40458 Federal Register / Vol. 76, No. 131 / Friday, July 8, 2011 / Rules and Regulations 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Office of the Secretary 

45 CFR Parts 160 and 162 

[CMS–0032–IFC] 

RIN 0938–AQ12 

Administrative Simplification: 

Adoption of Operating Rules for 

Eligibility for a Health Plan and Health 

Care Claim Status Transactions 

AGENCY: Office of the Secretary, HHS. 

ACTION: Interim final rule with comment 

period. 

SUMMARY: Section 1104 of the 

Administrative Simplification 

provisions of the Patient Protection and 

Affordable Care Act (hereafter referred 

to as the Affordable Care Act) 

establishes new requirements for 

administrative transactions that will 

improve the utility of the existing 

HIPAA transactions and reduce 

administrative costs. Specifically, in 

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

Act, Congress required the adoption of 

operating rules for the health care 

industry and directed the Secretary of 

Health and Human Services 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.’’ 

This interim final rule with comment 

period adopts operating rules for two 

Health Insurance Portability and 

Accountability Act of 1996 (HIPAA) 

transactions: eligibility for a health plan 

and health care claim status. This rule 

also defines the term ‘‘operating rules’’ 

and explains the role of operating rules 

in relation to the adopted transaction 

standards. In general, transaction 

standards adopted under HIPAA enable 

electronic data interchange through a 

common interchange structure, thus 

minimizing the industry’s reliance on 

multiple formats. Operating rules, in 

turn, attempt to define the rights and 

responsibilities of all parties, security 

requirements, transmission formats, 

response times, liabilities, exception 

processing, error resolution and more, 

in order to facilitate successful 

interoperability between data systems of 

different entities. 

DATES: Effective Date: These regulations 

are effective on June 30, 2011. The 

incorporation by reference of the 

publications listed in this interim final 

rule is approved by the Director of the 

Office of the Federal Register June 30, 

2011. 

Compliance Date: The compliance 

date for this regulation is January 1, 

2013. 

Comment Date: To be assured 

consideration, comments must be 

received at one of the addresses 

provided below, no later than 5 p.m. on 

September 6, 2011. 

ADDRESSES: In commenting, please refer 

to file code CMS–0032–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–0032–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–0032–IFC, 

Mail Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

4. By hand or courier. If you prefer, 

you may deliver (by hand or courier) 

your written comments before the close 

of the comment period to either of the 

following addresses: 

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, 

please call telephone number (410) 786– 

1066 in advance to schedule your 

arrival with one of our staff members. 

Comments 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: 

Shannon Whetzel (410) 786–3267. 

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 be 

also 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. Background 

A. Introduction 

The background discussion below 

presents a partial statutory and 

regulatory history related only to the 

statutory provisions and regulations that 

are important and relevant for purposes 

of this interim final rule with comment 

period. For further information about 

electronic data interchange, the 

complete statutory background, and the 

regulatory history, see the proposed rule 

entitled ‘‘Health Insurance Reform; 

Modifications to the Health Insurance 

Portability and Accountability Act 

(HIPAA) Electronic Transaction 

Standards,’’ published in the Federal 

Register on August 22, 2008 (73 FR 

49742). 

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 


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Social Security Act (hereinafter referred 

to as 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 (hereinafter referred to as the 

Secretary) to adopt standards for certain 

transactions to enable health 

information to be exchanged 

electronically and to achieve greater 

uniformity in the transmission of health 

information. Electronic Data interchange 

(EDI) enables providers and payers to 

process financial and administrative 

transactions faster and at a lower cost 

than manual transactions. 

In the August 17, 2000 Federal 

Register (65 FR 50312) we published a 

final rule entitled ‘‘Health Insurance 

Reform: Standards for Electronic 

Transactions’’ (hereinafter referred to as 

the Transactions and Code Sets rule). 

This 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 code 

sets to be used in those transactions. 

Accordingly, we adopted the Accredited 

Standards Committee (ASC) X12 

standards Version 4010 and the 

National Council for Prescription Drug 

Programs (NCPDP) Telecommunication 

standard Version 5.1, which are 

specified at 45 CFR part 162, subparts 

K through S. All health plans, health 

care clearinghouses, and health care 

providers who transmit health 

information in electronic form (referred 

to as covered entities) are required to 

comply with these adopted standards. 

In the January 16, 2009 Federal 

Register, we published a final rule 

entitled, ‘‘Health Insurance Reform; 

Modifications to the Health Insurance 

Portability and Accountability Act 

(HIPAA) Electronic Transaction 

Standards’’ (74 FR 3296) (hereinafter 

referred to as the Modifications final 

rule), that, among other things, adopted 

updated versions of the standards [(ASC 

X12 Version 5010 (hereinafter referred 

to as Version 5010)] and NCPDP Version 

D.0) for the electronic health care 

transactions originally adopted in the 

Transactions and Code Sets final rule. 

Covered entities are required to comply 

with the updated standards for 

electronic health care transactions on 

January 1, 2012. Table 1 lists HIPAA 

standard transactions. 

TABLE 1—CURRENT ADOPTED STANDARDS FOR HIPAA TRANSACTIONS

Standard Transaction 

ASC X12 837 D .............................. Health care claims—Dental. 

ASC X12 837 P .............................. Health care claims—Professional. 

ASC X12 837 I ................................ Health care claims—Institutional. 

NCPDP D.0 ..................................... Health care claims—Retail pharmacy drug. 

ASC X12 837 P and NCPDP D.0 ... Health care claims—Retail pharmacy supplies and professional services. 

NCPDP D.0 ..................................... Coordination of Benefits—Retail pharmacy drug. 

ASC X12 837 D .............................. Coordination of Benefits—Dental. 

ASC X12 837 P .............................. Coordination of Benefits—Professional. 

ASC X12 837 I ................................ Coordination of Benefits—Institutional. 

ASC X12 270/271 ........................... Eligibility for a health plan (request and response)—dental, professional, and institutional. 

NCPDP D.0 ..................................... Eligibility for a health plan (request and response)—Retail pharmacy drugs. 

ASC X12 276/277 ........................... Health care claim status (request and response). 

ASC X12 834 .................................. Enrollment and disenrollment in a health plan. 

ASC X12 835 .................................. Health care payment and remittance advice. 

ASC X12 820 .................................. Health plan premium payment. 

ASC X12 278 .................................. Referral certification and authorization (request and response). 

NCPDP D.0 ..................................... Referral certification and authorization (request and response)—retail pharmacy drugs. 

NCPDP 5.1 and D.0 ....................... Retail pharmacy drug claims (telecommunication and batch standards). 

NCPDP 3.0 ..................................... Medicaid pharmacy subrogation (batch standard). 

In general, the transaction standards 

adopted under HIPAA enable electronic 

data interchange using a common 

interchange structure, thus minimizing 

the industry’s reliance on multiple 

formats. While the standards 

significantly decrease administrative 

burden on covered entities by creating 

greater uniformity in data exchange, and 

reduce the amount of paper forms 

needed for transmitting data, gaps 

created by the flexibility in the 

standards permit each health plan to use 

the transactions in very different ways, 

which remains an obstacle to achieving 

greater health care industry 

administrative simplification. These 

gaps include all of the following: 

• Performance and system 

availability. Because the standards 

permit the flexibility of conducting the 

transactions in batch mode or real-time, 

in order to minimize the number of 

different implementations, some 

submitters have resorted to contracting 

with clearinghouses for transaction 

exchanges that require batch 

submissions, and simultaneously are 

utilizing internal resources for real-time 

submissions. Some batch submissions 

are only conducted overnight. Typically 

batch submissions can be substantially 

slower than real-time transmissions, and 

systems may be available only at certain 

times for conducting certain 

transactions. 

• Connectivity and transportation of 

information. In traditional trading 

partner agreements, health plans specify 

their connectivity options for 

conducting the standard transactions. 

These options can vary from plan to 

plan. For example, some payers only 

conduct the transactions through a 

contracted clearinghouse. Others offer a 

direct connection to their system. Still 

others use both—contract with a 

clearinghouse for some transactions, 

and offer direct connect solutions for 

other transactions. Also, there are some 

plans that offer a number of options, 

and negotiate a choice with each trading 

partner, including providers. 

• Security and authentication. 

Currently, security standards do not 

prescribe requirements for levels of 

security and authentication when 

conducting the standard transactions 

and accessing protected health 

information. A covered entity’s level of 

security and authentication 

requirements is determined by the 

individual entity’s periodic assessments 

for security risk and vulnerabilities. 

Organizations have latitude to 

determine and document the number 

and types of security safeguards that 

they implement. Although this 

flexibility supports the implementation 


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of security safeguards that are consistent 

with the uniqueness of various 

organizations, it also limits 

standardization for security compliance. 

• Business scenarios and expected 

responses. The standards do not define 

methods by which trading partners, 

including providers, establish electronic 

communication links, or types of 

hardware and software to exchange EDI 

data. Each trading partner, including 

providers, separately provides specific 

requirements; for example, the number 

of transactions that are submitted in a 

file. Transaction processing in each 

entity’s system will vary from one 

trading partner, including providers, to 

another. The responses to compliantly 

implementing these various transaction 

processing systems are identified by 

trading partners, including providers, in 

documentation that is in addition to the 

adopted implementation guides. These 

types of documented business 

requirements can vary in terms of 

number and complexity. 

• Data content refinements. In 

accordance with trading partner 

agreements, plans can ignore certain 

data that are submitted if not needed by 

them to conduct the transaction. They 

also can refine certain data elements 

and require their submission. Trading 

partner agreements and additional 

documentation that plans develop 

permit plans to define specific types of 

data and to clarify the specific data that 

is required to be submitted for 

successful completion of a transaction. 

Although the standards limit the 

number of data elements that can be 

defined or optionally submitted, a 

plan’s individual business flow and 

operations may impose specific data 

definition and submission requirements. 

These gaps, among other challenges in 

the implementation of the standards, 

have spurred the creation of companion 

guides by health plans. Health plans 

have created these companion guides to 

describe their unique implementation of 

HIPAA transactions and how they will 

work with their business partners. 

Historically, companion guides have 

been used to establish business 

practices such as response time, system 

availability, communication protocols, 

hours of operation, amount of claim 

history available for inquiries and realtime adjustments, security practices, 

and more. Health plans’ companion 

guides vary in format and structure. 

Such variance can be confusing to 

trading partners (those entities, 

including providers, who exchange 

HIPAA compliant electronic 

transactions), who must implement 

them in addition to the specifications in 

the transaction standard 

implementation guides. Further, each 

companion guide is unique for each 

different health plan. 

Currently, according to the American 

Medical Association (AMA) there are 

over 1,200 such companion guides in 

existence (http://www.ama-assn.org/ 

ama1/pub/upload/mm/368/hipaatcs.pdf). As mentioned previously, 

companion guides require providers and 

trading partners, including providers, to 

adhere to different transaction 

implementation rules for different 

health plans. Therefore, the widespread 

proliferation of health plan companion 

guides is particularly burdensome to 

health care providers, and we believe 

has subverted the goal of administrative 

simplification. 

Over the past 5 years, this 

proliferation of health plan companion 

guides has given rise to the 

development of operating rules. To 

facilitate successful interoperability 

between data systems of different 

entities, operating rules more clearly 

define the rights and responsibilities of 

all parties, security requirements, 

transmission formats, response times, 

liabilities, exception processing, error 

resolution and more. Operating rules 

have been shown to reduce costs and 

administrative complexities as will be 

described later in this interim final rule 

with comment period. 

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) 

payments among ACH associations are 

used in compliance with U.S. Federal 

Reserve regulations (12 CFR Part 370), 

and maintained by the Federal Reserve 

and the Electronic Payments Network. 

Additionally, credit card issuers employ 

detailed operating rules (for example, 

Cirrus Worldwide Operating Rules) 

describing types of members, their 

responsibilities and obligations, 

licensing and display of service marks, 

etc. 

B. Operating Rules Mandated by the 

Affordable Care Act 

Congress sought to address the 

aforementioned problems in the health 

care industry by requiring the adoption 

of operating rules for the health care 

industry as outlined in the Patient 

Protection and Affordable Care Act (Pub 

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

and by the Health Care and Education 

Reconciliation Act of 2010, (Pub. L. 

111–152), which was enacted on March 

30, 2010 (hereinafter referred to as the 

Affordable Care Act). Section 1173(g)(1) 

of the Act, as added by section 

1104(b)(2) 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 role of operating rules is to 

support the adopted standards for 

health care transactions in order to 

foster and enhance uniform use of the 

adopted standards and implementation 

guides across the health care industry. 

Standards and operating rules overlap 

in their functions to increase 

uniformity, but differ in their purposes. 

While standards are mainly concerned 

with the content transmitted in a 

transaction, operating rules provide for 

the method of how the information 

should be transmitted, as well as the 

elimination of certain situationality in 

the use of data content contained in the 

standards. Situationality refers to the 

fact that many transaction requirements 

only apply if the situation is presented. 

For example, in the 271 eligibility 

response transaction, the health plan 

name is only required when a specific 

plan name exists for the plan for which 

the individual has coverage. 

Operating rules augment the 

standards in the following three 

important ways: 

• They contain additional 

requirements that help implement the 

standard for a transaction in a more 

consistent manner across health plans. 

For example, when a provider currently 

sends an eligibility for a health plan 

inquiry to a health plan, the standard 

allows responses ranging from a simple 

‘‘yes’’ or ‘‘no’’, to the inclusion of a 

complete range of information. The 

operating rule requires the health plan 

to return patient eligibility and financial 

responsibility for a specified list of 

service type codes including, but not 

limited to, dental, vision, medical, 

hospital inpatient, and emergency care. 

This requirement ensures that a 

provider, who submits the same inquiry 

to multiple payers, receives a consistent 

response for an eligibility for a health 

plan inquiry. This reduces the number 

of customized transactions when 

dealing with multiple health plans, thus 

saving both time and money. 

• They address ambiguous or 

conditional requirements in the 

standard and clarify when to use or not 

use certain data elements or code 

values. For example, the standard may 

leave it to the discretion of the health 

plan whether or not to return the health 

plan’s name in a particular field, 

creating the possibility of inconsistency 

in health plan responses. An operating 

rule may require that the health plan 

name always be returned and that it 


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always be returned in one particular 

specified manner. This encourages 

uniformity and alleviates the problem of 

providers receiving inconsistent 

information. 

• They specify how trading partners, 

including providers, should 

communicate with each other and 

exchange patient information, with the 

goal of eliminating connectivity 

inconsistencies. Currently, individual 

health plans specify the transmission 

methods they expect each of their 

trading partners, including providers, to 

use for electronic transactions. 

Mandating one uniform method 

decreases the amount of work and 

inconsistencies providers experience 

when dealing with multiple payers with 

differing transmission methods. 

The Affordable Care Act presents a 

definition of operating rules and 

provides a great deal of guidance about 

the role Congress envisioned for 

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) 

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).’’ 

Section 1104(b)(2) of the Affordable 

Care Act also 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, 

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 * * * (D) 

The entity builds on the transactions issued 

under Health Insurance Portability and 

Accountability Act of 1996. * * * The 

National Committee on Vital and Health 

Statistics shall * * * (C) determine whether 

such operating rules represent a consensus 

view of 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 

We take from the statutory context the 

following information about operating 

rules to be adopted under HIPAA: 

• They are business rules and 

guidelines; 

• They are necessary for the 

electronic exchange of information; 

• They are not defined by a standard; 

• They do not conflict with the 

existing HIPAA standards; 

• They are consensus based; 

• They are consistent with HIPAA 

and Health Information Technology 

(HIT) standards adopted by the 

Secretary; and 

• Together with standards they 

encourage the use of electronic 

transactions by reducing ambiguities 

currently permitted by the standard, 

resulting in better-defined inquiries and 

responses that add value to provider 

practice management and health plan 

operations. 

II. Provisions of the Interim Final Rule 

With Comment Period 

A. Definition of Operating Rules 

Section 1171(9) of the Act, as added 

by section 1104(b)(1) of the Affordable 

Care Act, defines operating rules 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.’’ We are adding the term 

‘‘operating rules’’ to the definitions in 

regulations at 45 CFR 162.103, and 

defining it just as it appears in the 

statute. We note that, in the statutory 

reference, ‘‘this part’’ refers to Part C of 

Title XI of the Act, Administrative 

Simplification. In the regulation at 45 

CFR 162.103, ‘‘this part’’ refers to Part 

162 of the CFR, the part in which the 

definition appears, which contains the 

regulations that pertain to, among other 

things, the HIPAA transactions and code 

sets. The following discussion further 

explains operating rules and their scope, 

in light of their relationship to the 

standards. 

Business rules and guidelines are not 

defined by the statute, nor has the 

health care industry specifically defined 

business rules or guidelines for itself. 

These are very broad terms and there are 

many ways to define them. Generally, 

business rules and guidelines are 

statements that refine and specify. For 

purposes of operating rules, business 

rules and guidelines are statements that 

refine and specify. 

While operating rules may have a very 

broad scope as business rules and 

guidelines in order to cover the full 

spectrum of data content, from data 

elements to standards, we believe there 

are limitations. To meet the definition of 

operating rules, business rules and 

guidelines must be ‘‘necessary * * * for 

the electronic exchange of information 

that are not defined by a standard or its 

implementation specifications.’’ We 

interpret the term ‘‘necessary’’ to be 

those operating rules needed to facilitate 

better communication between trading 

partners, including providers, to fill 

gaps in the standards, and to fulfill the 

purposes and principles set out in 

sections 1173(a)(4)(A)(i) through (iv) 

and (B) of the Act. 

If a business rule or guideline is 

necessary for the electronic exchange of 

information, it must also be one that is 

‘‘not defined by’’ a HIPAA standard or 

its implementation specifications in 

order to meet the definition of an 

operating rule. We consider a business 

rule or guideline that does not duplicate 

what is in the standard to be one that 

is not defined by the standard. Business 

rules and guidelines that duplicate what 

is in the standard are not operating rules 

under our interpretation. 

The National Committee on Vital and 

Health Statistics (NCVHS) is tasked with 

reviewing any operating rule developed 

and recommended to the Secretary for 

adoption. The NCVHS is to make 

recommendations to the Secretary and 

determine whether such operating rules 

represent a consensus view of the health 

care stakeholders and are consistent 

with and do not conflict with other 


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existing standards under section 

1173(g)(3)(C) of the Act. The NCVHS 

must also determine if such operating 

rules are consistent with electronic 

standards adopted for health 

information technology under section 

1173(g)(3)(D) of the Act. From these 

statutory provisions, we understand that 

operating rules should be consistent 

with and not be in conflict with the 

adopted HIPAA standards and HIT 

standards (for example, those standards 

that address governance, funding and 

infrastructure of controlled 

vocabularies, value sets and vocabulary 

subsets to be used primarily to further 

interoperability between providers and 

systems). We believe that, if an 

operating rule imposes a requirement 

that would make it impossible for a 

party to comply with both the 

associated HIPAA standard and the 

operating rule, then the operating rule 

conflicts with the standard. This 

interpretation is consistent with 

fundamental principles and precedents 

regarding when a conflict exists. If a 

party is able to satisfy both the 

requirements of the standard and the 

requirements of the operating rule, there 

is no conflict and the operating rule is 

consistent with the standard. Table 2 

illustrates what we consider to be a 

conflict by presenting hypothetical 

scenarios that illustrate when an 

operating rule could or could not 

conflict with a standard. 

TABLE 2—COULD AN OPERATING RULE CONFLICT WITH A STANDARD? 

Statement in the standard Statement in the operating 

rule 

Does the operating rule’s 

statement conflict with the 

standard’s statement? 

Justification 

‘‘X is recommended.’’ .......... ‘‘X is ‘‘required.’’ ................ No ...................................... It is possible for an entity to comply with both the 

standard and the operating rule. 

‘‘X is not required.’’ .............. ‘‘X is required.’’ .................. No ...................................... It is possible for an entity to comply with both the 

standard and the operating rule. 

‘‘X cannot be required.’’ ....... ‘‘X is required.’’ .................. Yes .................................... It is impossible for an entity to comply with both the 

standard and the operating rule. 

‘‘X is required.’’ .................... ‘‘X is required.’’ .................. No ...................................... It is possible for an entity to comply with both the 

standard and the operating rule. (However, to the 

extent that the statement in the operating rule duplicates the statement in the standard, the operating 

rule statement would not be considered an operating rule.) 

‘‘X is at the discretion of 

person #1. Person #2 

cannot require it.’’ 

‘‘X is required.’’ .................. No ...................................... It is possible for an entity to comply with both the 

standard and the operating rule. 

‘‘X is required.’’ .................... ‘‘X is required, so is Y.’’ .... No ...................................... It is possible for an entity to comply with both the 

standard and the operating rule. 

‘‘X is required. No other can 

be required.’’ 

‘‘X is required, so is Y.’’ .... Yes .................................... It is impossible for an entity to comply with both the 

standard and the operating rule. 

Our current definition of standard at 

45 CFR 160.103 is very broad. In fact, 

it is so broad that it could include 

operating rules as we are defining that 

term at § 162.103. Therefore, we are 

revising the definition of standard at 

§ 160.103 to be clear that standards and 

operating rules are separate and distinct. 

See the ‘‘Additional Requirements’’ 

section for discussion of this change. 

B. National Committee on Vital and 

Health Statistics and the Affordable 

Care Act 

The National Committee on Vital and 

Health Statistics (NCVHS) was 

established by Congress to serve as an 

advisory body to the Department of 

Health and Human Services (DHHS) on 

health data, statistics and national 

health information policy, and has been 

assigned a significant role in the 

Secretary’s adoption of operating rules 

under section 1173(g)(3) of the Act (as 

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

Affordable Care Act). 

In July 2010, the NCVHS’ 

Subcommittee on Standards convened a 

hearing to discuss the Affordable Care 

Act’s provisions pertaining to operating 

rules for the eligibility for a health plan 

and health care claim status 

transactions. Section 1173(g)(3) requires 

the NCVHS to do the following: 

• Advise the Secretary whether a 

nonprofit entity meets the requirements 

for development of operating rules. 

• Review the operating rules 

developed and recommended by such 

nonprofit entity. 

• 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. 

• Evaluate whether such operating 

rules are consistent with electronic 

standards adopted for health 

information technology. 

• Submit to the Secretary a 

recommendation as to whether the 

Secretary should adopt such operating 

rules. 

The NCVHS engaged in a 

comprehensive review of health care 

operating rules and their authors, with 

the goal of determining whether an 

entity was qualified to develop 

operating rules for transactions and to 

evaluate existing operating rules for 

purposes of making a recommendation 

to the Secretary as to whether those 

operating rules should be adopted. The 

process consisted of a full day of public 

testimony on July 20, 2010, with 

participation by more than 20 

stakeholders representing a cross 

section of the health care industry, 

including health plans, provider 

organizations, health care 

clearinghouses, pharmacy industry 

representatives, health care industry 

associations, standards developers, 

professional associations, 

representatives of Federal and State 

health plans, the banking industry, and 

the entities proposing to serve as 

operating rules authoring entities. 

During the hearing, testifiers 

reiterated the need for greater 

consistency and standardization in 

HIPAA transactions consistent with the 

Affordable Care Act amendments to the 

HIPAA, which highlight the need to 

improve the use of standard 

transactions, increase industry 

adherence to the implementation 

specifications of the standards, 

encourage greater adoption of electronic 

transactions, and enable more timely 


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updates and adoption of the HIPAA 

standards. Testifiers claimed that all of 

these could help reduce the clerical 

burden on the industry in the use of 

paper and the non-standard use of the 

current transaction standards. 

We believe that the considerable 

public participation in the NCVHS 

hearings for adoption of operating rules 

demonstrates an increasing level of 

support and interest from broader 

segments of the health care industry. Per 

the NCVHS’ recommendation, we will 

work with industry to continue this 

public exchange of information 

regarding operating rules, standards and 

their respective roles in administrative 

simplification. 

Based on the NCVHS testimony 

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

100719ag.htm) and the NCVHS’ analysis 

of the operating rules and qualifications 

of the candidate authoring entities, the 

NCVHS developed a set of 

recommendations to the Secretary, 

which are outlined in the following 

discussions. 

C. Operating Rules Authoring Entities 

Section 1173(g)(3)(A) of the Act 

charges the NCVHS with advising the 

Secretary as to whether a nonprofit 

entity meets the statutory requirements 

for developing the operating rules to be 

adopted by the Secretary. Those 

requirements, at section 1173(g)(2) of 

the Act, include all of the following: 

• The entity focuses its mission on 

administrative simplification. 

• The entity demonstrates a multistakeholder and consensus-based 

process for development of operating 

rules, including representation by or 

participation from health plans, health 

care providers, vendors, relevant 

Federal agencies, and other standards 

development organizations. 

• The entity has a public set of 

guiding principles that ensure the 

operating rules and process are open 

and transparent, and supports 

nondiscrimination and conflict of 

interest policies that demonstrate a 

commitment to open, fair, and 

nondiscriminatory practices. 

• The entity builds on the transaction 

standards issued under the Health 

Insurance Portability and 

Accountability Act of 1996. 

• The entity allows for public review 

and updates of its operating rules. 

Of those organizations testifying at the 

July 2010 NCVHS hearing, two 

organizations formally requested to be 

considered authoring entities for 

operating rules. These entities were the 

Council for Affordable Quality 

Healthcare’s (CAQH) Committee on 

Operating Rules for Information 

Exchange (CORE) and the National 

Council for Prescription Drug Programs 

(NCPDP). 

The CAQH, a nonprofit alliance of 

health plans and trade associations, 

supports industry collaboration on 

initiatives that simplify health care 

administration (http://www.caqh.org/ 

about.php). The CAQH launched the 

CORE with the goal of giving providers 

access to eligibility and benefits 

information before or at the time of 

service. The CAQH CORE is engaged in 

the development of voluntary operating 

rules for the facilitation of 

administrative health care transactions. 

It has already developed operating rules 

for the eligibility for a health plan and 

health care claim status transactions. 

The CAQH CORE has also demonstrated 

that the use of these rules yields a return 

on investment for both business 

operations and systems within today’s 

complex health care environment (http: 

//www.caqh.org/COREIBMstudy.php). 

The NCPDP is a not-for-profit 

standards development organization 

(SDO) accredited by the American 

National Standards Institute (ANSI), 

with over 1,500 members representing 

the pharmacy services industry (http:// 

ncpdp.org/WP.aspx). It is one of several 

SDOs involved in health care 

information technology and 

standardization, with a focus on retail 

pharmacy services, and has member 

representation from the pharmacy 

services sector of health care (http:// 

ncpdp.org/about.aspx). The operating 

rules the NCPDP brought forth to 

NCVHS focus on the retail-pharmacy 

sector. 

The July 2010 NCVHS hearings were 

followed by a request from the NCVHS 

Subcommittee on Standards to both the 

CAQH CORE and the NCPDP as 

authoring entity candidates, to respond 

to detailed questionnaires about their 

ability to meet the statutory 

requirements of the Affordable Care Act 

as authoring entities for health care 

operating rules. The NCVHS request 

solicited specific documentation from 

the two candidates to validate their 

previous testimony, including minutes, 

voting records and copies of bylaws. 

Both the CAQH CORE and the NCPDP 

responded to the Subcommittee’s 

request and submitted their respective 

applicable materials. A synopsis of the 

candidates’ responses can be found on 

the Internet at http:// 

www.ncvhs.hhs.gov/100930lt2.pdf. 

Upon review of the CAQH CORE’s 

and the NCPDP’s respective responses 

to the NCVHS questionnaire, the 

NCVHS determined that both 

organizations met the statutory 

requirements to be an operating rules 

authoring entity. The NCVHS noted, 

however, that there are still adjustments 

to process and procedures that may be 

required of both organizations to 

enhance transparency, citing the need 

for more formalized relations with each 

other and with other SDOs, inclusion of 

a more diverse cadre of stakeholders, 

and a more formal public review 

process. Both the CAQH CORE and the 

NCPDP acknowledged these issues in 

their submitted responses to the NCVHS 

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

100930lt2.pdf). 

The NCVHS advised the Secretary in 

its letter dated September 30, 2010, 

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

100930lt2.pdf) that the CAQH CORE 

meets the requirements of section 

1173(g)(2) of the Act to be the operating 

rules authoring entity for the non-retail 

pharmacy-related eligibility for a health 

plan and health care claim status 

standard transactions with additional 

qualifying requirements. In the same 

letter, the NCVHS stated that the NCPDP 

met the requirements to be the 

authoring entity for operating rules for 

retail pharmacy-related eligibility 

transactions (as outlined in the 

Telecommunications Standard 

Implementation Guide Version D.0) also 

with additional qualifying requirements. 

Those requirements for both the CAQH 

CORE and the NCPDP are as follows: 

• Require authoring entities to 

maintain minutes, attendance, voting 

records, and other appropriate 

documentation that will help the 

NCVHS conduct verification that the 

authoring entities have utilized an open, 

consensus-driven process with broad 

stakeholder participation and provided 

an opportunity for public comment in 

authoring any new operating rules or 

new versions of existing operating rules, 

consistent with such processes followed 

by ANSI-accredited standards 

development organizations. 

• Continue to use the NCVHS and its 

open process to evaluate, select, and 

recommend any new qualifying 

operating rules authoring entities when 

it comes time to adopt operating rules 

for other transactions, or for newer 

versions of the operating rules for the 

transactions for which the CAQH CORE 

and the NCPDP are being recommended 

to be named authoring entities at this 

time. 

After our own review and analysis of 

the CAQH CORE and the NCPDP 

applications for consideration to be 

authoring entities for their respective 

developed operating rules, and the 

NCVHS’ recommendation, we have 

determined that the CAQH CORE is 

qualified to be the operating rules 

authoring entity for non-retail 


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pharmacy-related eligibility for a health 

plan and health care claim status 

standard transactions per section 

1173(g)(2) of the Act. 

At the time of the hearing, the NCVHS 

based its recommendation to appoint 

the NCPDP as an operating rules 

authoring entity on the testimony 

presented. However, upon further 

review and consultation, we have 

determined that the NCPDP’s standard 

provides enough detail and clarity to 

operationalize the standards to the point 

where no gaps exist that operating rules 

would need to fill and no further 

infrastructure or data content rules need 

to be adopted. (For a more detailed 

discussion, see section III. of this 

interim final rule with comment 

period). 

D. Adoption of Operating Rules 

1. Adoption of the CAQH CORE Phase 

I and Phase II Operating Rules for the 

Non-Retail Pharmacy Eligibility for a 

Health Plan and Health Care Claim 

Status Transactions (Updated for 

Version 5010) 

The CAQH CORE builds consensus 

among health care industry stakeholders 

on a set of operating rules that facilitate 

administrative interoperability between 

health plans and providers by building 

on applicable HIPAA transaction 

requirements, enabling providers to 

submit transactions from any system, 

and facilitating administrative and 

clinical data integration. The CAQH 

CORE uses a phased approach for 

developing operating rules. This 

approach allows for developing rules 

and implementing them via 

incremental, achievable milestones, and 

helps to maximize rule adoption. The 

CAQH CORE Phase I operating rules 

were developed in 2006 and focused on 

the eligibility for a health plan 

transaction. The CAQH CORE Phase II 

rules, developed in 2008, added 

operating rules for the health care claim 

status transaction, and more rules for 

the eligibility for a health plan 

transaction that were not included in 

Phase I. Both the CAQH CORE Phase I 

and Phase II operating rules were 

updated to accommodate the Version 

5010 HIPAA standards, which were 

adopted by the Secretary via the final 

rule published in the Federal Register 

on January 16, 2009 (74 FR 3296) and 

with which HIPAA covered entities 

must be compliant on January 1, 2012. 

The CAQH CORE operating rules 

(updated for Version 5010) include both 

infrastructure rules and data content 

rules. The infrastructure rules help 

improve data content flow between 

provider and payer. They improve 

interoperability by addressing all of the 

following: 

• Connectivity—provide a uniform 

way for stakeholders to connect 

(through the Internet). 

• Response Times—specify that 

information will be available in real 

time. 

• System Availability—specify 

systems delivering information be 

available a certain amount of time. 

• Patient Identification—help assure 

patient matching/identification can 

occur. 

The CAQH CORE’s first set of 

operating rules (updated for Version 

5010) are Phase I rules for eligibility for 

a health plan transaction. They help 

electronically confirm patient benefit 

coverage, copay, coinsurance, and base 

deductible. In addition, through 

requirements to use common Internet 

protocols, they allow providers to access 

needed patient information prior to or at 

the point of care. The CAQH CORE’s 

second set of operating rules (updated 

for Version 5010) are the Phase II rules 

for the eligibility for a health plan and 

health care claim status transactions. 

They expand on the first set by adding 

a requirement for transaction recipients 

to send back patient remaining 

deductible amounts, rules to improve 

patient matching, health care claim 

status infrastructure requirements (for 

example, response time) and more 

prescriptive connectivity requirements. 

We have examined each of the CAQH 

CORE Phase I and Phase II operating 

rules and are adopting those that we 

believe further enhance the HIPAA 

transactions by better facilitating 

communication between trading 

partners, including providers, filling 

gaps in the associated standards, and 

fulfilling the requirements, purposes, 

and principles set out in the statute at 

sections 1173(a)(4)(A)(i through iv) and 

(B). Of the eight CAQH CORE Phase I 

operating rules (updated for Version 

5010), we are adopting the following 

six: 

• Phase I CORE 152: Eligibility and 

Benefit Real Time Companion Guide 

Rule, version 1.1.0, March 2011, and 

CORE Version 5010 Master Companion 

Guide Template, 005010, 1.2, March 

2011. 

• Phase I CORE 153: Eligibility and 

Benefits Connectivity Rule, version 

1.1.0, March 2011. 

• Phase I CORE 154: Eligibility and 

Benefits 270/271 Data Content Rule, 

version 1.1.0, March 2011. 

• Phase I CORE 155: Eligibility and 

Benefits Batch Response Time Rule, 

version 1.1.0, March 2011. 

• Phase I CORE 156: Eligibility and 

Benefits Real Time Response Time Rule, 

version 1.1.0, March 2011. 

• Phase I CORE 157: Eligibility and 

Benefits System Availability Rule, 

version 1.1.0, March 2011. 

We are adopting all five of the CAQH 

CORE Phase II operating rules (updated 

for Version 5010). They include the 

following: 

• Phase II CORE 250: Claim Status 

Rule, version 2.1.0, March 2011, and 

CORE Version 5010 Master Companion 

Guide Template, 005010, 1.2, March 

2011. 

• Phase II CORE 258: Eligibility and 

Benefits 270/271 Normalizing Patient 

Last Name Rule, version 2.1.0, March 

2011. 

• Phase II CORE 259: Eligibility and 

Benefits 270/271 AAA Error Code 

Reporting Rule, version 2.1.0, March 

2011. 

• Phase II CORE 260: Eligibility & 

Benefits Data Content (270/271) Rule, 

version 2.1.0, March 2011. 

• Phase II CORE 270: Connectivity 

Rule, version 2.2.0, March 2011. 

Both the CAQH CORE Phase I and 

Phase II operating rules (updated for 

Version 5010) that we are adopting in 

this interim final rule with comment 

period can be found on the CAQH CORE 

Web site at http://www.caqh.org/ 

COREVersion5010.php. Below we 

briefly describe those operating rules. 

The Phase I CORE 152: Eligibility and 

Benefit Real Time Companion Guide 

Rule (updated for Version 5010) and 

CORE Version 5010 Master Companion 

Guide Template provide a standardized 

format for health plan companion 

guides. As mentioned previously, health 

plans have the option of creating a 

companion guide that describes the 

specifics of how they implement the 

HIPAA transactions. Currently, health 

plans have independently created 

companion guides that vary in format 

and structure, which can be confusing 

to trading partners, including providers, 

and providers who must review 

numerous companion guides along with 

the Version 5010 Implementation 

Guides. To address this issue, the CAQH 

CORE developed the CORE Version 

5010 Master Companion Guide 

Template to ensure that the structure of 

each health plan’s companion guide is 

similar to every other health plan’s 

companion guide, making it easier for 

providers to find information quickly. 

Developed with input from multiple 

health plans, system vendors, provider 

representatives and healthcare and 

HIPAA industry experts, the CAQH 

CORE template organizes information 

into several sections including, general 

information (sections 1 through 9) and 


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transaction-specific information (section 

10), as well as appendices that provide 

helpful information, such as an 

information checklist, descriptions of 

typical business scenarios, transmission 

examples, FAQs, and a summary of the 

changes between companion guides. 

The CAQH CORE recognizes that 

different health plans may have 

different requirements, so the CORE 

v5010 Master Companion Guide 

Template gives health plans the 

flexibility to tailor companion guides to 

meet each of their own particular needs. 

The Phase I CORE 153: Eligibility and 

Benefits Connectivity Rule (updated for 

Version 5010) addresses usage patterns 

for both batch and real time 

transactions, the exchange of security 

identifiers, and communications-level 

errors and acknowledgements. It does 

not define the specific content of the 

message. 

Currently, multiple connectivity 

methods, some based on open 

standards, others on proprietary 

approaches, are in use for 

administrative electronic transactions in 

the health care industry. Health care 

providers and health plans support 

multiple connectivity methods to 

connect to different health plans, 

clearinghouses, provider organizations 

and others, which add costs for health 

plans and providers. This rule is 

designed to provide a ‘‘safe harbor’’ that 

providers and health plans can be 

assured will be supported by any 

trading partner, including providers. 

Safe harbors are essentially connectivity 

requirements. When trading partners 

including providers, agree to follow the 

same connectivity requirements, 

connectivity is better enabled. This rule 

is not intended to require trading 

partners, including providers, to remove 

existing connections that do not match 

the rule, nor is it intended to require 

that all trading partners, including 

providers, must use this method for all 

new connections. It is expected that 

some trading partners, including 

providers, may agree to use different 

communication mechanism(s) and/or 

security requirements than that 

described by this rule. The rule simply 

provides a secure connection for those 

entities that do not currently have one. 

The Phase I CORE 154: Eligibility and 

Benefits 270/271 Data Content Rule 

(updated for Version 5010) provides 

more robust and consistent information 

prior to or at the point of care. It 

specifies the minimum requirements for 

using the ASC X12 005010X279A1 

Eligibility Benefit Request and Response 

(270/271) to inquire about health plan 

insurance coverage and to respond to 

such an inquiry using the ASC X12 

005010X279A1 Eligibility Benefit 

Request and Response (270/271). The 

requirements address certain situational 

elements and codes and are in addition 

to requirements contained in the 

Version 5010 270/271 implementation 

guides. This rule provides for not only 

determination of an individual’s 

eligibility but also his financial 

responsibility information for co-pay, 

deductible, and coinsurance prior to or 

at the point of care. This rule covers, for 

example, the following content in the 

Version 5010 271: 

• The dates of eligibility under the 

health plan (contract) level for past and 

future dates and the dates of eligibility 

at the benefit level if different from the 

contract level. 

• The patient financial responsibility 

for each specified benefit at the base 

contract amounts for both in-network 

and out-of-network. 

• The name of the health plan when 

it exists in the health plan’s system. 

Compliance with the requirements of 

this operating rule will ultimately 

reduce the time it takes providers to 

track down such information after the 

service has been rendered, and decrease 

the provider’s accounts receivable. 

The Phase I CORE 155 and 156: 

Eligibility and Benefits Batch Response 

and Real Time Response Rules (updated 

for Version 5010) streamline and 

improve the flow of transactions by 

imposing timeframe requirements for 

when a response is to be submitted for 

an eligibility for a health plan inquiry. 

For a Version 5010 270 batch mode 

response to a provider’s inquiry 

submitted by 9:00 pm Eastern time of a 

business day, the response must be 

returned by 7:00 am Eastern time the 

following business day. The maximum 

response time when processing in real 

time mode must be 20 seconds or less. 

The Phase I CORE 157: Eligibility and 

Benefits System Availability Rule 

(updated for Version 5010) also 

streamlines and improves the flow of 

transactions. It recognizes that many 

institutional providers need to be able to 

conduct health plan eligibility activities 

at any time. It also recognizes that 

health plans have a business need to 

take their eligibility and other systems 

offline periodically in order to perform 

system maintenance, which means that 

some systems will not be available for 

eligibility inquiries and responses on 

certain nights and weekends. The rule 

requires that systems be available to 

process eligibility inquiries no less than 

86 percent of the time per calendar 

week for real and batch modes, and 

requires health plans to publish 

regularly scheduled downtime. It 

ensures that systems are up and running 

in a consistent manner and that trading 

partners, including providers, are aware 

of any downtime so they can plan 

accordingly. 

The Phase II CORE 250: Claim Status 

Rule (updated for Version 5010) 

encourages and increases the use of the 

health care claim status transaction by 

providing for batch and real-time 

response times, system availability, the 

use of a companion guide template, and 

support for the CORE ‘‘safe harbor’’ 

connectivity requirement. These 

elements included in the CORE 250 rule 

follow the same requirements as and 

build upon the same requirements as for 

the eligibility for a health plan 

transaction infrastructure rules included 

in Phase I CORE 152, Phase I CORE 155, 

Phase I CORE 156 and Phase I CORE 

157 rules we are adopting in this 

interim final rule with comment period. 

This means that Phase II CORE 250 rule 

(updated for Version 5010) requires 

each health plan to: follow the 

companion guide format requirement as 

provided in CORE 152, which is the 

CORE Version 5010 Master Companion 

Guide Template; support the CORE 

‘‘safe harbor’’ connectivity 

requirements; support a maximum 

response time of 20 seconds from the 

time of submission of a Version 5010 

276 for real time and for batch mode 

response to a provider’s inquiry 

submitted by 9 p.m. Eastern time of a 

business day, the response must be 

returned by 7 a.m. Eastern time the 

following business day; ensure system 

availability of no less than 86 percent 

per calendar week for both real time and 

batch modes; and follow the companion 

guide format requirement as provided in 

CORE 152, which is the CORE v5010 

Master Companion Guide Template. 

The CORE 258: Eligibility and 

Benefits 270/271 Normalizing Patient 

Last Name Rule (updated for Version 

5010). Health plans and health care 

providers must be able to uniquely 

identify patients in order to ascertain 

patient eligibility. Although the Version 

5010 270/271 standards specify data 

elements and data element attributes 

that may be used to identify an 

individual, the standards do not address 

the use of punctuation and special 

characters. Therefore, the way health 

plans identify individuals does not 

always match the way providers 

identify individuals, which results in 

the rejection or denial of eligibility 

transactions. The CAQH CORE 258 rule 

addresses certain aspects of individual 

identification that enhance the real time 

processing of eligibility inquiries and 

responses. 

The Phase II CORE 259: Eligibility 

and Benefits 270/271 AAA Error Code 


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Reporting Rule (updated for Version 

5010) provides consistent and specific 

patient identification information on 

reasons for patient identification errors 

on an eligibility for a health plan 

inquiry. This allows providers to know 

specifically why they did not receive a 

match in an eligibility for a health plan 

inquiry, instead of trying to determine 

for themselves the reasons for the error 

and what corrective action is needed. 

This rule improves the specificity and 

standardized use of the AAA codes that 

would give providers better feedback to 

understand what information is missing 

or incorrect in order to obtain a valid 

match. It defines a standard way for 

health plans to report errors in the 

eligibility response that cause a health 

plan not to be able to respond with a 

Version 5010 271 showing eligibility 

information for the requested patient or 

subscriber. The goal is to use a unique 

error code wherever possible for a given 

error condition so that the re-use of the 

same error code is minimized. Where 

this is not possible, the goal (when reusing an error code) is to return a 

unique combination of one or more 

AAA segments along with one or more 

of the submitted patient identifying data 

elements such that the provider will be 

able to determine as precisely as 

possible what data elements are in error 

and take the appropriate corrective 

action. 

The Phase II CORE 260: Eligibility & 

Benefits Data Content (270/271) Rule 

(updated for Version 5010) builds on 

and enhances the Phase I CORE 154: 

Eligibility and Benefits 270/271 Data 

Content Rule (updated for Version 5010) 

by requiring the provision in the 

eligibility response of the remaining 

patient deductible amounts for certain 

service type codes. The use of this rule 

further reduces the time it takes to track 

down this information manually or 

eliminates the time completely after the 

service has been rendered and decreases 

the provider’s accounts receivable. 

The CAQH CORE determined that 

Phase I CORE rules should focus on 

improving electronic eligibility and 

benefits verification, as eligibility is the 

first transaction in the claims process. 

Thus, if eligibility and benefits are 

accurately known to health care 

providers, all the associated electronic 

transactions that follow will be more 

effective and efficient. The Phase I 

CORE 154: Eligibility and Benefits 270/ 

271 Data Content Rule (updated for 

Version 5010) primarily outlined a set of 

requirements for health plans to return 

base (not remaining or accumulated) 

patient financial responsibility related 

to the deductible, co-pay and coinsurance for a set of 12 services in the 

ASC X12 005010X279A1 Eligibility 

Benefit Request and Response (270/ 

271), and for vendors, clearinghouses 

and providers to transmit and use that 

financial data. The Phase II CORE 260: 

Eligibility & Benefits Data Content (270/ 

271) Rule (updated for Version 5010) 

extends and enhances the CORE Phase 

I Version 5010 271 transaction by 

requiring the provision of remaining 

deductible amounts for both the Phase 

I required 12 service type codes and an 

additional set of 39 other service type 

codes. 

The Phase II CORE 270: Connectivity 

Rule (updated for Version 5010), which 

applies to both the eligibility for a 

health plan and health care claim status 

transactions, builds on CORE 153: 

Eligibility and Benefits Connectivity 

Rule (updated for Version 5010) by 

requiring additional connectivity 

specifications which further facilitate 

interoperability. This rule addresses the 

message envelope metadata (that 

information which defines the context 

for interpretation of the rest of the data 

in the message, for example, response 

codes, request methods, etc.) and the 

message envelope, (a fixed number of 

fields that show source, destination, tag, 

and communicator) and the submitter 

authentication requirements for both 

batch and real time transactions, and 

communications-level errors. 

This rule improves utilization of 

electronic transactions by enabling more 

entities to interoperate with other 

entities, including reducing the 

implementation barrier for small entities 

(for example, small providers). It also 

extends the Phase I CORE 153: 

Eligibility and Benefits Connectivity 

Rule (updated for Version 5010) and 

establishes a safe harbor by further 

specifying the connectivity that all 

covered entities must demonstrate and 

implement. 

Tables 3 and 4 summarize each of the 

CAQH CORE Phase I and Phase II 

Version 5010 operating rules, which we 

are adopting in this interim final rule 

with comment period, as reflected in 45 

CFR 162.920, 162.1203, and 162.1403. 

TABLE 3—THE CAQH CORE PHASE I OPERATING RULES

[Updated for version 5010] 

Rule High level requirements 

Phase I CORE 152: Eligibility and Benefit Real Time Companion Guide 

Rule, Version 1.1.0, March 2011 and CORE Version 5010 Master 

Companion Guide Template, 005010, 1.2, March 2011.

Goal: Standardize template/common structure of companion guides for 

more efficient reference. 

Requirements: Standard template/structure for companion guides. 

Phase I CORE 153: Eligibility and Benefits Connectivity Rule, Version 

1.1.0, March 2011.

Goal: Provide a ‘‘safe harbor’’ that application vendors, providers, and 

health plans can be assured will be supported by any trading partner 

including providers, to facilitate connectivity standardization and 

interoperability across the exchange of health information. 

Requirements: Supports data exchange over the public Internet (HTTP/ 

S). 

Phase I CORE 154: Eligibility and Benefits 270/271 Data Content Rule, 

Version 1.1.0, March 2011.

Goal: Enable more robust and consistent exchange of eligibility information. 

Requirements: Specifies what is to be included in the 271 eligibility for 

a health plan response to a 270 eligibility for a health plan inquiry. 

Phase I CORE 155: Eligibility and Benefits Batch Response Time Rule, 

Version 1.1.0, March 2011.

Goal: Streamline and improve flow of transactions. 

Requirements: Response time is 20 seconds or less for real time, next 

day for batch. 

Phase I CORE 156: Eligibility and Benefits Real Time Response Time 

Rule, Version 1.1.0, March 2011.

Phase I CORE 157: Eligibility and Benefits System Availability Rule, 

Version 1.1.0, March 2011.

Goal: Streamline and improve flow of transactions. 

Requirements: Systems must be available 86 percent per calendar 

week, and regular downtime must be published. 


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TABLE 4—THE CAQH CORE PHASE II VERSION 5010 

Rule High level requirements 

Phase II CORE 250: Claim Status Rule, Version 2.1.0, March 2011 ..... Goal: Promote increased availability and usage of the health care claim 

status transaction through rules for real-time and batch response 

times, system availability, and connectivity. 

Requirements: Application of real-time and batch response times, system availability, and connectivity rules for health care claim status 

transactions, which were derived from the eligibility Phase I infrastructure rules. 

Phase II CORE 258: Eligibility and Benefits 270/271 Normalizing Patient Last Name Rule, Version 2.1.0, March 2011.Goal: Improve patient matching. 

Requirements: Normalize the submitted and stored last name (e.g., remove special characters, suffixes/prefixes) before trying to match. 

Phase II CORE 259: Eligibility and Benefits 270/271 AAA Error Code 

Reporting Rule, Version 2.1.0, March 2011.

Goal: Provide better information on why a match did not occur in an 

eligibility for a health plan request. 

Requirements: Return specified AAA codes for each error condition. 

Phase II CORE 260: Eligibility & Benefits Data Content (270/271) Rule, 

Version 2.1.0 , March 2011.

Goal: Provide additional financial responsibility/patient liability information in response to an inquiry and support more high volume service 

type codes. 

Requirements: Includes remaining deductible amount (plus static copay 

and coinsurance information) in response to an eligibility for a health 

plan inquiry, along with 39 additional service type codes beyond the 

service type codes provided in Phase I. 

Phase II CORE 270: Connectivity Rule, Version 2.2.0, March 2011 ...... Goal: Provide more comprehensive connectivity specifications to further interoperability. 

Requirements: Includes requirements for two message envelope standards submitter authentication (i.e., username/password, digital certificates) and metadata. 

In 45 CFR 162.103, we provide that a 

standard transaction means ‘‘a 

transaction that complies with an 

applicable standard adopted under this 

part.’’ In this interim final rule with 

comment period we are adopting 

operating rules and requiring that 

covered entities comply with those 

operating rules when conducting a 

transaction for which we have adopted 

a standard. In order to reflect that 

requirement in regulation text, in part, 

we need to modify the definition of 

standard transaction to be clear that a 

standard transaction is one that 

complies with the adopted standard and 

the adopted associated operating rule. 

Therefore, we are amending the 

definition of standard transaction at 45 

CFR 162.103. See the ‘‘Additional 

Requirements’’ section for discussion of 

this change. 

In the following sections, we identify 

and discuss several specific CAQH 

CORE operating rule requirements that 

we believe require further explanation. 

These include acknowledgements, 

certification, and the use of the CAQH 

CORE companion guide template. We 

believe these topics require additional 

explanation because in this interim final 

rule with comment period, we are not 

adopting the operating rules that pertain 

to acknowledgements or the 

requirements within the adopted 

operating rules that pertain to 

acknowledgements, nor are we adopting 

the CAQH CORE certification policies. 

Additionally, we believe we need to be 

especially clear that we are adopting the 

CAQH CORE companion guide template 

to avoid any confusion as to whether the 

companion guide template is included 

as part of the companion guide rules 

under CAQH CORE Phase I and Phase 

II rules we are adopting. 

a. Acknowledgements Operating Rules 

Acknowledgements are responses 

transmitted by EDI that inform 

submitters whether or not their 

transaction has been received or if there 

are problems with the transaction. The 

use of acknowledgements adds a great 

deal of 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 the February 2010 report to the 

NCVHS, the Designated Standards 

Maintenance Organization (DSMO), 

which receives and processes requests 

for adopting new standards or 

modifying adopted standards 

recommended that the NCVHS consider 

acknowledgements for adoption as 

HIPAA transactions, using the Version 

5010 999, 271, 277, and TA1 standards. 

In the DSMO recommendation, it was 

noted that acknowledgements help the 

health care industry better reconcile the 

status of transmitted EDI transactions, 

especially when sending claims and 

remittance transactions. The transaction 

sender benefits from knowing that the 

receiving party has successfully 

received the transaction or has 

encountered errors that need to be 

reconciled. 

We have received anecdotal reports of 

wide-spread industry use of 

acknowledgements on a voluntary basis, 

and we understand that provisions for 

acknowledgements are contained in 

many health plans’ companion guides. 

It is our understanding also that the 

health care industry has long supported, 

and even anticipated, the adoption of an 

acknowledgement transaction standard 

under HIPAA. The CAQH CORE 150 

and 151 rules (updated for Version 

5010) specifically pertain to requiring 

the use of the Version 5010 999, 271, 

and 277 acknowledgements. 

Additionally, the use of 

acknowledgements is referenced 

throughout many of the other CAQH 

CORE rules adopted in this interim final 

rule with comment period, including 

the CORE v5010 Master Companion 

Guide Template. 

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 new provision is an indication of 

Congress’ recognition of the important 

role acknowledgements play in EDI. 


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Although we are not requiring 

compliance with any of the CAQH 

CORE rule requirements regarding 

acknowledgements, 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 

regulation text at § 162.1203 and 

§ 162.1403. 

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. 

We welcome industry and stakeholder 

comments on this topic. 

b. CAQH CORE Operating Rules 

Certification 

Currently, the CAQH CORE 

administers a voluntary certification 

process, for a fee. Once the entity passes 

the certification requirements, the 

CAQH CORE assigns the status of 

‘‘CORE-certified Entity’’ and requires 

those entities to adhere to the CAQH 

CORE policies. The CAQH CORE 

operating rules are free and available for 

voluntary use today, and any trading 

partner, including providers, can opt to 

use them, they would simply not be able 

to claim that they were ‘‘CORE certified 

entities.’’ 

Throughout the CAQH CORE rules we 

are adopting, there are also many 

references to CORE certification. For 

example, the rules reference COREcertified entity, CORE-authorized testing 

vendor, CORE-certified participant, and 

the like. In many places, the rules 

describe what is required for the 

successful completion of the approved 

CORE test suite, CORE testing 

requirements, etc. In this interim final 

rule with comment period, we are not 

requiring covered entities to obtain the 

CAQH CORE certification or to adhere 

to the CAQH certification policies for 

Phase I and Phase II operating rules. We 

want to be clear that we are not 

requiring compliance with any aspect of 

CORE certification. 

We note that section 1173(h)(1)(A) of 

the Act (as added by section 1104(b)(2) 

of the Affordable Care Act) requires that 

health plans certify to the Secretary no 

later than December 31, 2013 that they 

are in compliance with any applicable 

HIPAA standards and associated 

operating rules for the eligibility for a 

health plan, health care claim status, 

and health care payment and remittance 

advice transactions. Until we develop a 

certification process in accordance with 

section 1173(h) of the Act specifying 

health plan compliance requirements, 

health plans and all other covered 

entities are not required to certify 

compliance with the CAQH CORE 

Version 5010 operating rules we are 

adopting. We reflect the exclusion of 

CORE certification in regulation text at 

§ 162.1203 and § 162.1403. 

c. Use of the CAQH CORE Companion 

Guide Template 

During the July 2010 NCVHS hearing, 

the NCVHS also heard testimony 

concerning the continued use of 

companion guides when operating rules 

are adopted. The NCVHS indicated that 

it does not wish to encourage the 

perpetual use of companion guides, 

which subvert the goals of 

administrative simplification; however, 

it acknowledged that companion guides 

may continue to be necessary for 

proprietary information, transmission 

instructions, and other limited business 

purposes, and will likely never be 

totally replaced by operating rules or 

updated versions of the standards. 

The NCVHS recommended that the 

Secretary require that any companion 

guides deemed necessary by health 

plans not conflict with the HIPAA 

standards, implementation 

specifications and operating rules, and 

that they follow a standard format and 

content agreed upon by industry 

consensus across all sectors. The 

NCVHS stated that companion guides 

should be limited to providing basic 

trading partner, including providers, 

facts, such as contact information, Web 

sites, service phone numbers, and other 

necessary information for conducting 

business, etc. 

With input from health plans, system 

vendors, provider representatives and 

healthcare/HIPAA industry experts, the 

CAQH CORE has developed a 

companion guide template as part of 

their Phase I and Phase II operating 

rules (updated for Version 5010) that 

organizes information into several 

simple sections and gives health plans 

the flexibility to tailor the document to 

meet their particular needs. The CORE 

152: Eligibility and Benefit Real Time 

Companion Guide Rule states that the 

ASC X12 005010X279A1 Eligibility 

Benefit Request and Response (270/271) 

transactions must follow the format/ 

flow as defined in the CORE v5010 

Master Companion Guide Template. 

The CORE 250: Claim Status Rule 

(updated for Version 5010) includes a 

requirement that entities using the ASC 

X12N/005010X212 Health Care Claim 

Status Request and Response (276/277) 

transactions must follow the format/ 

flow as defined in the Phase I CORE 

152, which is the CORE v5010 Master 

Companion Guide Template. The CAQH 

CORE companion guide template can be 

found on the CAQH CORE Web site at 

http://www.caqh.org/pdf/CLEAN5010/

MasterCompGuidTemp-Version 

5010.pdf. 

We are requiring that covered entities 

that use or plan to use companion 

guides comply with the CORE 152 and 

CORE 250 rules requirement to use the 

CORE v5010 Master Companion Guide 

Template for the eligibility for a health 

plan and health care claim status 

transactions. 

d. Updates to Standards and Operating 

Rules 

Section 1173(i) of the Act provides for 

the establishment of a review committee 

for the purposes of reviewing and 

amending the adopted standards and 

operating rules. It calls for a hearing of 

this review committee no later than 

April 2014 and not less than biennially 

thereafter as well as a report outlining 

recommendations for updating and 

improving the standards and operating 

rules. Per the statute, this review 

committee can include the NCVHS, or 

any appropriate committee as 

determined by the Secretary. 

Additionally, section 1173(a)(5) of the 

Act provides for the solicitation of input 

from the NCVHS and the Health 

Information Technology Standards 

Committee, as well as the standards 

setting organizations and stakeholders 

as determined appropriate by the 

Secretary for the purposes of describing 

‘‘(i) whether there could be greater 

uniformity in financial and 

administrative activities and items, as 

determined appropriate by the 

Secretary; and (ii) whether such 

activities should be considered financial 

and administrative transactions * * * 

for which the adoption of standards and 

operating rules would improve the 

operation of the health care system and 

reduce administrative costs.’’ 

Finally, we note that this interim final 

rule with comment period does not 

specify the timing or the process for 

updating operating rules. The timing 

and process for updating these, as well 

as future operating rules will be 

forthcoming. 

e. Additional Information 

The current definition of standard at 

45 CFR 160.103 is written so broadly 

that it could include operating rules as 

we are defining that term at § 162.103. 

However, as we have determined that 

operating rules are separate and distinct 

from standards, and that standards do 

not encompass operating rules, we 

believe it is necessary to revise the 

definition of standard to specifically 


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exclude operating rules. Therefore, we 

have amended the definition of standard 

at § 160.103 to exclude operating rules. 

Currently, 45 CFR 162.103 provides 

that a standard transaction means ‘‘a 

transaction that complies with an 

applicable standard adopted under this 

part.’’ In this interim final rule with 

comment period we are adopting 

operating rules and requiring covered 

entities to comply with those operating 

rules when conducting a transaction for 

which we have adopted a standard. We 

believe it is necessary to revise the 

definition of a standard transaction in 

order to be clear that a standard 

transaction is one that uses the adopted 

standard as well as the adopted 

operating rule for that transaction. 

Therefore, we are amending the 

definition of a standard transaction at 45 

CFR 162.103 to mean ‘‘a transaction that 

complies with an applicable standard 

and associated operating rules adopted 

under this part.’’ 

Section 1173(a)(4)(A)(iv) of the Act 

provides that the standards and 

associated operating rules must 

‘‘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).’’ We 

interpret this provision to mean that 

covered entities may not require 

additional data conditions of their 

trading partners, including providers, 

outside of those already included in the 

adopted standards and associated 

operating rules, except where it is 

necessary to implement State or Federal 

law, or to protect against fraud and 

abuse. Our regulations at 45 CFR 

162.915 already place restrictions on 

covered entities with regard to what 

they may require of their trading 

partners including providers, 

concerning standards. Currently, under 

§ 162.915(a), covered entities may not 

enter into a trading partner agreement 

that would change the definition, data 

condition, or use of a data element or 

segment in a standard. We do not need 

to do anything to incorporate the 

statutory requirement of section 

1173(a)(4)(iv) of the Act into our 

regulations with regard to standards; 

however we believe it is appropriate to 

revise § 162.915(a) to expand the 

restriction to include operating rules. 

Therefore, we are amending § 162.915(a) 

to include operating rules. The law 

permits limited circumstances under 

which covered entities may require 

additional data conditions where 

necessary to implement State or Federal 

law, or to protect against fraud and 

abuse. Therefore, we are also amending 

§ 162.915(a) to reflect that narrow 

exception. 

f. Conclusion 

Based on our analysis of the CAQH 

CORE operating rules and the 

recommendations of the NCVHS, and 

for the reasons provided in the previous 

discussions, we are adopting the CAQH 

CORE operating rules (updated for 

Version 5010), including the companion 

guide template, for the non-retail 

pharmacy eligibility for a health plan 

and health care claim status 

transactions, as reflected at 45 CFR 

162.920, 162.1203, and 162.1403. We 

are not requiring compliance with any 

of the requirements of the operating 

rules that pertain to the use of 

acknowledgements and CAQH CORE 

certification. 

2. NCPDP Telecommunication Standard 

Implementation Guide Version D.0 

Operating Rules for Retail Pharmacy 

Transactions 

In its testimony before the NCVHS, 

the NCPDP stated that the NCPDP 

Version D.0 standard represents retail 

pharmacy industry consensus on 

clarification of transactions, data 

elements, data values, and situations of 

usage. Additionally, the NCPDP testified 

at the July 2010 NCVHS hearing that it 

also publishes a free NCPDP Version D.0 

Editorial document, which is updated 

quarterly, and contains frequently asked 

questions, examples, and further 

clarifications, as well as addresses 

Medicare Part D prescription drug 

program needs that the industry brings 

forward. As business requirements 

change, as clarifications are needed, and 

as questions are asked, the NCPDP has 

indicated that, where possible, the 

information in the NCPDP Version D.0 

Editorial will be incorporated into 

future versions of the NCPDP Version 

D.0 standard to further support ongoing 

retail pharmacy business needs. 

The NCPDP formally requested that 

the NCVHS recommend to the Secretary 

that the NCPDP Version D.0 standard be 

adopted as the operating rule for use 

with the retail pharmacy eligibility for 

a health plan transaction, and the 

NCVHS included this recommendation 

in its September 30, 2010 letter to the 

Secretary. 

The pharmacy industry has long been 

utilizing NCPDP standards to conduct 

electronic transactions. These standards 

provide for real-time claims 

adjudication, eligibility and benefit 

verification, real-time ordering by the 

physician, and sharing of medication 

history. We believe that the NCPDP 

Version D.0 standard itself provides 

enough detail and clarity to 

operationalize the standards to the point 

where no gaps exist that operating rules 

would need to fill, so that no further 

infrastructure or data content rules need 

to be adopted at this time. Additionally, 

we believe that the NCPDP Version D.0 

standard already fulfills the purposes 

and principles of sections 1173(a)(4)(A) 

and (B) of the Act so that the adoption 

of operating rules to supplement or 

enhance the standard is not appropriate 

at this time. 

III. Effective and Compliance Dates 

Section 1173(g)(4)(B)(i) of the Act 

states that ‘‘[t]he set of operating rules 

for eligibility for a health plan and 

health claim status transactions shall be 

adopted not later than July 1, 2011, in 

a manner ensuring that such operating 

rules are effective not later than January 

1, 2013.’’ In each of our previous HIPAA 

rules, the date on 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. Here, 

the Act requires that the operating rules 

be effective not later than January 1, 

2013. This means that covered entities 

must be in compliance with the 

operating rules by January 1, 2013. If we 

receive comments that compel us to 

change any of the policies we are 

finalizing in this interim final rule with 

comment period, we will seek to 

finalize any such changes by January 1, 

2012, to allow sufficient time for 

industry preparation for compliance. 

IV. Waiver of Proposed Rulemaking 

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 


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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 an agency to 

dispense with normal rulemaking 

requirements for good cause if the 

agency makes a finding that notice and 

comment procedures are impracticable, 

unnecessary, or contrary to the public 

interest. Section 553(d)(3) of the APA 

allows the agency to avoid the 30-day 

delay in effective date where the agency 

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.’’ It is clear to us the statute 

intends that the ordinary notice and 

comment rulemaking procedures of the 

APA do not apply here. We are 

statutorily required to proceed with an 

interim final rule with comment period, 

which means we are compelled by the 

statute to dispense with normal APA 

notice and comment procedures. In light 

of the statutory requirement for us to 

publish an IFC for the adoption of these 

operating rules, we conclude that it is 

unnecessary for us to undertake 

ordinary notice and comment 

procedures and therefore, for good 

cause, we waive them. 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 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. That is not the 

case here. In this case, covered entities 

are not required to comply with the 

adopted operating rules until January 1, 

2013, nearly 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 

the rule does not change that fact. A 

waiver is in fact inconsequential here to 

covered entities—their statutorilyprescribed date of compliance remains 

January 1, 2013. Because we believe the 

30-day delay is unnecessary, we find 

good cause to waive it. 

V. 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 

each of these issues for the following 

section of this document that contains 

information collection requirements 

(ICRs): Specifications: Companion 

Guides 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 variances 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. As 

previously stated, there are currently 

more than 1,200 such companion guides 

in use today. 

Use of the CORE 152: Eligibility and 

Benefit Real Time Companion Guide 

Rule and the CORE 250: Claim Status 

Rule, two of the operating rules adopted 

in this interim final rule with comment 

period provide 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. 

The increasing use of health care EDI 

standards and transactions has raised 

the issue of the applicability of the PRA. 

The 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, is the initial onetime burden 

on health plans to use a standardized 

template for companion guides. 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 and, 

in the case of the NCPDP standards, 

they issue payer sheets specific to their 

requirements and often times 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 companion guide templates serve 

the purpose of providing a uniform 

structure for health plans to use when 

preparing companion guides. The use of 

these templates by health plans 

currently issuing companion guides is 

considered to be a one-time action and 

is considered a permanent standard 


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Federal Register / Vol. 76, No. 131 / Friday, July 8, 2011 / Rules and Regulations 40471 

template for a health plan companion 

guide. 

The information collection burden 

associated with this interim final rule 

with comment period is for the costs for 

adapting a health plan companion 

guide(s) to the CORE v5010 Master 

Companion Guide Template, 005010, 

1.2, March 2011 as required by the 

CAQH CORE operating rules for the 

eligibility for a health plan and health 

care claim status standard transactions. 

This is a one-time burden on health 

plans that will commence no later than 

January 1, 2013, the date by which 

HIPAA covered entities must be using 

the adopted operating rules for 

eligibility for a health plan and health 

care claim status transactions. 

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 trading partners, including 

providers, to access; therefore, printing 

and shipping costs are not considered. 

As the transition to the template is a 

one-time requirement, we do not 

estimate any ongoing labor costs 

associated with the use of this template 

beyond the initial first year conversion. 

We have estimated the one-time 

conversion to the template will cost 

industry $3,028,000. Our calculations 

were determined 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 at anywhere 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 of 

information, reconfiguration of the 

sequence in which information appears, 

addition of information, and other word 

processing and related tasks. It also 

would require specific technical 

knowledge, such as expertise in the 

Version 5010 standard transactions. We 

estimate that a technical writer, at an 

estimated hourly salary rate of $31.55, 

would make these revisions. Using the 

high estimate obtained in testimony to 

the NCHVS by the American Medical 

Association of 1,200 companion guides 

currently in use, we calculate an 

estimated average of 40 pages, (48,000 

responses) at an average rate of 2 hours 

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

hours per page × hourly rate of $31.55), 

for a one-time burden of $3,028,800 

across the industry for health plans that 

issue companion guides to adopt the 

standard template for health plan 

companion guides. 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. 

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 interim final 

rule; or 

2. Submit your comments to the 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, Attention: CMS Desk Officer, 

CMS–0032–IFC; Fax: (202) 395–6974; or 

E-mail: OIRA_submission@omb.eop.gov. 

VI. Response to Comments 

Because of the large number of items 

of correspondence we normally receive 

on Federal Register documents 

published for comment, we are not able 

to acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified in the DATES section of 

this preamble, and, if we proceed with 

a subsequent document, we will 

respond to the comments in the 

preamble to that document. 

VII. Regulatory Impact Analysis 

A. Introduction 

We have examined the impacts of this 

interim final rule with comment as 

required by Executive Order 12866 on 

Regulatory Planning and Review 

(September 30, 1993), the Regulatory 

Flexibility Act (RFA) (September 19, 

1980, Pub. L. 96–354) (as amended by 

the Small Business Regulatory 

Enforcement Fairness Act of 1996, Pub. 

L. 104–121), section 1102(b) of the 

Social Security Act, section 202 of the 

Unfunded Mandates Reform Act of 1995 

(Pub. L. 104–4), Executive Order 13132 

on Federalism (August 4, 1999), and the 

Congressional Review Act (5 U.S.C. 

804(2)). 

We have prepared a Regulatory 

Impact Analysis that, to the best of our 

ability, presents the costs and benefits of 

this interim final rule with comment 

period. 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). This rule has been designated 

an ‘‘economically’’ significant 

regulatory action, under section 3(f)(1) 

of Executive Order 12866 as it will have 

an impact of over $100 million on the 

economy in any 1 year. Accordingly, the 

rule has been reviewed by the Office of 

Management and Budget. We anticipate 

that the adoption of these operating 

rules would result in benefits that 

outweigh the costs to providers and 

health plans. 

Our Regulatory Impact Analysis also 

meets the various requirements of the 

Unfunded Mandates Reform Act of 1995 

(URMA). Section 202 of the URMA 

requires that agencies assess the 

anticipated costs and benefits before 

issuing any rule whose mandate 

requires spending in any 1 year of $100 

million in 1995 dollars, updated 

annually for inflation in any 1 year by 

State, local, or Tribal governments, in 

the aggregate, or by the private sector. 

That threshold level is currently 

approximately $136 million. Based on 

our analysis, we anticipate that the 

private sector would incur costs 

exceeding $136 million per year in the 

first 2 years following publication of the 

rule. 

In addition, under section 205 of the 

UMRA (2 U.S.C. 1535), having 

considered at least three alternatives 

that are referenced in the RIA section of 

this rule, HHS has concluded that the 

provisions in this rule are the most costeffective alternative for implementing 

HHS’ statutory obligation of 

administrative simplification. 

B. Current State, Need for Mandated 

Operating Rules and General Impact of 

Implementation 

Based on the current environment, 

there is a need for operating rules. When 

a patient calls to set up an appointment 

with a provider, or comes into the office 

or hospital for an appointment, a staff 

member will often verify the patient’s 

eligibility, coverage, and cost-sharing 

requirements. However, not all 


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providers will verify the eligibility of 

their patients, and even for providers’ 

offices that do, often just a subset of 

patients are verified. Some providers, 

however, do not conduct eligibility 

verification at all, and a claim is 

submitted to the health plan without an 

eligibility inquiry. 

Eligibility verification is done in a 

variety of ways including the following: 

• Accessing patient ‘‘eligibility’’ 

information via a health plan’s secure 

Web site. 

• Telephone. 

• The ASC X12 270 eligibility for a 

health plan inquiry. This is an 

electronic data interchange (EDI). 

After an actual claim has been 

submitted to a health plan, the need 

sometimes arises for a provider to 

follow-up on the claim regarding where 

it is in the payment process. This is 

called a claim status inquiry and, again, 

this inquiry is conducted via Web site, 

telephone, or through EDI. 

Currently, many providers do not use 

EDI at all as a means to conduct these 

two transactions and, of those that do, 

do not necessarily conduct them 

through EDI for every patient. Rather, 

most providers that use EDI transactions 

to verify a patient’s eligibility or claim 

status also use telephone or other 

means. 

In a larger context, most providers use 

EDI, but only for some transactions. For 

instance, according to the Healthcare 

Efficiency Index and the Oregon Study, 

over 75 percent of health care claims are 

now submitted by providers through 

EDI. 

Because of the infinite number of 

variations of a specific provider’s use of 

EDI, it is very difficult to determine the 

following: (1) the number of providers 

who use the eligibility for a health plan 

or the claim status transactions (or any 

other specific transaction) via EDI; and 

(2) the percent of eligibility for a health 

plan or claim status transactions that the 

average provider makes through EDI. 

However, studies have estimated the 

total number of electronic transactions 

conducted by all providers, even at the 

level of a specific transaction, and we 

will use such estimates to arrive at our 

saving assumptions. 

We assume that most providers have 

the technological capacity to perform 

EDI (or have hired a trading partner 

with that capacity). We base this 

assumption on— (1) the high percentage 

of claim submissions that are conducted 

through EDI; (2) responses to the Oregon 

study from providers indicating that 96 

percent of hospitals and 93 percent of 

ambulatory clinics (that is, physicians 

offices) are ready or would be ready for 

EDI transactions within 2 years; and (3) 

the impact analysis in the Modifications 

proposed rule (73 FR 49757 through 

49790) that, through industry 

interviews, stated ‘‘we do not believe 

that the number of providers who have 

no electronic capability is very high.’’ 

There are a number of studies that 

have illustrated the benefits and savings 

in conducting EDI in contrast to manual 

or paper-based transactions. We have 

noted a number of them in the Impact 

Analysis Resources section in this 

interim final rule with comment period. 

The basic idea is that systems can 

conduct these transactions faster, less 

expensive, and more accurate than 

human intervention. Specific to our 

purpose, it is faster, less expensive, and 

more accurate than human intervention 

for a provider’s system to communicate 

with a health plan’s system to verify the 

eligibility of a patient or check the 

status of a claim. 

So, why do not the majority of 

providers who have EDI capacity: (1) 

Use EDI to conduct the eligibility for a 

health plan or the claim status 

transaction; or (2) verify all their 

patients’ eligibility through EDI instead 

of just a few? In the Oregon Survey, the 

most robust study with regard to a 

provider environment, 87 percent of 

hospitals and 60 percent of physician 

clinics said that the barrier to using the 

electronic eligibility for a health plan 

transaction is that health plans ‘‘do not 

provide enough information in response 

to this type of inquiry.’’ This was the 

most frequently selected response 

among the providers surveyed. In 

addition, 16 percent of hospitals and 20 

percent of physician clinics stated that 

the barrier was that health plans ‘‘do not 

provide fast enough responses.’’ 

The June 22, 2009 AMA document 

entitled ‘‘Standardization of the Claims 

Process: Administrative Simplification 

White Paper’’ (hereinafter referred to as 

the 2009 AMA White Paper) describes 

the importance of a robust response in 

the eligibility for a health plan 

transaction: ‘‘Receiving an explicit 

answer can quickly assist in patient 

scheduling, billing the appropriate 

payer with financial responsibility for 

the service, communicating the patient’s 

financial responsibility and reducing 

the number of denied claims which the 

physician practice must manually 

handle.’’ (http://www.ama-assn.org/ 

ama1/pub/upload/mm/368/adminsimp-wp.pdf) 

The picture that emerges is that 

providers conduct the electronic 

eligibility for a health plan transaction 

only with health plans that return 

robust eligibility information and return 

the response quickly. If a provider’s staff 

will get more and faster eligibility 

information out of a specific health plan 

by picking up the phone or looking up 

the patient online, then the manual 

transaction will be used instead of the 

electronic transaction. 

In terms of the claim status inquiry, 

we know that the average providers’ 

office telephones the health plan in 

order to check on claim status. The 

‘‘Health Care Administration Expense 

Analysis’’, produced by the State of 

Washington Office of the Insurance 

Commissioner, found that 37 percent of 

the telephone calls from providers to the 

State’s largest insurer were claim status 

inquiries (costing the plan $4 million a 

year on staffing costs to answer only 

claim status calls) (Health Care 

Administration Expense Analysis: Blue 

Ribbon Commission Recommendation 

#6, Final Report, 11–16–2007, http:// 

www.insurance.wa.gov/consumers/ 

documents/ 

BRC_Efficiencies_Report.pdf.) Other 

studies indicate that less than 40 

percent of all claim status inquires are 

conducted electronically. Although we 

do not have direct data that informs the 

reasons why providers use the 

telephone instead of EDI for claim status 

inquiries, we can assume that the same 

dynamic as the eligibility verification is 

at play: If the electronic transaction is 

slower and produces less information, 

than a manual process will be used 

instead. 

Operating rules address this need for 

more and faster information. As noted 

in the provision section, this interim 

final rule with comment period is 

adopting specific operating rules with 

requirements regarding response times 

and robust responses about a patient’s 

eligibility from health plans. 

A number of extensive surveys, both 

private and governmental, have 

reinforced the causal link between 

requiring health plans to return fast, 

robust responses to the eligibility for a 

health plan electronic request and an 

increased use in the transaction itself. In 

its Blue Ribbon report, the state of 

Washington reported that less than 9 

percent of eligibility verification 

requests are conducted electronically in 

the state, while the state of Utah 

reported closer to 50 percent usage. The 

report credited Utah’s adoption rate 

with the State having an ‘‘enhanced 

transaction’’ in place for the eligibility 

verification in which providers are told 

exactly the benefits a particular patient 

has. The report concluded that 

‘‘improving the enhanced message [of 

the eligibility for a health plan 

response]* * * will greatly improve 

this area of administration.’’ 

The Oregon Survey explicitly 

expressed the causal link between 


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‘‘standardizing the standard’’ and 

greater use of EDI by concluding from 

its research that ‘‘the healthcare 

industry is unlikely to take major strides 

toward automated processes until there 

is greater standardization of the 

methods for conducting the transactions 

electronically.’’ 

The 2009 AMA White Paper also 

speaks to providers’ need for robust 

health plan responses to the eligibility 

for a health plan transactions and how 

such a response would affect providers: 

‘‘Such information would also be 

extraordinarily valuable to physicians to 

ensure accurate and timely payment, 

and this value would encourage widespread utilization of the standard 

transactions by physicians and 

increased physician automation. The 

AMA strongly supports the efforts of the 

Council on Affordable Quality 

Healthcare Committee on Operating 

Rules for Information Exchange [CAQH 

CORE] to not only expand the value of 

the eligibility standard transaction but 

also continue its efforts of adding value 

to electronic remittance advice and 

other standard transactions * * *’’ 

The IBM study demonstrates that 

electronic eligibility for health plan 

transactions would increase with use of 

operating rules. The study illustrates 

that providers’ use of the eligibility for 

a health plan transaction increases on 

two levels after operating rules are 

adopted. First, more patients as a whole 

are having their eligibility verified, 

either electronically or otherwise. 

Second, there is an increased use of the 

electronic transaction. The participating 

health care entities in the study reported 

increases in use of the eligibility for a 

health plan electronic transaction at the 

average rate of 33 percent in the first 

year after adopting CORE Phase I 

rules—a rate that participants of the 

study credited to operating rules. 

Additionally, the IBM study showed 

that providers saw on average 20 

percent increase of patients verified 

prior to a visit, significantly reducing 

practice administrative and financial 

burden at the point of care. 

On a more general level, in both the 

Transactions and Code Sets final rule 

and the update to the standards in the 

Modifications final rule, the savings 

analysis has been based on the 

increased use of electronic transactions 

due to the implementation of standards 

(in the Transactions and Code Sets final 

rule) and increased use of electronic 

transactions due to improved standards 

(in the Modifications final rule). The 

cost benefit of both these rules rested on 

the causal relationship between 

improved standards and the predicted 

increased use of EDI (and the cost 

savings that use of EDI brought with it). 

The impact analysis for this interim 

final rule with comment period rests on 

the same causality, except that we are 

more specific in how operating rules 

cause increased use of electronic 

transactions. 

As an example, the need for more 

robust and faster response to the 

eligibility for a health plan transaction 

has been realized by states seeking to 

reduce the administrative costs of health 

care in general. In the ‘‘Health Care 

Administration Expense Analysis,’’ 

required by Colorado state law and 

developed under the state’s 

Commissioner of Insurance, 

recommendations included requiring all 

health plans and providers to use CAQH 

CORE Phase I and II data content and 

infrastructure rules for the eligibility for 

a health plan and the claim status 

transactions ‘‘as a means of streamlining 

and standardizing administrative 

interoperability between plans and 

providers.’’ (Senate Bill 08–135 Work 

Group to Develop Standardized 

Electronic Identification System for 

Health Insurance: Final Report and 

Recommendations. September 3, 2009; 

http://caqh.org/Host/CORE/ 

SB135_COreport.pdf) 

As well, Minnesota has a set of 

companion guides for the HIPAA 

standard transactions. These companion 

guides are analogous to the operating 

rules developed by the CAQH CORE in 

that they are intended to standardize 

‘‘administrative processes when 

implementation of the processes will 

reduce administrative costs.’’ We have 

already mentioned initiatives and 

reports by Oregon and Washington that 

seek to achieve similar savings. (http:// 

www.health.state.mn.us/auc/ 

mn270271guide.pdf). 

It is evident that both state 

governments and private industry 

recognize the cost advantage to 

operating rules and similar ‘‘enhanced 

transaction’’ business rules to 

accompany the HIPAA standard 

transactions, in this case with regard to 

the eligibility for a health plan 

transaction. However, both state 

governments and private industry 

recognized the need for the adoption of 

operating rules on the Federal level 

because of the clear advantages to a 

faster adoption by all covered entities 

that a Federal mandate would engender. 

As illustrated by the numerous State 

and private initiatives, there is the 

danger that, without Federally 

mandated operating rules, different sets 

of ‘‘operating rules’’ will emerge, on a 

State by State or health plan by health 

plan basis. In such a case, both plans 

and providers would have to continue 

to customize their EDI transactions 

depending on the operating rules 

required under a particular state or 

contract. 

As well, some health care entities may 

be slow to adopt and implement any 

‘‘operating rules’’ voluntarily for fear 

that the Federal government, or a 

particular State government, will adopt 

‘‘operating rules’’ that require a new set 

of implementation requirements with 

associated costs. 

Finally, most providers now have to 

conduct transactions such as the 

eligibility for a health plan and the 

claim status transaction through two 

different processes, electronic and 

manual and paper-based, depending on 

the health plan that covers the patient 

or processes the claim. As long as some 

health plans continue to conduct 

standard transactions that are not fast or 

robust enough for providers’ needs, 

providers may continue to conclude that 

manually processing all such 

transactions is easier and more 

economical. 

C. Regulatory Flexibility Analysis: 

Impact on Small Entities 

The Regulatory Flexibility Act (RFA) 

of 1980, Public Law 96–354, requires 

agencies to describe and analyze the 

impact of the rule on small entities 

unless the Secretary can certify that the 

regulation will not have a significant 

impact on a substantial number of small 

entities. In the health care sector, a 

small entity is one with between $7 

million to $34.5 million in annual 

revenues or is a nonprofit organization. 

For details, see the SBA’s Web site at 

http://www.sba.gov/sites/default/files/ 

Size_Standards_Table.pdf (refer to 

Sector 62—Health Care and Social 

Assistance). (Accessed 2–1–11). 

For the purposes of this analysis 

(pursuant to the RFA), nonprofit 

organizations are considered small 

entities; however, individuals and 

States are not included in the definition 

of a small entity. We attempted to 

estimate the number of small entities 

and provided a general discussion of the 

effects of this interim final rule with 

comment period, and where we had 

difficulty, or were unable to find 

information, we solicited industry 

comment. We discuss the impact of the 

rule on small entities in section VII.K. 

of this interim final rule with comment 

period. 

As well, section 1102(b) of the RFA 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 603 of the 


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RFA. For purposes of section 1102(b) of 

the RFA, we define a small rural 

hospital as a hospital that is located 

outside of a Metropolitan Statistical 

Area and has fewer than 100 beds. (See 

the discussion at section VII.K. of this 

interim final rule with comment period 

for our discussion of the expected 

impact on small rural hospitals.) 

D. Alternatives Considered 

In deciding to adopt operating rules 

for the eligibility for a health plan and 

the health care claim status transactions, 

we considered a number of alternatives, 

on which we solicit public and industry 

comments. 

1. Do Not Adopt Operating Rules for 

Non-Retail Pharmacy Industry 

We considered this option, but 

determined that this would only be 

appropriate if operating rules for use in 

the health care industry were not 

available, or available and already in 

use on a voluntary basis. Per the 

aforementioned NVCHS hearings, 

public testimony and analysis, the 

NCVHS deemed that two authoring 

entities who came forward and applied 

to be candidates as authoring entities 

were qualified under the stipulations for 

the adoption of operating rules in the 

Affordable Care Act to act as authoring 

entities, namely the Council for 

Affordable Quality Healthcare’s (CAQH) 

Committee on Operating Rules for 

Information Exchange (CORE) and the 

National Council for Prescription Drug 

Programs (NCPDP). The CAQH CORE 

offered operating rules that, with some 

exceptions, have been determined to be 

feasible for use with the eligibility for a 

health plan transaction, and the health 

care claim status transaction under 

HIPAA, as specified in the Affordable 

Care Act. The NCPDP also offered 

operating rules, which are already in 

use in all retail pharmacies by virtue of 

the pharmacies’ use of the NCPDP 

Telecommunications standard Version 

5.1, and which will be updated on 

January 1, 2012, when the update to this 

standard, NCPDP Telecommunications 

standard Version D.0, goes into effect. 

Additionally, not adopting any 

operating rules for the eligibility for a 

health plan transaction and health care 

claim status transaction, as required by 

the Affordable Care Act, would violate 

the Act’s statutory requirements under 

section 1104(c) ‘‘Promulgation of 

Rules’’, which requires the Secretary to 

adopt operating rules for the two 

aforementioned electronic health care 

transactions by no later than July 1, 

2011 with a compliance date of January 

1, 2013. 

2. Adopt Another Authoring Entity’s 

Operating Rules 

As previously discussed in section 

II.B. of this interim final rule with 

comment period, section 1104(b)(3) of 

the Affordable Care Act amends section 

1173(g)(3)(a) of the Act by charging the 

NCVHS with advising the Secretary as 

to whether a nonprofit entity meets the 

statutory requirements for developing 

the operating rules to be adopted by the 

Secretary, and outlines the entity’s 

specific qualification requirements. Of 

those organizations testifying at the 

NCVHS hearing, two organizations 

formally requested to be considered 

authoring entities for operating rules, 

namely the CAQH CORE and the 

NCPDP. 

In its testimony before the NCVHS, 

the ASC X12, the standards 

development organization responsible 

for the development of the Version 5010 

standards for electronic health care 

transactions, expressed its support for 

the NCPDP being named as an operating 

rule authoring entity not only for the 

pharmacy industry, but for the entire 

health care industry (transcript of the 

July 20, 2010 NCVHS Subcommittee on 

Standards hearing at http:// 

www.ncvhs.hhs.gov). The ASC X12’s 

support was based upon their belief 

that— 

• The NCPDP’s ANSI-approved 

organization status supports consensus 

building and open participation; 

• The infrastructure for the NCPDP is 

able to handle the development of 

operating rules in the associated 

workgroup task group without any 

modifications to procedures or 

processes; 

• The NCPDP members are frequent 

users of the ASC X12 standards and 

thus the NCPDP is familiar with them; 

and 

• The pharmacy industry’s growing 

experience with real-time eligibility, 

real-time claim status, and real-time 

submission of claims beyond pharmacy. 

Based on the ASC X12 testimony, the 

NCPDP stated that it would consider 

playing a larger role if the NCVHS 

deemed that there should only be one 

authoring entity, and would take on the 

role of more than just the NCPDP 

standards, as appropriate. 

However, with respect to the 

requirements for the operating rules 

themselves, neither the NCPDP nor the 

CAQH CORE met all of the requirements 

for operating rules for both health care 

segments. As noted earlier, the July 

2010 NCVHS hearings were followed by 

a request from the NCVHS to each 

candidate to respond to a detailed 

questionnaire about the statutory 

requirements. The questionnaire 

solicited specific documentation to 

validate the testimony. Based on review 

of the CAQH CORE and the NCPDP 

submissions to this questionnaire the 

NCVHS determined, and we have 

concurred, that neither organization can 

unilaterally provide operating rules to 

support both retail pharmacy and nonretail pharmacy health care segments. 

The NCPDP naturally focuses on the 

NCPDP retail pharmacy standards, 

while the CAQH CORE has focused on 

the ASC X12 administrative health care 

transactions. While both entities have 

similar policies related to securing a 

consensus view of health care 

stakeholders and ensuring that rules are 

consistent with (and do not conflict 

with) other existing standards, neither 

organization has rules in place for both 

health care segments. While addressing 

the retail pharmacy industry’s needs 

relative to operating rules, the NCPDP 

did not present to the NCVHS for their 

consideration any existing NCPDP 

operating rules to accommodate the 

ASC X12 standards. The CAQH CORE 

has phases of operating rules that 

accommodate the ASC X12 standard for 

electronic health care transactions, but 

are not specific to retail pharmacy 

transactions. 

3. Wait for Resolution of All 

Outstanding Technical and 

Administrative Issues Before Adopting 

the Operating Rules Developed by the 

Authoring Entities 

Both the CAQH CORE and the NCPDP 

demonstrated to the NCVHS that their 

operating rules were based upon broad 

public and stakeholder input. However, 

as previously discussed in section II. of 

this interim final rule with comment 

period, there are certain exceptions that 

exist with regard to our adoption of the 

CAQH CORE operating rules in their 

entirety. Upon analysis, we declined to 

adopt the CAQH CORE operating rules 

for the ASC X12 999 acknowledgement 

transaction, and the references to being 

‘‘CORE certified’’ contained in the 

CAQH CORE Operating Rules as we 

have already described in section II.F. of 

this interim final rule with comment 

period. If we had opted to wait until the 

resolution of the administrative issues 

affecting the adoption of the entire 

CAQH CORE operating rules, it would 

seriously delay the health care 

industry’s ability to begin to achieve the 

benefits of administrative 

simplification. 

Additionally, as described in section 

III of this interim final rule with 

comment period, we have declined to 

adopt the NCPDP business rules and 

guidelines as embedded in its NCPDP 


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Telecommunication Standard Version 

D.0, as they do not qualify as operating 

rules as defined in section II.A. of this 

interim final rule with comment period. 

The NCPDP business rules and 

guidelines are embedded within the 

NCPDP Telecommunications Standard 

Version D.0, and while technically not 

operating rules as defined by this 

interim final rule with comment period, 

they function as such nonetheless in 

that they provide robust business rules 

and guidelines for use in retail 

pharmacy transactions. The pharmacy 

industry is already preparing to use the 

NCPDP Version D.0 standard in their 

day-to-day pharmacy transactions as 

required by the January 16, 2009 final 

rule (74 FR 3296) adopting the NCPDP 

Telecommunication Standard Version 

D.0 for use in retail pharmacy 

transactions, effective January 1, 2012. 

The NCPDP Telecommunications 

Standard Version D.0 already provides a 

full and robust array of tools for the 

retail pharmacy industry to realize the 

potential benefits of administrative 

simplification. 

E. Impact Analysis Resources 

We have considered a number of 

different cost benefit studies that have 

been conducted by industry and 

independent entities in recent years. 

The background and conclusions on 

these studies and surveys will 

illuminate how we calculated our 

assumptions and how we applied them 

to this impact analysis. In this section, 

we briefly describe these studies, as 

well as an explanation of all of the 

following: 

• The depth and completeness of the 

analysis and supporting evidence for the 

conclusions. 

• Data sources and a presentation of 

the data limitations. 

• The perceived objectivity of the 

analysis as demonstrated by the 

discussion of data sources and the rigor 

of the analysis. 

• Our ability to explain and justify 

the findings and conclusions presented 

in the study. 

We then present assumptions and an 

impact analysis for each of the covered 

entity types, referencing the data and 

conclusions of the various studies. The 

following is a description of the studies 

and reports referenced for this impact 

analysis. 

1. The Milliman Study 

Electronic Transaction Savings 

Opportunities for Physician Practices, 

hereinafter referred to as the Milliman 

study, was published by Milliman in 

January 2006 (http://transact.emdeon.

com/documents/milliman_study.pdf). 

Milliman is an international consulting 

and actuarial firm serving health care 

payers, service providers and consumer 

organizations. The Milliman study was 

commissioned by the Emdeon 

Corporation, a nationwide 

clearinghouse that provides a wide 

variety of information exchange services 

that connects payers, providers and 

patients in the U.S. health care system. 

The study’s main objective focused on 

how much providers could save by 

implementing electronic transactions. 

The Milliman study’s calculations are 

based on examining labor time and costs 

required to perform both manual and 

electronic transactions. These labor 

costs include employee benefits, payroll 

taxes, and general and administrative 

overhead. Notably, the study 

compensated for related fees for 

transactions and set-up costs for 

electronic transactions. 

The Milliman study’s methodology 

was basically mathematical, using 

factors established through payrolls and 

average administrative costs, as opposed 

to research based on surveys or 

interviews with providers. Milliman’s 

calculations were based on a model of 

a provider’s administrative processes 

developed with assumptions about the 

operating environment of the typical 

solo physician practice. Ultimately, 

Milliman tested its results ‘‘by observing 

administrative procedures in actual 

physician practices and medical 

groups.’’ 

The study reflected other industry 

research that found that, while manual 

processes are very similar among 

physicians, ‘‘there is much greater 

variance among practices * * * in the 

use of technology and the associated 

costs for electronic transactions.’’ In 

some cases, providers are fully 

automated. In the majority, however, 

there is a mix of electronic and manual 

processes, as well as processes that 

require a wide range of levels of human 

intervention. 

Milliman found that a singlephysician practice could save as much 

as $42,000 a year by moving processes 

from manual to electronic. This estimate 

is based on a physician office that 

moves from all manual transactions to 

fully electronic for six standard 

transactions. For our impact analysis, 

this savings could not be used as a 

factor to project savings for all 

physicians ($42,000 × the number of 

physicians), as other studies have 

demonstrated that most providers are 

already using some of the electronic 

transactions. 

Milliman’s approach was to look at 

provider costs and benefits, and we 

opine that it appears to be objective in 

its assumptions. The Milliman study 

will be useful in our impact analysis as 

it provides labor and administrative 

overhead costs. 

The Milliman study was published in 

2006. In its calculations, it accounted 

for inflation and other factors that may 

have changed since its source data were 

gathered and the study was finally 

published. However, its final 

conclusions are somewhat dated, and 

we will consider this in our 

assumptions. 

2. The AHIP Survey (2006) 

America’s Health Insurance Plans’ 

(AHIP) Center for Policy and Research 

conducted a survey of its members to 

examine the issue of claims processing 

and turnaround times for claim 

payments. The survey is summarized in 

the document entitled ‘‘An Updated 

Survey of Health Care Claims Receipt 

and Processing Times, May 2006’’ at 

http://www.ahipresearch.org/pdfs/

PromptPayFinalDraft.pdf. 

AHIP is a national association 

representing nearly 1,300 companies 

providing health insurance coverage to 

more than 200 million Americans. The 

study is a follow-up to a survey done in 

2002. We took data from the AHIP study 

to develop assumptions about savings 

calculations for health plans. 

3. The McKinsey Analysis 

Overhauling the U.S. Healthcare 

Payment System conducted by 

McKinsey & Company, hereinafter 

referred to as the McKinsey analysis, 

was published in The McKinsey 

Quarterly on June 2007 (http://www.

mckinseyquarterly.com/Overhauling_

the_US_health_care_payment_system_

2012). McKinsey & Company is an 

international management consulting 

firm advising companies on strategic, 

organizational, technology, and 

operational issues. The McKinsey 

analysis relies on a number of different 

resources in order to calculate the cost 

of non-electronic transactions compared 

with the cost of electronic transactions. 

As in the Milliman study, the McKinsey 

analysis makes the case for the move 

from paper to electronic transactions. 

Their analysis used sources including 

Faulkner & Gray Health Data Directory; 

Health Data Management; HIPAA 

Survey—Claims and Payment Practices; 

Milliman; National Health 

Expenditures, Centers for Medicare & 

Medicaid Services (CMS); U.S. 

Department of Health and Human 

Services (HHS); and McKinsey’s own 

analysis. For its analysis’ cost per 

transaction, it appears McKinsey relied 

mostly on the Milliman study. 


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As noted, the McKinsey analysis 

brings together secondary sources to 

make its assumptions, so it is not based 

on any primary research or surveys. 

However, the McKinsey analysis does 

summarize these secondary sources into 

quantitative ranges that are useful to our 

impact analysis. For instance, based on 

secondary sources, the McKinsey 

analysis gives a range of 1.4 to 3.5 

billion total eligibility verifications 

annually, both electronic and nonelectronic, across the health care 

industry. While this is a broad range, it 

is useful in estimating the low and high 

estimates for our calculations. 

The McKinsey analysis suggests that 

making the flow of dollars in the health 

care industry more efficient through 

electronic means will trim the 

administrative costs that are spent on 

the payment system, which its analysis 

calculates as 15 percent of every 

healthcare dollar. 

The McKinsey analysis was objective 

in its approach, especially with regard 

to its data on eligibility for a health plan 

transactions because it was focused on 

claim-centered transactions. Its 

emphasis was mostly on the 

deficiencies and possibilities regarding 

payment flow between payers and 

providers, with commentary on the 

involvement of financial institutions. Its 

recommendations did not include 

mention of operating rules or the 

eligibility for a health plan transaction, 

so we find its data neutral with regard 

to the purpose of this impact analysis. 

The McKinsey analysis, presented in 

June 2007, is used by other related 

industry studies, and, because we could 

not identify studies or analyses that 

argued against its conclusions, we 

presume that it reflects industry 

assumptions. 

4. The Healthcare Efficiency Report 

The National Progress Report on 

Healthcare Efficiency, hereinafter 

referred to as the Healthcare Efficiency 

Report, is the first annual report from 

the U.S. Healthcare Efficiency Index 

(USHEI), (http://www.ushealth

careindex.com). an industry forum for 

monitoring business efficiency in 

healthcare USHEI’s advisory council 

consists of representatives from 

hospitals, clearinghouses, health care 

consultants, health plans and other 

entities (http://www.ushealthcareindex.

com/advisorycouncil.php). The USHEI 

was launched in 2008 to raise awareness 

of the cost savings associated with the 

adoption of electronic transactions in 

health care. The USHEI National 

Progress Report takes the Milliman, 

McKinsey, and other studies and 

applies them to a tool that measures 

current status of electronic transaction 

usage (in percentages of transactions) 

and projects possible cost savings if 

those percentages are increased. 

The Healthcare Efficiency Report 

analyzed the eligibility for a health plan 

transaction as a part of its Phase 1, 

which relied on the Milliman study and 

the McKinsey report for most of its data. 

Nevertheless, the Healthcare Efficiency 

Report consolidates the secondary 

sources in an original and illustrative 

manner, and appears to be an accepted 

yardstick for administrative 

simplification in the health care 

industry. 

The Healthcare Efficiency Report 

repeats an important point presented by 

Milliman and which we considered in 

our analysis: Even among providers that 

use electronic means to conduct some of 

their transactions, there is a broad range 

of how much they utilize standard 

transactions, which standard electronic 

transactions they use, and which 

transactions are still conducted 

manually. 

5. The Oregon Provider and Payer 

Survey 

Like the Milliman, McKinsey, and the 

Healthcare Efficiency Report, the 

Oregon Provider and Payer Survey, 

hereinafter referred to as the Oregon 

Survey, (http://www.oregon.gov/ 

OHPPR/HEALTHREFORM/ 

AdminSimplification/Docs/ 

FinalReport_AdminSimp_6.3.10.pdf) 

sought to estimate the possible cost 

savings that would be realized if there 

was a continual shift from nonelectronic 

to electronic transactions among 

healthcare entities in Oregon. The 

survey was conducted by the Oregon 

Health Authority, Office for Oregon 

Health Policy and Research, which 

conducts impartial, non-partisan policy 

analysis, research, and evaluation, and 

provides technical assistance to support 

health reform planning and 

implementation in Oregon. The Office 

serves in an advisory capacity to Oregon 

Health Policy Board, the Oregon Health 

Authority, the Governor, and the 

Legislature. The survey asked payers, 

providers, and clearinghouses a number 

of qualitative questions in terms of how 

administrative simplification can best 

be realized. 

The study was comprehensive, and 

used both secondary sources and a 

survey in which responses were 

gathered from 55 percent of the State’s 

hospitals and 225 of the State’s 

‘‘ambulatory clinics.’’ Of those 225 

ambulatory clinics, 69 percent were 

clinics with less than 9 clinicians, and 

23 percent were clinics with only 1 

clinician. In our impact analysis on 

providers, the category of ‘‘physicians’’ 

corresponds to the Oregon Survey’s 

category of ‘‘ambulatory clinics.’’ 

Of all the studies cited in this impact 

analysis, the Oregon Survey had the 

most recent and statistically valid data 

with regard to provider use of electronic 

transactions and gave the clearest 

picture of how providers verify 

eligibility. The study received 

quantitative and qualitative data from a 

large number and range of providers. 

Oregon itself is a mix or rural and urban 

communities. However, we recognize 

that there are regional differences in the 

health care industry and the fact that 

only Oregon health care entities were 

surveyed. 

6. The IBM Study 

In 2009, the CAQH CORE contracted 

with IBM’s Global Business Services, 

the world’s largest business and 

technology services provider with the 

aim towards helping companies manage 

their IT operations and resources, to 

conduct a study (hereinafter referred to 

as the IBM study) (http://www.caqh.org/ 

COREIBMstudy.php) to assess the costs 

and benefits to health plans, provider 

groups, and vendors of adopting the 

CAQH CORE Phase I rules, which 

include the operating rules for the 

electronic eligibility for a health plan 

transaction, as adopted under this 

interim final rule with comment period. 

According to the IBM study, industrywide adoption of the CAQH CORE 

Phase I rules could potentially yield $3 

billion in savings in 3 years. 

The IBM study consisted of 

interviews during which participants 

answered a set of questions geared 

towards assessing the costs and savings 

of adopting the CAQH CORE operating 

rules. Participants in the study included 

six national and regional health plans, 

five clearinghouses and vendors, and six 

providers. The health plans together 

represented 33 million commercial 

members, 1.2 million providers, 22 

million eligibility verifications per 

month, and 30 million claims per 

month. The providers included 

hospitals, physician groups, and a 

surgery center. 

The IBM study did not track the costs 

and benefits of adopting the operating 

rules for the health care claim status 

transactions. It did attempt to track the 

costs and benefits of the infrastructure 

elements of the operating rules 

(connectivity, response time, system 

availability, acknowledgements, and 

companion guides) but health plan 

study participants were not able to fully 

account for the costs related to 

implementation, citing that they may 


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have allocated some costs to IT 

overhead., 

Highlights of the IBM study closely 

parallel the three key objectives 

outlined above that necessitate the 

adoption of operating rules: 

• Providers rapidly took advantage of 

the new capabilities that the operating 

rules provided; for example, real-time 

transactions (page 20 of IBM study 

report). 

• The average return on investment 

(ROI) for health plans surveyed in the 

study was less than a year. Average 

initial and on-going cost of 

implementing the operating rules for an 

individual health plan was $592,000. 

The average savings, due mostly to 

moving away from telephone to 

electronic transaction over the same 

time period, was nearly $2.7 million for 

an individual health plan (page 23 of 

the IBM study report). The ratio of 

verifications to claims was up from .63 

to .73 after the operating rules were 

adopted (page 20 of IBM study report). 

7. The 2009 Health Affairs Survey 

In 2009, Health Affairs published 

survey results in an article entitled 

‘‘What Does It Cost Physician Practices 

to Interact With Health Insurance 

Plans,’’ authored by Lawrence P. 

Casalino, Sean Nicholson, David N. 

Gans, Terry Hammons, Dante Morra, 

Theodore Karrison, and Wendy 

Levinson (Health Affairs, 28, no. 

4(2009):w533–w543, published online 

May 14, 2009; 10:1377hlthaff.28.4.

2533). The survey collected data from 

physicians from those identified as 

working in solo or two-physician 

practices, and physicians from those 

working in practices of three or more. 

Selection was stratified by specialty 

type—primary care (including family 

physicians, general internists, and 

general pediatricians), medical 

specialists, and surgical specialists, for 

a total of 895 physician practices. The 

survey asked about the physicians’ 

offices’ interactions with health plans 

by the physicians themselves and by 

staff at the administrative level, 

including the nursing staff, clerical staff, 

senior administrators, and lawyers and 

accountants. 

The survey was able to calculate the 

mean time and cost that a physician’s 

office spent interacting with health 

plans according to the size of the 

practice and according to the level at 

which the interaction took place, that is, 

whether the interaction was with the 

physicians themselves, the nursing staff, 

the administrative staff, or with the 

accountants, etc. 

Among other conclusions, the study 

demonstrated that a single physician 

spent a mean average of 3 hours a week 

interacting with plans, while nursing 

and clerical staff spent much larger 

amounts of time. 

We find the conclusions of the survey 

to be valid based on the large sampling 

of physicians’ offices that were used. 

We will be applying some of the results 

of the survey to our calculation of 

savings for providers. 

8. The Project SwipeIt (MGMA) Study 

In 2009, the Medical Group 

Management Association (MGMA) 

launched an industry wide effort calling 

on health insurers, vendors, and 

healthcare providers to adopt 

standardized, machine-readable patient 

ID cards by Jan. 1, 2010. In support of 

the effort, the MGMA developed costs 

estimates of implementing a machinereadable patient ID card. Ultimately, the 

project’s aim is for administrative 

simplification. The Project SwipeIt 

study demonstrated the quantifiable 

benefits to administrative 

simplification. Therefore, some of 

Project SwipeIt study’s estimates, 

especially the base assumptions used in 

the savings calculations can be applied 

to our impact analysis of the 

implementation of operating rules. 

Through their study, the MGMA 

estimated that it costs $25 to resubmit 

a denied claim. Additionally they found 

that 50 percent of the time claims are 

being denied because of incorrect 

patient information. We believe this 

could also be alleviated through the 

implementation of operating rules since 

eligibility information, including patient 

information, will be returned prior to or 

at the point of care. 

The MGMA cites many resources that 

were used to gather their data for their 

analysis. We find that the data used in 

the MGMA study are relevant to our 

analysis and therefore we will use some 

of this data in our calculations of 

provider savings. 

We invite public and industry 

stakeholder comments on our 

assumptions. 

F. Impacted Entities 

All HIPAA covered entities would be 

affected by this interim final rule with 

comment period, as well as software 

vendors and any other business 

associates providing transaction related 

services, such as billing support and 

third party administrators (TPAs). 

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. 

We note that health care providers may 

choose not to conduct transactions 

electronically. Therefore, they would be 

required to use these operating rules 

only for HIPAA transactions that they 

conduct electronically. However, one of 

the objectives of operating rules is to not 

only decrease manual transactions by 

entities that currently conduct some 

health care transactions electronically, 

but to make electronic transactions, 

specifically the eligibility for a health 

plan and health care claim status 

transactions attractive to those entities 

that do not currently use the HIPAA 

standards in EDI transactions to verify 

eligibility or claim status. (See the 

Transactions and Code Sets rule (65 FR 

50361) for a more detailed discussion of 

affected entities under the HIPAA.) 

As mentioned previously in this 

interim final rule with comment period, 

the barrier to adoption of the HIPAA 

standards is due to their flexibility and 

‘‘situationality’’ that allows health plans 

to implement them in very different 

ways. It allows plans to send back 

information that is inconsistent from 

plan to plan. By making these optional 

or situational elements mandatory, more 

entities, especially providers, will have 

more consistent data across health 

plans, making it easier to determine 

what information they will be receiving 

in a transaction, thus increasing the use 

of electronic transactions. 

We recognize that a few health plans 

have already embraced the use of the 

CAQH CORE operating rules and have, 

in a published report on the utility of 

operating rules in the health care 

industry, noted substantive return on 

investment (ROI) derived from reduced 

costs associated with avoidance of 

manual (both paper and staff time) 

response to provider inquiries. This 

raises the question of why all health 

plans would not voluntarily adopt the 

use of operating rules (or standards, for 

that matter) given the benefits. We opine 

that there are a number of barriers, 

including a tendency by providers to 

simply accept the status quo, for 

example, whatever information 

currently is provided to them by a 

health plan; a health plan’s lack of 

experience with, and knowledge of, the 

role that operating rules play in making 

a standard work more efficiently, given 

that the use of operating rules is not yet 

widespread throughout the health care 

industry; and the expense to a health 

plan of systems and other business 

transitions without a regulatory 

mandate for adoption. Despite projected 

savings, health plan system managers 

would be hard pressed to obtain from 

their managements the upfront funds, 

staff and/or contractors, and corporate 

commitment needed for such a 


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transition without a regulatory 

requirement. Absent specifications as 

codified in regulation, health plans 

could be confused as to which operating 

rule version to use, and/or any 

exceptions to the use of operating rules 

that may or may not be effective, which 

would adversely affect enforcement of 

the HIPAA transaction and code sets. In 

our impact analysis, we analyze the 

impact of moving from non-electronic to 

electronic transactions among all 

entities, whether they currently use 

some electronic transactions or not. We 

assume that most providers and health 

plans use some electronic transactions 

and very few if any use none. Through 

the use of operating rules, we assume 

that all entities will increase their use of 

electronic transactions. The total 

savings and return on investment for 

each category of covered entity will not 

include the costs associated with setting 

up the basic infrastructure to send and 

receive standard health care 

transactions. Those costs are accounted 

for in the May 7, 1998 (63 FR 25300) 

proposed rule entitled, ‘‘Health Care 

Reform: Standards for Electronic 

Transactions’’. The costs included in 

this impact analysis include only those 

that are necessary to implement the 

operating rules as adopted for the two 

HIPAA transactions stipulated in this 

interim final rule with comment period. 

Based on industry surveys and 

research referenced herein, we do not 

believe there are many entities that are 

not capable of conducting electronic 

transactions. As stated previously, 

according to the Oregon Survey, 96 

percent of hospitals and 93 percent of 

ambulatory clinics (physicians) in that 

state indicated that they were ready, or 

could be ready within 2 years, to 

implement a system for electronic 

information exchange. Although the 

study only reflects Oregon providers, we 

believe the study’s findings demonstrate 

that there will be very few covered 

entities that will not have the ability to 

conduct electronic health care 

transactions by the time the operating 

rules are required to be implemented. 

The segments of the health care 

industry that will be affected by the 

implementation of operating rules 

include the following: 

• Providers: Physicians and Hospitals 

• Health Plans 

• Clearinghouses and Vendors 

Please note that we have not included 

an impact to pharmacies because this 

interim final rule with comment period 

adopts only operating rules for the 

eligibility for a health plan (270/271) 

and the health care claim status (276/ 

277) transactions which are not used by 

the retail pharmacy industry for drugs 

and medications. Therefore, we assume 

no impact to pharmacies of this interim 

final rule with comment period. 

Table 5 outlines the number of 

entities in the health care industry that 

we use in our analysis along with the 

sources of those numbers. We have not 

apportioned the data to reflect any 

particular sub-segment of the industry, 

other than ‘‘physicians’’ and ‘‘hospitals’’ 

in general terms. In this impact analysis, 

the number of providers impacted is not 

a factor in our calculation of the benefits 

of the adoption of these operating rules. 

(The number if providers are a factor in 

our calculation of providers costs.) 

Rather, benefits for providers are based 

on the total number of all health care 

claims throughout the health care 

system, including non-hospital 

institutions. We invite public comment 

on our assumptions and estimates, 

particularly as they related to nonhospital institutions. 

TABLE 5—TYPE AND NUMBER OF AFFECTED ENTITIES

Type Number Source 

Providers—Offices of Physician Offices 

(includes offices of mental health specialists).

234,222 Health Insurance Reform; Modifications to the Health Insurance Portability and Accountability Act (HIPAA) Electronic Transaction Standards; Proposed Rule, http:// 

edocket.access.gpo.gov/2008/pdf/E8-19296.pdf, (based on the AMA statistics). 

Providers—Hospitals ................................ 5,764 Health Insurance Reform; Modifications to the Health Insurance Portability and Accountability Act (HIPAA) Electronic Transaction Standards; Proposed Rule, http:// 

edocket.access.gpo.gov/2008/pdf/E8-19296.pdf. 

Providers—All ........................................... 239,986 Physicians Offices + Hospitals. 

Health Plans—Commercial ....................... 4,523 The # of health plans was obtained from the 2007 Economic Census Data—Finance and Insurance (sector 52)—NAICS code 5241114 (Direct health and medical insurance carriers). (n=4,523) http://factfinder.census.gov/servlet/ 

IBQTable?_bm=y&-ds_name=EC0752A1&-geo_id=01000US&-dataitem=*. 

Health Plans—Government ...................... 54 Represents the 51 state Medicaid programs, Medicare, the Veteran’s Administration (VA), and Indian Health Service (IHS). 

Health Plans—All ...................................... 4577 Census Data for commercial plans (n=4,523) + Medicaid agencies (N=51) + Medicare, VA and IHS = 4,577 total health plans. 

Clearinghouses ......................................... 51 EC EDI Vantage Point Healthcare Directory—6th Edition (n=51) http://www.ecedi.biz/content/en/dir-guest-login.asp. 

Vendors ..................................................... 51 EC EDI Vantage Point Healthcare Directory—6th Edition (n=51) http://www.ecedi.biz/content/en/dir-guest-login.asphttp://www.ec-edi.biz/content/en/dir-guestlogin.asp. 

Also, although we acknowledge the 

impact to ERISA (Employee Retirement 

Income Security Act) plans, we did not 

include them in our analysis due to the 

complexity involved with describing 

downstream costs to these plans, as well 

as members/beneficiaries of health 

plans, tax payers, etc. While it is 

understood that the approximately 2.5 

million ERISA plans (and, ultimately, 

their members) may be charged by their 

third party administrators (TPAs) and 

health insurance companies to comply 

with any Federal regulation, ultimately 

we assume that the 4,577 plans that do 

business as health plans, or their 

business associates, are the entities 

conducting the transactions and that is 

where the costs will be incurred. We 

assume that few, if any, of the ERISA 

plans do their own transactions. 

Additionally, because not all ERISA 

plans are required to report, it is 

difficult to determine the exact number 

of ERISA plans. 

G. Impact Analysis Approach 

This impact analysis is framed by the 

two key objectives that operating rules 

will achieve by augmenting the 

eligibility for a health plan and health 

care claim status transactions: 

• Decrease covered entities’ use of 

more costly manual activities, including 

telephone and paper-based transactions, 


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by addressing ambiguous requirements 

of the standards and clarifying when to 

use or not use certain elements or code 

values. We assume that the cost and 

benefits of these operating rules will be 

directed toward covered entities that 

currently perform some or no eligibility 

for a health plan and claim status 

transactions. For those who currently 

perform these two standard 

transactions, we assume that their 

volumes of electronic transactions will 

increase due to operating rules. 

• Decrease the clerical burdens that 

are associated with the inconsistent use 

of these two standard transactions; for 

example, the instances of denied claims 

and pended claims that burdens 

patients, providers, and health plans in 

terms of time and money. 

Our overall calculation for this 

analysis is as follows: 

(X * Y) + C–Z = Annual Return on 

investment of operating rules 

implementation 

Where— 

X = annual increase in number of electronic 

eligibility for a health plan and health 

care claim status transactions due to 

operating rules implementation 

Y = savings per transaction conducted 

electronically 

C = savings through decrease in claim denials 

for providers and pended claims for 

health plans 

Z = cost of operating rules implementation 

In order to make this calculation, we 

need to describe baseline assumptions, 

transaction increase assumptions, and 

cost assumptions that correspond to the 

X, Y, C, and Z factors in the calculation 

before arriving at costs and benefits. 

In section VII.H. of this interim final 

rule with comment period, we describe 

the baseline assumptions for each of the 

two transactions. The baseline 

assumptions include, first, an estimate 

on the number of electronic and nonelectronic eligibility for a health plan 

transactions and health care claim status 

transactions, respectively, that 

physicians, providers, and health plans 

will be conducting in 2012, the year 

before the operating rules take effect. 

Second, from those estimates, we will 

estimate the number of eligibility for a 

health plan transactions and health care 

claim status transactions that are 

conducted electronically starting in 

2012. For the baseline assumption on 

the number of electronic transactions in 

2012, we have developed a range of high 

and low estimates derived from data 

gathered from a number of studies. This 

range of high and low reflects different 

estimates that are presented by industry 

studies that have attempted to arrive at 

a similar baseline. The final baseline 

assumption is an estimate on the rate of 

increased use of each of the two 

transactions due to operating rules 

adopted herein for 10 years after 

implementation of the operating rules 

(X factor in the calculation). 

The transaction increase estimate (X 

factor in the calculation) assumes an 

annual percentage increase in the use of 

the eligibility for a health plan and 

health care claims status electronic 

transactions due to the implementation 

of operating rules. In this specific 

baseline assumption, we will be giving 

a range of high and low estimates. 

Although these estimates on the 

increase in usage due to operating rules 

are informed by industry studies, 

specifically the IBM study, they also 

illustrate the uncertainty inherent in 

such a predictive estimate. As we have 

described, there is a causal link between 

operating rules and increased use of 

EDI. However, the rate of increased use 

of the two transactions is dependent on 

many factors above and beyond 

operating rules. For instance, visits to 

physicians’ offices and hospital 

emergency and outpatient departments 

are experiencing a steady rise, 

translating into an accompanying rise in 

health care transactions in general. (The 

CDC reports that health care visits 

increased 25 percent from 1997 to 2007: 

http://www.cdc.gov/nchs/data/series/

sr_13/sr13_169.pdf accessed on June 

21). The range of estimates on the 

increased use of the two electronic 

transactions included in our baseline 

assumptions should be viewed as a 

reflection of the uncertainties involved. 

For our cost assumptions, Z in the 

calculation is the total cost of 

implementing the operating rules for 

both the eligibility for a health plan 

transaction and the health care claim 

status transaction. The costs will be 

analyzed according to each impacted 

category of health care entity. Many of 

our estimates in terms of cost are 

derived from the cost estimates in the 

Modifications final rule because 

industry studies we surveyed focused 

on savings rather than costs. These costs 

will be presented in a range of high and 

low estimates to reflect the broad range 

in readiness for operating rule 

implementation among covered entities 

in terms of infrastructure, software, and 

business process. In section VII.I. of this 

interim final rule with comment period, 

we describe our cost assumptions. 

For our savings assumptions, Y and C 

in the calculation, Y is the dollar 

savings per eligibility of a health plan 

and health care claim status transaction 

that is saved when the transactions are 

conducted electronically as opposed to 

non-electronically, and C is the dollar 

saved, or cost avoided, of a decrease in 

claim denials for providers and a 

decrease in pended claims for health 

plans. For the C estimate, we will again 

provide a high and low range of 

estimates. Industry studies indicate that 

more robust eligibility for a health plan 

transactions will result in a decrease in 

pended and denied claims (which, in 

turn, will result in savings). However, 

we are less certain of the percent of 

decrease that operating rules will effect, 

so we have reflected this uncertainty 

with a range. In section VII.J. of this 

interim final rule with comment period, 

we describe our savings assumptions. 

Our analysis begins with a description 

of the baseline and transaction increase 

assumptions; that is, how we arrived at 

the numbers of eligibility for a health 

plan transactions and health care claim 

status conducted electronically as of 

2012, and our assumptions on what 

percentage of annual increase in the 

transactions are due to the 

implementation of operating rules. We 

will subsequently describe our cost 

assumptions, savings assumptions, and 

finally summarize the costs and savings. 

The costs and savings will also be 

presented in a range of high and low 

estimates. 

In general, the high and low range 

approach used in this impact analysis 

illustrates both the range of probable 

outcomes, based on state and industry 

studies, as well as the uncertainty 

germane to a mandated application of 

business rules on an industry with 

highly complex business needs and 

processes. Within those ranges, 

however, the summary demonstrates 

that there is considerable return on 

investment resulting from the 

implementation of operating rules. We 

solicit comments on these assumptions 

as well as the direct costs of 

implementing these operating rules 

adopted under this interim final rule 

with comment period. 

H. Baseline Assumptions 

1. Baseline Assumption A 

Total number of electronic and 

nonelectronic eligibility for a health 

plan and health care claim status 

transactions conducted by providers. 

We estimate that the total number of 

claims submitted, both electronically 

and manually, for the year 2012 is 5.6 

billion. This estimate is the average of 

the high and low estimates given in the 

January 2009 Modifications final rule, 

http://edocket.access.gpo.gov/2009/pdf/

E9-740.pdf. 

In order to arrive at the number of 

eligibility verifications conducted in 

2012, both electronic and nonelectronic, we applied the per claim 


jlentini on DSK4TPTVN1PROD with RULES2
40480 Federal Register / Vol. 76, No. 131 / Friday, July 8, 2011 / Rules and Regulations 

ratio as concluded by the Oregon 

Survey. The Oregon Survey concluded 

that, for every claim submitted, the low 

estimate was 0.68 eligibility 

verifications per claim; the high 

estimate was 1.12 eligibility 

verifications per claim submitted. We 

use the average of these two estimates, 

0.9 eligibility verifications per claim 

submitted. We then assume that of the 

5.6 billion claims submitted, 0.9 of 

those were preceded by an eligibility 

inquiry to come up with approximately 

5 billion eligibility verifications. 

In order to arrive at the number of 

claim status inquiries conducted in 

2012, both electronic and nonelectronic, we again applied the per 

claim submitted ratio as concluded by 

the Oregon Survey. The Oregon Survey 

concluded that, for every claim 

submitted, they estimated that 0.14 

claim status inquiries were submitted. 

We looked at other studies that included 

various numbers for claim status 

transactions, but we believe the Oregon 

Survey to be the most valid picture of 

providers’ use of these transactions 

based on the interviews conducted. 

Based on our previous assumptions, we 

estimate that there will be 784 million 

claim status inquiries conducted in 

2012. 

To find the total number of eligibility 

for a health plan transactions and health 

care claim status transactions that 

physicians and hospitals conducted 

individually, we divided the total 

number of eligibility for a health plan 

transactions and health care claim status 

transactions between physicians and 

hospitals by a factor of 9 to 1; that is, 

approximately 90 percent of all 

eligibility for a health plan and health 

care claim status inquiries, electronic 

and non-electronic, are conducted by 

physicians, while 10 percent are 

conducted by hospitals. We have taken 

this physician to hospital ratio from the 

Oregon Survey due to its reliance on 

direct provider input. The survey 

indicated that physicians are 

responsible for 91 percent of all 

eligibility for a health plan transactions 

and 89 to 90 percent of health care 

claim status transactions. 

TABLE 6—ESTIMATES ON TOTAL NUMBER OF ELIGIBILITY AND HEALTH CARE CLAIM STATUS INQUIRIES, ELECTRONIC AND

NON–ELECTRONIC CONDUCTED ANNUALLY

Total number of 

transactions, 

electronic and 

non-electronic, conducted per year 

(in millions) 

Number conducted 

by physicians 

(90%) 

Number conducted 

by hospitals 

(10%) 

Claim submissions ............................................................................................... 5,600 N/A N/A 

Eligibility inquiries ................................................................................................ 5,040 4,536 504 

Claim status inquiries .......................................................................................... 784 705.6 78.4 

For the health plan eligibility 

transaction, we determined that the total 

number of eligibility for a health plan 

inquiries conducted electronically by 

physicians to be between 453.6 million, 

and 201.6 million for hospitals. The 

Oregon Survey found that 

approximately 10 percent of all 

eligibility for a health plan transactions 

conducted by physicians are electronic. 

Other studies appear to contradict 

Oregon’s findings by a considerable 

margin. For instance, the Healthcare 

Efficiency Index reports that 40 percent 

of all eligibility for a health plan 

transactions are conducted 

electronically and the McKinsey report 

estimates 40 to 50 percent. We weighed 

the Oregon Survey more heavily, and 

estimated that 10 percent, or 453.6 

million, of all eligibility for a health 

plan transactions conducted by 

physicians are electronic. (Table 7). For 

the percentage of hospitals’ use of the 

electronic eligibility for a health plan 

transaction, we relied on the Oregon 

Survey’s finding that 40 percent, or 

201.6 million, of all eligibility for a 

health plan inquiries conducted by 

hospitals are electronic. This Oregon 

estimate appears to be more in line with 

other industry studies on the use of 

these transactions. (Table 7). 

For the health care claim status 

electronic transaction, the Oregon 

Survey found that none of the 

physicians or hospitals it surveyed uses 

the health care claim status electronic 

transaction. Instead, physicians and 

hospitals use the telephone and, to a 

lesser extent, a secure Internet Web site 

provided by the health plan or 

contractor to check the status of health 

care claims. 

Although, as we have stated before, 

the Oregon Survey appears to have the 

most valid methodology, the McKinsey 

study’s conclusion implies that many 

providers do conduct the health care 

claim status transaction electronically 

(30 to 50 percent). The two studies are 

basically incompatible with respect to 

conclusions about usage of the 

electronic health care claim status 

transaction. As noted, a percentage of 

the health care claim status checks are 

conducted through the Internet. It is 

possible that the numbers of the 

McKinsey analysis are affected by 

considering Web-based health care 

claim status transactions as 

‘‘electronic.’’ Only the Oregon Survey is 

clear in its methodology to make a 

distinction between electronic data 

interchange of HIPAA transactions and 

electronic Web-based transactions. Still, 

the McKinsey analysis has been used by 

others, for example, the Healthcare 

Efficiency Report, to demonstrate the 

frequency of use of HIPAA standard 

transactions. 

We assume that there are some 

physicians who use the electronic 

health care claim status and response 

transaction, but believe that the 

McKinsey study’s high estimate of 30 to 

50 percent of health care claim status 

transactions being electronic is too high 

given the Oregon Survey finding. We 

estimate that 10 percent of all health 

care claim status inquiries, 70.56 

million for physicians and 7.84 million 

for hospitals, will be made 

electronically in 2012. Again, we weigh 

the Oregon Survey more heavily. (See 

Table 7). 

In order to determine the number of 

eligibility for a health plan and health 

care claim status transactions that 

health plans respond to electronically, 

we use the number of eligibility for a 

health plan inquiries for physicians and 

hospitals added to the number of health 

claim status inquiries for physicians and 

hospitals, based on our assumption that 

for all inquiries submitted by physicians 

and hospitals, health plans will submit 

the same number of responses. We 

assume that health plans will conduct 

655.2 million electronic eligibility 

responses and 78.4 million claim status 

responses. 


jlentini on DSK4TPTVN1PROD with RULES2
Federal Register / Vol. 76, No. 131 / Friday, July 8, 2011 / Rules and Regulations 40481 

TABLE 7—ESTIMATES ON NUMBER OF ELECTRONIC ELIGIBILITY FOR A HEALTH PLAN AND HEALTH CARE CLAIM STATUS

TRANSACTIONS CONDUCTED BY PROVIDERS AND HEALTH PLANS

For 2012 

Number of total 

eligibility for a 

health plan and 

health care claim 

status inquiries 

(non-electronic and 

electronic) conducted 

(in millions) 

Percentage of 

inquiries that are 

electronic 

Total number of 

electronic eligibility 

for a health plan and 

health care claim 

status as of 2012 

(in millions) 

Physicians: 

Eligibility for a Health Plan ......................................................................... 4,536 10 453 .6 

Health Care Claim Status ........................................................................... 705.6 10 70 .56 

Hospitals: 

Eligibility for a Health Plan ......................................................................... 504 40 201 .6 

Health Care Claim Status ........................................................................... 78.4 10 7 .84 

Health Plans: 

Eligibility for a Health Plan ......................................................................... N/A N/A 655 .2 

Health Care Claim Status ........................................................................... N/A N/A 78 .4 

2. Baseline Assumption B 

Transaction Increase Assumptions: 

Annual increase in use of electronic 

eligibility for a health plan and health 

care claims status transactions due to 

implementation of operating rules. 

a. Providers 

As stated, there is a direct causal link 

between the implementation of 

operating rules and an increase in the 

use of eligibility for a health plan and 

health care claim status transactions 

industry-wide. 

In its conclusions, the IBM study 

estimated the baseline growth of total 

health care eligibility for a health plan 

transaction transactions (electronic and 

non-electronic) to be 10 percent without 

operating rules over a period of 3 years. 

It then estimated a 25 percent increase 

in the use of electronic eligibility for a 

health plan transaction across the entire 

industry if operating rules are 

implemented. For our analysis, we have 

assumed a more conservative growth 

rate in the use of the electronic 

eligibility for a health plan transactions 

than that of the IBM study both in 

general (that is, not attributed to any 

particular factor) and as a result of the 

implementation of operating rules. 

We have estimated a 15 percent 

annual growth rate in general from 2013 

through 2017, and then an 8 percent 

annual growth for 5 years thereafter. 

This general growth rate is reflected in 

Table 8. In general, eligibility for a 

health plan inquiries, electronic and 

non-electronic, for both physicians and 

hospitals, are expected to increase 

annually due to a number of market 

forces. For one, it is anticipated that 

population trends will increase the total 

overall number of patient visits and 

claims in the United States, especially 

in regards to baby-boomers who will 

require more care in the coming years. 

(http://www.cdc.gov/nchs/data/

databriefs/db41.htm). It is probable that 

this increase alone will account for our 

15 percent estimated annual growth rate 

of the use of the eligibility for a health 

plan transaction. As well, it is probable 

that providers will adopt EDI out of 

necessity from the sheer number of 

health care visits and claims that will 

experienced. In summary, we have 

chosen this estimate as our general 

predicted increase because it is a 

probable increase, even without the 

mandated implementation of operating 

rules. 

With the implementation of operating 

rules, the estimate on the increased use 

of transactions by providers moves from 

probable to practical. The estimate on 

the percentage increase due to operating 

rules is the primary savings driver in 

our per transaction benefit analysis. 

Again, we assume a more conservative 

growth rate due to operating rules than 

the IBM study. In this regard, our 

analysis of the IBM study follows: 

Although the IBM study did not control 

for other factors that may have 

contributed to an increased use of the 

eligibility for a health plan transaction, 

the study was based on interviews 

which directed respondents to isolate 

the costs and benefits of operating rules 

in particular. While it is probable that 

other factors contributed to the extreme 

increase in the use of the transaction 

among the study’s participants, the 

participants themselves believed that 

both the costs and benefits were a 

consequence of the operating rules and 

CAQH CORE certification. 

However, because the IBM study 

analyzed a comparably small number of 

entities that have adopted operating 

rules, we are hesitant to accept the 

study’s conclusions as the normative 

result of implementing operating rules 

for the eligibility for a health plan 

transaction. There may be entities that 

have implemented (or will implement) 

the operating rules that did not 

experience the same success as those 

that were surveyed in the study. 

With this in mind, we have given a 

high and low range of probable increase 

usage rates due to operating rules. Our 

low and high estimate of 10 to 12 

percent annual for the first 5 years falls 

far below the IBM study’s average rate 

(25 percent annual increase). We believe 

these estimates are conservative, but do 

not believe that we are justified in 

estimating a more aggressive growth. 

We also assume that 5 years after 

implementation of the operating rules 

the 10 to 12 percent annual growth due 

to operating rules will decrease to 5 

percent a year. We assume this will be 

due to the fact that by this time the 

health care industry will have 

implemented the operating rules thus 

making the use of the electronic 

transactions more widespread, resulting 

in market stabilization and less of an 

increase in the number of electronic 

transactions. 

We then estimate the annual increase 

in the number of electronic eligibility 

for a health plan inquiries from 

physicians and hospitals respectively 

due to operating rules. It is calculated 

by multiplying the range of total number 

of electronic eligibility for a health plan 

inquiries by the range of total percent 

increase in electronic transactions due 

to operating rules per year. 


jlentini on DSK4TPTVN1PROD with RULES2
40482 Federal Register / Vol. 76, No. 131 / Friday, July 8, 2011 / Rules and Regulations 

TABLE 8—ANNUAL INCREASE IN NUMBER OF ELECTRONIC ELIGIBILITY FOR A HEALTH PLAN TRANSACTIONS FOR

PHYSICIANS DUE TO IMPLEMENTATION OF OPERATING RULES

I II III IV V VI VII 

Year 

Number of 

electronic eligibility for health 

plan transactions 

(in millions). 

Assumes 15% 

increases first 5 

yrs/8% increase 

second 5 yrs 

Number increase 

in electronic 

eligibility for 

health plan transactions from previous year (in 

millions) (high = 

low) 

Total percentage 

increase in 

electronic eligibility for health 

plan transactions 

from previous 

year due to operating rules (low) 

(percent) 

Total percentage 

increase in 

electronic eligibility for health 

plan transactions 

from previous 

year due to operating rules (high) 

Number increase 

in electronic 

eligibility for 

health plan transactions from previous year due to 

operating rules 

(in millions) (low) 

Number increase 

in electronic 

eligibility for 

health plan transactions from previous year due to 

operating rules 

(in millions) 

(high) 

2012 ................................. 453.6 0.0 0 0 0.0 0.0 

2013 ................................. 521.6 68.0 10 12 45.4 54.4 

2014 ................................. 599.9 78.2 10 12 52.2 62.6 

2015 ................................. 689.9 90.0 10 12 60.0 72.0 

2016 ................................. 793.3 103.5 10 12 69.0 82.8 

2017 ................................. 912.4 119.0 10 12 79.3 95.2 

2018 ................................. 985.3 73.0 5 5 45.6 45.6 

2019 ................................. 1064.2 78.8 5 5 49.3 49.3 

2020 ................................. 1149.3 85.1 5 5 53.2 53.2 

2021 ................................. 1241.2 91.9 5 5 57.5 57.5 

2022 ................................. 1340.5 99.3 5 5 62.1 62.1 

Totals ........................ ............................ ............................ ............................ ............................ 573.5 634.6 

TABLE 9—ANNUAL INCREASE IN NUMBER OF ELECTRONIC ELIGIBILITY FOR A HEALTH PLAN TRANSACTIONS FOR

HOSPITALS DUE TO IMPLEMENTATION OF OPERATING RULES

I II III IV V VI VII 

Year 

Number of 

electronic eligibility for health 

plan transactions 

(in millions). 

Assumes 15% 

increases first 5 

yrs/8% increase 

second 5 yrs 

Number increase 

in electronic 

eligibility for 

health plan transactions from previous year (in 

millions) (low = 

high) 

Total percentage 

increase in 

electronic eligibility for health 

plan transactions 

from previous 

year due to operating rules (low) 

Total percentage 

increase in 

electronic eligibility for health 

plan transactions 

from previous 

year due to operating rules (high) 

Number increase 

in electronic 

eligibility for 

health plan transactions from previous year due to 

operating rules 

(in millions) (low) 

Number increase 

in electronic 

eligibility for 

health plan transactions from previous year due to 

operating rules 

(in millions) 

(high) 

2012 ................................. 201.6 0.0 0 ............................ ............................ 0.0 

2013 ................................. 231.8 30.2 10 12 20.2 24.2 

2014 ................................. 266.6 34.8 10 12 23.2 27.8 

2015 ................................. 306.6 40.0 10 12 26.7 32.0 

2016 ................................. 352.6 46.0 10 12 30.7 36.8 

2017 ................................. 405.5 52.9 10 12 35.3 42.3 

2018 ................................. 437.9 32.4 5 5 20.3 20.3 

2019 ................................. 473.0 35.0 5 5 21.9 21.9 

2020 ................................. 510.8 37.8 5 5 23.6 23.6 

2021 ................................. 551.7 40.9 5 5 25.5 25.5 

2022 ................................. 595.8 44.1 5 5 27.6 27.6 

Totals ........................ ............................ ............................ ............................ ............................ 254.9 282.1 

We assume that health care claim 

status inquiries will increase annually 

for all providers in general at a rate of 

20 percent a year for the first 5 years, 

for many of the same reasons as our 

estimates on the usage rate of the 

eligibility for a health plan transaction. 

We also assume that this rate of increase 

will slow after 5 years to about 10 

percent a year. This general growth rate 

is reflected in Tables 10 and 11. We 

expect health care claim status 

transactions to be adopted at a higher 

rate than the eligibility for a health plan 

transaction because there is significantly 

less use of the transaction now (and so 

there is more room for growth). 

We again have given a range of high 

and low estimates for the rate of 

increase that can be attributed to the 

implementation of operating rules. We 

have estimated a 12 to 15 percent 

annual growth in usage attributable to 

operating rules from 2013 through 2017, 

and then a 7 percent annual growth in 

usage for 5 years thereafter. 


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Federal Register / Vol. 76, No. 131 / Friday, July 8, 2011 / Rules and Regulations 40483 

TABLE 10—ANNUAL INCREASE IN NUMBER OF HEALTH CARE CLAIM STATUS TRANSACTIONS FOR PHYSICIANS DUE TO

IMPLEMENTATION OF OPERATING RULES

I II III IV V VI VII 

Year 

Minimum number 

of electronic 

health care claim 

status 

transactions (in 

millions). Assumes 20% increases first 5 

yrs/10% increase 

second 5 yrs 

Number increase 

in electronic 

health care claim 

status 

transactions from 

previous year 

(in millions) 

(high = low) 

Total percentage 

increase in 

electronic health 

care claim status 

transactions from 

previous year 

due to operating 

rules (low) 

Total percentage 

increase in 

electronic health 

care claim status 

transactions from 

previous year 

due to operating 

rules (high) 

Number increase 

in electronic 

health care claim 

status 

transactions from 

previous year 

due to operating 

rules 

(in millions) 

(low) 

Number increase 

in electronic 

health care claim 

status 

transactions from 

previous year 

due to operating 

rules (in millions) 

(high) 

2012 ................................. 70.6 0.0 0 0 0.0 0.0 

2013 ................................. 84.7 14.1 12 15 8.5 10.6 

2014 ................................. 101.6 16.9 12 15 10.2 12.7 

2015 ................................. 121.9 20.3 12 15 12.2 15.2 

2016 ................................. 146.3 24.4 12 15 14.6 18.3 

2017 ................................. 175.6 29.3 12 15 17.6 21.9 

2018 ................................. 193.1 17.6 7 7 12.3 12.3 

2019 ................................. 212.4 19.3 7 7 13.5 13.5 

2020 ................................. 233.7 21.2 7 7 14.9 14.9 

2021 ................................. 257.1 23.4 7 7 16.4 16.4 

2022 ................................. 282.8 25.7 7 7 18.0 18.0 

Totals ........................ ............................ ............................ ............................ ............................ 138.0 153.8 

TABLE 11—ANNUAL INCREASE IN NUMBER OF HEALTH CARE CLAIM STATUS TRANSACTIONS FOR HOSPITALS DUE TO

IMPLEMENTATION OF OPERATING RULES

I II III IV V VI VII 

Year 

Minimum number 

of electronic 

health care claim 

status 

transactions (in 

millions). Assumes 20% increases first 5 

yrs/10% increase 

second 5 yrs 

Number increase 

in electronic 

health care claim 

status 

transactions from 

previous year 

(in millions) 

(high = low) 

Total percentage 

increase in 

electronic health 

care claim status 

transactions from 

previous year 

due to operating 

rules (low) 

Total percentage 

increase in 

electronic health 

care claim status 

transactions from 

previous year 

due to operating 

rules (high) 

Number increase 

in electronic 

health care claim 

status 

transactions from 

previous year 

due to operating 

rules 

(in millions) 

(low) 

Number increase 

in electronic 

health care claim 

status 

transactions from 

previous year 

due to operating 

rules (in millions) 

(high) 

2012 ................................. 7.8 0.0 0 0 0.0 0.0 

2013 ................................. 9.4 1.6 12 15 0.9 1.2 

2014 ................................. 11.3 1.9 12 15 1.1 1.4 

2015 ................................. 13.5 2.3 12 15 1.4 1.7 

2016 ................................. 16.3 2.7 12 15 1.6 2.0 

2017 ................................. 19.5 3.3 12 15 2.0 2.4 

2018 ................................. 21.5 2.0 7 7 1.4 1.4 

2019 ................................. 23.6 2.1 7 7 1.5 1.5 

2020 ................................. 26.0 2.4 7 7 1.7 1.7 

2021 ................................. 28.6 2.6 7 7 1.8 1.8 

2022 ................................. 31.4 2.9 7 7 2.0 2.0 

Totals ........................ ............................ ............................ ............................ ............................ 15.3 17.1 

b. Health Plans 

To find the increase in electronic 

eligibility for a health plan and health 

care claims status transactions annually 

for health plans, we add the total annual 

increase usage of the two transactions 

by providers. The sum again gives us a 

low to high range of increased usage of 

the two transactions due to operating 

rules. 

We solicit comments on these 

baseline assumptions. 


jlentini on DSK4TPTVN1PROD with RULES2
40484 Federal Register / Vol. 76, No. 131 / Friday, July 8, 2011 / Rules and Regulations 

TABLE 12—ANNUAL INCREASE IN NUMBER OF ELIGIBILITY FOR A HEALTH PLAN TRANSACTIONS DUE TO IMPLEMENTATION

OF OPERATING RULES

I II III IV V VI VII 

Year Physician number increase in electronic eligibility for a health plan 

transactions from previous year 

due to operating rules in millions 

Hospital number increase in electronic eligibility for a health plan 

transactions from previous year 

due to operating rules in millions 

Plan number increase in electronic 

eligibility for a health plan transactions from previous year due to 

operating rules in millions 

Low High Low High Low High 

2012 ................................. 0.0 0.0 0.0 0.0 0.0 0.0 

2013 ................................. 45.4 54.4 20.2 24.2 65.5 78.6 

2014 ................................. 52.2 62.6 23.2 27.8 75.3 90.4 

2015 ................................. 60.0 72.0 26.7 32.0 86.7 104.0 

2016 ................................. 69.0 82.8 30.7 36.8 99.6 119.6 

2017 ................................. 79.3 95.2 35.3 42.3 114.6 137.5 

2018 ................................. 45.6 45.6 20.3 20.3 65.9 65.9 

2019 ................................. 49.3 49.3 21.9 21.9 71.2 71.2 

2020 ................................. 53.2 53.2 23.6 23.6 76.9 76.9 

2021 ................................. 57.5 57.5 25.5 25.5 83.0 83.0 

2022 ................................. 62.1 62.1 27.6 27.6 89.6 89.6 

Totals ........................ 573.5 634.6 254.9 282.1 828.3 916.7 

TABLE 13—ANNUAL INCREASE IN NUMBER OF HEALTH CARE CLAIM STATUS TRANSACTIONS FOR HEALTH PLANS DUE TO

IMPLEMENTATION OF OPERATING RULES

I II III IV V VI VII 

Year Physician number increase in electronic health care claim status transactions from previous year due to 

operating rules in millions 

Hospital number increase in electronic 

health care claim status transactions from previous year due to 

operating rules in millions 

Plan number increase in health care 

claim status transactions from previous year due to operating rules in 

millions 

Low High Low High Low High 

2012 ..................... 0.0 0.0 0.0 0.0 0.0 0.0 

2013 ..................... 8.5 10.6 0.9 1.2 9.4 11.8 

2014 ..................... 10.2 12.7 1.1 1.4 11.3 14.1 

2015 ..................... 12.2 15.2 1.4 1.7 13.5 16.9 

2016 ..................... 14.6 18.3 1.6 2.0 16.3 20.3 

2017 ..................... 17.6 21.9 2.0 2.4 19.5 24.4 

2018 ..................... 12.3 12.3 1.4 1.4 13.7 13.7 

2019 ..................... 13.5 13.5 1.5 1.5 15.0 15.0 

2020 ..................... 14.9 14.9 1.7 1.7 16.5 16.5 

2021 ..................... 16.4 16.4 1.8 1.8 18.2 18.2 

2022 ..................... 18.0 18.0 2.0 2.0 20.0 20.0 

Totals ............ 138.0 153.8 15.3 17.1 153.4 170.9 

I. Cost Assumptions 

1. Providers 

We assume that physicians and 

hospitals will incur some start-up costs 

for implementing operating rules. These 

include training of staff and changes to 

internal business processes. Unlike the 

costs to health plans, we assume that 

the costs are less likely to be expensive 

infrastructure updates, because we 

assume most providers will already 

have the necessary infrastructure in 

place to accommodate the operating 

rules adopted under this interim final 

rule with comment period. We base this 

assumption on industry studies that 

demonstrates that EDI is utilized in over 

75 percent of claim submissions. This 

means that the majority of providers or 

their business partners are capable of 

transmitting EDI. 

While we assume that there may 

remain some providers who do not 

conduct any EDI, the operating rules 

adopted herein do not apply to 

providers who prefer paper-based or 

manual transactions. If such a provider 

were to move to EDI after learning of the 

advantages of operating rules, the 

provider’s costs for initial EDI 

infrastructure can be found in the 

Transaction and Code Sets final rule, 

and impacts of the operating rules per 

se can be found in this interim final rule 

with comment period. In summary, 

costs regarding initial EDI infrastructure 

to transmit HIPAA transactions are not 

a factor in our estimates. We solicit 

comments on these assumptions. 

We assume the costs of implementing 

operating rules will mostly be borne by 

health plans. However, we expect that 

some costs will be borne by providers in 

the form of increased fees from vendors 

and clearinghouses, such as upgraded 

software costs and an increase in perclaim transaction fees based on the 

increase in volume of transactions. 

These fees are variable depending on 

existing infrastructure, number of 

providers in a practice, geographic 

areas, etc. To account for possible costs 

to providers, we have assumed that the 

costs attributed to implementing the 

Modifications final rule are applicable 

here. We estimate the cost for providers 


jlentini on DSK4TPTVN1PROD with RULES2
Federal Register / Vol. 76, No. 131 / Friday, July 8, 2011 / Rules and Regulations 40485 

to implement operating rules will be 25 

percent of the total unadjusted costs 

estimated by the Modifications rule. We 

use this estimate based on the fact that 

most of the costs of implementing 

operating rules will be realized by 

health plans due to the more robust 

information they will be required to 

send in these transactions. As well, any 

software updates that providers will 

need may only apply to the eligibility 

for a health plan and health care claim 

status transactions, unlike the 

Modifications rule, which required 

software updates that applied to up to 

seven transactions. (See Table 14.) 

We base our estimates on provider 

costs solely on the Modifications final 

rule because the types of costs included 

in that impact analysis are similar to 

those that would be borne by 

implementing operating rules: software 

upgrades; training; and testing of 

transaction improvements. 

We believe that these costs are high 

considering the fact that the 

Modifications rule applies to seven 

different transactions, while the 

operating rules adopted in this interim 

final rule with comment period only 

applies to two. However, we have no 

evidence or justification for supporting 

a lower cost. 

TABLE 14—PROVIDER COSTS

Unadjusted total 

physicians’ cost 

from 

modifications 

final rule 

Physicians’ cost 

to implement 

operating rules 

for eligibility for a 

health plan and 

health care claim 

status 

transactions 

(25% of modifications final rule 

estimates) 

Unadjusted total 

hospital’s cost 

from 

modifications 

final rule 

Hospitals’ cost to 

implement 

operating rules 

for 

eligibility for a 

health plan and 

health care claim 

status 

transactions 

(25% of modifications final rule 

estimates) 

Total cost to 

providers 

5010 Implementation Costs—Low ................ $370 $93 $792 $198 $291 

5010 Implementation Costs—High ................ 740 185 1,584 396 581 

5010 Transition Costs—Low ......................... 174 44 373 93 137 

5010 Transition Costs—High ........................ 348 87 746 187 274 

Total Costs—Low ............................................. 544 136 1,165 291 427 

Total Costs—High ............................................ 1,088 272 2,330 583 855 

2. Health Plans 

As stated earlier, we assume that 

health plans will bear the majority of 

costs of adopting operating rules. All of 

the studies that were considered for this 

impact analysis provided qualitative 

descriptions of the possible costs of 

adoption; however, the IBM study was 

the only one to attribute specific costs 

of operating rule adoption for health 

plans. The IBM study gave a range of 

costs: $8,000 to $1.7 million total cost 

of adoption including IT staff services 

such as programming, software, and 

hardware across a number of systems; 

and annual ongoing costs of $0 to 

$79,000 for IT staff services such as 

programming, and minor hardware and 

software upgrades to annually update 

operating rules. 

In contrast, total implementation costs 

to implement the updated Version 5010 

of the HIPAA standards ranged from an 

average of $1.14 to $2.28 million per 

health plan, excluding government 

health plans. We assume that 

implementing Version 5010 may be 

comparable to implementing the 

operating rules adopted herein. 

However the Modifications rule broadly 

amends or alters seven HIPAA standard 

transactions. This interim final rule 

with comment period adopts operating 

rules for only two transactions. 

To calculate the range of costs for 

health plans we start with the low and 

high costs to health plans estimated in 

the Modifications rule. We increased 

these costs by 14 percent to account for 

the 14 percent increase in the number 

of health plans from the Modifications 

rule. We estimate the cost for health 

plans to implement operating rules will 

be 50 percent of the total costs estimated 

by the Modifications rule. We estimated 

a low cost of $2.6 billion and a high $5.1 

billion for health plans. We reduced the 

estimate of health plans costs based 

upon the Modifications final rule 

because, unlike the Modifications final 

rule, operating rules adopted herein 

only apply to the eligibility for a health 

plan and health care claim status 

transactions. 

We will assume that the ongoing cost 

to maintaining operating rules for 

eligibility for a health plan and health 

care claim status will continue 2 years 

after implementation. However, since 

we do not know what updates will be 

needed at this time, we cannot 

determine costs for those updates. 

Afterwards, we will assume that 

ongoing costs will decrease to zero. We 

base this assumption on the IBM study 

finding that the majority of the ongoing 

cost was due to IT staff services for 

programming, and after 2 years we 

assume that this programming will no 

longer be necessary. 

Note that by using 4,577 as the total 

number of health plans, we have not 

adjusted for the number of health plans 

that have already updated their 

infrastructure and communications, and 

have already implemented the operating 

rules. This includes not only those 

health plans that have been certified by 

the CAQH CORE as having 

implemented portions of Phase I and, 

perhaps, Phase II, but also health plans 

that have done so without going through 

the CAQH CORE certification process. 

As we have noted, a number of states 

have statutes that are similar, to the 

CAQH CORE operating rules with 

which all health care entities operating 

in the same state must comply. 

Therefore, we believe our costs may be 

overstated. We invite public and 

interested stakeholder comments on our 

cost assumptions. 


jlentini on DSK4TPTVN1PROD with RULES2
40486 Federal Register / Vol. 76, No. 131 / Friday, July 8, 2011 / Rules and Regulations 

TABLE 15—COST TO HEALTH PLANS OF OPERATING RULE ADOPTION FOR ELIGIBILITY FOR A HEALTH PLAN AND HEALTH

CARE CLAIM STATUS TRANSACTIONS

Total health plans’ 

cost from 

modifications final 

rule (+14% to account for increase 

in number of plans) 

Health plans’ cost 

to implement 

operating rules for 

eligibility for a 

health plan and 

claim 

status transactions 

(50% of adjusted 

modifications final 

rule estimates) 

5010 Implementation Costs—Low ........................................................................................................ $3,483 $1,742 

5010 Implementation Costs—High ....................................................................................................... 6,968 3,484 

5010 Transition Costs—Low ................................................................................................................. 1,640 820 

5010 Transition Costs—High ................................................................................................................ 3,279 1,639 

Total Costs—Low .................................................................................................................................... 5,123 2,562 

Total Costs—High .................................................................................................................................... 10,246 5,123 

3. Vendors and Clearinghouses 

None of the studies considered for 

this impact analysis were able to 

quantify the costs and savings, or the 

return on investment of adopting 

operating rules for vendors or 

clearinghouses. As previously 

mentioned, we expect that some costs 

will be borne by providers in the form 

of increased fees from vendors and 

clearinghouses, such as upgraded 

software costs and an increase in perclaim transaction fees based on the 

increase in volume of transactions. 

Because of this we believe that costs 

to vendors will be the same as the costs 

expected by providers since vendors 

pass along their costs to their provider 

clients in the form of increased fees, 

which are included as the costs to 

providers of implementing these 

operating rules. Additionally, we 

believe that costs to clearinghouses for 

routing of additional electronic 

transactions, which we assume will be 

due to implementation of the operating 

rules, are included in the costs expected 

by health plans. We invite interested 

stakeholder comments regarding these 

costs and assumptions for vendors and 

clearinghouses. 

J. Savings Assumptions 

1. Providers 

We have analyzed two areas in which 

providers will find savings or avoid 

costs upon implementation of the 

operating rules for eligibility for a health 

plan and health care claim status 

transactions. The first area that provides 

considerable cost savings is the 

avoidance of claim denials that 

implementation of the eligibility for a 

health plan operating rules is estimated 

to provide. The second area of savings 

for providers will be the per transaction 

savings of moving eligibility for a health 

plan and health care claim status 

transactions from non-electronic to EDI. 

It is difficult, if not impossible, to 

estimate the number of eligibility for a 

health plan and claim status 

transactions conducted per provider, 

even as an average. Given the added 

difficulty of the range of technological 

capabilities of providers, it would be 

difficult, if not impossible, to make any 

assumptions on the cost or benefit on a 

per provider basis, or to project an 

estimate of increased EDI use for any 

one provider. 

This impact analysis will not base its 

cost or benefit to providers on the 

number of providers or on a perprovider or average provider basis. It 

would be specious to presume that such 

numbers reflect any real situation in a 

provider’s office. Rather, we will look at 

the total number of eligibility for a 

health plan and claim status 

transactions that we estimate all 

providers conduct through a given year, 

and estimate an increase based on the 

implementation of operating rules. In 

the same vein, we will calculate a 

savings based on an estimate of the total 

number of denied claims, instead of 

attempting to calculate an average of 

denied claims per provider. 

In the area of claims denials, we 

assume that there will be a low to high 

range of $$560 million to $700 million 

annual cost savings in the reduction of 

denied claims once the eligibility for a 

health plan transaction operating rules 

are implemented. We base this 

assumption on a number of studies. We 

use the total annual number of claims 

submitted from the Modifications final 

rule as mentioned above, 5.6 billion, 

and divide it between physicians and 

hospitals according to the Oregon 

Survey’s 9 to 1 ratio of physician to 

hospital transactions. We then take the 

5 billion annual claims for physicians 

and 560 million for hospitals and apply 

the 5 percent of denied claims as 

outlined in the MGMA Project Swipe IT 

study. With this number, we consider 

the IBM study data that found that the 

implementation of eligibility for a 

health plan operating rules resulted in 

a 10 percent to 12 percent decrease in 

denied claims. We have consistently 

created low to high ranges in this 

impact analysis that uses the results of 

the IBM study as the ‘‘best case’’ or high 

estimates, and we will do so here as 

well. We have provided a range of 8 to 

10 percent decrease in denied claims 

due to operating rules. 

This results in a total of 22.4 million 

to 28 million denied claims for 

providers that could be avoided through 

eligibility for a health plan operating 

rules. We then take these numbers and 

apply them to the cost to providers of 

processing denied claims, which is $25 

per denied claim according to a 

December 2000 study sponsored by the 

Medical Group Management 

Association, http://www.acpinternist.

org/archives/2000/12/

claimsdenied.htm). This results in $560 

million to $700 million in annual 

savings for providers due to 

implementation of operating rules for 

the eligibility for a health plan 

transaction. 

X * Y * Z * A = Total annual savings 

to providers by avoiding denied claims 

Where: 

X = Total number of claims (Column II) 

Y = Percent of claims that are denied 

(Column III) 

Z = Percent of denied claims that will be 

avoided by implementing eligibility for a 

health plan operating rules (Column V) 

A = Cost for providers to resubmit a single 

denied claim (Column VII) 


jlentini on DSK4TPTVN1PROD with RULES2
Federal Register / Vol. 76, No. 131 / Friday, July 8, 2011 / Rules and Regulations 40487 

TABLE 16—ANNUAL SAVINGS TO PROVIDERS FOR AVOIDING CLAIMS DENIALS AFTER IMPLEMENTATION OF OPERATING

RULES FOR ELIGIBILITY FOR A HEALTH PLAN

I II III IV V VI VII VIII IX X XI 

Total 

number of 

claims (in 

millions) 

Percent of 

claims 

denied 

(MGMA 

2007) 

(percent) 

Number of 

claims 

denied in 

millions = 

(Col II) × 

(Col III) 

Percent of denied claims 

that will be avoided 

through eligibility for a 

health plan operating 

rules (IBM: 10%–12%) 

(percent) 

Number of denied claims 

that will be avoided 

through eligibility for a 

health plan operating 

rules in millions = (Col 

IV) × (Col V/VI) 

Cost to 

resubmit a 

denied 

claim (Larch 

2000, ACP– 

ASIM 

Observer) 

Total annual savings of eligibility for a health plan 

operating rules through 

reduction in claims denial in millions (Col VII/ 

VIII) × (Col IX) 

LOW HIGH LOW HIGH LOW HIGH 

Physician ........... 5,040 5 252 8 10 20.16 25.2 $25 504 630 

Hospital ............. 560 5 28 8 10 2.24 2.8 25 56 70 

Totals ......... .................... .................... .................... .................... .................... 22.4 28 .................... 560 700 

In the area of per transaction savings, 

we assume that the move from nonelectronic to electronic transmission of 

the eligibility for a health plan 

transaction will save providers, 

physicians and hospitals, $2.10 per 

transaction. This number reflects the 

difference in labor time and costs 

required to conduct the electronic 

transaction compared to the manual 

transaction. It includes the difference in 

the cost of labor—employee salary, 

benefits, and payroll taxes—as well as 

the difference in general overhead. 

We arrived at $2.10 savings per 

transaction after analyzing a number of 

the studies already mentioned, 

including the Health Efficiency Report, 

the Milliman study, and the IBM study. 

We decided that the IBM study’s 

estimate of a savings of $2.10 per 

eligibility for a health plan transaction 

that moves from non-electronic to 

electronic was the best starting estimate 

because, unlike the other studies, the 

IBM study surveyed entities that 

actually realized costs savings as a 

result of the use of operating rules for 

the electronic eligibility for a health 

plan transactions. As well, the IBM 

study gives us the most conservative 

estimate, as can be seen by comparing 

it with other studies’ conclusions. 

We assume that the move from nonelectronic to EDI transmission of the 

health care claim status transaction will 

save physicians and hospitals $3.33 per 

transaction. The benefits to physicians 

in streamlining the health care claim 

status transaction through operating 

rules are potentially significant if, as we 

assume, it leads to less dependence on 

more time consuming and costly 

manual means, and increased use of the 

EDI transaction. 

Unlike the eligibility for a health plan 

transaction analysis, we did not base 

our savings per health care claim status 

transaction for providers on the IBM 

study, as the IBM study did not measure 

the impact of the operating rules for the 

health care claim status transaction. 

Instead, we took our assumptive savings 

of $3.33 per transaction from the 

number that is used in all studies we 

analyzed and which was first illustrated 

in the Milliman study. We will use this 

assumption as this is the number on 

which industry studies appear to agree. 

However, we note that, as the health 

care claim status transaction is very 

seldom used, there is very little data on 

which to base actual savings. 

Note that the low to high estimates on 

the estimated increase in the 

transactions based on operating rules 

are carried through this calculation. We 

arrived at this range in our calculations 

described in the baseline assumptions. 

TABLE 17—SAVINGS FOR PROVIDERS PER ELIGIBILITY FOR A HEALTH PLAN AND HEALTH CARE CLAIMS STATUS

TRANSACTION THAT MOVES FROM NONELECTRONIC TO ELECTRONIC FOR PROVIDERS

Source 

Savings for every 

eligibility for a 

health plan 

transaction that 

moves from nonelectronic to electronic 

Savings for every 

health care claim 

status transaction 

that moves from 

non-electronic to 

electronic 

Health Efficiency Report .......................................................................................................................... $2.95 $3.33 

Oregon Survey (low estimate) ................................................................................................................. 2.46 3.33 

Milliman study .......................................................................................................................................... 2.44 3.33 

IBM study ................................................................................................................................................. 2.10 NA 

Our assumption ....................................................................................................................................... 2.10 3.33 


jlentini on DSK4TPTVN1PROD with RULES2
40488 Federal Register / Vol. 76, No. 131 / Friday, July 8, 2011 / Rules and Regulations 

TABLE 18—PROVIDER (PHYSICIAN AND HOSPITALS) SAVINGS FOR ELIGIBILITY

I II III IV V VI 

Year 

Low number 

increase in 

eligibility for a 

health plan transactions from previous year due to 

operating rules in 

millions 

(from table 12) 

High number 

increase in 

eligibility for a 

health plan 

transactions from 

previous year 

due to operating 

rules in millions 

(from table 12) 

Savings per 

transaction 

Low annual 

savings in millions 

High annual 

savings in millions 

2012 ............................................................... 0.0 0.0 $0 .0 $0.0 $0.0 

2013 ............................................................... 65.5 78.6 2 .10 137.6 165.1 

2014 ............................................................... 75.3 90.4 2 .10 158.2 189.9 

2015 ............................................................... 86.7 104.0 2 .10 182.0 218.4 

2016 ............................................................... 99.6 119.6 2 .10 209.3 251.1 

2017 ............................................................... 114.6 137.5 2 .10 240.6 288.8 

2018 ............................................................... 65.9 65.9 2 .10 138.4 138.4 

2019 ............................................................... 71.2 71.2 2 .10 149.4 149.4 

2020 ............................................................... 76.9 76.9 2 .10 161.4 161.4 

2021 ............................................................... 83.0 83.0 2 .10 174.3 174.3 

2022 ............................................................... 89.6 89.6 2 .10 188.3 188.3 

Total ........................................................ ............................ ............................ .............................. 1,739.5 1,925.0 

TABLE 19—PROVIDER (PHYSICIAN AND HOSPITALS) SAVINGS FOR CLAIM STATUS

I II III IV V VI 

Year 

Low number 

increase in 

health care claim 

status transactions from previous year due to 

operating rules in 

millions 

(from table 13) 

High number 

increase in 

health care claim 

status transactions from previous year due to 

operating rules in 

millions 

(from table 13) 

Savings per 

transaction 

Low annual 

savings in millions 

High annual 

savings in millions 

2012 ............................................................... 0.0 0.0 $0 .0 $0.0 $0.0 

2013 ............................................................... 9.4 11.8 3 .33 31.3 39.2 

2014 ............................................................... 11.3 14.1 3 .33 37.6 47.0 

2015 ............................................................... 13.5 16.9 3 .33 45.1 56.4 

2016 ............................................................... 16.3 20.3 3 .33 54.1 67.7 

2017 ............................................................... 19.5 24.4 3 .33 65.0 81.2 

2018 ............................................................... 13.7 13.7 3 .33 45.5 45.5 

2019 ............................................................... 15.0 15.0 3 .33 50.0 50.0 

2020 ............................................................... 16.5 16.5 3 .33 55.0 55.0 

2021 ............................................................... 18.2 18.2 3 .33 60.5 60.5 

2022 ............................................................... 20.0 20.0 3 .33 66.6 66.6 

Total ........................................................ ............................ ............................ .............................. 510.8 569.0 

TABLE 20—PROVIDER SAVINGS SUMMARIZED

Year 

Low savings High savings 

Annual provider 

savings due to 

increased use of 

electronic 

transactions 

Annual provider 

savings due to 

decrease in 

claim denials 

Total annual 

savings to providers 

(in millions) 

Annual provider 

savings due to 

increased use of 

electronic 

transactions 

Annual provider 

savings due to 

decrease in 

claim denials 

Total annual 

savings to providers 

(in millions) 

2013 ................................. $168.92 $560 $729 $204.27 $700 $904 

2014 ................................. 195.83 560 756 236.87 700 937 

2015 ................................. 227.08 560 787 274.75 700 975 

2016 ................................. 263.40 560 823 318.78 700 1,019 

2017 ................................. 305.61 560 866 369.98 700 1,070 

2018 ................................. 183.85 560 744 183.85 700 884 

2019 ................................. 199.46 560 759 199.46 700 899 

2020 ................................. 216.42 560 776 216.42 700 916 

2021 ................................. 234.84 560 795 234.84 700 935 

2022 ................................. 254.83 560 815 254.83 700 955 


jlentini on DSK4TPTVN1PROD with RULES2
Federal Register / Vol. 76, No. 131 / Friday, July 8, 2011 / Rules and Regulations 40489 

TABLE 20—PROVIDER SAVINGS SUMMARIZED—Continued 

Year 

Low savings High savings 

Annual provider 

savings due to 

increased use of 

electronic 

transactions 

Annual provider 

savings due to 

decrease in 

claim denials 

Total annual 

savings to providers 

(in millions) 

Annual provider 

savings due to 

increased use of 

electronic 

transactions 

Annual provider 

savings due to 

decrease in 

claim denials 

Total annual 

savings to providers 

(in millions) 

Cumulative Totals ..... ............................ ............................ 7,850 ............................ ............................ 9,494 

2. Health Plans 

We have analyzed two areas in which 

health plans will find savings or avoid 

costs upon implementation of the 

operating rules for eligibility for a health 

plan and health care claim status 

transactions. The first area that provides 

considerable cost savings is a decrease 

in the number of pended claims that 

implementation of the eligibility for a 

health plan operating rules is estimated 

to provide. Pended claims are claims 

that necessitate a manual review by the 

health plan. The second area of savings 

for health plans will be the per 

transaction savings of moving eligibility 

for a health plan and health care claim 

status transactions from non-electronic 

to EDI transmittal. 

In the area of pended claims, we base 

this assumption on a study by the 

America’s Health Insurance Plans in 

2006 (AHIP Center for Policy and 

Research, An Updated Survey of Health 

Care Claims Receipt and Processing 

Times (May 2006) at http://www.

ahipresearch.org/pdfs/PromptPayFinal

Draft.pdf). 

We start our calculation with the total 

annual number of claims submitted 

based on the Modifications final rule as 

mentioned previously, 5.6 billion. AHIP 

reported that 14 percent of all claims 

were pended by health plans, which 

calculates to 784 million pended claims. 

The AHIP study broke down the reasons 

why claims were pended. Four of those 

categories, including lack of necessary 

information, no coverage based on date 

of service, non-covered/non-network 

benefit or service, and coverage 

determination, we believe can be 

avoided by implementing operating 

rules for the eligibility for a health plan 

transaction and the increased use of the 

eligibility for a health plan transactions. 

These categories comprise 31 percent of 

all pended claims. We also assume that 

many pended claims can be avoided 

with increased use of the claim status 

transaction and its operating rules. 

However, we were unable to establish a 

correlation between use of claim status 

operating rules and a decrease in 

pended claims, and have not included 

any savings attributable to the claim 

status operating rules. 

To reflect the uncertainty of this effect 

of operating rules on a ‘‘downstream’’ 

process, we estimate that 20 to 25 

percent of pended claims could be 

avoided through use of operating rules. 

(See Table 21.) 

AHIP estimated that $0.85 was the 

cost to reply electronically to a ‘‘clean’’ 

claim submission, while $2.05 was the 

cost to claims that ‘‘necessitate manual 

or other review cost,’’ according to the 

study. The difference is $1.20, which is 

the per pended claim factor we use for 

our cost savings analysis. (See Table 21.) 

This results in $188 million to $235 

million for health plans in annual 

savings of eligibility for a health plan 

operating rules through reduction in 

pended claims. 

X * Y * Z * A = Total annual savings 

to providers by avoiding denied 

claims 

Where: 

X = Total number of claims (Column I) 

Y = Percent of claims that are pended 

(Column II) 

Z = Percent of pended claims that will be 

avoided by implementing eligibility for a 

health plan operating rules (Column IV) 

A = Cost for health plans to manually review 

a pended claim (Column VI) 

TABLE 21—ANNUAL SAVINGS TO PLANS FOR AVOIDING PENDED CLAIMS AFTER IMPLEMENTATION OF OPERATING RULES

FOR ELIGIBILITY FOR A HEALTH PLAN

I II III IV V VI VII VIII IX X 

Total number 

of claims in 

millions 

Percent of 

claims pended 

(AHIP 2006) 

Number of 

claims pended 

claims in 

millions = 

(Col I) 

× 

(Col II) 

Percent of 

pended claims 

that will be 

avoided 

through 

eligibility for a 

health plan 

operating 

rules 

(AHIP 2006) 

Low 

Percent of 

pended claims 

that will be 

avoided 

through 

eligibility for a 

health plan 

operating 

rules 

(AHIP 2006) 

High 

Number of 

pended claims 

that will be 

avoided 

through 

eligibility for a 

health plan 

operating 

rules in 

millions = 

(Col III 

× 

(Col IV) 

Low 

Number of 

pended claims 

that will be 

avoided 

through 

eligibility for a 

health plan 

operating 

rules in 

millions = 

(Col III) 

× 

(Col V) 

High 

Cost to review 

a pended 

claim 

(AHIP, 2006) 

Total annual 

savings of 

eligibility for a 

health plan 

operating 

rules through 

reduction in 

pended claims 

in millions 

(Col VI) 

× 

(Col VIII) 

Low 

Total annual 

savings of 

eligibility for a 

health plan 

operating 

rules through 

reduction in 

pended claims 

in millions 

(Col VII) 

× 

(Col VIII) 

High 

5,600 14% 784 20% 25% 156.8 196 $1.20 $188 $235 

The second area of savings for health 

plans is the per transaction savings of 

moving eligibility for a health plan and 

health care claim status transactions 

from non-electronic to electronic 

transmittal. We assume that the average 

savings for health plans in adopting 

operating rules for eligibility for a health 

plan is approximately $3.13 per 

transaction that moves from nonelectronic to electronic, and $3.75 for 

health care claim status transactions 

that move from non-electronic to 

electronic. 

To determine these savings, we 

assumed that the IBM study and the 

Oregon Survey were the most recent and 

the most valid with regard to eligibility 

for a health plan savings, as they are 

based on detailed surveys with health 

plans. To arrive at our savings 


jlentini on DSK4TPTVN1PROD with RULES2
40490 Federal Register / Vol. 76, No. 131 / Friday, July 8, 2011 / Rules and Regulations 

assumption, therefore, we averaged the 

two studies. (See Table 22) 

For health care claim status 

transactions, we relied solely on the 

Oregon Survey, again based on the 

validity of its results. (See Table 22) 

TABLE 22—SAVINGS PER ELIGIBILITY FOR A HEALTH PLAN AND HEALTH CARE CLAIM STATUS TRANSACTION THAT MOVES

FROM NON–ELECTRONIC TO ELECTRONIC FOR HEALTH PLANS

Source 

Savings for every 

eligibility for a 

health plan 

transaction that 

moves from nonelectronic to electronic 

Savings for every 

health care claims 

status transaction 

that moves from 

non-electronic to 

electronic 

Oregon Survey ......................................................................................................................................... $3.75 $3.75 

IBM study ................................................................................................................................................. $2.50 NA 

Our assumption ....................................................................................................................................... $3.13 $3.75 

Note that the low to high estimates on 

the estimated increase in the 

transactions based on operating rules 

are carried through this calculation (in 

Tables 23 and 24). We arrived at this 

range in our calculations described in 

the baseline assumptions. 

TABLE 23—SAVINGS FOR ELIGIBILITY FOR A HEALTH PLAN OPERATING RULES FOR HEALTH PLANS

I II III IV V VI 

Year 

Number increase 

in electronic 

eligibility for a 

health plan transactions from previous year due to 

operating rules 

(in millions) 

low 

Number increase 

in electronic 

eligibility for a 

health plan transactions from previous year due to 

operating rules 

(in millions) 

high 

Savings per 

transaction 

Annual savings 

(in millions) 

low 

Annual savings 

(in millions) 

high 

2012 ............................................................... 0.0 0.0 $0 .0 $0.0 $0.0 

2013 ............................................................... 65.5 78.6 3 .13 205.1 246.1 

2014 ............................................................... 75.3 90.4 3 .13 235.8 283.0 

2015 ............................................................... 86.7 104.0 3 .13 271.2 325.5 

2016 ............................................................... 99.6 119.6 3 .13 311.9 374.3 

2017 ............................................................... 114.6 137.5 3 .13 358.7 430.4 

2018 ............................................................... 65.9 65.9 3 .13 206.2 206.2 

2019 ............................................................... 71.2 71.2 3 .13 222.7 222.7 

2020 ............................................................... 76.9 76.9 3 .13 240.6 240.6 

2021 ............................................................... 83.0 83.0 3 .13 259.8 259.8 

2022 ............................................................... 89.6 89.6 3 .13 280.6 280.6 

Total ........................................................ ............................ ............................ .............................. 2,592.7 2,869.2 

TABLE 24—SAVINGS FOR HEALTH CARE CLAIM STATUS OPERATING RULES FOR HEALTH PLANS

I II III IV V VI 

Year 

Number increase 

in health care 

claim status 

transactions from 

previous year 

due to operating 

rules 

(in millions) 

low 

Number increase 

in claim status 

health care 

transactions from 

previous year 

due to operating 

rules 

(in millions) high 

Savings per 

transaction 

Annual savings 

(in millions) 

low 

Annual savings 

(in millions) 

high 

2012 ............................................................... 0.0 0.0 $0 .0 $0.0 $0.0 

2013 ............................................................... 9.4 11.8 3 .75 35.3 44.1 

2014 ............................................................... 11.3 14.1 3 .75 42.3 52.9 

2015 ............................................................... 13.5 16.9 3 .75 50.8 63.5 

2016 ............................................................... 16.3 20.3 3 .75 61.0 76.2 

2017 ............................................................... 19.5 24.4 3 .75 73.2 91.4 

2018 ............................................................... 13.7 13.7 3 .75 51.2 51.2 

2019 ............................................................... 15.0 15.0 3 .75 56.3 56.3 

2020 ............................................................... 16.5 16.5 3 .75 62.0 62.0 

2021 ............................................................... 18.2 18.2 3 .75 68.2 68.2 

2022 ............................................................... 20.0 20.0 3 .75 75.0 75.0 


jlentini on DSK4TPTVN1PROD with RULES2
Federal Register / Vol. 76, No. 131 / Friday, July 8, 2011 / Rules and Regulations 40491 

TABLE 24—SAVINGS FOR HEALTH CARE CLAIM STATUS OPERATING RULES FOR HEALTH PLANS—Continued 

I II III IV V VI 

Year 

Number increase 

in health care 

claim status 

transactions from 

previous year 

due to operating 

rules 

(in millions) 

low 

Number increase 

in claim status 

health care 

transactions from 

previous year 

due to operating 

rules 

(in millions) high 

Savings per 

transaction 

Annual savings 

(in millions) 

low 

Annual savings 

(in millions) 

high 

Total ........................................................ ............................ ............................ .............................. 575.2 640.8 

TABLE 25—HEALTH PLAN SAVINGS SUMMARIZED

Low savings High savings 

Annual health 

plan savings due 

to increased use 

of electronic 

transactions 

Annual health 

plan savings due 

to decrease in 

claim denials 

Total annual 

savings to health 

plans 

(in millions) 

Annual health 

plan savings due 

to increased use 

of electronic 

transactions 

Annual health 

plan savings due 

to decrease in 

claim denials 

Total annual 

savings to health 

plans 

(in millions) 

2013 ................................. $240.4 $188 $429 $290.19 $235 $525 

2014 ................................. 278.2 188 466 335.93 235 571 

2015 ................................. 322.0 188 510 388.96 235 624 

2016 ................................. 372.9 188 561 450.48 235 686 

2017 ................................. 431.8 188 620 521.86 235 757 

2018 ................................. 257.5 188 446 257.45 235 493 

2019 ................................. 279.1 188 467 279.07 235 514 

2020 ................................. 302.5 188 491 302.52 235 538 

2021 ................................. 328.0 188 516 327.97 235 563 

2022 ................................. 355.6 188 544 355.57 235 591 

Totals ........................ ............................ ............................ 5,049 ............................ ............................ 5,862 

3. Vendors and Clearinghouses 

None of the studies considered for 

this analysis were able to quantify the 

costs and savings, or the return on 

investment of adopting operating rules 

for the eligibility for a health plan and 

health care claim status inquiry and 

response transactions for vendors and 

clearinghouses. As noted previously, we 

expect that some costs will be borne by 

providers in the form of increased fees 

from vendors and clearinghouses such 

as upgraded software costs. 

We would anticipate that the savings, 

as well as the costs, to vendors of 

upgrading provider software will be 

passed along to their provider clients. 

Therefore, we assume that the costs and 

benefits for vendors in implementing 

the operating rules will be the same as 

those for providers. 

Additionally, since clearinghouses 

work on behalf of health plans and act 

as intermediaries between providers and 

health plan in regards to electronic 

transactions, we believe that the 

savings, as well as the costs, to 

clearinghouses for routing of additional 

electronic transactions will be the same 

savings and costs as those expected by 

health plans. We invite public and 

interested stakeholder comments on our 

assumptions. 

K. Summary 

1. Providers 

As previously noted, providers will 

assume the least cost and see the 

greatest benefit from the 

implementation of operating rules as 

required by this interim final rule with 

comment period. Within 10 years of 

implementation of the operating rules 

for eligibility for a health plan and 

health care claim status transactions, we 

estimate that there will be $7.9 billion 

to $9.5 billion in savings for providers 

at a cost of up to $855 million. 

TABLE 26—SUMMARY OF PROVIDER

SAVINGS AND COSTS OVER 10 YEARS

[In millions] 

Low High 

Provider Savings .......... $7,850 $9,494 

Total Provider Costs ..... 427 855 

2. Health Plans 

We estimate that health plans will see 

a savings of $5 billion to $5.8 billion 

within 10 years of the implementation 

of operating rules (both for eligibility for 

a health plan and health care claim 

status transactions). We believe that this 

is a conservative estimate. The IBM 

study found an average return on 

investment of over $2 million per health 

plan within 1 year of implementation. If 

multiplied by the number of health 

plans, this results in over $9 billion 

savings after the first year. We estimate 

that costs to health plans will range 

from $2.6 billion to $5.1 billion over 10 

years. 

In March 2010, the Congressional 

Budget Office (CBO) (http:// 

www.cbo.gov/ftpdocs/113xx/doc11379/ 

AmendReconProp.pdf) estimated that 

the administrative simplification 

requirements in the Affordable Care Act 

would produce savings to the Federal 

budget. In contrast to the CBO analysis, 

government health plans are not 

considered separately in our impact 

analysis and summary estimate, and 

were instead included along with 

private health plans. When considering 

the impact on the Federal government of 

this interim final rule with comment 

period, note that the operating rules 

adopted herein are only one part of the 

broader administrative simplification 

mandates outlined in section 1104 of 

the Affordable Care Act, from which a 


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greater return on investment (ROI) in 

total is anticipated. Also, because we are 

addressing requirements that will 

impact the entire health care industry, 

we again reiterate that we choose to 

make conservative estimates based on 

the variation within the studies on 

which to base such estimates. 

TABLE 27—SUMMARY OF HEALTH

PLAN SAVINGS AND COSTS OVER 10 

YEARS

[In millions] 

Low High 

Health Plan Savings ..... $5,049 $5,862 

Health Plan Costs ......... 2,562 5,123 

TABLE 28—SUMMARY OF PROVIDER

AND HEALTH PLAN SAVINGS AND

COSTS OVER 10 YEARS

[In millions] 

Low High 

Provider and Health 

Plan Savings ............. $12,899 $15,356 

Total Provider and 

Health Plan Costs ..... 2,989 5,978 

L. Regulatory Flexibility Analysis 

The Regulatory Flexibility Act (RFA) 

of 1980, Public Law 96–354, requires 

agencies to describe and analyze the 

impact of the interim final rule with 

comment on small entities unless the 

Secretary can certify that the regulation 

will not have a significant impact on a 

substantial number of small entities. In 

the healthcare sector, the Small 

Business Administration (SBA) size 

standards define a small entity as one 

with between revenues of $7 million to 

$34.5 million in any 1 year. For details, 

see the SBA’s Web site at http:// 

www.sba.gov/sites/default/files/ 

Size_Standards_Table.pdf (refer to 

Sector 62—Health Care and Social 

Assistance). (Accessed 2–1–11). 

For the purposes of this analysis 

(pursuant to the RFA), nonprofit 

organizations are considered small 

entities; however, individuals and 

States are not included in the definition 

of a small entity. We have attempted to 

estimate the number of small entities 

and provide a general discussion of the 

effects of this interim final rule with 

comment period, and where we had 

difficulty, or were unable to find 

information, we solicit industry 

comment. Because most medical 

providers are either nonprofit or meet 

the SBA’s size standard for small 

business, we treat all medical providers 

as small entities. 

1. Number of Small Entities 

The following sections discuss which 

entities across the health care industry, 

that are impacted by this interim final 

rule with comment period, are 

considered small entities as part of this 

Regulatory Flexibility Analysis. 

• Providers—All health care 

providers are assumed to be small 

entities. The number of providers 

utilized in this analysis is taken from 

the August 21, 2008 HIPAA Electronic 

Transaction Standards proposed rule, as 

well as the U.S. Census Bureau, Detailed 

Statistics, 2007 Economic Census, 

August 31, 2010. The determination to 

include all health care providers as 

small entities is modeled after many 

previous HHS rules which utilized the 

same assumption. 

• Clearinghouses—All clearinghouses 

were assumed to not be small entities. 

Three national association Web sites 

were consulted (EHNAC, HIMSS and 

the Cooperative Exchange). 

Additionally, the Health Data Dictionary 

by Faulkner and Gray which was last 

published in 2000 determined that the 

number of clearinghouses that would be 

considered small entities was negligible. 

The top 51 clearinghouse entities were 

listed, and the range of monthly 

transactions was 2,500 to 4 million, 

with transaction fees of $0.25 per 

transaction to $2.50 per transaction. It 

was determined that even based on this 

data, few of the entities would fall into 

the small entity category, and as such, 

we did not count them in this RFA 

analysis. 

• Health Plans—All health plans are 

assumed to not be small entities. Based 

on the available public data, the number 

of plans that meet the SBA size standard 

of $7 million in annual receipts was 

unable to be determined; therefore we 

did not include an analysis of the 

impact on health plans. 

• Software Vendors—Vendors are not 

considered covered entities under 

HIPAA; however we assume that all 

vendors are small entities based on their 

relation to providers. Based on our 

analysis in the regulatory impact 

analysis, we assume that the costs and 

benefits for software vendors would be 

the same as those for providers. 

We solicit industry comment on our 

above assumptions. 

In total, we estimate that there are 

approximately 300,000 health care 

organizations that may be considered 

small entities either because of their 

nonprofit status or because of their 

revenues. On the provider side, 

practices of doctors of osteopathy, 

podiatry, chiropractors, mental health 

independent practitioners with annual 

receipts of less than $7 million are 

considered to be small entities. Solo and 

group physicians’ offices with annual 

receipts of less than $9 million (97 

percent of all physician practices) are 

also considered small entities, as are 

clinics. Approximately 92 percent of 

medical laboratories, 100 percent of 

dental laboratories and 90 percent of 

durable medical equipment suppliers 

are assumed to be small entities as well. 

The American Medical Billing 

Association (AMBA) (http:// 

www.ambanet.net/AMBA.htm) lists 97 

billing companies on its Web site. It 

notes that these are only ones with Web 

sites. 

The Business Census data shows that 

there are 4,526 (plus Medicare, VA, and 

IHS) firms considered as health plans 

and/or payers responsible for 

conducting transactions with health 

care providers (not including State 

Medicaid Agencies). For purposes of the 

RFA, we did not identify a subset of 

small plans, and instead solicit industry 

comment as to the percentage of plans 

that would be considered small entities. 

State Medicaid agencies were also 

excluded from the analysis as well 

because States are not considered small 

entities in any Regulatory Flexibility 

Analysis. We solicit industry comment 

on this assumption. 

We identified the top 51 

clearinghouses/vendors in the Faulkner 

and Gray health data directory from 

2000, the last year this document was 

produced. Health care clearinghouses 

provide transaction processing and 

translation services to both providers 

and health plans. 

The following table outlines the 

estimated number of small entities 

utilized in the preparation of the initial 

regulatory flexibility analysis. 

TABLE 29—NUMBER OF IMPACTED SMALL ENTITIES

[In Whole Numbers] 

Type Number Source 

Hospitals (NAICS 622) ............................. 6,505 U.S. Census Bureau, Detailed Statistics, 2007 Economic Census, August 31, 2010. 


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TABLE 29—NUMBER OF IMPACTED SMALL ENTITIES—Continued 

[In Whole Numbers] 

Type Number Source 

Ambulatory health care services (NAICS 

code 6211).

547,561 U.S. Census Bureau, Detailed Statistics, 2007 Economic Census, August 31, 2010. 

Clearinghouses ......................................... 0 Survey of EHNAC, HIMSS, the Cooperative Exchange, and the Maryland Commission for Healthcare) Assume, all clearinghouse are not small entities. 

Health Plans (including Government 

Health Plans such as Medicare, VA 

and IHS).

0 Assume all health plans are not small entities. 

Vendors (NAICS code 5415—Computer 

design and related services).

51 EC EDI Vantage Point Healthcare Directory—6th Edition (n=51) http://www.ecedi.biz/content/en/dir-guest-login.asp. 

Health Plans—Medicaid ........................... 0 State Medicaid agencies were excluded from the analysis because States are not 

considered small entities in any Regulatory Flexibility Analysis. 

2. Cost for Small Entities 

To determine the impact on health 

care providers we used Business Census 

data on the number of establishments 

for hospitals and firms for the classes of 

providers and revenue data reported in 

the Survey of Annual Services for each 

NAICS code. Because each hospital 

maintains its own financial records and 

reports separately to payment plans, we 

decided to report the number of 

establishments rather than firms. For 

other providers, we assumed that the 

costs to implement the operating rules 

for eligibility for a health plan and 

health care claim status transactions 

would be accounted for at the level of 

firms rather than at the individual 

establishments. Therefore, we reported 

the number of firms for all other 

providers. 

In the following tables, we take the 

information from the impact analysis 

and break out the costs for both 

physicians and hospitals. As stated 

earlier in the impact analysis, we 

assume that vendor costs will be the 

same as those for providers because of 

our assumption that vendors will pass 

along their costs in the form of 

increased fees to their provider clients. 

As we are treating all health care 

providers as small entities for the 

purpose of the regulatory flexibility 

analysis, we allocated 100 percent of the 

implementation costs reported in the 

impact analysis for physicians and 

hospitals. Accordingly we treat all 

software vendors as small entities based 

on their relationship to providers and 

allocate the same costs. Table 30 shows 

the impact of the implementation costs 

of operating rules as a percent of the 

provider revenues. Data on the number 

of entities for these tables were gathered 

from the 2007 census (http:// 

factfinder.census.gov/servlet/ 

IBQTable?_bm=y&-geo_id=&- 

fds_name=EC0700A1&-_skip=0&- 

ds_name=EC0762SSSZ1&-_lang=en). 

We used the NAICS code 5415 

computer system design and related 

services for software vendors. 

TABLE 30—ANALYSIS OF THE BURDEN OF IMPLEMENTATION OF OPERATING RULES ON SMALL COVERED ENTITIES

NAICS No. Entities Total number 

of entities 

Number of 

small entities 

Revenues or 

receipts ($ in 

millions) 

Small entity 

receipts of 

total receipts 

(percent) 

Op rules costs 

annual ($ in 

millions) 

Implementation 

cost revenue 

receipts (percent) 

6211 ......... Ambulatory health care 

services.

547,561 547,561 668,453 100 136–272 0.0002–0.004 

622 ........... Hospitals ........................ 6,505 6,505 702,960 100 291–583 0.0004–0.0008 

5415 ......... Computer system design 

and related services.

105,710 105,710 297,200 100 136–272 0.0005–0.0009 

In Column I we display the NAICS 

code for class of entity. Column II shows 

the number of entities that are reported 

in the Business Census for 2002 and 

Column III shows the number of small 

entities that were computed based on 

the Business Census and Survey of 

Annual Service. As mentioned 

previously, we assume that all health 

care providers are small. Column IV 

shows revenues that were reported for 

2008 in the Survey of Annual Services 

(http://www.census.gov/services/ 

sas_data.html). Column V shows the 

percent of small entity revenues. 

Column VI shows the costs to providers 

for implementation of eligibility for a 

health plan and health care claim status 

operating rules. Column VII shows the 

costs allocated to the small entities 

based on the percent of small entity 

revenues to total revenues. 

Column VIII presents the percent of 

the small entity share of implementation 

costs as a percent of the small entity 

revenues. We have established a 

baseline threshold of 3 percent of 

revenues that would be considered a 

significant economic impact on affected 

entities. None of the entities exceeded 

or came close to this threshold. 

We note that the impact in our 

scenarios is consistently under the 

estimated impact of 3 percent for all of 

the entities previously listed, which is 

below the threshold we consider as a 

significant economic impact. As 

expressed in the guidance on 

conducting regulatory flexibility 

analyses, the threshold for an economic 

impact to be considered significant is 3 

percent to 5 percent of either receipts or 

costs. As is clear from the analysis, the 

impact does not come close to the 

threshold. Thus, based on the foregoing 

analysis, we conclude that some small 

health care providers may encounter 

some burdens in the course of 

implementing the eligibility for a health 

plan and health care claim status 

operating rules. However, we are of the 

opinion that, for most small providers, 

the costs will not be significant, and for 

providers who are not HIPAA covered 

entities and do not conduct electronic 

health care transactions, there is no cost. 


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We did not include an analysis of the 

impact on small health plans here, 

because we were not able to determine 

the number of plans that meet the SBA 

size standard of $7 million in annual 

receipts. 

In evaluating whether there were any 

clearinghouses that could be considered 

small entities, we consulted with three 

national associations (EHNAC, HIMSS, 

and the Cooperative Exchange), as well 

as the Maryland Commission for Health 

Care, and determined that the number of 

clearinghouses that would be 

considered small entities was negligible. 

Revenues cited on the Cooperative 

Exchange Web site (http:// 

www.cooperativeexchange.org/ 

faq.html) divided clearinghouses into 

three revenue categories—small ($10 

million); medium ($10 million to $50 

million) and large ($50 million or 

greater). We identified the top 51 

clearinghouses, and determined that 

they are typically part of large electronic 

health networks, such as Siemens, 

RxHub, Availity, GE Healthcare etc., 

none of which fit into the category of 

small entity. As referenced earlier, in a 

report by Faulkner and Gray in 2000, 

the top 51 entities were listed, and the 

range of monthly transactions was 2,500 

to 4 million, with transaction fees of 

$0.25 per transaction to $2.50 per 

transaction. We determined that even 

based on this data, few of the entities 

would fall into the small entity category, 

and we do not count them in this 

analysis. 

Based on the results of this analysis, 

we are reasonably confident that the 

rule will not have a significant impact 

on a substantial number of small 

entities. Nevertheless, we are 

specifically requesting comments on our 

analysis and asking for any data that 

will help us determine the number and 

sizes of firms implementing the 

operating rules adopted in this interim 

final rule with comment period. 

We solicit industry comment on our 

above assumptions. 

3. Alternatives Considered 

As stated in section VII.D. of this 

interim final rule with comment period, 

we considered various policy 

alternatives to adopting operating rules, 

including not adopting operating rules, 

adopting another authoring entity’s 

operating rules, or waiting for resolution 

of all outstanding technical and 

administrative issues before adopting 

the operating rules developed by the 

authoring entities. For reasons cited in 

section VII.D. of this interim final rule 

with comment period we have 

determined that none of these options 

were viable. Please see section VII.D. of 

this interim final rule with comment 

period for a discussion of these options 

and why we determined they were not 

viable. 

4. Conclusion 

As stated in the HHS guidance cited 

earlier in this section, HHS uses a 

baseline threshold of 3 percent of 

revenues to determine if a rule would 

have a significant economic impact on 

affected small entities. None of the 

entities exceeded or came close to this 

threshold. Based on the foregoing 

analysis, we could certify that this 

interim final rule with comment would 

not have a significant economic impact 

on a substantial number of small 

entities. 

However, because of the relative 

uncertainty in the data, the lack of 

consistent industry data, and our 

general assumptions, we invite public 

comments on the analysis and request 

any additional data that would help us 

determine more accurately the impact 

on the various categories of small 

entities affected by this interim final 

rule with comment period. In addition, 

section 1102(b) of the Act requires us to 

prepare a regulatory impact analysis if 

a rule would have a significant impact 

on the operations of a substantial 

number of small rural hospitals. This 

analysis must conform to the provisions 

of section 603 of the RFA. For purposes 

of section 1102(b) of the Act, we define 

a small rural hospital as a hospital that 

is located outside of a metropolitan 

statistical area and has fewer than 100 

beds. Based on the analysis above, 

including that the overall costs to small 

hospitals is under the $136 million 

threshold, we do not believe this rule 

would have a significant impact on 

small rural hospitals, for the reasons 

stated above in reference to small 

entities. Therefore, the Secretary has 

determined that this interim final rule 

with comment period would not have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. 

M. Accounting Statement 

TABLE 31—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES, FROM FY 2011 TO FY 2023 

[in millions] 

Category Primary estimate 

(millions) 

Minimum 

estimate 

(millions) 

Maximum 

estimate 

(millions) 

Source 

citation 

(RIA, 

preamble, 

etc. 

BENEFITS 

Annualized Monetized benefits 

7% Discount ...................... Not estimated ............................................................................... $1,124 ......... $1,347 ......... RIA. 

3% Discount ...................... Not estimated ............................................................................... 1,153 ........... 1,376 ........... RIA. 

Qualitative (un-quantified) benefits.Wider adoption of standards due to consistent use of standards 

and responses robust in data; increased productivity due to 

decrease in manual intervention requirements; avoidance of 

pended claims, claim denials, and other obstacles to expedited billing.

..................... .....................

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

COSTS 

Annualized Monetized costs 

7% Discount ...................... Not estimated ............................................................................... $373 ............ $745 ............ RIA. 

3% Discount ...................... Not estimated ............................................................................... 314 .............. 627 .............. RIA. 

Qualitative (un-quantified) costs None ............................................................................................ None ........... None ...........


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TABLE 31—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES, FROM FY 2011 TO FY 2023— 

Continued 

[in millions] 

Category Primary estimate 

(millions) 

Minimum 

estimate 

(millions) 

Maximum 

estimate 

(millions) 

Source 

citation 

(RIA, 

preamble, 

etc. 

Providers will pay costs to vendors and clearinghouses. Health plans will pay costs to software vendors, programming and IT staff/contractors, 

and clearinghouses. Clearinghouses will pay costs to programming and IT staff/contractors and software developers. Government will pay 

costs to vendors and staff. 

TRANSFERS 

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

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

Annualized monetized transfers: ‘‘off-budget’’.N/A ............................................................................................... N/A .............. N/A ..............

List of Subjects 

45 CFR Part 160 

Administrative practice and 

procedure, Computer technology, 

Health care, Health facilities, Health 

insurance, Health records, Hospitals, 

Medicaid, Medicare, Penalties, 

Reporting and recordkeeping 

requirements. 

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 parts 

160 and 162 to read as follows: 

PART 160—ADMINISTRATIVE DATA 

STANDARDS AND RELATED 

REQUIREMENTS 

■ 1. The authority citation for part 160 

is revised to read as follows: 

Authority: 42 U.S.C. 1302(a), 42 U.S.C. 

1320d–1320d–8, sec. 264 of Pub. L. 104–191, 

110 Stat. 2033–2034 (42 U.S.C. 1320d–2 

(note)), 5 U.S.C. 552; secs. 13400 and 13402, 

Pub. L. 111–5, 123 Stat. 258–263, and sec. 

1104 of Pub. L. 111–148, 124 Stat. 146–154. 

Subpart A—General Provisions 

§ 160.101 [Amended] 

■ 2. Amend § 160.101 by removing the 

phrase ‘‘and section 13410(d) of Public 

Law 111–5.’’ and adding in its place the 

phrase ‘‘section 13410(d) of Public Law 

111–5, and section 1104 of Public Law 

111–148.’’ 

■ 3. Amend § 160.103 by adding a 

paragraph (3) to the definition of 

‘‘standard’’ to read as follows: 

§ 160.103 Definitions. 

* * * * * 

Standard * * * 

(3) With the exception of operating 

rules as defined at § 162.103. 

* * * * * 

PART 162—ADMINISTRATIVE 

REQUIREMENTS 

■ 4. The authority citation for part 162 

is revised 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. 

Subpart A—General Provisions 

■ 5. Amend § 162.103 as follows: 

■ A. Adding the definition of ‘‘operating 

rules’’. 

■ B. Revising the definition of ‘‘standard 

transaction’’. 

The revision and addition read as 

follows: 

§ 162.103 Definitions. 

* * * * * 

Operating rules means 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. 

* * * * * 

Standard transaction means a 

transaction that complies with an 

applicable standard and associated 

operating rules adopted under this part. 

Subpart I—General Provisions for 

Transactions 

■ 6. Amend § 162.915 by revising 

paragraph (a) to read as follows: 

§ 162.915 Trading partner agreements. 

* * * * * 

(a) Change the definition, data 

condition, or use of a data element or 

segment in a standard or operating rule, 

except where necessary to implement 

State or Federal law, or to protect 

against fraud and abuse. 

* * * * * 

■ 7. Amend § 162.920 as follows: 

■ A. Revising the section heading and 

introductory text. 

■ C. Adding paragraph (c). 

The revisions and addition read as 

follows: 

§ 162.920 Availability of implementation 

specifications and operating rules. 

Certain material is incorporated by 

reference into this subpart with the 

approval of the Director of the Federal 

Register under 5 U.S.C. 552(a) and 1 

CFR part 51. To enforce any edition 

other than that specified in this section, 

the Department of Health and Human 

Services must publish notice of change 

in the Federal Register and the material 

must be available to the public. All 

approved material is available for 

inspection at the National Archives and 

Records Administration (NARA). For 

information on the availability of this 

material at NARA, call (202) 714–6030, 

or go to: http://www.archives.gov/ 

federal_register/ 

code_of_federal_regulations/ 

ibr_locations.html. The materials are 

also available for inspection by the 

public at the Centers for Medicare & 

Medicaid Services (CMS), 7500 Security 

Boulevard, Baltimore, Maryland 21244. 


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For more information on the availability 

on the materials at CMS, call (410) 786– 

6597. The materials are also available 

from the sources listed below. 

* * * * * 

(c) Council for Affordable Quality 

Healthcare’s (CAQH) Committee on 

Operating Rules for Information 

Exchange (CORE), 601 Pennsylvania 

Avenue, NW. South Building, Suite 500 

Washington, DC 20004; Telephone (202) 

861–1492; Fax (202) 861- 1454; E-mail 

info@CAQH.org; and Internet at http:// 

www.caqh.org/benefits.php. 

(1) CAQH, Committee on Operating 

Rules for Information Exchange, CORE 

Phase I Policies and Operating Rules, 

Approved April 2006, v5010 Update 

March 2011. 

(i) Phase I CORE 152: Eligibility and 

Benefit Real Time Companion Guide 

Rule, version 1.1.0, March 2011, as 

referenced in § 162.1203. 

(ii) Phase I CORE 153: Eligibility and 

Benefits Connectivity Rule, version 

1.1.0, March 2011, as referenced in 

§ 162.1203. 

(iii) Phase I CORE 154: Eligibility and 

Benefits 270/271 Data Content Rule, 

version 1.1.0, March 2011, as referenced 

in § 162.1203. 

(iv) Phase I CORE 155: Eligibility and 

Benefits Batch Response Time Rule, 

version 1.1.0, March 2011, as referenced 

in § 162.1203. 

(v) Phase I CORE 156: Eligibility and 

Benefits Real Time Response Time Rule, 

version 1.1.0, March 2011, as referenced 

in § 162.1203. 

(vi) Phase I CORE 157: Eligibility and 

Benefits System Availability Rule, 

version 1.1.0, March 2011, as referenced 

in § 162.1203. 

(2) ACME Health Plan, HIPAA 

Transaction Standard Companion 

Guide, Refers to the Implementation 

Guides Based on ASC X12 version 

005010, CORE v5010 Master Companion 

Guide Template, 005010, 1.2, (CORE v 

5010 Master Companion Guide 

Template, 005010, 1.2), March 2011, as 

referenced in §§ 162.1203 and 162.1403. 

(3) CAQH, Committee on Operating 

Rules for Information Exchange, CORE 

Phase II Policies and Operating Rules, 

Approved July 2008, v5010 Update 

March 2011. 

(i) Phase II CORE 250: Claim Status 

Rule, version 2.1.0, March 2011, as 

referenced in § 162.1403. 

(ii) Phase II CORE 258: Eligibility and 

Benefits 270/271 Normalizing Patient 

Last Name Rule, version 2.1.0, March 

2011, as referenced in § 162.1203. 

(iii) Phase II CORE 259: Eligibility and 

Benefits 270/271 AAA Error Code 

Reporting Rule, version 2.1.0, March 

2011, as referenced in § 162.1203. 

(iv) Phase II CORE 260: Eligibility & 

Benefits Data Content (270/271) Rule, 

version 2.1.0, March 2011, as referenced 

in § 162.1203. 

(v) Phase II CORE 270: Connectivity 

Rule, version 2.2.0, March 2011, as 

referenced in § 162.1203 and § 162.1403. 

Subpart L—Eligibility for a Health Plan 

■ 8. Adding a new § 162.1203 to read as 

follows: 

§ 162.1203 Operating rules for eligibility 

for a health plan transaction. 

On and after January 1, 2013, the 

Secretary adopts the following: 

(a) Except as specified in paragraph 

(b) of this section, the following CAQH 

CORE Phase I and Phase II operating 

rules (updated for Version 5010) for the 

eligibility for a health plan transaction: 

(1) Phase I CORE 152: Eligibility and 

Benefit Real Time Companion Guide 

Rule, version 1.1.0, March 2011, and 

CORE v5010 Master Companion Guide 

Template. (Incorporated by reference in 

§ 162.920). 

(2) Phase I CORE 153: Eligibility and 

Benefits Connectivity Rule, version 

1.1.0, March 2011. (Incorporated by 

reference in § 162.920). 

(3) Phase I CORE 154: Eligibility and 

Benefits 270/271 Data Content Rule, 

version 1.1.0, March 2011. (Incorporated 

by reference in § 162.920). 

(4) Phase I CORE 155: Eligibility and 

Benefits Batch Response Time Rule, 

version 1.1.0, March 2011. (Incorporated 

by reference in § 162.920). 

(5) Phase I CORE 156: Eligibility and 

Benefits Real Time Response Rule, 

version 1.1.0, March 2011. (Incorporated 

by reference in § 162.920). 

(6) Phase I CORE 157: Eligibility and 

Benefits System Availability Rule, 

version 1.1.0, March 2011. (Incorporated 

by reference in § 162.920). 

(7) Phase II CORE 258: Eligibility and 

Benefits 270/271 Normalizing Patient 

Last Name Rule, version 2.1.0, March 

2011. (Incorporated by reference in 

§ 162.920). 

(8) Phase II CORE 259: Eligibility and 

Benefits 270/271 AAA Error Code 

Reporting Rule, version 2.1.0. 

(Incorporated by reference in § 162.920). 

(9) Phase II CORE 260: Eligibility & 

Benefits Data Content (270/271) Rule, 

version 2.1.0, March 2011. (Incorporated 

by reference in § 162.920). 

(10) Phase II CORE 270: Connectivity 

Rule, version 2.2.0, March 2011. 

(Incorporated by reference in § 162.920). 

(b) Excluding where the CAQH CORE 

rules reference and pertain to 

acknowledgements and CORE 

certification. 

Subpart N—Health Care Claim Status 

■ 9. Add § 162.1403 to read as follows: 

§ 162.1403 Operating rules for health care 

claim status transaction. 

On and after January 1, 2013, the 

Secretary adopts the following: 

(a) Except as specified in paragraph 

(b) of this section, the following CAQH 

CORE Phase II operating rules (updated 

for Version 5010) for the health care 

claim status transaction: 

(1) Phase II CORE 250: Claim Status 

Rule, version 2.1.0, March 2011, and 

CORE v5010 Master Companion Guide, 

00510, 1.2, March 2011. (Incorporated 

by reference in § 162.920). 

(2) Phase II CORE 270: Connectivity 

Rule, version 2.2.0, March 2011. 

(Incorporated by reference in § 162.920). 

(b) Excluding where the CAQH CORE 

rules reference and pertain to 

acknowledgements and CORE 

certification. 

Dated: May 26, 2011. 

Donald M. Berwick, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Dated: June 29, 2011. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2011–16834 Filed 6–30–11; 2:00 pm] 

BILLING CODE 4120–01–P 


jlentini on DSK4TPTVN1PROD with RULES2