```

[Federal Register Volume 77, Number 155 (Friday, August 10, 2012)]
[Rules and Regulations]
[Pages 48007-48044]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-19557]

[[Page 48007]]

Vol. 77

Friday,

No. 155

August 10, 2012

Part III

Department of Health and Human Services

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 Office of the Secretary

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45 CFR Part 162

 Administrative Simplification: Adoption of Operating Rules for Health 
Care Electronic Funds Transfers (EFT) and Remittance Advice 
Transactions; Final Rule

Federal Register / Vol. 77 , No. 155 / Friday, August 10, 2012 / 
Rules and Regulations

[[Page 48008]]

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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.

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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\
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    \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.
    \3\ Morra, 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.
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    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 full-time employee per physician is necessary 
to conduct BIR tasks.\5\
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    \4\ Casalino, 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).
    \5\ Sakowski, 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.
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    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

[[Page 48009]]

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.
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    \6\ Ibid, p. w547.
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    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\
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    \7\ Estimates 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.
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    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.
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    \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.
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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

[[Page 48010]]

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    ASC X12 Standards for Electronic Data Interchange Technical Report
 information--Dental.                          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    ASC X12 Standards for Electronic Data Interchange Technical Report
 information--Professional.                    Type 3--Health Care Claim: Professional (837), May 2006, ASC X12N/
                                               005010X222.
Health care claims or equivalent encounter    ASC X12 Standards for Electronic Data Interchange Technical Report
 information--Institutional.                   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    Telecommunication Standard Implementation Guide, Version D,
 information--Retail pharmacy.                 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    Telecommunication Standard, Implementation Guide Version 5,
 information--Retail pharmacy supplies and     Release 1, September 1999; The Telecommunication Standard
 professional services.                        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     Telecommunication Standard Implementation Guide, Version D,
 drugs.                                        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    ASC X12 Standards for Electronic Data Interchange Technical Report
 response)--Dental, professional, and          Type 3--Health Care Eligibility Benefit Inquiry and Response (270/
 institutional.                                271), April 2008, ASC X12N/005010X279.
Eligibility for a health plan (request and    Telecommunication Standard Implementation Guide, Version D,
 response)--Retail pharmacy drugs.             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         ASC X12 Standards for Electronic Data Interchange Technical Report
 response).                                    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      ASC X12 Standards for Electronic Data Interchange Technical Report
 plan.                                         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      ASC X12 Standards for Electronic Data Interchange Technical Report
 (request and response)--Dental,               Type 3--Health Care Services Review--Request for Review and
 professional, and institutional.              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.

[[Page 48011]]

 
Referral certification and authorization      Telecommunication Standard Implementation Guide, Version D,
 (request and response)--Retail pharmacy       Release 0 (Version D.0), August 2007, and equivalent Batch
 drugs.                                        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\
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    \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.
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    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\
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    \10\ Ibid, p. 1.
    \11\ Ibid, p. 2.
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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\
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    \12\ ``CAQH CORE Phase I Measures of Success Final 
Report,,''(presentation), July 7, 2009.
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    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 * * *

[[Page 48012]]

    (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 Sec.  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 Sec.  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 co-insurance, 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

[[Page 48013]]

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.
[GRAPHIC] [TIFF OMITTED] TR10AU12.000

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.

[[Page 48014]]

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.
---------------------------------------------------------------------------

    \13\ For agenda and testimony, see http://www.ncvhs.hhs.gov.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \14\ February 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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \15\ March 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.
---------------------------------------------------------------------------

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 consensus-building on the operating rules.\16\
---------------------------------------------------------------------------

    \16\ August 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).
---------------------------------------------------------------------------

    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\:
---------------------------------------------------------------------------

    \17\ August 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).
---------------------------------------------------------------------------

     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\
---------------------------------------------------------------------------

    \18\ August 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).
---------------------------------------------------------------------------

    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.

[[Page 48015]]

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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

     ``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.
---------------------------------------------------------------------------

    \20\ Ibid, pp. 5-6.
---------------------------------------------------------------------------

    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 (Sec.  
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 Sec.  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) CORE-required Code Combinations for CORE-defined 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 Sec.  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         1. Requirement 4.2: Identifies a maximum
 Enrollment Data Rule.          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.

[[Page 48016]]

 
Phase III CORE 382 ERA         1. Requirement 4.2: Identifies a maximum
 Enrollment Data Rule.          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     Requirements 4.1.1 and 4.1.3: Identify
 Use of CARCs and RARCs (835)   four business scenarios with a maximum
 Rule, including CORE-          set of CARCs/RARCs/CAGCs/NCPDP Reject
 required Code Combinations     Codes combinations that can be applied
 for CORE-defined Business      to convey details of the claim denial or
 Scenarios.                     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    1. Requirement 4.1: Requires that
 Reassociation (CCD+/835)       providers must proactively contact their
 Rule.                          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      1. Requirement 4.1: Requires covered
 Care Claim Payment/Advice      entities to implement HTTP/S Version 1.1
 (835) Infrastructure Rule.     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

[[Page 48017]]

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\
---------------------------------------------------------------------------

    \21\ September 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
---------------------------------------------------------------------------

    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 Sec.  
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 (Sec.  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 (Sec.  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 Sec.  162.1601 to reference the 
transaction by the new name.
    Specifically, we are changing the heading of Sec.  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

[[Page 48018]]

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 Sec.  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\
---------------------------------------------------------------------------

    \24\ CAQH 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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \26\ CAQH 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.

    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 Sec.  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

[[Page 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, CORE-Required 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 
one-time 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 x 40 pages x 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

[[Page 48020]]

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 CORE-Required 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 one-time burden on health plans to use the CORE-required 
Maximum ERA Enrollment Data Elements and CORE-required 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
------------------------------------------------------------------------
                                           Burden of
                                          reformatting
    One-time burden of reformatting       EFT and ERA      Total burden
      companion guides (in hours)          enrollment       (in hours)
                                           forms (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

[[Page 48021]]

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.
---------------------------------------------------------------------------

    \27\ American 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).
---------------------------------------------------------------------------

     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
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                    Total number of
                                                                                                Total number of     EFT enrollments    Number of annual
                                                       Base hourly rate        Number of         increased EFT      attributable to   enrollments in EFT
                                                       (in dollars) for        physician          enrollments      adoption of EFT &    attributable to
   Time (in hours) per enrollment form (column 1)         billing and         practices/         (column 3 * 6       ERA operating        adoption of
                                                        posting clerks*    hospitals (column     enrollments)      rules set at 18%     operating rules
                                                          (column 2)              3)              (column 4)       of total (column     set (column 6)
                                                                                                                          5)
--------------------------------------------------------------------------------------------------------------------------------------------------------
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)      $1.4      $1.4      $1.5      $1.5      $1.5      $7.3
 (in millions)......................................
----------------------------------------------------------------------------------------------------------------

    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

[[Page 48022]]

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 insurance-
related (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\
---------------------------------------------------------------------------

    \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.
    \29\ Sakowski, 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.
---------------------------------------------------------------------------

    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 mid-size 
physicians' offices.\32\
---------------------------------------------------------------------------

    \31\ ``Health Care Administrative Expense Analysis, Blue Ribbon 
Commission Recommendation 6: Final Report 11/26/07;'' 
Washington State Office of the Insurance Commissioner.
    \32\ Akscin 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 
National Insurance Cards,'' J. Oncol Pract, 4:161, 2008.

---------------------------------------------------------------------------

[[Page 48023]]

    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, 
write-offs, posting refunds, filing for shared risk-pool payments, 
filing for contractual payments, and follow-up on denials, underpaid 
and nonresponsive claims.\33\
---------------------------------------------------------------------------

    \33\ Casalino, 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).
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \34\ http://data.bls.gov/cgi-bin/print.pl/oes/current/oes433021.htm.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \35\ Casalino, et al., 2009.
---------------------------------------------------------------------------

    Twenty-eight percent of administrative staff time on BIR tasks in a 
physician practice is spent simply receiving and posting payments, 
follow-up, 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.
---------------------------------------------------------------------------

    \36\ Sakowski et al., 2009.
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

    \37\ March 12, 2012 letter from the Medical Group Management 
Association (MGMA) to Secretary Sebelius as public comment on the 
health care EFT standards IFC.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \38\ March 9, 2012 letter from UPMC, submitted to HHS as public 
comment on the health care EFT standards IFC.
---------------------------------------------------------------------------

    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 E-payment 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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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

[[Page 48024]]

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.
---------------------------------------------------------------------------

    \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.
    \41\ http://www.whitehouse.gov/healthreform/relief-for-americans-and-businesses.
    \42\ http://www.whitehouse.gov/healthreform/timeline.
---------------------------------------------------------------------------

    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-to-business 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\
---------------------------------------------------------------------------

    \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.
    \44\ Sucharita 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.
    \45\ Shy, 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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \46\ More information on the MREP: https://www.cms.gov/Research-Statistics-Data-and-Systems/CMS-Information-Technology/AccesstoDataApplication/MedicareRemitEasyPrint.html.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \47\ National Health Expenditure Projections 2009-2019 (CMS), 
http://www.cms.gov/NationalHealthExpendData/25_NHE_Fact_Sheet.asp.
    \48\ CMS Electronic Data Interchange (EDI) Performance 
Statistics (http://www.cms.gov/EDIPerformanceStatistics/) and CMS 
CROWD data.
---------------------------------------------------------------------------

     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\
---------------------------------------------------------------------------

    \49\ There 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.
---------------------------------------------------------------------------

     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.
---------------------------------------------------------------------------

    \50\ Financial 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.
    \51\ The National Progress Report on Healthcare Efficiency, 
2010, Produced by the U.S. Healthcare Efficiency Index.
---------------------------------------------------------------------------

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

[[Page 48025]]

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\
---------------------------------------------------------------------------

    \52\ ``2010 AFP Electronic Payments: Report of Survey Results,'' 
Association for Financial Professionals, underwritten by J.P. 
Morgan, November, 2011.
    \53\ The National Progress Report on Healthcare Efficiency, 
2010, Produced by the U.S. Healthcare Efficiency Index.
    \54\ http://www.ncvhs.hhs.gov.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \55\ ``Medicare Contractor Transaction Report, MAC Part A 
Electronic Funds Transfer (EFT) Data by Year (2007-2011).''
---------------------------------------------------------------------------

     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
----------------------------------------------------------------------------------------------------------------
                                        EFT Usage as a     ERA Usage as a     EFT Usage as a     ERA Usage as a
                                        percentage of    percentage of all    percentage of    percentage of all
           Payment source                payments per    remittance advice     payments per    remittance advice
                                      payment source in     per payment     payment source in     per payment
                                             2013          source in 2013          2023          source in 2023
----------------------------------------------------------------------------------------------------------------
Medicare............................                76%                65%                98%                90%
Medicaid, CHIP, VHA, and Other                       18                 37                 79                 80
 Federal, State, and Local
 Governmental Payers................
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\
---------------------------------------------------------------------------

    \56\ March 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.''
---------------------------------------------------------------------------

    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

[[Page 48026]]

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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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 multi-stakeholder 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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

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:

[[Page 48027]]

              Table 7--Type and Number of Affected Entities
------------------------------------------------------------------------
              Type                 Number              Source
------------------------------------------------------------------------
Health Care Providers--Offices     234,222  Health Insurance Reform;
 of Physicians (includes                     Modifications to the Health
 offices of mental health                    Insurance Portability and
 specialists).                               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--              5,764  Health Insurance Reform;
 Hospitals.                                  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      66,464  The number of providers was
 and Residential Care                        obtained from the 2007
 Facilities not associated with              Economic Census Data--
 a hospital.                                 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 x 87
                                             percent (percent of nursing
                                             and residential care
                                             facilities not associated
                                             with a hospital) = 66,464.
Other Health Care Providers--      384,192  The number of providers was
 Offices of dentists,                        obtained from the 2007
 chiropractors, optometrists,                Economic Census Data--
 mental health practitioners,                Health Care and Social
 speech and physical                         Assistance (sector 62)
 therapists, podiatrists,                    using the number of
 outpatient care centers,                    establishments: http://
 medical and diagnostic                      factfinder.census.gov/
 laboratories, home health care              servlet/IBQTable?--bm=y&-
 services, and other ambulatory              ds--name=EC0762A1&-geo--
 health care services, resale                id=01000US&-dataitem=* and
 of health care and social                   http://
 assistance merchandise                      factfinder.census.gov/
 (durable medical equipment).                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--             18,000  Health Insurance Reform;
 Independent Pharmacies.                     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        200  Health Insurance Reform;
 chains.                                     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:            1,827  This number represents the
 Impacted commercial health                  most recent number as
 plans considered in this RIA                referenced in ``Patient
 are health insurance issuers;               Protection and Affordable
 that is, insurance companies,               Care Act; Standards Related
 services, or organizations,                 to Reinsurance, Risk
 including HMOs, that are                    Corridors, and Risk
 required to be licensed to                  Adjustment, 2011 Federal
 engage in the business of                   Register (Vol. 76), July,
 insurance in a State.                       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.
---------------------------------------------------------------------------

    \59\ Kahn, James, ``Excess Billing and Insurance-Related 
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.
---------------------------------------------------------------------------

    We do not analyze the impact on nursing and residential care 
facilities,

[[Page 48028]]

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 
non-Federal 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 self-funded 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 self-
insured 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
------------------------------------------------------------------------
                                                               Number of
                           Entities                             entities
------------------------------------------------------------------------
Physician Practices (includes offices of mental health           234,222
 specialists)................................................
Hospitals....................................................      5,764
Commercial Health Plans (includes TPAs and health insurance        2,577
 issuers)....................................................
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 day-to-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

[[Page 48029]]

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.
---------------------------------------------------------------------------

    \60\ Mean 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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \61\ Mean 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.
---------------------------------------------------------------------------

    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 paper-based 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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

     For all IT infrastructure estimates in this RIA, which 
includes software updates, we have based the costs on a wide range of 
projected ``person-months'' 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

[[Page 48030]]

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\
---------------------------------------------------------------------------

    \63\ Based on case studies from PerfectForms, 
www.perfectforms.com.
    \64\ Mean 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.
---------------------------------------------------------------------------

    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
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              LOW one-    HIGH one-    LOW number  HIGH number
                                                              Ongoing cost   time cost    time cost    of health    of health
                                                                   of           for          for         plans        plans      LOW total    HIGH total
                                                              on[dash]line    business     business     without      without     cost  (in    cost  (in
                                                               enrollment     process      process     electronic   electronic   millions)    millions)
                                                                  forms       changes      changes    forms (60%)  forms (80%)
--------------------------------------------------------------------------------------------------------------------------------------------------------
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.

[[Page 48031]]

                  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
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                     Percent
                                                                                                                    adjustment
                                                        Low costs from   High cost from                             to account
                                                       eligibility and  eligibility and                            for smaller
                                                         claim status     claim status   Low percent      High      number of
                                                       operating rules  operating rules   adjustment    percent    health plan    Low cost    High cost
                                                       (implementation  (implementation                adjustment      than
                                                         + transition     + transition                              operating
                                                            costs)           costs)                                   rules
                                                                                                                     estimate
--------------------------------------------------------------------------------------------------------------------------------------------------------
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\
---------------------------------------------------------------------------

    \65\ Mean 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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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

[[Page 48032]]

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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \68\ Parametric Cost Estimating Handbook, ``Chapter 5--Software 
Parametric Cost Estimating,'' Joint Government/Industry Initiative, 
Fall 1995, Department of Defense, p. 114.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \69\ Some 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.
---------------------------------------------------------------------------

    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 ``person-months'' 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\
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \71\ Mean 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.
---------------------------------------------------------------------------

    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

[[Page 48033]]

[GRAPHIC] [TIFF OMITTED] TR10AU12.001

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

[[Page 48034]]

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.

[[Page 48035]]

[GRAPHIC] [TIFF OMITTED] TR10AU12.002

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.

[[Page 48036]]

   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          $87....................................  $200
 Electronic Enrollment Costs
 for Health Plans.
Health Plan Infrastructure       $148...................................  $590
 Costs (SAFE HARBOR/HTTPS)
 Costs for Health Plans.
EFT & ERA Reassociation rule     $474 for commercial plans..............  $931 for commercial plans
 4.2: Transmit ERA within 3      $22 for government plans...............  $43 for government plans
 days before/after EFT --Cost
 to Health Plans.
EFT & ERA Uniform Use of CARCs   $467 for commercial plans..............  $892 for commercial plans
 and RARs (835 Rule) Cost to     $22 for government plans...............  $42 for government plans
 Health Plans.
One-Time Cost to Health Plans    $1.5...................................  $1.5
 of Reformatting Companion
 Guides.
Cost to Health Plans of          $3.2...................................  $3.2
 Reformatting EFT and ERA
 Enrollment Forms.
Cost to providers to enroll in   $15.7..................................  $15.7
 EFT.
                                --------------------------------------------------------------------------------
    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.

[[Page 48037]]

    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.
---------------------------------------------------------------------------

    \72\ ``Trend in Remittance Advice (Abstract),'' October 26, 
2011, Center for Medicare and Medicaid Services.
---------------------------------------------------------------------------

     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.
---------------------------------------------------------------------------

    \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%20Healthcare.pdf.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

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

   Table 14--Baseline Cost Savings for EFT and ERA for Commercial and
 Governmental Health Plans (Difference Between NonElectronic Transaction
                       and Electronic Transaction)
------------------------------------------------------------------------
                                                             Savings per
                                                             transaction
                                                                 for
                                                              commercial
                        Transaction                              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                  HIGH                   LOW                  HIGH
                                                                                Annual                Annual                Annual                Annual
                                                                          Cost Savings          Cost Savings          Cost Savings          Cost Savings
                                                                       Attributable to       Attributable to       Attributable to       Attributable to
                                                                       Operating Rules       Operating Rules       Operating Rules       Operating Rules
                                                                         (in millions)         (in millions)         (in millions)         (in millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2014............................................................                 $26.6                 $35.5                 $1.82                 $2.42
2015............................................................                  31.9                  42.6                  2.36                  3.15

[[Page 48038]]

 
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.
---------------------------------------------------------------------------

    \76\ Lawrence P. Casalino, S. Nicholson, D.N. Gans, T. Hammons, 
D. Morra, T. Karrison and W. Levinson, ``What does it cost physician 
practices to interact with health insurance plans?'' Health Affairs, 
28(4)(2009): w533-w543.
---------------------------------------------------------------------------

    We believe the implementation of 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,

[[Page 48039]]

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 write-offs 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 stop-loss 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.
---------------------------------------------------------------------------

    \77\ Sakowski, 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.
---------------------------------------------------------------------------

     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\
---------------------------------------------------------------------------

    \78\ Summary 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.
---------------------------------------------------------------------------

     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

[[Page 48040]]

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.
---------------------------------------------------------------------------

    \79\ Occupational Employment and Wages, May 2011, 43-3021 
Billing and Posting Clerks, Bureau of Labor Statistics, http://www.bls.gov/oes/current/oes433021.htm.

  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
                                                                   -----------------------------------------------------------------------------------------------------------------------------
                                                                                                                    Physician     Hospital low 3%
                                                                                                                 practice low 3%    reduction in                   Physician
                                                                                                      Total        reduction in     reduction in                 practice high    Hospital high
                                                                                                  reduction in       cost of          cost of                   5% reduction in  5% reduction in
                                                                                 Total cost per      cost of      receiving and    receiving and                    BIR time         BIR time
                                                                       Total       practice of    receiving and      posting          posting        Average       (number of       (number of
                                                                     number of    receiving and      posting        payments,        payments,      number of     minutes per      minutes per
                                                                     physicians      posting        payments,     follow-up and    follow-up and     new EFT      week per EFT     week per EFT
                                                                         in         payments,     follow-up and      payment          payment       enrollment    enrollment)      enrollment)
                                                                     physician    follow up and      payment      reconciliation   reconciliation      per      attributable to  attributable to
                                                                    practices *      payment     reconciliation  attributable to  attributable to    provider      EFT & ERA        EFT & ERA
                                                                                 reconciliation     [col.I *        EFT & ERA        EFT & ERA                   operating rule   operating rule
                                                                                    (28%) **       col.II] (in    operating rule   operating rule               set--compounded  set--compounded
                                                                                                    millions)    set--compounded  set--compounded                  yearly (in       yearly (in
                                                                                                                    yearly (in       yearly (in                    millions)        millions)
                                                                                                                    millions)        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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

     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.
---------------------------------------------------------------------------

    \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.

[[Page 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)
------------------------------------------------------------------------
                                                             Savings per
                                                             transaction
                        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            HIGH             LOW            HIGH
                                                          Annual          Annual          Annual          Annual
                                                    Cost Savings    Cost Savings    Cost Savings    Cost Savings
                                                    Attributable    Attributable    Attributable    Attributable
                                                    to Operating    to Operating    to Operating    to Operating
                                                           Rules           Rules           Rules           Rules
                                                   (in millions)   (in millions)   (in millions)   (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
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                               LOW Increase in    HIGH Increase in
                                                                                  EFT & ERA          EFT & ERA
                                                                                 transactions       transactions
                                         LOW Time savings  HIGH Time savings   attributable to    attributable to
                                          for physician      for physician        EFT & ERA          EFT & ERA          LOW Total          HIGH Total
                 Year                     practices and      practices and      operating rule     operating rule   provider savings/  provider savings/
                                         hospitals (Table   hospitals (Table  set for physician  set for physician    cost avoidance     cost avoidance
                                        16) (in millions)  16) (in millions)    practices and      practices and
                                                                               hospitals (Table   hospitals (Table
                                                                              18) (in millions)  18) (in millions)
--------------------------------------------------------------------------------------------------------------------------------------------------------
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

[[Page 48042]]

 
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:                                         Costs:
                                          Commercial and     Savings:                     Commercial and      Costs:
                                            government       Physician     Total savings    government       Physician      Total costs     Net savings
                                           health plans/    practices &                    health plans/    practices &
                                               TPAs          hospitals                         TPAs          hospitals
--------------------------------------------------------------------------------------------------------------------------------------------------------
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.

[[Page 48043]]

                                    Table 22--Accounting Statement 2013-2023
                                           [In millions, 2012 dollars]
----------------------------------------------------------------------------------------------------------------
                                                                                                Source citation
            Category               Primary estimate    Minimum estimate    Maximum estimate     (RIA, preamble,
                                      (millions)          (millions)          (millions)             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:   N/A...............  N/A...............  N/A.                ..................
 ``On budget''.
From whom to whom?..............  N/A...............  N/A...............  N/A.                ..................
Annualized monetized transfers:   N/A...............  N/A...............  N/A.                ..................
 ``Off[dash]budget''.
----------------------------------------------------------------------------------------------------------------

    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

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

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

0
2. Section 162.920 is amended as follows:
0
A. In paragraph (c)(2), the references ``Sec. Sec.  162.1203 and 
162.1403'' are removed and the references ``Sec. Sec.  162.1203, 
162.1403, and 162.1603'' are added in their place.
0
B. Adding a new paragraph (c)(4).
    The addition reads as follows:

Sec.  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 Sec.  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''.
* * * * *

0
3. Section 162.1601 is amended by revising the section heading and 
introductory text to read as follows:

Sec.  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:
* * * * *

0
4. Section 162.1603 is added to Subpart P to read as follows:

Sec.  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 Sec.  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.

[[Page 48044]]

    (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 Sec.  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
```