ERA companion 

guides according to a CORE Master 

Companion Guide Template. These 

requirements could save days and 

perhaps weeks in terms of setting up 

with new trading partners. 

• Reassociation of the EFT data with 

the ERA data. The maximum set of 

standard data elements required by the 

Phase III CORE 380 EFT Enrollment 

Data Rule and Phase III CORE 382 ERA 

Enrollment Data Rule ensures that the 

health plan will have the proper data 

necessary for the required data 

content—the data elements of the X12 

TRN Segment—for the health care EFT 

so that automated reassociation is 

supported. The Phase III CORE 370 EFT 

& ERA Reassociation (CCD+/835) Rule 

has further data content requirements 

for the CCD+ and a requirement of plus 

or minus three days between 

transmission of the EFT and ERA, both 

of which facilitate automated 

reassociation by the provider. The Phase 

III CORE 370 EFT & ERA Reassociation 

(CCD+/835) Rule also requires a 

transition period between paper and 

electronic remittance advice, allowing a 

provider a test period before 

implementing ERA exclusively. 

• Posting payment adjustments and 

claim denials. The Phase III CORE 360 

Uniform Use of CARCs and RARCs (835) 

Rule, including CORE-required Code 

Combinations for CORE-defined 

Business Scenarios, puts limits on the 

number of code combinations used for 

four common rejection scenarios. This 

rule makes it easier for providers to 

understand the reasons for a health 

plan’s rejection or adjustment of a claim 

payment, and will decrease time spent 

on the manual follow-up (telephone 

calls, emails, etc.) on rejections and 

adjustments. 

C. Operating Rules on 

Acknowledgements 

The CORE EFT & ERA Operating Rule 

Set requires the use of the Version 5010 

999 acknowledgements standard in the 

Phase III CORE 350 Health Care Claim 

Payment/Advice (835) Infrastructure 

Rule Requirement 4.2, titled ‘‘Health 

Care Claim Payment/Advice Batch 

Acknowledgement Requirements.’’ As 

noted previously, we are not adopting 

that particular requirement within the 

EFT & ERA Operating Rule Set. 

Acknowledgements are responses 

transmitted by electronic data 

interchange (EDI) that inform 

transaction senders whether or not their 

transaction has been received or if there 

are problems with the transaction. The 

use of acknowledgements adds value to 

the underlying transactions for which 

they are sent by informing the sender 

that a transaction has been received or 

has been rejected. Without 

acknowledgements, it is difficult for the 

sender to know whether the intended 

recipient received the transmission, 

which often results in the sender 

repeatedly querying the intended 

receiver as to the status of the 

transmission. 

In its September 22, 2011 letter to the 

Secretary, the NCVHS forwarded some 

observations and recommendations on 

the adoption of a standard for electronic 

acknowledgment transactions based on 

a hearing of the NCVHS Subcommittee 

on Standards on April 27, 2011.21 In the 

letter, the NCVHS noted that ‘‘[d]uring 

the April 2011 hearing, virtually all 

testifiers were supportive of a mandate 

for acknowledgment standards because 

of the time and costs savings 

benefits.’’ 22 The NCVHS recommended 

that ASC X12 Acknowledgment 

standards be adopted for three different 

Acknowledgments transactions.23

Section 1173(a)(4)(A)(iii) of the Act, 

as added by section 1104(b) of the 

Affordable Care Act, provides that 

standards and associated operating rules 

shall ‘‘provide for timely 

acknowledgement, response, and status 

reporting that supports a transparent 

claims and denial management process 

(including adjudication and appeals).’’ 

This provision is an indication of 

Congress’ recognition of the important 

role acknowledgements play in EDI. 

Although we are not requiring 

compliance with Phase III CORE 350 

Health Care Claim Payment/Advice 

(835) Infrastructure Rule requirement 

4.2, we are addressing the important 

role acknowledgements play in EDI by 

strongly encouraging the industry to 

implement the acknowledgements 

requirements in the CAQH CORE rules 

we are adopting herein. We reflect the 

exclusion of the requirement to use 

acknowledgments in § 162.1603(a)(6). 

Until such time as the Secretary 

adopts a standard for acknowledgments, 

we support the industry’s ongoing 

voluntary use of acknowledgements and 

encourage even more widespread use. 

D. Applicability (§ 162.100) 

Per 45 CFR 162.100, the health care 

electronic funds transfers (EFT) and 

remittance advice transaction operating 

rules adopted in this interim final rule 

with comment period apply to all 

covered entities: Health plans, health 

care clearinghouses, and health care 

providers who transmit any health 

information in electronic form in 

connection with a transaction for which 

a standard has been adopted under 

HIPAA. 

E. Technical Changes (§ 162.1601) 

In the Health Care EFT Standards IFC, 

we named the new transaction the 

‘‘Health Care Electronic Funds Transfers 

(EFT) and Remittance Advice’’ 

Transaction. In this IFC, we are making 

a conforming change to the title and 

introductory language of § 162.1601 to 

reference the transaction by the new 

name. 

Specifically, we are changing the 

heading of § 162.1601 from ‘‘health care 

payment and remittance advice 

transaction’’ to ‘‘health care electronic 

funds transfers (EFT) and remittance 

advice transaction.’’ In the introductory 

text, we are revising the statement ‘‘The 

health care payment and remittance 

advice transaction is the transmission of 

either of the following for health care’’ 

to read ‘‘The health care electronic 

funds transfers (EFT) and remittance 

advice transaction is the transmission of 

either of the following for health care.’’ 

F. Effective and Compliance Dates 

Section 1173(g)(4)(B)(ii) of the Act, as 

added by section 1104(b)(2)(C) of the 

Affordable Care Act, states that ‘‘[t]he 

set of operating rules for electronic 

funds transfers and health care payment 

and remittance advice transactions shall 

* * * be adopted not later than July 1, 

2012, in a manner ensuring that such 

operating rules are effective not later 

than January 1, 2014.’’ In each of our 

previous HIPAA rules, the date on 


tkelley on DSK3SPTVN1PROD with RULES2
48018 Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Rules and Regulations 

24CAQH Committee on Operating Rules for 

Information Exchange (CORE), Phase III CORE EFT 

& ERA Operating Rules Set (As of May XX, 2012), 

Phase III CORE 382 ERA Enrollment Data Rule, 

Section 3.4. and Phase III CORE 380 EFT 

Enrollment Data Rule, Section 3.4. 

25 Ibid. 

26CAQH Committee on Operating Rules for 

Information Exchange (CORE), Phase III CORE EFT 

& ERA Operating Rules Set (As of May XX, 2012), 

Phase III CORE 360 Uniform Use of CARCs and 

RARCs (835) Rule, Section 3.5. 

which the rule was effective was the 

date on which the rule was considered 

to be established or adopted or, in other 

words, the date on which adoption took 

effect and the CFR was accordingly 

amended. Typically, the effective date 

of a rule is 30 or 60 days after 

publication in the Federal Register. 

Under certain circumstances, the delay 

in the effective date can be waived, in 

which case the effective date of the rule 

may be the date of filing for public 

inspection or the date of publication in 

the Federal Register. 

The effective date of standards, 

implementation specifications, 

modifications, or operating rules that 

are adopted in a rule, however, is 

different than the effective date of the 

rule. The effective date of standards, 

implementation specifications, 

modifications, or operating rules is the 

date on which covered entities must be 

in compliance with the standards, 

implementation specifications, 

modifications, or operating rules. The 

Act requires that the operating rules for 

the health care electronic funds 

transfers (EFT) and remittance advice 

transaction be effective not later than 

January 1, 2014. This means that 

covered entities must be in compliance 

with the operating rules by January 1, 

2014. New § 162.1603 reflects this 

compliance date for the EFT & ERA 

Operating Rule Set. 

If we change any of the policies we 

are finalizing in this interim final rule 

with comment period as a result of 

comments received, we will seek to 

finalize any such changes to allow 

sufficient time for industry preparation 

for compliance. 

IV. Other Considerations: Process for 

Maintaining and Revising the EFT & 

ERA Operating Rule Set 

The CORE EFT & ERA Operating Rule 

Set includes a number of statements 

about how the operating rules will be 

reviewed and updated. According to the 

Phase III CORE 382 ERA Enrollment 

Data Rule and the Phase III CORE 380 

EFT Enrollment Data Rule, CORE will 

review the enrollment data sets on an 

annual or semi-annual basis. The Phase 

III CORE 382 ERA Enrollment Data Rule 

and the Phase III CORE 380 EFT 

Enrollment Data Rule state: ‘‘The first 

review shall commence one year after 

the [adoption] of a federal regulation 

requiring’’ implementation of the two 

CORE enrollment rules.24 ‘‘Substantive 

changes necessary to the data set will be 

reviewed and approved by CORE as 

necessary to ensure accurate and timely 

revision to the data set.’’ 25

The Phase III CORE 360 Uniform Use 

of CARCs and RARCs (835) Rule states 

that— 

CAQH CORE will establish an open 

process for soliciting feedback and input 

from the industry on a periodic basis, no less 

than 3 times per year, on the CARC/RARC/ 

CAGC and CARC/NCPDP Reject Codes/CAGC 

combinations in the CORE-required Code 

Combinations for CORE-defined Business 

Scenarios.doc and convene a Subgroup to 

agree on appropriate revisions. As part of this 

process, it will be expected that health plans/ 

providers/vendors will report to CORE 

additional business Scenarios that health 

plans may be using on a frequent basis that 

are not covered by this CORE rule for 

consideration for additional Business 

Scenarios.26

Note that these processes will be 

applied by CORE to update and revise 

those particular rules in the EFT & ERA 

Operating Rule Set. However, any 

modified versions of the EFT & ERA 

Operating Rule Set would be vetted 

through the rulemaking process before 

covered entities would be required to 

comply with them under HIPAA. 

The CORE process for updating the 

operating rules is separate and distinct 

from the HHS process for updating 

standards and operating rules. Section 

1104(b)(2)(C) of the Affordable Care Act 

added new section 1773(i) to the Act, 

which requires the establishment of a 

‘‘review committee’’ to evaluate and 

review the adopted standards and 

operating rules and to report 

recommendations for updating and 

improving standards and operating rules 

to the Secretary. We will establish the 

review committee at a later date and a 

description of the review, evaluation, 

and update process will be presented at 

that time. 

V. Waiver of Proposed Rulemaking and 

Delay in Effective Date 

Under 5 U.S.C. 553(b) of the 

Administrative Procedure Act (APA), 

we are required to publish a notice of 

proposed rulemaking in the Federal 

Register. In addition, the APA mandates 

a 30-day delay in the effective date. 

Sections 553(b) and (d) of the APA 

provide for an exception from these 

APA requirements. Section 553(b)(B) of 

the APA authorizes the Department to 

waive normal rulemaking requirements 

if the Department for good cause finds 

that notice and comment procedures are 

impracticable, unnecessary, or contrary 

to the public interest. Section 553(d)(3) 

of the APA allows the Department to 

waive the 30-day delay in effective date 

where the Department finds good cause 

to do so and includes a statement of 

support. 

Subsection (C) of section 1173(g)(4) of 

the Act is titled ‘‘Expedited 

Rulemaking’’ and provides that ‘‘[t]he 

Secretary shall promulgate an interim 

final rule applying any standard or 

operating rule recommended by the 

[NCVHS] pursuant to paragraph (3). The 

Secretary shall accept and consider 

public comments on any interim final 

rule published under this subparagraph 

for 60 days after the date of such 

publication.’’ As discussed previously, 

this interim final rule applies the 

recommendations made by the NCVHS 

to adopt the EFT & ERA Operating Rule 

Set. 

Because the statute requires us to 

publish an interim final rule with 

comment period for the adoption of 

these operating rules, we conclude that 

it is unnecessary to undertake ordinary 

notice and comment procedures. On 

this basis, we waive the ordinary notice 

and comment provisions of the APA. In 

accordance with the requirements of 

section 1173(g)(4)(C) of the Act, we are 

providing a 60-day public comment 

period. 

We also find that it is unnecessary to 

undertake ordinary notice and comment 

procedures to revise the name in the 

title and introductory language of the 

transaction in § 162.1601. In the Health 

Care EFT Standards IFC, we named the 

new transaction the ‘‘Health Care 

Electronic Funds Transfers (EFT) and 

Remittance Advice,’’ and we are simply 

making a conforming change to the title 

and introductory language of that 

regulatory section to call the transaction 

by the new name. 

We also find good cause for waiving 

the 30-day delay in the effective date of 

this interim final rule with comment 

period. The 30-day delay is intended to 

give affected parties time to adjust their 

behavior and make preparations before 

a final rule takes effect. Sometimes a 

waiver of the 30-day delay in the 

effective date of a rule directly impacts 

the entities required to comply with the 

rule by minimizing or even eliminating 

the time during which they can prepare 

to comply with the rule. In this case, 

covered entities are not required to 

comply with the adopted operating 

rules until January 1, 2014, 

approximately one-and-one-half years 

after the publication of this interim final 

rule with comment period; a waiver of 

the 30-day delay in the effective date of 


tkelley on DSK3SPTVN1PROD with RULES2
Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Rules and Regulations 48019 

the rule does not change that fact. A 

waiver is in fact inconsequential here to 

covered entities; their statutorily 

prescribed date of compliance remains 

January 1, 2014. Because we believe the 

30-day delay is unnecessary, we find 

good cause to waive it. 

VI. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 60- 

day notice in the Federal Register and 

solicit public comment before a 

collection of information is 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 Paperwork 

Reduction Act of 1995 requires that we 

solicit comment on the following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our 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. 

We are soliciting public comment on 

the information collection requirements 

(ICRs) on each of these issues that 

contains information collection 

requirements (ICRs): Specifications: 

Companion Guides Template, CORERequired Maximum ERA Enrollment 

Data Elements, and CORE-Required 

Maximum EFT Enrollment Data 

Elements. 

A. Health Plans Are Required To Format 

Companion Guides According to 

Companion Guide Template 

In current practice, companion guides 

are developed by individual health 

plans and require providers to adhere to 

different transaction implementation 

rules for each health plan. Health plans 

have created these companion guides to 

describe the specifics of how they 

implement the HIPAA transactions and 

how they will work with their trading 

partners. 

Health plans’ companion guides vary 

not only in format and structure, but 

also in size, being anywhere from a few 

to 60 pages or more. Such variance can 

be confusing to trading partners and 

providers who must implement them 

along with the standard implementation 

guides, and who must refer to different 

companion guides for different health 

plans. There are more than 1,200 such 

companion guides in use today. 

The Phase III CORE 350 Health Care 

Claim Payment/Advice (835) 

Infrastructure Rule, Requirement 4.4, 

adopted in this interim final rule with 

comment period, requires a standard 

template/common structure that health 

plans must use that is more efficient for 

providers to reference, given the 

multiple industry companion guides 

they must consult today. 

OMB has determined that this 

regulatory requirement (which 

mandates that the private sector disclose 

information and do so in a particular 

format) constitutes an agency-sponsored 

third-party disclosure as defined under 

the PRA. The burden associated with 

the requirements of this interim final 

rule with comment period, which is 

subject to the PRA, includes the initial 

one-time burden on health plans to use 

a standardized template for companion 

guides. 

Common practice in the industry is 

for companion guides to be published as 

electronic documents and updated 

periodically in the routine course of 

business. Companion guides are posted 

to and made available on health plan 

Web sites for trading partners, including 

providers, to access; therefore, printing 

and shipping costs are not considered. 

The burden associated with the 

routine or ongoing maintenance of the 

information reported in the standard 

template format for companion guides is 

exempt from the PRA as defined in 5 

CFR 1320.3(b)(2). 

Based on the assumption that the 

burden associated with systems 

modifications that need to be made to 

implement the standard template for 

companion guides may overlap with the 

systems modifications needed to 

implement other HIPAA standards, and 

the fact that the standard template for 

companion guides will replace the use 

of multiple companion guides, resulting 

in an overall reduction of burden for 

providers, commenters should take into 

consideration when drafting comments 

that: (1) One or more of these current 

companion guides may not be used; (2) 

companion guide modifications may be 

performed in an aggregate manner 

during the course of routine business; 

and/or (3) systems modifications may be 

made by contractors such as practice 

management vendors, in a single effort 

for a multitude of affected entities. 

Health plans that issue companion 

guides do so, in part, to direct providers 

on how to implement the ASC X12 

standards and, in the case of the NCPDP 

standards, issue payer sheets specific to 

their requirements, and often provide 

other plan-specific information, such as 

contact information, address, etc. It is 

expected that even with the advent of 

operating rules, companion guides will 

never be completely eliminated, but the 

companion guides themselves may be 

greatly reduced in size and complexity 

as a result of the use of operating rules. 

The CORE Master Companion Guide 

Template serves the purpose of 

providing a uniform structure for health 

plans to use when preparing companion 

guides. The use of this template by 

health plans currently issuing 

companion guides is considered to be a 

one-time action and is considered a 

permanent standard template for a 

health plan companion guide. 

As the transition to the CORE Master 

Companion Guide Template is a onetime requirement, we do not estimate 

any ongoing labor costs associated with 

the use of CORE Master Companion 

Guide Template beyond the initial first 

year conversion. 

In the Eligibility and Claim Status 

Operating Rules IFC, we estimated the 

one-time conversion to the template will 

cost health plans across the industry 

$3,028,000. The calculations in the 

Eligibility and Claim Status Operating 

Rules IFC Collection of Information 

section were as follows: The current 

length of health plan companion guides 

related to the eligibility for a health plan 

and health care claim status transactions 

is anecdotally estimated as ranging from 

just a few to 60 or more pages. We 

estimate it will take a health plan staff 

person, most likely a technical writer, 

from 1 to 4 hours per page to reformat 

companion guides into the standard 

template for companion guides. This 

burden would involve re-entering 

information, reconfiguring the sequence 

in which information appears, adding 

information, and other word processing 

and related tasks. Also, it would require 

specific technical knowledge, such as 

expertise in the Version 5010 standard 

transactions. 

Using the high estimate obtained in 

testimony to the NCHVS by the 

American Medical Association of 1,200 

companion guides currently in use, we 

calculated in the Eligibility and Claim 

Status Operating Rules IFC an estimated 

average of 40 pages, (48,000 responses) 

at an average rate of 2 hours per page 

(1,200 guides × 40 pages × 2 hours per 

page), for a one-time burden of 

approximately 96,000 hours across the 

industry to implement the CORE Master 

Companion Guide Template. 

The total burden calculated in the 

Eligibility and Claim Status Operating 

Rules IFC applied to the transition to 

the template for two transactions, while 

we are only considering one here: the 

health care electronic funds transfers 

(EFT) and remittance advice transaction. 

Therefore, for purposes of this IFC, in 


tkelley on DSK3SPTVN1PROD with RULES2
48020 Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Rules and Regulations 

order to calculate the burden to 

transition companion guides to the 

CORE Master Companion Guide 

Template, we have taken the total 

burden as estimated in the COI section 

of the Eligibility and Claim Status 

Operating Rules IFC and divided it in 

two, to result in approximately 48,000 

hours (Table 3). 

As existing word processing 

capabilities would be used for this task, 

we do not anticipate any software, 

hardware or other specialized 

equipment to be purchased and/or 

maintained for this specific purpose. 

B. Health Plans Are Required To Use 

CORE-Required Maximum ERA 

Enrollment Data Elements and CORERequired Maximum EFT Enrollment 

Data Elements in ERA and EFT 

Enrollment Forms 

Requirements 4.2 and 4.3 of both the 

Phase III CORE 380 EFT Enrollment 

Data Rule and the Phase III CORE 382 

ERA Enrollment Data Rule require 

health plans to change the forms they 

currently use for enrolling providers in 

EFT and ERA, as these rules require a 

maximum set of standard data elements, 

a controlled vocabulary, and a standard 

format and flow to the forms. We 

assume that most, if not all, health plans 

will have to alter their current 

enrollment forms for EFT and ERA in 

order to comply with these 

requirements. 

Health plans make alterations to their 

forms on a fairly routine basis in order 

to comply with internal business needs 

and State and Federal mandates. 

Changing or altering an existing form 

will often include a technical writer to 

make the actual changes, and an 

approval process that guarantees that 

the changes do not alter business 

processes in the organization. The 

burden associated with the 

requirements of this interim final rule 

with comment period is the initial onetime burden on health plans to use the 

CORE-required Maximum ERA 

Enrollment Data Elements and CORErequired Maximum EFT Enrollment 

Data Elements. 

The burden associated with the 

routine or ongoing maintenance of the 

enrollment forms is exempt from the 

PRA as defined in 5 CFR 1320.3(b)(2). 

We assume that, for each of the two 

forms, it will take a technical writer 16 

hours to reformat and alter the form 

according to the requirements in the 

Phase III CORE EFT 380 Enrollment 

Data Rule and Phase III CORE ERA 382 

Enrollment Data Rule (2 forms * 16 

hours = 32 hours). This includes the 

time it takes to incorporate revisions 

that may result from the approval 

process. 

We assume that the two forms will 

have to get a number of levels of 

approval before they can be used, so we 

have added 4 hours of time being 

reviewed by general and operations 

managers. We multiply these hours (36) 

by the number of health plans and third 

party administrators (2,577) for a total 

burden to the industry of approximately 

92,772 hours (Table 3). 

As existing word processing 

capabilities would be used for this task, 

we do not anticipate any software, 

hardware or other specialized 

equipment to be purchased and/or 

maintained for this specific purpose. 

TABLE 3—THE ONE-TIME BURDEN TO HEALTH PLANS OF REFORMATTING EXISTING COMPANION GUIDES AND ALTERING

EFT AND ERA ENROLLMENT FORMS

One-time burden of reformatting companion guides 

(in hours) 

Burden of reformatting EFT 

and ERA enrollment forms 

(in hours) 

Total burden 

(in hours) 

48,000 ...................................................................................................................................................................... 92,772 140,772 

C. Cost of Provider Enrollment 

The EFT & ERA Operating Rule Set 

adopted herein does not require 

providers to accept payments via EFT or 

remittance advice via ERA, so there is 

no requirement that providers must 

enroll in EFT to receive these 

transactions. 

However, we do assume that, in part 

due to this regulation, physician 

practices, and hospitals will increase 

their usage of EFT, or, in some cases, 

will begin accepting EFT for health care 

claim payments for the first time. As we 

relay in the RIA of this interim final rule 

with comment period, for the savings 

for health plans, the high range of 

estimated increase in EFT usage 

attributable to implementation of the 

EFT and ERA standards makes up a 

percentage of the total increase. 

Therefore, we have included the cost 

of enrollment in EFT to both physician 

practices and hospitals (Table 3), as we 

did in the Health Care EFT Standards 

IFC. This cost will also be reflected in 

the summary included in the RIA of the 

cost and benefits of implementing the 

EFT & ERA Operating Rule Set. 

We have not included the cost of 

enrollment in ERA to providers in this 

COI or RIA. The standard for the ERA 

was adopted in the Transaction and 

Code Sets final rule and the costs for 

implementing EDI were considered in 

that rule. A provider’s enrollment in 

ERA with a health plan is a cost that 

would be included in initial 

implementation of EDI. 

Data have demonstrated that hospitals 

have a much higher usage of EDI than 

physician practices and, by extension, 

we assume that hospitals have a higher 

usage of EFT than physician practices. 

However, there is no valid data on EFT 

usage among hospitals and so we will 

include them with physician practices, 

knowing that cost estimates are likely 

conservative. 

Many physician practices and 

hospitals already accept EFT for health 

care claim payments from the health 

plans that pay them the most (as a 

percentage of total payments to the 

provider), pay them most often, or 

transmit payment/processing 

information that works most 

successfully with the particular 

provider’s practice management system. 

The burden associated with this 

requirement of the EFT & ERA 

Operating rules is the completion of the 

health care EFT enrollment which is 

accomplished by filling out and 

submitting what is generally a 3- to 18- 

page form, obtaining signatures, and 

transmitting the completed document. 

The burden associated with the 

providers’ routine or ongoing 

enrollment in order to receive payments 

from health plans is exempt from the 

PRA as defined in 5 CFR 1320.3(b)(2). 

In order to quantify the average cost 

per physician practice or hospital, we 

have applied the following assumptions: 

• In the Health Care EFT Standards 

IFC, we assumed that, for the typical 

physician practice, the time burden of 

an EFT enrollment with a single health 

plan is 2 hours. We base this time 

burden on the estimated length of time 


tkelley on DSK3SPTVN1PROD with RULES2
Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Rules and Regulations 48021 

27American Medical Association, ‘‘Competition 

in Health Insurance: A Comprehensive Study of 

U.S. Markets,’’ 2008 and 2009. 

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,’’ United 

States Government Accountability Office (GAO), 

July 31, 2009 (GAO–09–864R). 

it would take an average consumer to 

complete and submit a 3 to 18 page 

form, including obtaining bank account, 

bank routing, and necessary signatures 

to allow an employer to Direct Deposit 

an employee’s salary into the 

employee’s account (a common 

consumer EFT enrollment). However, 

Phase III CORE 380 EFT Enrollment 

Data Rule Requirement 4.4 requires 

health plans to offer electronic EFT 

enrollment. The rule does not require 

health plans to discontinue manual or 

paper-based methods of enrollment, but 

that electronic EFT enrollment be made 

available by a health plan if requested 

by a trading partner. We assume that 

providers that take advantage of the 

electronic EFT enrollment will find the 

time it takes to enroll cut significantly. 

If we assume that up to 50 percent of 

physician practices may opt to use the 

electronic enrollment in EFT, then the 

time it takes for a physicians practice to 

enroll will be decreased to between 1 to 

2 hours. For simplicity, we are using the 

average enrollment time of 1.5 hours. 

• The majority of the enrollment will 

be done by a billing and posting clerk, 

at that position’s average salary rate of 

approximately $17.50 per hour. This 

rate is based on Bureau of Labor 

Statistics adjusted to 2014 by factoring 

an increase in labor costs at the rate of 

3 percent per year. 

• The model physician practice 

receives the vast majority of its 

payments from 25 or less plans.27 From 

the beginning of 2014 through 2018, we 

assume that the number of health plans 

with whom the model physician 

practice does business will remain 

constant because industry trends 

indicate that the number of health plans 

will remain constant, or even decrease. 

• According to our projections, the 

typical physician practice will receive 

34 percent of its health care claim 

payments via EFT at the beginning of 

2014, and this will increase to 56 

percent by the end of 2018 (reflecting 

our calculation in the RIA of this 

interim final rule with comment period 

for the whole industry). Using these 

factors, we can calculate that the typical 

physician practice is already enrolled in 

an EFT program with approximately 

eight of the twenty five health plans 

with which it does business (34 percent) 

at the beginning of 2014. We predict 

that the model physician practice would 

be expected to add six new EFT 

enrollments from 2014 through 2018, 18 

percent of which are due to the positive 

consequences of the EFT & ERA 

Operating Rule Set. The 18 percent 

attribution is the percentage of total EFT 

usage that is attributable to the EFT & 

ERA Operating Rule Set as calculated in 

the RIA of this IFC. Any updates to the 

enrollments would be in the normal 

course of business. 

TABLE 4—COSTS AND NUMBER OF ENROLLMENTS IN EFT BY PHYSICIANS AND HOSPITALS FOR 2014 THROUGH 2018 

Col. 1 Col. 2 Col. 3 Col. 4 Col. 5 Col. 6 

Time (in hours) per enrollment form 

(column 1) 

Base hourly rate 

(in dollars) for billing and posting 

clerks* 

(column 2) 

Number of physician practices/hospitals 

(column 3) 

Total number of 

increased EFT enrollments (column 

3 * 6 enrollments) 

(column 4) 

Total number of 

EFT enrollments 

attributable to 

adoption of EFT & 

ERA operating 

rules set at 18% 

of total 

(column 5) 

Number of annual 

enrollments in 

EFT attributable to 

adoption of operating rules set 

(column 6) 

1.5 .......................................................... $17.5 240,727 1,444,362 259,985 52,000 

The total burden to providers that 

move to EFT due to the EFT & ERA 

Operating Rule Set from 2014 through 

2018 is $7.27 million. Table 5 illustrates 

the annualized burden. 

TABLE 5—ESTIMATED ANNUALIZED BURDEN

Year 

Total 

2014 2015 2016 2017 2018 

Cost (Burden Hours for total hospitals & providers) (in millions) .................................... $1.4 $1.4 $1.5 $1.5 $1.5 $7.3 

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 proposed rule; 

or 

2. Submit your comments to the 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, Attention: CMS Desk Officer, 

CMS–0028–IFC 

Fax: (202) 395–6974; or 

Email: 

OIRA_submission@omb.eop.gov. 

VII. Regulatory Impact Analysis 

We have examined the impacts of this 

interim final rule with comment period 

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 (March 22, 1995; Pub. L. 104– 

4), Executive Order 13132 on 

Federalism (August 4, 1999), and the 


tkelley on DSK3SPTVN1PROD with RULES2
48022 Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Rules and Regulations 

28 Kahn, J. G., Kronick, R., Kreger, M., & Gans, 

D.N. ‘‘The Cost of Health Insurance Administration 

in California: Estimates for Insurers, Physicians, 

and Hospitals,’’ Health Affairs: 24(6):1629–1639, 

2005. 

29Sakowski, J.A., Kahn, J.G., Kronick, R.G., 

Newman, J.M., & Luft, H.S., ‘‘Peering Into the Black 

Box: Billing and Insurance Activities in a Medical 

Group,’’ Health Affairs: 28(4):w544–w554, 2009. 

30 ‘‘Overhauling the U.S. Healthcare Payment 

System,’’ conducted by McKinsey & Company, 

published in The McKinsey Quarterly, June 2007. 

31 ‘‘Health Care Administrative Expense Analysis, 

Blue Ribbon Commission Recommendation #6: 

Final Report 11/26/07;’’ Washington State Office of 

the Insurance Commissioner. 

32Akscin J., Barr T., & Towle E.; ‘‘Key Practice 

Indicators in Office-Based Oncology Practices: 2007 

Report on 2006 Data.’’ J Oncol Pract 3:200–203, 

2007, and Mulvey, T.: ‘‘The Time Has Come for 

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 to not 

only engage public 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 (RIA) 

must be prepared for major rules with 

economically significant effects ($100 

million in 1995 dollars or more in any 

1 year). We estimate that this 

rulemaking is ‘‘economically 

significant,’’ 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. Accordingly, we 

have prepared an RIA that, to the best 

of our ability, presents the costs and 

benefits of this interim final rule with 

comment period, and the rule has been 

reviewed by the Office of Management 

and Budget. We anticipate that the 

adoption of the EFT & ERA Operating 

Rule Set would result in benefits that 

outweigh the costs to health care 

providers and health plans. 

The Regulatory Flexibility Act (RFA) 

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). 

We have determined, and certify, that 

this rule will not have a significant 

economic impact on a substantial 

number of small entities, and that a 

regulatory flexibility analysis is not 

required. Our reasoning is as follows: 

• Most physician practices, hospitals 

and other health care providers are 

small entities, either by nonprofit status 

or by having revenues of $7 to $34.5 

million in any 1 year. However, the 

costs to individual providers will be 

minimal. 

• The health insurance industry was 

examined in depth in the RIA prepared 

for the August 3, 2004 proposed rule on 

establishment of the Medicare 

Advantage program (69 FR 46866). In 

that analysis, it was determined that 

there were few if any ‘‘insurance firms,’’ 

including health maintenance 

organizations (HMOs), that fell below 

the size thresholds for ’’small’’ business 

established by the SBA. Then, and even 

more so now, the market for health 

insurance is dominated by a relatively 

small number of firms with substantial 

market shares. We assume that the 

‘‘insurance firms’’ are synonymous, for 

the most part, with health plans that 

make health care claims payments to 

health care providers and are, therefore, 

the entities that will have costs 

associated with implementing health 

care EFT standards. However, there are 

a number of 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 100 such HMOs. 

These HMOs and health plans that are 

nonprofit organizations, like the other 

firms affected by this interim final rule, 

will be required to implement the EFT 

& ERA Operating Rule Set. 

Accordingly, this IFC will affect a 

’’substantial number’’ of small entities; 

that is, nonprofit health plans. However, 

as illustrated in the RIA, we estimate 

that the costs for implementation of this 

IFC are, at most, approximately 

$460,000 to $1 million per health plan 

(regardless of size or non-profit status). 

We assume that the nonprofit HMOs 

that are considered ‘‘small’’ by virtue of 

their nonprofit status are not small in 

terms of revenue. Therefore, we do not 

consider the cost of implementation to 

be substantial for these nonprofit health 

plans. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant economic impact on the 

operations of a substantial number of 

small rural hospitals. This analysis must 

conform to the provisions of section 604 

of the RFA. This IFC would not affect 

small rural hospitals, under the same 

reasoning previously given with regard 

to health care providers. Therefore, the 

Secretary has determined that this rule 

would not have a significant impact on 

the operations of a substantial number 

of small rural hospitals. 

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 IFC will impose unfunded 

mandates in excess of $139 million on 

the private sector. 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule (and subsequent final 

rule) that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 

This IFC does not have a substantial 

direct effect on State or local 

governments, preempt State law, or 

otherwise have a Federalism 

implication. 

A. Current State, Need for the EFT & 

ERA Operating Rule Set, and General 

Impact of Implementation 

1. EFT and Remittance Advice Usage 

a. Billing and Insurance Related (BIR) 

Costs 

As noted in the preamble, a 

significant portion of administrative 

costs for physician practices and 

hospitals are billing and insurancerelated (BIR) costs. It is estimated that 

half of administrative costs for 

physician practices are BIR costs 28—or 

between 10 to 12 percent of a physician 

practice’s annual revenue.29 In contrast, 

the U.S. retail sector spends about 2 

percent of annual revenue on payment 

processing.30

Along with estimated increases in all 

health care administrative costs, we can 

expect BIR costs to grow as well: In a 

study by the Washington State Office of 

the Insurance Commissioner, BIR costs 

grew between 1997 and 2005 at an 

average pace of 20 percent per year for 

hospitals in Washington State and 10 

percent per year for physicians.31 In 

some cases, the increasing 

administrative cost of processing claims 

threatens the survival of small and midsize physicians’ offices.32


tkelley on DSK3SPTVN1PROD with RULES2
Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Rules and Regulations 48023 

National Insurance Cards,’’ J. Oncol Pract, 4:161, 

2008. 

33Casalino, L.P., Nicholson, S., Gans, D.N., 

Hammons, T., Morra, D., Karrison, T., & Levinson, 

W., ‘‘What Does It Cost Physician Practices to 

Interact With Health Insurance Plans?’’ Health 

Affairs, 28(4) (2009):w533–w543). 

34http://data.bls.gov/cgi-bin/print.pl/oes/current/ 

oes433021.htm. 

35Casalino, et al., 2009. 

36Sakowski et al., 2009. 

37March 12, 2012 letter from the Medical Group 

Management Association (MGMA) to Secretary 

Sebelius as public comment on the health care EFT 

standards IFC. 

38March 9, 2012 letter from UPMC, submitted to 

HHS as public comment on the health care EFT 

standards IFC. 

39 ‘‘E-Payment Cures for Healthcare,’’ 

presentation, Barbara C. Mayerick, Department of 

Veterans Affairs, April 26, 2010, https:// 

admin.nacha.org/userfiles/File/ 

Healthcare%20Resource/ 

Epayments%20Cures%20for%20Healthcare.pdf 

and ‘‘Comments from VHA Health Care as Health 

Care Provider,’’ testimony by Barbara Mayerick for 

NCVHS December 3, 2010 hearing: http:// 

hhs.granicus.com/MediaPlayer.php?publish_id=11. 

BIR tasks include: Patient billing, 

insurance verification, responding to 

patients’ cost questions, contracting 

with health plans, health care provider 

credentialing, processing payer requests 

for additional information, 

authorizations (procedures, referrals), 

payment for services provided outside 

the group, coding support, entering 

charges, claims review and edits, filing 

claims, creating and mailing patient 

statements, data entry and payment 

processing managements, collecting 

payments and posting to patient 

accounts, depositing checks and 

payments, account reconciliation, 

discrepancy research, follow-up, writeoffs, posting refunds, filing for shared 

risk-pool payments, filing for 

contractual payments, and follow-up on 

denials, underpaid and nonresponsive 

claims.33

BIR tasks are costly, in part, because 

physician practice staff must often 

manually customize transactions 

depending on the separate requirements 

of multiple health plans, insurance 

companies, clearinghouses, and TPAs 

with which the physician practice 

contracts. Because of the manual nature 

of BIR tasks, the majority of BIR costs 

are associated with staffing costs. 

Hospitals, physician offices and other 

health care providers employ more 

billing and posting staff than any other 

industry, according to the U.S. Bureau 

of Labor Statistics.34

These costs include not just the labor 

costs of employing staff, but also the 

opportunity cost of providers whose 

time would otherwise be spent caring 

for patients. A 2009 study found that the 

average physician spent three hours a 

week interacting with health plans— 

nearly 3 weeks a year—while 

physicians’ nursing and clerical staff 

spent much more time.35 Even beyond 

the financial costs of manual BIR tasks, 

interruptions in the work of physician 

practices to deal with BIR tasks may 

interfere with patient care. 

Twenty-eight percent of 

administrative staff time on BIR tasks in 

a physician practice is spent simply 

receiving and posting payments, followup, and payment reconciliation in 

accounts receivable.36 The operating 

rules adopted in this IFC are designed 

specifically to streamline the receipt of 

and the posting of payments, follow-up, 

and payment reconciliation in accounts 

receivable in the provider office. 

b. The Benefits of ERA and EFT 

As described in the preamble, three 

standards have been adopted for the 

health care electronic funds transfers 

(EFT) and remittance advice transaction. 

In August 2000, the Secretary adopted 

the ASC X12 835 TR3 in the Transaction 

and Code Sets final rule as the standard 

for what was then the health care 

payment and remittance advice 

transaction. The Modifications final rule 

adopted a new version of the ASC X12 

835 TR3. In January 2012, the Secretary 

adopted two standards for the health 

care EFT transmission in the Health 

Care EFT Standards IFC: The CCD + 

Addenda for the Stage One payment 

initiation and the TRN Segment from 

the ASC X12 835 TR3 as the standard 

data elements that are inputted into the 

Addenda of the CCD. In the Health Care 

EFT Standards IFC, the Secretary 

maintained the ASC X12 835 TR3 as the 

standard for the ERA transmission. 

There is some evidence that adoption 

of a standard for the ERA in August 

2000 returned benefits for the health 

care industry. The Medical Group 

Management Association (MGMA) 

suggests that, for many physician 

practices, when the EFT and ERA are 

sent instead of paper checks and paper 

remittance advice, payment posting 

time has gone from six to seven hours 

per day to 3 to 4 hours.37

As an anecdote, a large health system, 

with 20 hospitals, 400 clinical locations, 

and a 1.6 million member health plan, 

found that the adoption of the X12 835 

standard required its staff to spend less 

time programming individual file 

formats, significantly reduced staffing 

expenses incurred in applying payments 

to billing systems, and provided a better 

understanding of the root causes of 

denied payments. For this health 

system, over 85 percent of payment data 

was applied electronically to the health 

system’s patient accounts as of early 

2012.38

Similarly, the Veterans Health 

Administration (VHA) conducted a 

study of cost avoidance after 

implementing an ‘‘E-payment system’’ 

in 2003 with the 1,675 health care 

‘‘payers’’ from which it collect health 

care claim payments. The new Epayment system implemented a number 

of changes to how payers paid VHA 

claims, including: (1) Enabling the VHA 

to accept ERA (X12 835 TR3) and health 

care EFT, and urging health plans to 

transmit remittance advice and payment 

electronically; (2) routing the payment 

to a single lockbox bank; and (3) routing 

the health care EFT and ERA together 

for accounts receivable posting.39

In cases where health plans 

transmitted both the health care EFT 

and the ERA electronically, the VHA 

found two substantial consequences 

resulted from the new system. There 

was a: (1) 71 percent reduction in the 

time between when a claim was 

submitted and when the payment was 

received by the VHA, from 49 days 

down to 14 days; and (2) 64 percent 

time savings for accounts receivable 

management and related tasks by 2010. 

The first result is especially important 

when applied to small physician 

practices for which cash-on-hand is 

crucial for continuity of operations. The 

second consequence resulted in $9.3 

million in annual cost avoidance for the 

VHA. In a clear example of how cost 

avoidance can be of benefit, the 64 

percent time saving resulted in the VHA 

being able to handle 2.5 times the 

number of claims that were processed 

before the E-payment system was 

implemented in 2003 without adding 

additional staff. 

However, in both examples, simply 

developing the capability to transmit or 

receive EDI in the standard format was 

not enough to realize the efficiencies of 

EFT and ERA. Both entities needed to 

create new processes, assure there were 

specific data elements in the 

transactions, coordinate with trading 

partners, and apply best practices to 

transmitting and receiving the 

transactions. 

2. Current and Projected EFT and ERA 

Usage 

For this impact analysis, we make a 

base assumption that the usage of EFT 

and ERA will increase over the next 10 

years for a number of reasons. We base 

this projection on many of the same 

reasons we gave for projecting an 

increased usage of EFT in the RIA of the 

Health Care EFT Standards IFC. 

First, the number of total health care 

claim payments are expected to increase 


tkelley on DSK3SPTVN1PROD with RULES2
48024 Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Rules and Regulations 

40 ‘‘The 2011 Medicare Trustees Report: The Baby 

Boomer Tsunami,’’ presentation by the American 

Enterprise Institute for public Policy Research, May 

2011: http://www.aei.org/event/100407. 

41http://www.whitehouse.gov/healthreform/ 

relief-for-americans-and-businesses. 

42http://www.whitehouse.gov/healthreform/ 

timeline. 

43 ‘‘The 2010 Federal Reserve Payments Study: 

Noncash Payment Trends in the United States: 

2006–2009,’’ Research Sponsored by the Federal 

Reserve System, April 2011, http:// 

www.frbservices.org/files/communications/pdf/ 

press/2010_payments_study.pdf. 

44Sucharita Mulpuru, P. Hult, ‘‘U.S. Online 

Retail Forecast, 2009 to 2014: Online Retail Hangs 

Tough for 11% Growth in a Challenging Economy,’’ 

March, 2010, Forrester Research, http:// 

www.forrester.com/rb/Research/ 

us_online_retail_forecast,_2009_to_2014/q/id/ 

56551/t/2. 

45Shy, Oz, ‘‘Person-to-Person Electronic Funds 

Transfers: Recent Developments and Policy Issues,’’ 

Public Policy Discussion Paper No. 10–1, Federal 

Reserve Bank of Boston, http://www.bostonfed.org/ 

economic/ppdp/2010/ppdp1001.pdf. 

46More information on the MREP: https:// 

www.cms.gov/Research-Statistics-Data-andSystems/CMS-Information-Technology/ 

AccesstoDataApplication/ 

MedicareRemitEasyPrint.html. 

47National Health Expenditure Projections 2009– 

2019 (CMS), http://www.cms.gov/ 

NationalHealthExpendData/ 

25_NHE_Fact_Sheet.asp. 

48CMS Electronic Data Interchange (EDI) 

Performance Statistics (http://www.cms.gov/ 

EDIPerformanceStatistics/) and CMS CROWD data. 

49There are 6 percent more remittance advice 

sent than payments (some remittance advice adjusts 

to no payment). CMS Electronic Data Interchange 

(EDI) Performance Statistics (http://www.cms.gov/ 

EDIPerformanceStatistics/) and CMS CROWD data. 

50Financial Management Service, U.S. 

Department of Treasury, Payment Volume Charts 

Treasury-Disbursed Agencies, (www.fms.treas.gov/ 

eft/reports.html). 

‘‘Comments from VHA Health Care as Health Care 

Provider,’’ testimony by Barbara Mayerick for 

NCVHS December 3, 2010 hearing. 

‘‘FY10 Geographic Distribution of VA 

Expenditures (GDX),’’ Veterans Health 

Administration Chief Business Office. 

51The National Progress Report on Healthcare 

Efficiency, 2010, Produced by the U.S. Healthcare 

Efficiency Index. 

52 ‘‘2010 AFP Electronic Payments: Report of 

Survey Results,’’ Association for Financial 

Professionals, underwritten by J.P. Morgan, 

November, 2011. 

considerably due to the anticipated 

increase in the number of claims, and 

usage of EFT is expected to rise with it. 

Health care claims are expected to 

increase due to an aging population that 

will require an increasing number of 

health care services. For instance, aging 

baby boomers will double Medicare’s 

enrollment between 2011 and 2031.40

Moreover, the Affordable Care Act is 

expected to increase the number of 

insured adults by 32 million in 2014,41

though this anticipated rise in the 

number of health care claims may be 

countered somewhat by the Affordable 

Care Act’s initiatives to encourage the 

bundling of payments.42 Not only will 

more health care claims mean more 

payments, but the expected increase in 

claims will drive health care providers 

to seek more automated BIR processes 

in order to handle them all. 

Second, it is anticipated that the use 

of electronic payments is expected to 

become more widespread and 

acceptable for U.S. businesses and 

society at large. ACH payments 

increased 9.4 percent every year 

between 2006 and 2009.43 Business-tobusiness transactions have increasingly 

moved to EFT. E-commerce is expected 

to have a compound average growth rate 

of 11 percent each year from 2009 to 

2014.44 Growth of ACH payments is 

expected in sectors of the economy that 

have remained largely untapped by 

electronic payments; for instance, 

business-to-consumer transactions and 

person-to-person EFT transactions.45

Third, statutory and regulatory 

initiatives at the State and Federal levels 

will drive or attract health care entities 

to increased usage of EFT and ERA. On 

the Federal level, regulatory initiatives 

include EFT requirements for Federal 

payments issued by the Department of 

the Treasury, and implementation of 

provisions in the Affordable Care Act, 

including the required use of EFT for 

health care claim payments for 

Medicare mandated in section 1104(d) 

of the Affordable Care Act, the health 

care EFT standards adopted in the 

Health Care EFT Standards IFC, and the 

EFT & ERA Operating Rule Set adopted 

herein. 

Other nonregulatory initiatives 

promote adoption of the EFT and ERA 

over paper and manual-based 

transactions as well. For instance, 

Medicare offers a free application to 

providers, Medicare Remit Easy Print 

(MREP), that allows providers to view 

and print remittance advice and special 

reports from the ERA.46

In order to calculate our assumed 

increase in ERA and EFT, we start with 

an estimate of the current usage of EFT 

and ERA to establish a baseline. 

a. ERA Usage: 2013 Baseline 

For the RIA of the April 17, 2012 

proposed rule (77 FR 22950), 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 the International 

Classification of Diseases, 10th Edition 

(ICD–10–CM and ICD–10–PCS) Medical 

Code Sets,’’ (hereinafter referred to as 

the HPID/NPI/ICD–10 Delay Proposed 

Rule), we calculated the baseline usage 

of ERA in 2013. In that proposed rule, 

we used the baseline and projected an 

increase in the use of ERA across the 

industry from 2014 to 2022 in order to 

arrive at a savings for health plans and 

providers attributable to the 

implementation of a standard health 

plan identifier (HPID). We apply the 

same calculation here to arrive at a 

baseline ERA usage in 2013 and 

projected increase in use. 

In the HPID/NPI/ICD–10 Delay 

Proposed Rule and in this IFC, we 

calculate the 2013 estimates of ERA 

usage (illustrated in Table 6) based on 

a number of sources and calculations: 

• We use national health 

expenditures 47 and Medicare data to 

arrive at the average dollar amount of a 

single batch payment for health care 

claims, projected from 2013 through 

2023.48

• We used the ratio of remittance 

advice to single batch payment 

according to Medicare data and applied 

that to industry payments and 

remittance advice at large.49

• The percentage estimate of 

electronic remittance advice as a 

proportion of total remittance advice 

(electronic and paper) industry wide 

was calculated using a weighted average 

of Medicare data (electronic remittance 

advice as a percentage of total 

remittance advice), VA data,50 and 

industry studies 51 on ERA usage. 

b. EFT Usage: 2013 Baseline 

We calculate the baseline 2013 

estimates of EFT usage with the same 

calculations we used in the Health Care 

EFT Standards IFC. We summarize the 

assumptions in calculating 2013 usage 

of EFT by industry and government 

payers as follows: 

• We considered numerous health 

care and other industry studies, but all 

report that EFT is generally used for less 

than 40 percent of all health care claim 

payments to providers. According to the 

‘‘2010 AFP Electronic Payments: Report 

of Survey Results,’’ produced by the 

Association for Financial Professionals 

and underwritten by J.P. Morgan,52 the 

typical U.S. business makes 43 percent 

of its business-to-business payments by 

EFT. There was general agreement 

among industry representatives who 

testified at the December 2010 NCVHS 

hearing that EFT usage in the health 

care industry was considerably less than 

other industries (that is, less than 43 

percent). Based on data supplied by 

Emdeon, a national health care 

clearinghouse, the National Progress 

Report on Healthcare Efficiency, 2010 

(sponsored by Emdeon) reports that 


tkelley on DSK3SPTVN1PROD with RULES2
Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Rules and Regulations 48025 

53The National Progress Report on Healthcare 

Efficiency, 2010, Produced by the U.S. Healthcare 

Efficiency Index. 

54http://www.ncvhs.hhs.gov. 

55 ‘‘Medicare Contractor Transaction Report, MAC 

Part A Electronic Funds Transfer (EFT) Data by 

Year (2007–2011).’’ 56March 7, 2012 Letter to Marilyn Taverner for 

Public Comment from American Hospital 

Association, ‘‘RE: CMS Administrative 

Simplification: Adoption of Standards for Health 

Care Electronic Funds Transfers (EFTs) and 

Remittance Advice; File Code CMS–0024–IFC.’’ 

only 10 percent of all health care claim 

payments are conducted 

electronically,53 though other anecdotal 

evidence suggests that estimate may be 

low. PNC Bank representatives testified 

at the December 3, 2010 NCVHS hearing 

that 30 percent of health care claim 

payments it initiated on behalf of health 

industry clients in September 2010 were 

EFT payments.54

Based on this data and research, we 

estimate that approximately 10 to 20 

percent of commercial health plan 

payments are made via EFT. This range 

reflects our uncertainty. For simplicity 

sake, we will use the average, 15 

percent, as the EFT usage rate for 

commercial health plans. 

• Seventy percent of Medicare 

payments to health care providers are 

made via EFT, and Medicare EFT 

payments to health care providers 

account for 20 percent of all industry 

health care claim payments.55

• Knowing the percentage of 

payments made by EFT for Medicare, 

we calculated a weighted average of 

usage by the entire health care industry 

as making up approximately 32 percent 

of all health care claim payments in 

2010. 

The baseline estimates on EFT and 

ERA usage are not precise, and we 

welcome comments on our assumptions 

and calculations. 

We have noted previously in this IFC 

the reasons why we predict that 

electronic transactions, overall, will 

increase. These reasons include a 

substantial increase in the number of 

claims, a broader acceptance of the use 

of electronic transactions by U.S. 

businesses and society at large, and 

State and Federal mandates and 

initiatives requiring or promoting 

electronic transactions of health 

information. Due to these reasons, we 

foresee a 20 percent increase in ERA 

usage year over year from 2013 through 

2018, and a 12 percent increase year 

over year from 2019 through 2023. 

Again, despite the year over year 

increases, the number of total 

remittance advice transactions will 

increase substantially over that same 

period, so the percentage of ERA as a 

proportion of all remittance advice 

increases at a slower rate, averaging less 

than 5 percentage points a year over 11 

years. 

Based on the reasons given 

previously, we assume that EFT usage 

will increase by 52 percentage points, as 

a percentage of total payments, across 

the whole industry, from 33 percent in 

2013 to 84 percent in 2023 (Table 6). 

Table 6 illustrates the predicted 

increase in usage of EFT and ERA by 

health plan category, driven by the 

increased number of health care claims, 

business acceptance, and regulatory 

initiatives. We believe these estimates to 

be conservative: The increase in patients 

and patient visits in the next decade 

alone may drive a greater number of 

health care entities to adopt EDI. 

However, we recognize the uncertainties 

inherent in this projection, and we are 

specifically soliciting comments on 

these assumptions. 

TABLE 6—EFT AND ERA USAGE FOR MEDICARE, MEDICAID AND OTHER GOVERNMENT HEALTH PLANS, AND COMMERCIAL

HEALTH PLANS BETWEEN 2013 AND 2023 

Payment source 

EFT Usage as a 

percentage of 

payments per payment source in 

2013 

ERA Usage as a 

percentage of all 

remittance advice 

per payment 

source in 2013 

EFT Usage as a 

percentage of 

payments per payment source in 

2023 

ERA Usage as a 

percentage of all 

remittance advice 

per payment 

source in 2023 

Medicare .................................................................................. 76% 65% 98% 90% 

Medicaid, CHIP, VHA, and Other Federal, State, and Local 

Governmental Payers .......................................................... 18 37 79 80 

Commercial Health Plans ........................................................ 15 27 79 75 

Entire Industry .................................................................. 33 * 35 * 84 * 82 * 

* Weighted average, based on proportion of payments per category. 

c. Overall Assumption for Industry 

Savings in RIA: A Projected Increase in 

EFT and ERA Attributable to the EFT & 

ERA Operating Rule Set 

We have assumed that, in addition to 

the causes listed previously, some of the 

anticipated increase in EFT and ERA 

will be attributable to the 

implementation of the EFT & ERA 

Operating Rule Set adopted herein 

because these operating rules will make 

health care claim payments via EFT and 

the transmission of ERA more cost 

effective, thus incentivizing increased 

use of EFT and ERA. 

We have applied the same basic 

assumption—that improvements to the 

standards and transactions will 

incentivize more providers and health 

plans to use EDI—in the RIA of other 

Administrative Simplification 

regulations. For instance, the 

Modifications Proposed Rule, the 

Eligibility and Claim Status Operating 

Rules IFC, the HPID/NPI/ICD–10 Delay 

Proposed Rule, and the Health Care EFT 

Standards IFC all suggested that, with 

improved standards and transactions, 

more providers and health plans will 

move from manual and paper-based 

transactions to EDI. 

Anecdotally, representatives of the 

health care industry agree with this 

assumption. For instance, during public 

comment for the Health Care EFT 

Standards IFC, a large provider 

association suggested that the adopted 

standard ‘‘should increase the number 

of providers willing to take EFT as the 

preferred method of receiving 

payments.’’ 56

The RIA in this interim final rule with 

comment period illustrates that savings 

to physician practices, hospitals and 

commercial and government health 

plans will be derived through two 

avenues: (1) Time/staff savings realized 

by the adoption of operating rules that 

streamline provider payment processes; 

and (2) material savings (paper, 

printing, postage) derived from an 

overall increased use in EFT and ERA 

over paper and manual remittance 

advice. The time/staff savings 

incentivizes the increase usage in EFT 


tkelley on DSK3SPTVN1PROD with RULES2
48026 Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Rules and Regulations 

57 ‘‘Minnesota Uniform Companion Guide for the 

Implementation of the Health Care Claim Payment 

and Remittance Advice Electronic Transaction 

(ANSI ASC X12 835),’’ Minnesota Department of 

Health, Division of Health Policy, Center for Health 

Care Purchasing Improvement, Prepared in 

Consultation with Minnesota Administrative 

Uniformity Committee, October, 2009, Version 4.0. 

58 ‘‘Committee on Operating Rules for Information 

Exchange (CORE) ACA Operating Rules Status for 

AMA Federation Staff: EFT and ERA,’’ presentation 

April, 2011 (http://www.caqh.org/Audiocast/AMA/ 

April2011/ERA-1slide.pdf). 

and ERA by industry and thus results in 

the material savings. 

B. Alternatives Considered 

1. Do Not Adopt the EFT & ERA 

Operating Rule Set at This Time 

We considered delaying the adoption 

of the EFT & ERA Operating Rule Set. 

There are a number of advantages to 

delaying the EFT & ERA Operating Rule 

Set, including the following: 

• A delay would give the industry 

more time to develop more 

comprehensive EFT and ERA operating 

rules. The EFT & ERA Operating Rule 

Set adopted herein were developed and 

vetted over a 6-month period in 2011. 

Given a longer period to develop 

operating rules, we might expect more 

comprehensive rules. A longer period to 

develop operating rules might also 

allow time for a more comprehensive 

analysis by industry of the costs and 

benefits of specific operating rules. 

• A delay would give the industry 

more time to implement the EFT & ERA 

Operating Rule Set. Over the next few 

years, the health care industry as a 

whole is working to comply with a 

number of different Federal and State 

laws and regulations. Delaying 

implementation of operating rules 

would allow more time for the health 

care industry to prepare for the 

compliance dates of these Federal and 

State laws and regulations. 

However, a delay in adopting 

operating rules would not be an 

appropriate approach for a number of 

reasons: 

• The adoption and compliance dates 

for the health care EFT and remittance 

advice transaction operating rules is 

mandated by the Affordable Care Act. 

• By implementing these operating 

rules, we believe the health care 

industry will make large strides toward 

automating reassociation, yielding a 

fairly immediate return on investment. 

• The EFT & ERA Operating Rule Set 

is not dependent on or directly 

impacted by other Federal regulations or 

their adoption and compliance dates. 

• The expected positive return on 

investment represents more benefit than 

burden to the industry. 

2. Adopt a Different Set of EFT and ERA 

Operating Rules 

We considered adopting a different 

set of EFT and ERA operating rules. 

Other organizations have worked on 

some of the problem areas of the health 

care EFT and remittance advice 

transaction, although they are not 

labeled as operating rules. For instance, 

the state of Minnesota has developed 

and implemented the ‘‘Minnesota 

Uniform Companion Guide for the 

Implementation of the Health Care 

Claim Payment and Remittance 

Advice.’’ 57 The Minnesota Uniform 

Companion Guide includes 

requirements that are analogous in 

scope to operating rules; for instance, it 

includes data content requirements that 

further clarify the implementation 

specifications in the X12 835 TR3 and 

a crosswalk of CARCs, CAGCs, and 

RARCs that establishes limits to the 

combinations of those codes that can be 

used. 

Nevertheless, we have adopted the 

operating rules as developed by CAQH 

CORE for a number of reasons: 

• The NCVHS recommended CAQH 

CORE as the authoring entity of the EFT 

and ERA operating rules and the Draft 

EFT & ERA Operating Rule Set that 

CORE developed for adoption by the 

Secretary. The NCVHS based both of 

these recommendations on requirements 

established in section 1104 (b)(2)(C) of 

the Affordable Care Act that they 

believed the authoring entity CAQH 

CORE met, including— 

(A) The entity focuses its mission on 

administrative simplification. 

(B) The entity demonstrates a multistakeholder and consensus-based process for 

development of operating rules * * *; 

(C) The entity has a public set of guiding 

principles that ensure the operating rules and 

process are open and transparent, and 

support nondiscrimination and conflict of 

interest policies that demonstrate a 

commitment to open, fair, and 

nondiscriminatory practices. 

(D) The entity builds on the transaction 

standards issued under Health Insurance 

Portability and Accountability Act of 1996. 

(E) The entity allows for public review and 

updates of the operating rules. 

• The CAQH CORE had robust 

participation by health care entities in 

the development of its operating rules in 

terms of types of health care entities, 

geographic location of the entities, and 

numbers of entities represented. 

• The CAQH CORE considered the 

work done by many organizations on 

the health care electronic funds transfer 

(EFT) and remittance advice transaction 

that fit the scope of operating rules, 

including work by WEDI, ASC X12, and 

Minnesota.58 In some cases, the 

operating rules reflect some of this 

work. 

3. Adopt Certain EFT & ERA Operating 

Rules of Those Recommended by 

NCVHS 

While there was some consideration 

given to adopting some but not all of the 

EFT & ERA Operating Rule Set 

developed by CAQH CORE, this idea 

was abandoned (with the exception of 

the decision not to adopt operating rules 

related to acknowledgements). First, as 

reflected in our RIA, all of the rules in 

the EFT & ERA Operating Rule Set 

result in net savings. Second, as noted 

in the preamble, the EFT & ERA 

Operating Rule Set was developed with 

representation from over 80 health care 

entities. These representatives 

developed the operating rules with the 

understanding that the rules would 

likely become required law on January 

1, 2014. That is, as industry developed 

these rules, their decision making 

process was guided by what they 

believed was most likely to be 

ultimately implemented by the industry. 

Many votes, both formal and straw 

votes, were taken at every step in the 

development of the rules in order to 

gauge industry’s acceptance of the 

operating rules as they were written. 

Given the net savings and the prudence 

of the entities represented, we think it 

is appropriate to adopt the EFT & ERA 

Operating Rule Set nearly in its entirety. 

C. Impacted Entities 

All HIPAA covered entities may be 

affected by the EFT & ERA Operating 

Rules adopted in this IFC. 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 7 outlines the number of 

entities that may be impacted by the 

EFT & ERA Operating Rules, along with 

the sources for that data: 


tkelley on DSK3SPTVN1PROD with RULES2
Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Rules and Regulations 48027 

59 Kahn, James, ‘‘Excess Billing and InsuranceRelated Administrative Costs,’’ in The Healthcare 

Imperative; Lowering Costs and Improving 

Outcomes: Workshop Series Summary, edited by 

Yong, P.L., Saunders, R.S., & Olsen, L.A., The 

National Academies Press: 2010. 

TABLE 7—TYPE AND NUMBER OF AFFECTED ENTITIES

Type Number Source 

Health Care Providers—Offices of Physicians (includes 

offices of mental health specialists).

234,222 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 the 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 Care Facilities not associated with a hospital.66,464 The number of providers was obtained from the 2007 Economic Census 

Data—Health Care and Social Assistance (sector 62) using the number of establishments: http://factfinder.census.gov/servlet/ 

IBQTable?_bm=y&-ds_name=EC0762A1&-geo_id=01000US&- 

dataitem=* and http://factfinder.census.gov/servlet/IBQTable?_bm=y&- 

fds_name=EC0700A1&-_skip=100&-ds_name=EC0762SLLS1&- 

NAICS2007=62&-_lang=en. 

∼NAICS code 623: Nursing Homes & Residential Care Facilities n = 

76,395 × 87 percent (percent of nursing and residential care facilities 

not associated with a hospital) = 66,464. 

Other Health Care Providers—Offices of dentists, chiropractors, optometrists, mental health practitioners, 

speech and physical therapists, podiatrists, outpatient 

care centers, medical and diagnostic laboratories, 

home health care services, and other ambulatory health 

care services, resale of health care and social assistance merchandise (durable medical equipment).

384,192 The number of providers was obtained from the 2007 Economic Census 

Data—Health Care and Social Assistance (sector 62) using the number of establishments: http://factfinder.census.gov/servlet/ 

IBQTable?_bm=y&-ds_name=EC0762A1&-geo_id=01000US&- 

dataitem=* and http://factfinder.census.gov/servlet/IBQTable?_bm=y&- 

fds_name=EC0700A1&-_skip=100&-ds_name=EC0762SLLS1&- 

NAICS2007=62&-_lang=en. 

∼NAICS code 621: All ambulatory health care services (excluding offices 

of physicians) = 313,339 (547,561 total—234,222 offices of physicians). 

∼NAICS code 62–39600 (product code): Durable medical equipment = 

70,853. 

Health Care Providers—Independent Pharmacies ............ 18,000 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—Pharmacy chains ......................... 200 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 Plans—Commercial: Impacted commercial health 

plans considered in this RIA are health insurance 

issuers; that is, insurance companies, services, or organizations, including HMOs, that are required to be licensed to engage in the business of insurance in a 

State.

1,827 This number represents the most recent number as referenced in ‘‘Patient Protection and Affordable Care Act; Standards Related to Reinsurance, Risk Corridors, and Risk Adjustment, 2011 Federal Register 

(Vol. 76), July, 2011,’’ from www.healthcare.gov. 

Health Plans—Government ................................................ 60 Represents the 56 Medicaid programs, Medicare, the Veteran’s Administration (VHA), Indian Health Service (IHS), and TRICARE. 

Health Plans—All ................................................................ 1,887 Insurance issuers (n = 1,827) + Government agencies (N = 60). 

Clearinghouses and Vendors ............................................. 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- 

19296.pdf, based on a study by Gartner. 

Third Party Administrators .................................................. 750 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. 

D. Scope and Methodology of the 

Regulatory Impact Analysis 

This impact analysis analyzes the 

costs and benefits to be realized by 

implementation of the EFT & ERA 

Operating Rule Set. 

While we assume that adoption of the 

EFT & ERA Operating Rule Set may 

impact a broad range of health care 

providers, as illustrated in Table 7, we 

will only be examining the costs and 

benefits of the operating rules on two 

types of providers: hospitals and 

physician practices. There are two 

reasons for narrowing the scope of this 

analysis to only two categories of health 

care providers: (1) We have very little 

data on the adoption rate or usage of the 

health care electronic funds transfers 

(EFT) and remittance advice transaction 

among pharmacies, 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; 59 and (2) we assume that 

hospitals and physician practices, 

which receive the majority of health 

care claim payments, stand to gain the 

greatest benefits. 

We do not analyze the impact on 

nursing and residential care facilities, 


tkelley on DSK3SPTVN1PROD with RULES2
48028 Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Rules and Regulations 

dentists or suppliers of durable medical 

equipment. Also, based on the 

information we have regarding EFT and 

ERA usage for pharmacies, we do not 

anticipate that there will be a significant 

benefit, though there may be some costs. 

We welcome comments from industry 

and the public as to our assumptions. 

We include health care 

clearinghouses and vendors as impacted 

entities in Table 7. However, we did not 

calculate costs and benefits in our 

impact analysis for these entities 

because we assume that any associated 

costs and benefits will be passed on, 

and included in the costs and benefits 

we apply, to health plans. 

Although we acknowledge the impact 

to self-funded health plans and nonFederal government plans, we did not 

include the costs or benefits of such 

‘‘health plans’’ or other employers who 

might be defined as ‘‘health plans’’ in 

our analysis due to the lack of data with 

regard to these types of health plans. 

Only a very small percentage of 

employers with self-insured health 

plans conduct their own health care 

transactions. The majority employ 

TPAs. For our analysis, we use the 

number of TPAs (∼750) estimated in the 

August 22, 2011 proposed rule (76 FR 

52455) titled ‘‘Summary of Benefits and 

Coverage and the Uniform Glossary.’’ 

Self-funded and non-Federal 

government health plans meet the 

definition of covered entities under 

HIPAA, while TPAs, in general, do not. 

However, TPAs employed by selffunded and non-federal government 

health plans will ultimately be the party 

that implements the health care EFT 

standards. Ostensibly, these TPAs will 

pass on their costs and benefits to the 

self-funded and non-Federal 

government health plans that they serve. 

In order to reflect the costs to selfinsured plans, we will estimate the costs 

and benefits to TPAs in this analysis, 

and assume that TPAs will be impacted 

similarly to the 1,827 commercial health 

insurance issuers indicated in Table 7. 

In this RIA, we do not separate the 

analysis of the costs and benefits of 

TPAs and commercial health insurers, 

and, hereinafter, we refer to both 

collectively as ‘‘commercial health 

plans’’ for purposes of this analysis. 

We use the total number of health 

insurance issuers as the number of 

commercial health plans that will be 

affected by this IFC, and will use this 

number, plus the number of TPAs 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 of ‘‘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. 

We estimate that, because of the time 

savings that will be quantified in the 

analysis of benefits, patients will benefit 

downstream from a health care delivery 

system that spends less time on 

administrative tasks. However, we do 

not quantify the benefits to patients. 

Table 8 summarizes the sectors that 

will be analyzed in the impact analysis. 

TABLE 8—ENTITIES ANALYZED IN THE

REGULATORY IMPACT ANALYSIS

Entities Number 

of entities 

Physician Practices (includes offices of mental health specialists) ............................................ 234,222 

Hospitals ....................................... 5,764 

Commercial Health Plans (includes TPAs and health insurance issuers) ............................. 2,577 

Medicare ....................................... 1 

Other Government Health Plans 

(Medicaid, VHA, TRICARE, 

IHS) ........................................... 60 

In general, the high and low range 

approach used in this impact analysis 

illustrates both the range of probable 

outcomes, based on our analysis, as well 

as the uncertainty germane to a 

mandated application of a operating 

rules on an industry with highly 

complex business needs and processes. 

E. Costs 

We assume that the costs of 

implementing the EFT & ERA Operating 

Rule Set will fall mostly on health 

plans, and that providers as a whole 

will garner most of the benefits. 

The EFT & ERA Operating Rule Set 

requires health plans to implement best 

business practices that will make it less 

difficult for providers to: enroll in EFT 

and ERA, connect with health plans, 

and reassociate and reconcile the EFT 

and the ERA data. 

A provider is not required to accept 

EFT under this IFC for health care claim 

payments, nor is a provider required to 

accept ERA. If a provider decides or has 

decided to accept EFT or ERA, there are 

no requirements within the EFT & ERA 

Operating Rule Set that would result in 

substantial costs for providers. 

However, in our COI and in the 

summary tables of the RIA, we have 

calculated a provider cost associated 

with the initial enrollment in EFT and 

ERA because our projection of savings 

for the health care industry is 

dependent upon this enrollment. 

There is a requirement that a provider 

‘‘must proactively contact its financial 

institution to arrange for the delivery of 

the CORE-required Minimum CCD+ 

Data Elements necessary for successful 

reassociation of the EFT payment with 

the ERA remittance advice * * *’’ 

(Phase III CORE 370 EFT & ERA 

Reassociation (CCD+835) Rule, 

Requirement 4.1) We have not attributed 

a provider cost to this requirement, as 

it is dependent on the relationship a 

provider has with its bank, the bank’s 

policies and customer service, and other 

variable factors. The specific 

requirement can be met by simply 

sending an email, but the intent of the 

rule, we assume, is for a provider to 

work with its bank to assure that the 

data elements are delivered, and 

meeting that intent may take more time. 

We assume that most providers 

maintain routine communication with 

their banks, and that this discussion can 

take place within one of those routine 

communications. 

Aside from specific requirements of 

the EFT & ERA Operating Rule Set, the 

efficiencies that are possible through a 

provider’s use of EFT and ERA are 

dependent upon the sophistication of a 

provider’s practice management 

software (PMS) system used for the dayto-day management of a provider’s 

office. There is a wide range of 

sophistication among providers’ PMS 

systems and accounts receivable 

processes. An underlying assumption in 

this RIA is that even providers with the 

most elementary PMS systems will 

garner savings when these operating 

rules are implemented because the 

sophistication of PMS systems is not a 

factor in the cost and savings 

calculations. 

For example, these operating rules 

will produce time savings for providers 

in the EFT & ERA enrollment process, 

and the sophistication of a provider’s 

PMS system is not a factor in the 

enrollment process. These operating 

rules also include data content 

requirements that will make it easier for 

a provider to reassociate the EFT with 

the ERA data and reconcile accounts 

through the use of RARCs and CARCs. 

We have assumed that these savings 


tkelley on DSK3SPTVN1PROD with RULES2
Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Rules and Regulations 48029 

60Mean hourly wage for Technical Writers (27– 

3042), ‘‘May 2011 National Occupational 

Employment and Wage Estimates, United States,’’ 

Bureau of Labor Statistics, United States 

Department of Labor, http://www.bls.gov/oes/ 

current/oes_nat.htm#43-0000. 

61Mean hourly wage for General and Operations 

Managers (11–1021), ‘‘May 2011 National 

Occupational Employment and Wage Estimates, 

United States,’’ Bureau of Labor Statistics, United 

States Department of Labor, http://www.bls.gov/oes/ 

current/oes_nat.htm#43-0000. 

62 ‘‘Healthcare EFT Enrollment: Stakeholder 

Meeting; Pre-read material, March 25, 2011,’’ 

Research sponsored by CAQH, NACHA—The 

Electronic Payments Association, The 

Clearinghouse, pg 14. 

63Based on case studies from PerfectForms, 

www.perfectforms.com. 

will occur even if the reassociation and 

reconciliation processes remain manual 

processes because the operating rule 

requirements address data necessary for 

streamlining both automated and 

manual processes. Finally, these 

operating rules include connectivity 

requirements for health plans that will 

give providers a choice on how to 

connect to their health plan. The 

sophistication of the PMS system may 

be a factor in a provider’s decision on 

which network to choose; however, the 

connectivity requirements allow more 

flexibility with regard to choosing a 

network that works well with PMS 

system, not less. 

We believe the implementation of the 

EFT & ERA Operating Rule Set provides 

an opportunity for substantial savings 

beyond what is estimated in this RIA if 

a provider has a sophisticated PMS that 

is able to automate many of the payment 

and reconciliation processes. The 

amount of investment in PMS systems 

and the amount of time and resources 

spent on business processes is 

dependent upon the size and 

complexity of the provider and the 

provider’s priorities with regard to 

resources and budget. Because there are 

no substantive requirements for 

providers in this IFC, and because the 

cost savings for providers are not 

dependent on the level of sophistication 

of the provider PMS system, an analysis 

of such factors is not calculated in this 

RIA. 

We have divided the costs of 

implementation of the EFT & ERA 

Operating Rule Set into four areas. The 

majority of these costs are one-time 

costs. The four areas of costs parallel the 

four areas of administrative tasks in 

which the cost savings will be found 

when the EFT & ERA Operating Rule Set 

is implemented. The four areas of costs 

are associated with: 

• Implementing the operating rules 

regarding provider enrollment in EFT 

and ERA. 

• Implementing connectivity 

requirements. 

• The data requirements for health 

plans for providers to successfully 

reassociate the EFT data with the ERA 

data. 

• The data requirements for health 

plans associated with posting payment 

adjustments and claim denials. 

We present each of the areas of costs 

by detailing the operating rules that 

apply to them and the assumptions we 

use for each cost. 

1. The Cost of Implementing the 

Operating Rules With Regard to 

Provider Enrollment in EFT and ERA 

Requirements 4.2 and 4.3 of both the 

Phase III CORE 380 EFT Enrollment 

Data Rule and the Phase III CORE 382 

ERA Enrollment Data Rule require 

health plans to change the forms they 

currently use for enrolling providers in 

EFT and ERA, as these rules require a 

maximum set of standard data elements, 

a controlled vocabulary, and a standard 

format and flow respectively. We 

assume that most, if not all, health plans 

will have to alter their current 

enrollment forms for EFT and ERA in 

order to comply with these 

requirements. 

We estimate that a technical writer, at 

an estimated hourly salary rate of 

approximately $32,60 would make these 

revisions. As noted in the Collection of 

Information section of this IFC, we 

assume that, for each of the two forms, 

it will take a technical writer 16 hours 

to reformat and alter the form according 

to the requirements in the Phase III 

CORE EFT 380 Enrollment Data Rule 

and Phase III CORE ERA 382 Enrollment 

Data Rule (2 forms * 16 hours = 32 

hours) resulting in a cost of 

approximately $1,024. This includes the 

time it takes to incorporate revisions 

that may result from the approval 

process. 

We assume that the two forms will 

have to get a number of levels of 

approval before they can be used, so we 

have added 4 hours of time priced at the 

hourly salary rate of approximately 

$55,61 the mean hourly wage of general 

and operations managers, for a total cost 

of $1,244. We multiply this cost to 

health plans by the number of health 

plans and third party administrators 

(2,577) for a total cost to the industry of 

approximately $3.2 million. 

We will include that cost in our 

summary of costs in Table 13. Please 

refer to the Collection of Information 

section for more details on our 

assumptions with regard to that 

calculation. 

Requirement 4.4 of both the Phase III 

CORE 380 EFT Enrollment Data Rule 

and the Phase III CORE 382 ERA 

Enrollment Data Rule requires health 

plans to offer electronic enrollment for 

EFT and ERA. (It does not require health 

plans to discontinue manual or paperbased methods of enrollment, but that 

electronic EFT enrollment be made 

available by a health plan if requested 

by a trading partner.) We have made a 

number of assumptions in order to 

calculate the cost of setting up an 

electronic enrollment form for both the 

EFT and ERA: 

• We assume that 60 to 80 percent of 

health plans do not currently have 

electronic enrollment for both EFT and 

ERA and will be required to offer it to 

providers. This assumption is based on 

an informal review of payers, including 

Medicare, a Medicaid health plan, four 

commercial health plans, and one 

vendor that found that only two of the 

seven offered electronic forms (or 30 

percent).62 As the survey has little 

statistical validity, the range of 60 to 80 

percent reflects the uncertainty in this 

estimate. 

• For all IT infrastructure estimates in 

this RIA, which includes software 

updates, we have based the costs on a 

wide range of projected ‘‘personmonths’’ required at each phase of the 

implementation. It is important to view 

these estimates as an attempt to furnish 

a realistic context rather than as precise 

budgetary predictions. In this estimate 

and in the other IT infrastructure 

estimates, we have tried to detail 

specific steps, periods of time, and 

personnel that we assume would be 

necessary for IT infrastructure 

alterations. We welcome comments that 

might speak to specific assumptions in 

our calculations. 

• We assume that creating on-line 

forms is a comparatively simple 

technological upgrade. Based on cost 

estimates for large institutions such as 

universities and financial institutions, 

the software cost for developing an 

online form that can interact with 

existing databases and systems is 

approximately $4,500 a year.63 This cost 

is for infrastructure, and not for the 

more complex task of actually 

integrating an online form with existing 

systems so that enrollment is truly 

automated. For the task of integrating an 

online form with existing systems, we 

estimate a cost of $10,000 to $50,000, 

reflecting a range of costs dependent on 

the complexity of a health plans’ 

systems. The $10,000 represents 2 

weeks full time work by two computer 


tkelley on DSK3SPTVN1PROD with RULES2
48030 Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Rules and Regulations 

64Mean hourly wages, ‘‘May 2011 National 

Occupational Employment and Wage Estimates, 

United States, ’’ Bureau of Labor Statistics, United States Department of Labor, http://www.bls.gov/oes/ 

current/oes_nat.htm#43-0000. 

programmers and one computer systems 

analyst. The $50,000 represents 2 

months full time work by two computer 

programmers, one computer system 

analyst, and one administrative services 

manager.64

However, we believe this range to be 

high, because an electronic enrollment 

will not be any more expensive to 

integrate into systems than the paper 

forms that are currently being used. We 

welcome comments on these estimates. 

• As the range of costs could 

encompass both large and small health 

plans, we have combined the 

government health plans, including 

Medicare, with the commercial health 

plans for the total number of health 

plans. The low and high totals 

illustrated in Table 9 reflect the cost for 

all health plans, government, and 

commercial. 

With these assumptions, the cost of 

creating on-line forms for EFT and ERA 

enrollment are calculated in Table 9. 

TABLE 9—THE COST OF CREATING ON-LINE ENROLLMENT FORMS FOR EFT AND ERA ENROLLMENT

Ongoing 

cost of 

on-line enrollment 

forms 

LOW 

one-time 

cost for 

business 

process 

changes 

HIGH 

one-time 

cost for 

business 

process 

changes 

LOW 

number of 

health plans 

without 

electronic 

forms (60%) 

HIGH 

number of 

health plans 

without 

electronic 

forms (80%) 

LOW 

total cost 

(in millions) 

HIGH 

total cost 

(in millions) 

2014 ......................................................... $4,500 $10,000 $50,000 1,582 2,110 $22.9 $115 

2015 ......................................................... 4,500 .................... .................... 1,582 2,110 7.1 9.5 

2016 ......................................................... 4,500 .................... .................... 1,582 2,110 7.1 9.5 

2017 ......................................................... 4,500 .................... .................... 1,582 2,110 7.1 9.5 

2018 ......................................................... 4,500 .................... .................... 1,582 2,110 7.1 9.5 

2019 ......................................................... 4,500 .................... .................... 1,582 2,110 7.1 9.5 

2020 ......................................................... 4,500 .................... .................... 1,582 2,110 7.1 9.5 

2021 ......................................................... 4,500 .................... .................... 1,582 2,110 7.1 9.5 

2022 ......................................................... 4,500 .................... .................... 1,582 2,110 7.1 9.5 

2023 ......................................................... 4,500 .................... .................... 1,582 2,110 7.1 9.5 

Total .................................................. .................... .................... .................... .................... .................... 87 200 

2. The Cost of Implementing 

Infrastructure Rule Requirements 

Requirement 4.1 of the Phase III CORE 

350 Health Care Claim Payment/Advice 

(835) Infrastructure Rule requires health 

plans to offer connectivity over the 

internet, with specific rules regarding 

usage patterns for batch transactions, 

the exchange of security identifiers, and 

communications-level errors and 

acknowledgements. There will be costs 

associated with developing this 

connectivity in order to have the ability 

to offer it to trading partners, though we 

assume that much of the development of 

this connectivity will have already 

occurred in order to comply with the 

Eligibility and Claim Status Operating 

Rules IFC. 

The Eligibility and Claim Status 

Operating Rules IFC adopted Phase I 

and Phase II Operating Rules (with the 

exception of operating rules from those 

phases that refer to acknowledgments or 

CORE certification). Requirement 4.1 of 

the Phase III CORE 350 Health Care 

Claim Payment/Advice (835) 

Infrastructure Rule requires health plans 

to offer the same infrastructure, with 

accompanying security, usage patterns, 

and errors and acknowledgments that 

are required under Phase I and Phase II 

CORE Operating Rules. 

Therefore, though there will be some 

costs associated with offering the same 

connectivity as is used for the eligibility 

for a health plan transaction and the 

claim status transaction, the costs will 

be minimal in comparison to the costs 

associated with developing this 

infrastructure from the ground up. 

We have no concrete costs associated 

with offering this connectivity for 

transmission of the ERA. Therefore, we 

have made the assumption that it will 

be 10 to 20 percent of the cost to 

establish the connectivity for Phase I 

and Phase II Operating Rules as 

estimated in the Eligibility and Claim 

Status Operating Rules IFC (Table 10, 

Columns IV and V). We adjusted the 

costs to account for the smaller number 

of health plans that we have estimated 

in this IFC in contrast to the number 

that was used in the Eligibility and 

Claim Status Operating Rules IFC (Table 

10, Column VI). We have calculated 

these costs in Table 10. The low cost is 

calculated by multiplying the low cost 

from the Eligibility and Claim Status 

Operating Rules IFC times the low 

adjustment, 10 percent (Table 10, 

Column IV), times the percent 

adjustment to account for a lower 

number of health plans than was used 

in the Eligibility and Claim Status 

Operating Rules IFC. The high cost is 

calculated using the same factors. We 

welcome comments on this assumption. 


tkelley on DSK3SPTVN1PROD with RULES2
Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Rules and Regulations 48031 

65Mean hourly wage for Technical Writers (27– 

3042), ‘‘May 2011 National Occupational 

Employment and Wage Estimates, United States,’’ 

Bureau of Labor Statistics, United States 

Department of Labor, http://www.bls.gov/oes/ 

current/oes_nat.htm#43-0000. 

66 ‘‘CAQH Committee on Operating Rules for 

Information Exchange (CORE), CORE Steering 

Committee, Draft Phase III EFT & ERA 

Reassociation (CCD+/835) Rule For Steering 

Committee Review—as of 10/10/11,’’ p. 19, 

referencing NACHA Operating Rules and 

Guidelines 2011. 

TABLE 10—COSTS TO HEALTH PLANS TO IMPLEMENT CONNECTIVITY REQUIRMENTS OF THE EFT AND ERA OPERATING

RULES IN MILLIONS

I II III IV V VI VII VIII 

Low 

costs from 

eligibility 

and claim 

status operating rules 

(implementation + 

transition 

costs) 

High 

cost from 

eligibility 

and claim 

status operating rules 

(implementation + 

transition 

costs) 

Low 

percent 

adjustment 

High 

percent 

adjustment 

Percent adjustment to 

account for 

smaller 

number of 

health plan 

than operating rules 

estimate 

Low cost High cost 

2014 ......................................................... $1742 $3484 10% 20% 58% $100.34 $401.36 

2015 ......................................................... 410 820 10 20 58 23.62 94.41 

2016 ......................................................... 410 820 10 20 58 23.62 94.41 

Total .................................................. .................... .................... .................... .................... .................... 147.57 590.17 

Requirement 4.4 requires health plans 

to conform to form and format standards 

for their companion guides for the ERA. 

In the Collection of Information section 

of this IFC, we have estimated the 

burden in hours for health plans to 

change their current companion guides 

so that they meet the flow and format 

requirements of the operating rules. We 

stated in that section that we used the 

same calculation that was used in the 

Eligibility and Claim Status Operating 

Rules IFC to arrive at an estimate of the 

time that was required. As we noted in 

that section, the total cost calculated in 

the Eligibility and Claim Status 

Operating Rules IFC applied to the 

transition to the template for two 

transactions, while we are only 

considering one here: The health care 

electronic funds transfers (EFT) and 

remittance advice transaction. 

Therefore, for purposes of this IFC, in 

order to calculate the cost to transition 

companion guides to the CORE Master 

Companion Guide Template, we have 

taken the total cost as estimated in the 

COI section of the Eligibility and Claim 

Status Operating Rules IFC and divided 

it in two, to result in approximately $1.5 

million. We have adjusted for a slight 

rise in the salary of a technical writer 

that has occurred since the calculations 

for the Eligibility and Claim Status 

Operating Rules IFC were made (2011 

mean hourly wage: $32).65

We will include that cost in our 

summary of costs in Table 13. Please 

refer to the Collection of Information 

section of this IFC for details on our 

assumptions with regard to that 

calculation. 

3. The Cost of Meeting Data 

Requirements for Successful 

Reassociation of the EFT Data With the 

ERA Data 

Although Phase III CORE 370 EFT & 

ERA Reassociation (CCD+/835) Rule, 

Requirement 4.1, does not explicitly 

require health plans to include five 

(plus one situational) defined data 

elements in the CCD+, it does define 

CORE-required Minimum Data Elements 

from the CCD+ that a provider must 

access. This rule builds on the standards 

adopted in the Health Care EFT 

Standards IFC which included the 

standard for the data content of the 

addenda record for the CCD+, the TRN 

Segment from the X12 835 TR3. The 

standard for the data content of the 

addenda record for the CCD+ includes 

three of the data elements required in 

this operating rule, plus the situational 

data element. 

The Health Care EFT Standards IFC 

(77 FR 1581) accounted for the costs of 

including these 3 data elements, plus 

the situational data element, noting that 

‘‘[t]he high range of costs takes into 

consideration the possible difficulties 

associated with coordinating the health 

plan’s payment or treasury systems so 

that the TRN Segment is duplicated in 

both the ERA and the health care EFT.’’ 

Requirement 4.1 of the Phase III CORE 

370 EFT & ERA Reassociation (CCD+/ 

835) Rule requires two data elements in 

addition to the three data elements 

required by the Health Care EFT 

Standards IFC that must be inputted in 

the CCD+. We assume the cost of 

inputting these two data elements is 

insignificant: These data elements 

include the ‘‘Effective Entry Date’’ and 

the ‘‘Amount’’ of the payment, both of 

which, we assume, are relatively easy to 

establish and input, regardless of the 

system. We have not included any costs 

associated with inputting these two data 

elements. 

Both Requirements 4.2 and 4.2.1 place 

time restrictions on health plans with 

regard to synchronizing EFT with the 

corresponding ERA and will likely 

require health plans to incur costs by 

making sure their systems and process 

can meet these requirements. 

Phase III CORE 370 EFT & ERA 

Reassociation (CCD+/835) Rule, 

Requirement 4.2, requires health plans 

to transmit the ERA corresponding to 

the CCD+ within 3 days before or after 

the CCD+ Effective Entry Date. The 

CCD+ Effective Entry Date is defined as 

‘‘the date the payer intents to provide 

good funds to the payee via EFT as 

specified in the ACH CCD+ Standard in 

Field #9 of the Company Batch Header 

Record 5.’’ 66

Phase III CORE 370 EFT & ERA 

Reassociation (CCD+/835) Rule, 

Requirement 4.2.1 applies to health care 

claim payments to retail pharmacy and 

allows a health plan to transmit the ERA 

any time prior to the CCD+ Effective 

Entry Date of the corresponding EFT, 

but no later than 3 days after the CCD+ 

Effective Entry Date. 

In order to meet the requirements of 

these rules, health plans will have to 

make alterations in their IT 

infrastructures and business processes 

in order to coordinate the treasury 

system—that often is the source of the 

EFT transmission—and the claims 

processing system—that often is the 

source of the ERA transmission. In 

addition, health plans may have to 

coordinate with their trading partners 


tkelley on DSK3SPTVN1PROD with RULES2
48032 Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Rules and Regulations 

67 ‘‘GAO Cost Estimating and Assessment Guide: 

Best Practices for Developing and Managing Capital 

Program Costs,’’ March 2009, United States 

Government Accountability Office, Applied 

Research and Methods (GAO–09–3SP), p. 138. 

68Parametric Cost Estimating Handbook, 

‘‘Chapter 5—Software Parametric Cost Estimating,’’ 

Joint Government/Industry Initiative, Fall 1995, 

Department of Defense, p. 114. 

69Some of these elements are taken from ‘‘Table 

17: Common Software Risks That Affect Cost and 

Schedule,’’ GAO Cost Estimating and Assessment 

Guide: Best Practices for Developing and Managing 

Capital Program Costs,’’ March 2009, United States 

Government Accountability Office, Applied 

Research and Methods (GAO–09–3SP), p. 138. 

70 ‘‘GAO Cost Estimating and Assessment Guide: 

Best Practices for Developing and Managing Capital 

Program Costs,’’ March 2009, United States 

Government Accountability Office, Applied 

Research and Methods (GAO–09–3SP). 

71Mean hourly wages, ‘‘May 2011 National 

Occupational Employment and Wage Estimates, 

United States,’’ Bureau of Labor Statistics, United 

States Department of Labor, http://www.bls.gov/oes/ 

current/oes_nat.htm#43-0000. 

that process the EFT or ERA in order to 

meet this requirement. 

For purposes of this RIA, we are 

defining IT infrastructure as the 

equipment, systems, software, and 

services used in common across an 

organization, regardless of mission, 

program, or project. IT infrastructure 

also serves as the foundation on which 

mission, program, or project-specific 

systems and capabilities are built.67

However, we assume that the majority 

of costs will be in altering software. 

In terms of software alterations, this is 

a difficult estimate to make and we 

welcome comments from health plans 

as to our assumptions and estimates. As 

noted in a Department of Defense cost 

estimating handbook, ‘‘[o]ne of the first 

steps in any estimate is to understand 

and define the system to be estimated. 

Software, however, is intangible, 

invisible, and intractable * * *. 

Software grows and changes as it is 

written.’’ 68 This is especially true with 

regard to the legacy software and IT 

systems of health plans and TPAs that 

are altered according to a swiftly 

changing world of business needs and 

State and Federal regulations. 

Estimating an overall average cost to 

health plans and TPAs is further 

complicated because the systems for 

each entity will have a range of 

differences with regard to the 

complexity and reliability of their 

software, the analyst and programmer 

capabilities, the experience of the team 

that will apply the changes, schedule 

overlaps, number of locations, 

management and executive oversight 

and the use of tools and software 

engineering practices.69 Because of 

these variables, it would be difficult to 

apply a parametric or ‘‘bottoms up’’ 

analysis that could be applied to 

calculate an industry-wide estimate. 

The major cost associated with system 

changes is the staff time required to 

develop and carry out the business 

requirements. We assume that there will 

be no hardware costs to meeting the 

requirements of this rule. The software 

costs will be a one-time cost, with a few 

years of transitional costs. The costs 

associated with altering business 

processes—that is, the organizational 

processes that feed the input to the 

systems and process the output—will 

also be a one-time cost with a few years 

of transitional costs. 

For all IT infrastructure estimates in 

this RIA, we have based the costs on a 

wide range of projected ‘‘personmonths’’ required at each phase of the 

implementation. It is important to view 

these estimates as an attempt to furnish 

a realistic context rather than as precise 

budgetary predictions. In our estimates, 

we detailed specific steps, periods of 

time, and personnel that we assume 

would be necessary for IT infrastructure 

alterations. We welcome comments that 

might speak to specific assumptions in 

our calculations. 

In Table 11, we have broken down the 

major tasks required to implement any 

software implementation project, based 

on the Government Accountability 

Office’s ‘‘work breakdown structure’’ for 

software projects as referenced in the 

‘‘GAO Cost Estimating and Assessment 

Guide.’’ 70

For each task, we have assigned a 

group of employees, calculated their 

total annual salaries and monthly 

salaries based on Bureau of Labor 

statistics, 71 then estimated a low and 

high range of time that the team would 

spend on a particular task. The group of 

employees is to be understood to likely 

include more than just the specific 

employees listed; that is, the group of 

employees represents a cumulative 

effort that a health plan would expend 

on a task. For example, project 

management includes four employees— 

one Computer and Info Systems 

manager, one operations manager, one 

computer Systems analyst, and one 

computer programmer—that together 

spend 2 weeks (0.5 to 1 month) full time 

defining the project and assigning roles 

to employees and team. We expect that 

more than four employees will be 

involved at different levels in this task; 

however, the total anticipated time 

spent in the task is expected not to 

exceed four full time employees 

working at these organizational levels 

full time for 2 weeks. 

Although we expect that some health 

plans already transmit ERA and its 

associated EFT within 3 days of each 

other, we have no basis for that 

expectation. We have multiplied the 

cost per health plan, as calculated in 

Table 11, times the number of 

commercial health plans and TPAs in 

order to arrive at the range of total cost 

for all commercial health plans and 

TPAs: $474 million to $931 million. 

We assume that government health 

plans, including the VHA, Indian Health 

Plans, Medicaid, and Medicare, will 

have more difficulty altering systems. In 

many cases, government health plans 

will have to work across agencies—for 

example, with the Department of 

Treasury—to meet the requirements of 

the EFT & ERA Operating Rule Set 

while also ensuring that their own 

Federal requirements and business 

needs are met. In addition, agencies 

such as Medicare may have more 

complex implementation solutions 

because multiple systems will be 

affected. We have doubled the average 

cost to arrive at a total for all 

government health plans: $22 to $43 

million. 

We assume that the majority of health 

plan costs with regard to meeting data 

content requirements will occur in 

2013, with some transition costs 

occurring in 2014. For simplicity’s sake, 

we include the costs as occurring in 

2013. 

We welcome comments addressing 

our assumptions and calculations. 

BILLING CODE 4120–01–P 


tkelley on DSK3SPTVN1PROD with RULES2
Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Rules and Regulations 48033 

4. The Data Requirements Associated 

With Posting Payment Adjustments and 

Claim Denials 

Phase III CORE 360 Uniform Use of 

CARCs and RARs (835) Rule, 4.1.1 

defines four business scenarios with a 

maximum set of CARC/RARC/CAGC 

combinations that can be applied to 

convey details of the claim denial or 

payment adjustment to the provider. 

Health plans can only use the CARC/ 

RARC/CAGC combinations specified in 

the ‘‘CORE-required Code Combinations 

for Core-defined Business Scenarios’’ 

document except that new or adjusted 

combinations can be used if the code 

committees responsible for maintaining 

the codes create a new code or adjust an 

existing code. The four business 

scenarios are the minimum set of 

business scenarios; health plans may 

develop additional scenarios. 

In order to meet the requirements of 

this rule, health plans will likely have 

to make alterations to their business 

processes, and, in some instances, to 

their IT infrastructures. It is likely that 

health plans will have to remove certain 

coding combinations from their 

business processes. IT infrastructure 

changes are only required if the health 

plan needs to alter its payment system 

with regard to certain code 

combinations that will no longer be 

allowed. We assume that this is a 

minimum IT infrastructure cost, though 


tkelley on DSK3SPTVN1PROD with RULES2ER10AU12.001</GPH>
48034 Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Rules and Regulations 

it may be a more extensive cost to 

business processes, as reflected in Table 

12. 

We have adopted the same categories 

of IT infrastructure and business process 

changes that we applied for Table 11, 

with many of the same factors. A major 

distinction between the two estimates is 

the higher cost to business processes 

and training in order to meet the 

requirements of this rule compared to 

the IT infrastructure changes necessary 

under the Phase III CORE 370 EFT & 

ERA Reassociation (CCD+/835) Rule. 

We assume that the majority of health 

plan costs with regard to meeting data 

content requirements will occur in 

2013, with some transition costs 

occurring in 2014. For simplicity’s sake, 

we include the costs as occurring in 

2013. Again, it is important to view 

these estimates as an attempt to furnish 

a realistic context rather than as precise 

budgetary predictions. We welcome 

comments that might speak to specific 

assumptions in our calculations. 


tkelley on DSK3SPTVN1PROD with RULES2
Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Rules and Regulations 48035 

BILLING CODE 4120–01–C 

Table 13 summarizes all the estimated 

costs to commercial and government 

health plans and providers for 

implementing the EFT & ERA Operating 

Rule Set. It includes figures from Table 

5 with regard to providers and Tables 3, 

9, 10, 11, and 12 for costs to health 

plans. The costs are from 2013 through 

2023, but the majority of the costs are 

incurred from 2013 through 2016. 


tkelley on DSK3SPTVN1PROD with RULES2ER10AU12.002</GPH>
48036 Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Rules and Regulations 

TABLE 13—SUMMARY OF COSTS TO IMPLEMENT THE EFT & ERA OPERATING RULE SET FOR PROVIDERS, AND

COMMERCIAL AND GOVERNMENT HEALTH PLANS

Low 

(in millions) 

High 

(in millions) 

Health Plan EFT and ERA Electronic Enrollment Costs for Health Plans ........... $87 .......................................... $200 

Health Plan Infrastructure Costs (SAFE HARBOR/HTTPS) Costs for Health 

Plans.

$148 ........................................ $590 

EFT & ERA Reassociation rule 4.2: Transmit ERA within 3 days before/after 

EFT —Cost to Health Plans.

$474 for commercial plans .....

$22 for government plans .......

$931 for commercial plans 

$43 for government plans 

EFT & ERA Uniform Use of CARCs and RARs (835 Rule) Cost to Health 

Plans.

$467 for commercial plans .....

$22 for government plans .......

$892 for commercial plans 

$42 for government plans 

One-Time Cost to Health Plans of Reformatting Companion Guides ................. $1.5 ......................................... $1.5 

Cost to Health Plans of Reformatting EFT and ERA Enrollment Forms ............. $3.2 ......................................... $3.2

Cost to providers to enroll in EFT ........................................................................ $15.7 ....................................... $15.7 

TOTAL COSTS .............................................................................................. $1,239 ..................................... $2,719 

F. Savings 

The quantifiable savings estimated in 

this RIA are derived from two means: (1) 

time savings will be realized by the 

adoption of operating rules that 

streamline provider payment processes; 

and (2) material savings will be derived 

from an overall increased use in EFT 

and ERA over paper and manual 

remittance advice and payment 

processes and the decrease in printing, 

paper, and mailing costs as a 

consequence of this increase. The time 

savings of the former incentivizes the 

increase usage in EFT and ERA and thus 

results in material savings. 

We have based our time savings on 

the assumption that four areas of 

administrative tasks will be streamlined 

by the implementation of the EFT & 

ERA Operating Rule Set adopted in this 

IFC. The four areas of administrative 

tasks include the following: 

• Provider enrollment in EFT and 

ERA. 

• Setting up connectivity between 

trading partners. 

• Reassociation of the EFT data with 

the ERA data. 

• Posting payment adjustments and 

claim denials. 

We will consider the time and 

material savings for commercial and 

government health plans and then 

analyze the time and material savings 

for physician practices and hospitals. 

1. Commercial Health Plans, 

Government Health Plans, and Third 

Party Administrators: Time Savings 

From Implementation of the EFT & ERA 

Operating Rule Set 

We estimate that commercial and 

government health plans will achieve 

savings in two of the four areas of tasks 

that implementation of EFT & ERA 

Operating Rule Set adopted in this IFC 

will streamline: Setting up connectivity 

between trading partners and the 

processing of rejection and denial codes 

by provider practice management 

systems. 

However, these time savings cannot 

be easily quantified for health plans and 

TPAs. We will give narrative 

description below about how health 

plans and TPAs can achieve time 

savings through streamlining these 

tasks, but we are unable to quantify the 

savings on these two particular tasks. 

a. Setting Up Connectivity Between 

Trading Partners 

The requirements in the Phase III 

CORE 350 Health Care Claim Payment/ 

Advice (835) Infrastructure Rule will 

streamline the process for setting up 

new trading partner arrangements. The 

Phase III CORE 350 Health Care Claim 

Payment/Advice (835) Infrastructure 

Rule broadens the infrastructure 

requirements contained in the Phase I 

and Phase II CORE Operating Rules, 

adopted in July, 2011, to include the 

health care electronic funds transfers 

(EFT) and remittance advice transaction. 

The Phase III CORE 350 Health Care 

Claim Payment/Advice (835) 

Infrastructure Rule requires health plans 

to use the CORE V5010 Master 

Companion Guide Template for their 

companion guides that describe 

implementation of the X12 835 to their 

trading partners. Requiring health plans 

to use a common flow and format for 

their companion guides will enable 

providers to more efficiently and 

effectively configure their accounting 

systems to automatically process the 

ERA successfully. 

The Phase III CORE 350 Health Care 

Claim Payment/Advice (835) 

Infrastructure Rule also requires that 

health plans have the capability to use 

the public Internet for connectivity. 

Currently, multiple connectivity 

methods are in use for electronic 

transaction between trading partners. 

Health care providers and health plans 

support multiple connectivity methods 

to connect to different health plans, 

clearinghouses, provider organizations 

and others. Supporting multiple 

connectivity methods for different 

entities adds costs for health plans and 

providers. When new trading partners 

set up connectivity parameters, knowing 

that all entities are capable of using the 

public Internet for connectivity saves 

time. 

b. Posting Payment Adjustments and 

Claim Denials 

The requirements in the Phase III 

CORE 360 Uniform Use of CARCs and 

RARCs (835) Rule will reduce the time 

needed by health plans and TPAs spent 

interacting with providers who have 

questions concerning a payment denial 

and adjustment codes used on the ERA. 

We expect that phone calls to the health 

plan help desk by providers with 

questions about denied claims will 

decrease considerably. 

c. Commercial Health Plans, 

Government Health Plans, and TPAs: 

Material Cost Savings in Increase in Use 

of EFT and ERA 

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 

savings by virtue of reducing or 

eliminating the paper, postage, and 

equipment and the additional staff time 

required to conduct paper-based 

transactions. 


tkelley on DSK3SPTVN1PROD with RULES2
Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Rules and Regulations 48037 

72 ‘‘Trend in Remittance Advice (Abstract),’’ 

October 26, 2011, Center for Medicare and 

Medicaid Services. 

73 ‘‘Overhauling the U.S. Healthcare Payment 

System,’’ conducted by McKinsey & Company, 

published in The McKinsey Quarterly, June 2007. 

(http://www.mckinseyquarterly.com/Overhauling_

the_US_health_care_payment_system_2012). 

74 ‘‘E-Payment Cures for Healthcare,’’ 

presentation by J.W. Troutman (PNC Healthcare), D. 

Lisi (United Healthcare), B.C. Mayerick 

(Department of Veterans Affairs), April 26, 2010, 

https://admin.nacha.org/userfiles/File/Healthcare

%20Resource/Epayments%20Cures%20for%20

Healthcare.pdf. 

75www.fms.treas.gov/eft/index.html. 

Table 14 lists our estimates of the 

savings for health plans and TPAs per 

transaction when they move from a 

nonelectronic transaction for payment 

and remittance to usage of ERA and 

EFT. We have used the following 

assumptions to arrive at these per 

transaction savings for health plans: 

• The estimated savings associated 

with the ERA is taken from Medicare 

data. Medicare found that the average 

estimated cost avoidance in terms of 

printing and mailing charges was $4.24 

per ERA transaction when it was sent 

electronically as opposed to through the 

mail in paper form.72 We have assumed 

that an equivalent savings can be 

realized for commercial and other 

government health plans. 

• Table 14 reflects the same dollar 

savings per EFT transaction that we 

used in the Health Care EFT Standards 

IFC. There are a number of different 

analyses and case studies with regard to 

the possible savings realized when a 

health plan switches from paper checks 

to EFT for health care claim payments. 

We considered a 2007 analysis by 

McKinsey and Company that concluded 

that the ‘‘system wide cost’’ of using 

paper checks for health care claim 

payments was $8.00 per check.73 We 

did not use the McKinsey’s conclusion 

because we do not know what 

methodology was used and wanted to be 

specific about the difference between 

health care provider savings and health 

plan savings. A United Healthcare 

report found that it costs the company 

$30.7 million to pay 145 million health 

care claims with paper checks compared 

with the cost of $2.7 million to pay the 

same amount of claims using EFT.74 We 

did not use United Healthcare’s savings 

estimate since, apparently, it is based on 

single claims, and the metric we used is 

based on health care claim payments. A 

single health care claim payment from 

a health plan often includes payments 

for multiple claims submitted by a 

provider. 

For our calculations, we use data from 

the Financial Management Service 

(FMS), a bureau of the United States 

Department of the Treasury. We use 

FMS data because they are the lowest 

estimates, and because we consider 

them the most valid. According to FMS, 

it costs the U.S. government $0.11 to 

issue an EFT payment compared to 

$1.03 to issue a check payment—a 

difference of $0.92 per payment.75 This 

estimate includes the cost of material 

such as postage, envelopes, and checks, 

but does not include labor costs. FMS 

processes millions of transactions so it 

enjoys economies of scale that health 

plans may not experience, thus the 

$0.92 estimate is probably less than the 

amount plans will experience. Table 14 

summarizes the estimated increase and 

savings based on the Department of the 

Treasury’s numbers. 

TABLE 14—BASELINE COST SAVINGS

FOR EFT AND ERA FOR COMMERCIAL AND GOVERNMENTAL HEALTH

PLANS (DIFFERENCE BETWEEN NONELECTRONIC TRANSACTION AND

ELECTRONIC TRANSACTION) 

Transaction 

Savings per 

transaction 

for commercial and 

government 

health plans 

Health care electronic funds 

transfer (EFT) ........................ $0.92 

Electronic remittance advice 

(ERA) .................................... $4.24 

* Based on 2012 dollars. 

In Table 15, we illustrate a projected 

annual increase of 6 (LOW) to 8 (HIGH) 

percent in the use of the ERA 

attributable to the implementation of the 

EFT & ERA Operating Rule Set over the 

next 10 years. We estimate an annual 

increase of 6 (LOW) to 8 (HIGH) percent 

in the use of the EFT resulting from the 

adoption of the EFT & ERA Operating 

Rule Set. These are not annual increases 

in percentage points, but rather percent 

increases in the use of electronic 

transactions from the year before 

attributable to implementation of the 

EFT & ERA Operating Rules Set. The 

total annual increases in EFT and ERA 

implementation will be greater, 

attributable to implementation of the 

EFT & ERA Operating Rule Set, the 

health care EFT standards, and other 

factors as discussed in section VII.A.2. 

of this IFC and illustrated in Table 15. 

Based on these assumptions, we 

estimate that the savings to health plans 

because of increased usage in the EFT 

and ERA will be at least $50 million 

within 10 years of implementation of 

the EFT & ERA Operating Rule Set. This 

represents total quantified savings for 

all government and commercial health 

plans attributable to EFT & ERA 

Operating Rule Set. 

TABLE 15—ANNUAL COST SAVINGS FOR GOVERNMENT AND COMMERCIAL HEALTH PLANS FROM INCREASE IN EFT AND

ERA ATTRIBUTABLE TO THE EFT & ERA OPERATING RULE SET * 

I II III IV V 

Savings from Increase in ERA attributable to 

the EFT & ERA Operating Rule Set 

Savings from Increase in EFT attributable to 

the EFT & ERA Operating Rule Set 

Year LOW 

Annual 

Cost Savings Attributable to Operating 

Rules 

(in millions) 

HIGH 

Annual 

Cost Savings Attributable to Operating 

Rules 

(in millions) 

LOW 

Annual 

Cost Savings Attributable to Operating 

Rules 

(in millions) 

HIGH 

Annual 

Cost Savings Attributable to Operating 

Rules 

(in millions) 

2014 ................................................................. $26.6 $35.5 $1.82 $2.42 

2015 ................................................................. 31.9 42.6 2.36 3.15 


tkelley on DSK3SPTVN1PROD with RULES2
48038 Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Rules and Regulations 

76Lawrence 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. 

TABLE 15—ANNUAL COST SAVINGS FOR GOVERNMENT AND COMMERCIAL HEALTH PLANS FROM INCREASE IN EFT AND

ERA ATTRIBUTABLE TO THE EFT & ERA OPERATING RULE SET *—Continued 

Year 

2016 ................................................................. 38.3 51.1 3.07 4.09 

2017 ................................................................. 46.0 61.3 3.99 5.32 

2018 ................................................................. 55.2 73.6 5.18 6.91 

2019 ................................................................. 44.2 66.2 4.49 6.74 

2020 ................................................................. 49.5 74.2 5.39 8.09 

2021 ................................................................. 55.4 83.1 6.47 9.71 

2022 ................................................................. 62.0 93.1 7.76 11.65 

2023 ................................................................. 69.5 104.2 9.32 13.98 

Total .......................................................... 478.7 685.0 49.86 72.04 

* Based on 2012 dollars. 

2. Physician Practices and Hospitals: 

Time Savings in BIR Tasks 

According to a 2009 study published 

in Health Affairs,76 the cumulative time, 

on a per physician basis, that a 

physician and his or her staff and 

administration spend interacting with 

health plans is approximately 60 hours 

per week. (Staff includes office 

managers, receiving and posting clerks 

etc. Administration includes attorneys, 

accountants, physician practice 

directors, and administrators, etc.) Of 

that time, 88 percent is spent on 

authorizations and claims/billing issues. 

We believe the implementation of the 

EFT & ERA Operating Rule Set will 

eliminate some of the manual 

intervention that is required when 

providers re-associate the EFT with the 

ERA and reconcile the adjustments on 

the ERA in their systems. We estimate 

that 3 percent to 5 percent of the time 

spent on reconciling and following-up 

on payments and posting can be 

trimmed on account of implementation 

of the EFT & ERA Operating Rule Set. 

This is equivalent to 7 to 11 minutes a 

week for every health plan from which 

a provider receives EFT payments. 

We estimate that the 3 percent to 5 

percent of time on follow-up and 

reconciliation can be saved because the 

EFT & ERA Operating Rule Set will 

streamline the following four areas of 

administrative tasks: 

a. Provider Enrollment in EFT and ERA: 

Standardizing the Flow, Format, and 

Data Content of Enrollment Forms 

Both the Phase III CORE 380 EFT 

Enrollment Data Rule and the Phase III 

CORE 382 ERA Enrollment Data Rule 

require that health plans request 

specific data elements on the EFT 

enrollment form when first setting 

providers up for health care claim 

payments through EFT. This addresses 

a key barrier to the use of EFT by 

providers and further enables automated 

processing of healthcare payments. 

Currently, providers face significant 

challenges when enrolling to receive 

EFT payments from a health plan. These 

challenges include health plans 

requesting a diverse set of data 

elements, health plans using a variety of 

terms to refer to the same data elements 

(‘‘Routing number’’ vs. ‘‘Bank Routing 

number’’), differences in enrollment 

processes and approvals that each 

health plan requires, and, in some cases, 

an absence of critical data elements 

providers need health plans to know in 

order for health plans to correctly route 

the payments to providers. 

Due to these variations across health 

plans in the data elements requested, 

providers manually process enrollment 

forms for each plan to which they bill 

claims and from which they wish to 

receive an EFT payment. This results in 

unnecessary manual processing of 

multiple forms requesting a range of 

information. 

Both the Phase III EFT and ERA 

Enrollment Data Rules require that 

health plans offer an electronic way for 

providers to complete and submit ERA 

and EFT enrollment. Once the EFT & 

ERA Operating Rule Set is 

implemented, we assume that there will 

be time savings for providers when they 

first enroll with EFT or ERA, due to the 

fact that now the flow, format, and data 

requirements of different health plan 

enrollment forms will be similar and 

enrollment can be done electronically. 

The enrollment process for EFT, it has 

been noted, is considered burdensome 

for providers and has been characterized 

as an obstacle to providers making the 

switch from receiving paper checks to 

receiving EFT. 

However, we have not quantified the 

cost savings associated with a more 

standardized enrollment form in terms 

of the staff time saved. Instead, we will 

attribute some staff time saved in the 

reassociation process, previously 

defined, because the EFT & ERA 

Operating Rule Set will require data 

elements in the enrollment process that 

will make it easier for reassociation to 

occur. 

b. Reassociation of the EFT Data With 

the ERA Data in the Provider’s Practice 

Management System 

The main intent of the health care 

EFT standards, adopted in the Health 

Care EFT Standards IFC on January 10, 

2012 (77FR 1565), is to provide some 

assurance that providers could automate 

the reassociation of the ERA with the 

EFT that it describes. The Health Care 

EFT Standards IFC did this by requiring 

a specific NACHA format be used, the 

CCD+Addenda, and specific data 

content, the X12 TRN Segment, be 

placed in the addenda. The Health Care 

EFT Standards IFC did not require that 

the X12 TRN Segment in a particular 

EFT be the same X12 TRN Segment that 

is included in the associated ERA 

because ‘‘[w]e believe that the details of 

any such requirement are best addressed 

through operating rules for the health 

care EFT and remittance advice 

transaction.’’ 

The EFT & ERA Operating Rule Set 

includes a number of requirements that 

will facilitate reassociation, including 

the following: 

• Phase III, CORE 370 EFT & ERA 

Reassociation (CCD+/835) Rule, 


tkelley on DSK3SPTVN1PROD with RULES2
Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Rules and Regulations 48039 

77Sakowski, Julie Ann, James G. Kahn, Richard 

G. Kronick, Jefferey M. Newman and Harold S. Luft, 

‘‘Peering into The Black Box: Billing and Insurance 

Activities in a Medical Group,’’ Health Affairs, 28, 

No. 4 (2009): w544–w554. 

78Summary of ‘‘The Complexities of Physician 

Supply and Demand: Projections Through 2025, 

Center for Workforce Studies, AAMC,’’ 2008, by the 

Association of American Medical Colleges, and 

‘‘The Impact of Health Care Reform on the Future 

Supply and Demand for Physicians Updated 

Projections Through 2025,’’Association of American 

Medical Colleges. 

79Occupational Employment and Wages, May 

2011, 43–3021 Billing and Posting Clerks, Bureau 

of Labor Statistics, http://www.bls.gov/oes/current/ 

oes433021.htm. 

Requirement 4.1: Requires five (plus one 

situational) defined data elements in the 

CCD+Addenda. 

• Phase III, CORE 370 EFT & ERA 

Reassociation (CCD+/835) Rule, 

Requirement 4.2: Requires health plans 

to transmit the EFT within three days of 

the transmission of the ERA. 

• Phase III, CORE 370 EFT & ERA 

Reassociation (CCD+/835) Rule, 

Requirement 4.3: Outlines requirements 

for the resolving late or missing EFT and 

ERA transmissions. 

• Phase III, CORE 370 EFT & ERA 

Reassociation (CCD+/835) Rule, 

Requirement 4.1: Requires that 

providers proactively contact their 

financial institutions to arrange for the 

delivery of minimum data elements 

necessary for successful reassociation of 

the EFT with the ERA. 

• Phase III CORE 382 ERA Enrollment 

Data Rule and Phase III CORE 380 EFT 

Enrollment Data Rule, Requirement 4.2: 

Identifies a maximum set of standard 

data elements that health plans can 

request from providers for enrollment to 

receive ERA. 

• Phase III CORE 382 ERA Enrollment 

Data Rule and Phase III CORE 380 EFT 

Enrollment Data Rule, Requirement 4.2: 

Applies a ‘‘controlled vocabulary’’— 

predefined and authorized terms—for 

health plans to use when referring to the 

same data element. For instance, 

‘‘Provider Name’’ is to be used instead 

of ‘‘Provider’’ or ‘‘Name.’’ 

• Phase III CORE 382 ERA Enrollment 

Data Rule and Phase III CORE 380 EFT 

Enrollment Data Rule, Requirements 

4.3.1 and 4.3.2: Requires standard data 

elements to appear on paper enrollment 

forms in a standard format and flow, 

using Master Templates for paper-based 

and electronic enrollment, respectively. 

We assume that, given all the rules 

and how their implementation will 

facilitate reassociation, a physician 

practice or hospital can expect a 

decrease in the time spent on receiving 

and posting claim payments. For 

instance, in our calculation for 

physician practices, we assume that, for 

every health plan with which a provider 

enrolls to receive payment via EFT, 7 to 

11 minutes a week will be saved. 

The EFT & ERA Operating Rule Set, 

complementing the Health Care EFT 

Standards IFC, will allow for 

automation of the reassociation process. 

However, complete automation of 

reassociation rests with the provider 

and the capability of the provider’s 

practice management system, so the 

requirements in the EFT & ERA 

Operating Rule Set facilitate manual 

reassociation as well. 

c. Posting Payment Adjustments and 

Claim Denials 

Consistent and uniform rules enabling 

providers to reassociate the EFT with 

the ERA will help to decrease manual 

provider follow-up, faulty electronic 

secondary billing, inappropriate writeoffs of billable charges, incorrect billing 

of patients for co-pays and deductibles, 

and posting delays. This allows for less 

staff time spent on phone calls and Web 

sites, increased ability to conduct 

targeted follow-up with health plans 

and/or patients, and more accurate and 

efficient payment of claims. 

We assume that implementation of 

the Phase III CORE 360 Uniform Use of 

CARCs and RARCs (835) Rule, 

including CORE-required Code 

Combinations for CORE-defined 

Business Scenarios will lead to a 

decrease in ‘‘follow up and payment 

reconciliation’’ BIR tasks. 

d. Time Savings Calculation 

In order to estimate the cost 

avoidance of a 3 to 5 percent decrease 

in the time (cost) spent on following up 

and reconciling payments, we used the 

following assumptions and calculations: 

• A study of BIR tasks by Sarkowski, 

et al. (2009) categorized BIR tasks 

within a physician practice office, 

specifying a dollar cost per single 

physician to specific tasks.77 The study 

found that 28 percent of the equivalent 

of a full-time staff was dedicated to 

‘‘follow-up and payment reconciliation’’ 

and ‘‘receiving and posting payments.’’ 

Sarkowski, et. al. assigned a dollar 

amount to these tasks, which included 

collecting payments and posting to 

patients’ accounts; depositing checks 

and payments; account reconciliation; 

discrepancy research, follow up, and 

write-offs; receiving and allocating 

capitated payments; posting refunds; 

follow-up on denials, underpaid, or 

nonresponsive claims; filing for stoploss and other contractual payments; 

filing for shared risk-pool payments, 

and follow-up supervision. This is a 

category of tasks that will be most 

affected by the streamlining of the four 

areas of administrative tasks that we 

detailed previously. 

• The total cost per physician for 

these tasks is reflected in Table 16, 

Column II, adjusted for 2013 dollars and 

increased annually by 3 percent to 

reflect cost of living increases, because 

the majority of this cost is for salaries 

and benefits (70 percent). A smaller 

percentage of the cost is for operating 

expenses, purchased services, and 

allocation of overhead, and for the 

purchase and operation of IT systems. 

• We have projected the increase in 

the number of physicians in physician 

practices between 2014 and 2023 (Table 

16, Column I) based on the average 

between the projected supply and 

demand of physicians according to the 

Association of American Medical 

Colleges.78

• Table 16, Column III illustrates the 

total cost of receiving and posting 

payments, follow up and payment 

reconciliation for all physicians in 

physician practices. 

• We have previously assumed, in the 

Health Care EFT Standards IFC, that the 

average provider will newly enroll to 

receive payments in EFT from 12 health 

plans from 2014 through 2023, reflected 

in Table 16, Column VI. We make an 

identical projection here—the average 

provider will newly enroll to receive 

payments in EFT from 12 health plans 

from 2014 through 2023. Therefore, a 

factor in the calculation will be a 

multiplier of 1.2 every year that 

represents the number of health plans 

with which typical provider has newly 

to receive EFT. 

• We assume that there will be a 

reduction of 3 to 5 percent in time costs 

for each of the 12 new EFT enrollments 

that the typical physician practice will 

enroll between 2014 and 2023, 

compounded yearly (Table 16, Columns 

IV and VII). By 2023, this will result in 

a cost savings of as much as 50 percent 

(high estimate) in tasks related to follow 

up and payment reconciliation and 

receiving and posting payments. 

• The number of billing and posting 

clerks in physician practices is 

approximately double the number of 

billing and posting clerks in hospitals.79

We used this ratio as representative of 

the physician practice to hospital 

administrative burden of receiving and 

posting payments, follow-up and 

payment reconciliation. To arrive at the 

cost to hospitals, therefore, we halved 

the costs that physician practices 

experienced carrying out these tasks 

(Table 16, Columns V and VIII). 

Although 55 percent of physicians are 

employed in hospitals, BIR tasks in 


tkelley on DSK3SPTVN1PROD with RULES2
48040 Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Rules and Regulations 

80 ‘‘The National Progress Report on Healthcare 

Efficiency, 2010,’’ Produced by the U.S. Healthcare 

Efficiency Index. 

81 ‘‘Oregon Administrative Simplification 

Strategy and Recommendations: Final Report of the 

Administrative Simplification Work Group, June 

2010,’’ Oregon Health Authority, Office for Oregon 

Health Policy and Research. 

82 ‘‘Standardization of the Claims Process: 

Administrative Simplification White Paper,’’ 

Prepared by the American Medical Association, 

Practice Management Center, June 22, 2009, 

adjusted for 2012 dollars. 

83 ‘‘Standardization of the Claims Process: 

Administrative Simplification White Paper, ’’ 

Prepared by the American Medical Association, 

Practice Management Center, June 22, 2009, 

adjusted for 2012 dollars. 

hospitals would likely be significantly 

less on a per physician basis due to 

economies of scale that are found in 

hospital billing and payment processes. 

TABLE 16—EFT & ERA OPERATING RULE SET: 3 PERCENT TO 5 PERCENT DECREASE IN COST SPENT IN PHYSICIAN

PRACTICES AND HOSPITALS ON RECEIVING AND POSTING, FOLLOW-UP AND RECONCILIATION OF PAYMENTS 2013–2023 

I II III IV V VI VII VIII 

Total number of physicians in 

physician 

practices * 

Total cost 

per practice 

of receiving 

and posting 

payments, 

follow up 

and payment reconciliation 

(28%) ** 

Total reduction in cost 

of receiving 

and posting 

payments, 

follow-up 

and payment reconciliation 

[col.I * col.II] 

(in millions) 

Physician 

practice low 

3% reduction in cost 

of receiving 

and posting 

payments, 

follow-up 

and payment reconciliation 

attributable 

to EFT & 

ERA operating rule 

set—compounded 

yearly 

(in millions) 

Hospital low 

3% reduction in reduction in 

cost of receiving and 

posting payments, follow-up and 

payment 

reconciliation attributable to 

EFT & ERA 

operating 

rule set— 

compounded 

yearly 

(in millions) 

Average 

number of 

new EFT 

enrollment 

per provider 

Physician 

practice 

high 

5% reduction in BIR 

time 

(number of 

minutes per 

week per 

EFT enrollment) attributable to 

EFT & ERA 

operating 

rule set— 

compounded 

yearly 

(in millions) 

Hospital 

high 

5% reduction in BIR 

time 

(number of 

minutes per 

week per 

EFT enrollment) attributable to 

EFT & ERA 

operating 

rule set— 

compounded 

yearly 

(in millions) 

2013 ................................. 335,120 $15,028 $5036 $0.0 $0 0 $0.0 $0.0 

2014 ................................. 340,146 15,479 5265 181 91 1.2 302 151 

2015 ................................. 345,173 15,943 5503 175 87 1.2 284 142 

2016 ................................. 348,638 16,421 5725 168 84 1.2 267 133 

2017 ................................. 352,103 16,914 5955 162 81 1.2 251 125 

2018 ................................. 355,568 17,421 6194 157 78 1.2 236 118 

2019 ................................. 359,033 17,944 6442 151 75 1.2 222 111 

2020 ................................. 362,498 18,482 6700 145 73 1.2 208 104 

2021 ................................. 366,561 19,037 6978 140 70 1.2 196 98 

2022 ................................. 370,625 19,608 7267 135 68 1.2 184 92 

2023 ................................. 374,688 20,196 7567 130 65 1.2 173 87 

Total .......................... .................... .................... .................... 1,545.79 772.90 12 2,324 1,162 

* Occupational Employment and Wages, May 2011, 43–3021 Billing and Posting Clerks, Bureau of Labor Statistics, http://www.bls.gov/oes/current/oes433021.htm. 

** Based on Sakowski, et. al. 2009, adjusted to 2012 dollars. 

3. Physician Practices and Hospitals: 

Material Cost Savings in Increase in Use 

of EFT and ERA 

As noted previously, the more 

efficient and streamlined EDI becomes, 

the more providers and health plans 

will be incentivized to use EDI for their 

billing and insurance related tasks. Our 

assumption is that implementation of 

the EFT & ERA Operating Rule Set will 

result in time and staff savings for both 

providers and health plans. Therefore, 

more providers and health plans will 

decide to switch their payment and 

remittance advice to electronic 

transactions. 

Table 17 illustrates estimates on the 

material costs that can be avoided for 

every EFT or ERA that is transmitted 

electronically instead of produced on 

paper and sent through the post. For 

Table 17, we used the following 

assumptions. 

• The estimated savings associated 

with the ERA are taken from the ‘‘The 

National Progress Report on Healthcare 

Efficiency, 2010,’’ 80 which calculates its 

data based on available studies of cost 

from a variety of sources, and which is 

sponsored by Emdeon, a national health 

care clearinghouse. We found no other 

resources for this estimate, though other 

reports, such as the Oregon survey,81

used the same Emdeon report for its 

projections. 

• The estimated savings for using EFT 

over paper checks is taken from a 2009 

American Medical Association white 

paper on Administrative 

Simplification.82 As noted in our 

discussion of estimated savings of EFT 

over paper checks for health plans, we 

found a number of estimates with regard 

to EFT that estimate the combined cost 

avoided for both health plan and 

provider. However, we found no other 

resources for the more specific cost 

avoidance for providers. 


tkelley on DSK3SPTVN1PROD with RULES2
Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Rules and Regulations 48041 

TABLE 17—SUMMARY OF SAVINGS ATTRIBUTABLE TO THE EFT & ERA 

OPERATING RULE SET: BASELINE

COST SAVINGS FOR EFT AND ERA 

FOR PROVIDERS (DIFFERENCE BETWEEN NON–ELECTRONIC TRANSACTION AND ELECTRONIC TRANSACTION) 

Transaction 

Savings per 

transaction 

for health 

care providers 

Health care electronic funds 

transfers (EFT) ...................... $1.63 83

Electronic remittance advice 

(ERA) .................................... 1.55 

Based on 2012 dollars. 

In Table 18 we illustrate a projected 

annual increase of 6 (LOW) to 8 (HIGH) 

percent in the use of the ERA 

attributable to the implementation of the 

EFT & ERA Operating Rule Set over the 

next 10 years. We estimate an annual 

increase of 6 (LOW) to 8 (HIGH) percent 

in the use of the EFT resulting from the 

implementation of the EFT & ERA 

Operating Rule Set. These are not 

annual increases in percentage points, 

but rather annual percent increases in 

the use of ERA and EFT compounded 

yearly. 

Based on these assumptions, we 

estimate that the savings to providers 

because of increased usage in three 

transactions will be at $172 million to 

$249 million over the 10 years after 

implementation of the EFT & ERA 

Operating Rule Set. 

TABLE 18—ANNUAL COST SAVINGS IN REDUCED USE OF MATERIALS FOR PROVIDERS FROM INCREASE IN EFT AND ERA 

ATTRIBUTABLE TO THE EFT & ERA OPERATING RULE SET * 

I II III IV V 

Savings from Increase in EFT 

attributable to the EFT & ERA 

Operating Rule Set 

Savings from Increase in ERA 

attributable to the EFT & ERA 

Operating Rule Set 

Year LOW 

Annual 

Cost Savings 

Attributable to 

Operating 

Rules 

(in millions) 

HIGH 

Annual 

Cost Savings 

Attributable to 

Operating 

Rules 

(in millions) 

LOW 

Annual 

Cost Savings 

Attributable to 

Operating 

Rules 

(in millions) 

HIGH 

Annual 

Cost Savings 

Attributable to 

Operating 

Rules 

(in millions) 

2014 ................................................................................................................. $3.22 $4.29 $3.06 $4.08 

2015 ................................................................................................................. 4.18 5.57 3.98 5.30 

2016 ................................................................................................................. 5.44 7.25 5.17 6.89 

2017 ................................................................................................................. 7.07 9.42 6.72 8.96 

2018 ................................................................................................................. 9.19 12.25 8.73 11.65 

2019 ................................................................................................................. 7.96 11.94 7.57 11.36 

2020 ................................................................................................................. 9.55 14.33 9.08 13.63 

2021 ................................................................................................................. 11.46 17.20 10.90 16.35 

2022 ................................................................................................................. 13.76 20.63 13.08 19.62 

2023 ................................................................................................................. 16.51 24.76 15.70 23.55 

Total .......................................................................................................... 88.33 127.64 83.99 121.38 

* Based on 2012 dollars. 

TABLE 19—SUMMARY OF SAVINGS FOR PROVIDERS ATTRIBUTABLE TO THE EFT & ERA OPERATING RULE SET

Year 

LOW 

Time savings for 

physician practices and hospitals 

(Table 16) 

(in millions) 

HIGH 

Time savings for 

physician practices and hospitals 

(Table 16) 

(in millions) 

LOW 

Increase in EFT & 

ERA transactions 

attributable to EFT 

& ERA operating 

rule set for physician practices and 

hospitals 

(Table 18) 

(in millions) 

HIGH 

Increase in EFT & 

ERA transactions 

attributable to EFT 

& ERA operating 

rule set for physician practices and 

hospitals 

(Table 18) 

(in millions) 

LOW 

Total provider 

savings/cost 

avoidance 

HIGH 

Total provider 

savings/cost 

avoidance 

2014 ..................... $272 $453 $6 $8 $278 $462 

2015 ..................... 262 426 8 11 270 437 

2016 ..................... 253 400 11 14 263 415 

2017 ..................... 244 376 14 18 257 395 

2018 ..................... 235 354 18 24 253 378 

2019 ..................... 226 333 16 23 242 356 

2020 ..................... 218 313 19 28 237 341 

2021 ..................... 210 294 22 34 233 327 

2022 ..................... 203 276 27 40 230 317 


tkelley on DSK3SPTVN1PROD with RULES2
48042 Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Rules and Regulations 

TABLE 19—SUMMARY OF SAVINGS FOR PROVIDERS ATTRIBUTABLE TO THE EFT & ERA OPERATING RULE SET— 

Continued 

Year 

LOW 

Time savings for 

physician practices and hospitals 

(Table 16) 

(in millions) 

HIGH 

Time savings for 

physician practices and hospitals 

(Table 16) 

(in millions) 

LOW 

Increase in EFT & 

ERA transactions 

attributable to EFT 

& ERA operating 

rule set for physician practices and 

hospitals 

(Table 18) 

(in millions) 

HIGH 

Increase in EFT & 

ERA transactions 

attributable to EFT 

& ERA operating 

rule set for physician practices and 

hospitals 

(Table 18) 

(in millions) 

LOW 

Total provider 

savings/cost 

avoidance 

HIGH 

Total provider 

savings/cost 

avoidance 

2023 ..................... 196 260 32 48 228 308 

Cumulative 

total over 

10 years .... 2,319 3,485 172 249 2491 3734 

Table 20 reflects the total costs and 

benefits for the years 2013 through 2023 

detailed in this RIA according to sector. 

The net savings for the health care 

industry as a whole (savings minus 

costs) ranges from approximately $300 

million (low savings minus high costs) 

to $3.3 billion (high savings minus low 

cost) over ten years, or an expected net 

savings of $1.8 billion. 

TABLE 20—SUMMARY OF TOTAL COSTS AND BENEFITS FOR COMMERCIAL AND GOVERNMENTAL HEALTH PLANS, TPAS, 

PHYSICIAN PRACTICES, AND HOSPITALS ATTRIBUTABLE TO THE EFT & ERA OPERATING RULE SET

[In millions] 

Savings: 

Commercial 

and government health 

plans/TPAs 

Savings: 

Physician 

practices & 

hospitals 

Total savings 

Costs: 

Commercial 

and government health 

plans/TPAs 

Costs: 

Physician 

practices & 

hospitals 

Total costs Net savings 

Low ............................... $529 $2,491 $3,020 $1,224 $16 $1,239 $301 

High .............................. 757 3,734 4,491 2,703 16 2,719 3,252 

Mean ............................ 643 3,113 3,755 1,963 16 1,979 1,777 

Table 21 is a summary of the costs 

and benefits annualized and discounted. 

TABLE 21—SUMMARY OF TOTAL COSTS AND BENEFITS FOR COMMERCIAL AND GOVERNMENTAL HEALTH PLANS, TPAS, 

PHYSICIAN PRACTICES, AND HOSPITALS ATTRIBUTABLE TO THE EFT & ERA OPERATING RULES SET

[In millions] 

Present values 

7% 3% 

BENEFITS Monetized ($millions): 

Low ........................................................................................................................................................................... $1,986 $2,503 

High .......................................................................................................................................................................... 2,982 3,738 

COSTS Monetized ($millions): 

Low ........................................................................................................................................................................... 1,133 1,190 

High .......................................................................................................................................................................... 2,497 2,618 

G. Accounting Statement 

As required by OMB Circular A–4 

(available at link http://www.

whitehouse.gov/sites/default/files/omb/

assets/regulatory_matters_pdf/a-4.pdf), 

we have prepared an accounting 

statement. 


tkelley on DSK3SPTVN1PROD with RULES2
Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Rules and Regulations 48043 

TABLE 22—ACCOUNTING STATEMENT 2013–2023 

[In millions, 2012 dollars] 

Category Primary estimate 

(millions) 

Minimum estimate 

(millions) 

Maximum estimate 

(millions) 

Source citation 

(RIA, preamble, etc.) 

BENEFITS 

Annualized Monetized benefits: 

7% Discount ......................................... Not estimated ....................... $265 ........................ $398 ........................ RIA 

3% Discount ......................................... Not estimated ....................... $270 ........................ $404 ........................ RIA 

Qualitative (un-quantified) benefits 

Benefits generated from health plans to health care providers, and health care providers to health plans. 

COSTS 

Annualized Monetized costs: 

7% Discount ......................................... Not Estimated ....................... $151 ........................ $333 ........................ RIA and Collection 

of Information. 

3% Discount ......................................... Not Estimated ....................... $129 ........................ $283 ........................ RIA and Collection 

of Information. 

Qualitative (unquantified) costs ................... ............................................... None ........................ None ........................

Health plans and health care providers will pay costs to software vendors, programming and IT staff/contractors, transaction vendors, and 

health care clearinghouses. 

TRANSFERS 

Annualized monetized transfers: ‘‘On budget’’.N/A ........................................ N/A .......................... N/A. 

From whom to whom? ................................ N/A ........................................ N/A .......................... N/A. 

Annualized monetized transfers: 

‘‘Off-budget’’.

N/A ........................................ N/A .......................... N/A. 

In accordance with the provisions of 

Executive Order 12866, this regulation 

was reviewed by the Office of 

Management and 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 

■ 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. 

■ 2. Section 162.920 is amended as 

follows: 

■ A. In paragraph (c)(2), the references 

‘‘§§ 162.1203 and 162.1403’’ are 

removed and the references 

‘‘§§ 162.1203, 162.1403, and 162.1603’’ 

are added in their place. 

■ B. Adding a new paragraph (c)(4). 

The addition reads as follows: 

§ 162.920 Availability of implementation 

specifications and operating rules. 

* * * * * 

(c) * * * 

(4) Council for Affordable Quality 

Healthcare (CAQH) Phase III Committee 

on Operating Rules for Information 

Exchange (CORE) EFT & ERA Operating 

Rule Set, Approved June 2012, as 

specified in this paragraph and 

referenced in § 162.1603. 

(i) Phase III CORE 380 EFT 

Enrollment Data Rule, version 3.0.0, 

June 2012. 

(ii) Phase III CORE 382 ERA 

Enrollment Data Rule, version 3.0.0, 

June 2012. 

(iii) Phase III 360 CORE Uniform Use 

of CARCs and RARCs (835) Rule, 

version 3.0.0, June 2012. 

(iv) CORE-required Code 

Combinations for CORE-defined 

Business Scenarios for the Phase III 

CORE 360 Uniform Use of Claim 

Adjustment Reason Codes and 

Remittance Advice Remark Codes (835) 

Rule, version 3.0.0, June 2012. 

(v) Phase III CORE 370 EFT & ERA 

Reassociation (CCD+/835) Rule, version 

3.0.0, June 2012. 

(vi) Phase III CORE 350 Health Care 

Claim Payment/Advice (835) 

Infrastructure Rule, version 3.0.0, June 

2012, except Requirement 4.2 titled 

‘‘Health Care Claim Payment/Advice 

Batch Acknowledgement 

Requirements’’. 

* * * * * 

■ 3. Section 162.1601 is amended by 

revising the section heading and 

introductory text to read as follows: 

§ 162.1601 Health care electronic funds 

transfers (EFT) and remittance advice 

transaction. 

The health care electronic funds 

transfers (EFT) and remittance advice 

transaction is the transmission of either 

of the following for health care: 

* * * * * 

■ 4. Section 162.1603 is added to 

Subpart P to read as follows: 

§ 162.1603 Operating rules for health care 

electronic funds transfers (EFT) and 

remittance advice transaction. 

On and after January 1, 2014, the 

Secretary adopts the following for the 

health care electronic funds transfers 

(EFT) and remittance advice transaction: 

(a) The Phase III CORE EFT & ERA 

Operating Rule Set, Approved June 2012 

(Incorporated by reference in § 162.920) 

which includes the following rules: 

(1) Phase III CORE 380 EFT 

Enrollment Data Rule, version 3.0.0, 

June 2012. 

(2) Phase III CORE 382 ERA 

Enrollment Data Rule, version 3.0.0, 

June 2012. 


tkelley on DSK3SPTVN1PROD with RULES2
48044 Federal Register / Vol. 77, No. 155 / Friday, August 10, 2012 / Rules and Regulations 

(3) Phase III 360 CORE Uniform Use 

of CARCs and RARCs (835) Rule, 

version 3.0.0, June 2012. 

(4) CORE-required Code 

Combinations for CORE-defined 

Business Scenarios for the Phase III 

CORE 360 Uniform Use of Claim 

Adjustment Reason Codes and 

Remittance Advice Remark Codes (835) 

Rule, version 3.0.0, June 2012. 

(5) Phase III CORE 370 EFT & ERA 

Reassociation (CCD+/835) Rule, version 

3.0.0, June 2012. 

(6) Phase III CORE 350 Health Care 

Claim Payment/Advice (835) 

Infrastructure Rule, version 3.0.0, June 

2012, except Requirement 4.2 titled 

‘‘Health Care Claim Payment/Advice 

Batch Acknowledgement 

Requirements’’. 

(b) ACME Health Plan, CORE v5010 

Master Companion Guide Template, 

005010, 1.2, March 2011 (incorporated 

by reference in § 162.920), as required 

by the Phase III CORE 350 Health Care 

Claim Payment/Advice (835) 

Infrastructure Rule, version 3.0.0, June 

2012. 

Dated: June 26, 2012. 

Marilyn Tavenner, 

Acting Administrator, Centers for Medicare 

& Medicaid Services. 

Approved: August 1, 2012. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2012–19557 Filed 8–7–12; 11:15 am] 

BILLING CODE 4120–01–P 


tkelley on DSK3SPTVN1PROD with RULES2