1556 Federal Register / Vol. 77, No. 6 / Tuesday, January 10, 2012 / Rules and Regulations 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Office of the Secretary 

45 CFR Parts 160 and 162 

[CMS–0024–IFC] 

RIN 0938–AQ11 

Administrative Simplification: 

Adoption of Standards for Health Care 

Electronic Funds Transfers (EFTs) and 

Remittance Advice 

AGENCY: Office of the Secretary, HHS. 

ACTION: Interim final rule with comment 

period. 

SUMMARY: This interim final rule with 

comment period implements parts of 

section 1104 of the Affordable Care Act 

which requires the adoption of a 

standard for electronic funds transfers 

(EFT). It defines EFT and explains how 

the adopted standards support and 

facilitate health care EFT transmissions. 

DATES: Effective Date: These regulations 

are effective on January 10, 2012. The 

incorporation by reference of the 

publications listed in this interim final 

rule with comment period is approved 

by the Director of the Office of the 

Federal Register January 10, 2012. 

Compliance Date: The compliance 

date for this regulation is January 1, 

2014. 

Comment Date: To be assured 

consideration, comments must be 

received at one of the addresses 

provided below on or before March 12, 

2012. 

ADDRESSES: In commenting, please refer 

to file code CMS–0024–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–0024–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–0024–IFC, 

Mail Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

4. By hand or courier. Alternatively, 

you may deliver (by hand or courier) 

your written comments ONLY to the 

following addresses prior to the close of 

the comment period: 

a. For delivery in Washington, DC— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Room 445–G, Hubert 

H. Humphrey Building, 200 

Independence Avenue SW., 

Washington, DC 20201. 

(Because access to the interior of the 

Hubert H. Humphrey Building is not 

readily available to persons without 

Federal government identification, 

commenters are encouraged to leave 

their comments in the CMS drop slots 

located in the main lobby of the 

building. A stamp-in clock is available 

for persons wishing to retain a proof of 

filing by stamping in and retaining an 

extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

If you intend to deliver your 

comments to the Baltimore address, call 

telephone number (410) 786–1066 in 

advance to schedule your arrival with 

one of our staff members. 

Comments erroneously mailed to the 

addresses indicated as appropriate for 

hand or courier delivery may be delayed 

and received after the comment period. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

Matthew Albright (410) 786–2546. 

Denise Buenning (410) 786–6711. 

SUPPLEMENTARY INFORMATION: Inspection 

of Public Comments: All comments 

received before the close of the 

comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following Web 

site as soon as possible after they have 

been received: http://regulations.gov. 

Follow the search instructions on that 

Web site to view public comments. 

Comments received timely will 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. Statutory and Regulatory Background 

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 (EDI), the 

complete statutory background, and the 

regulatory history, see the August 22, 

2008 (73 FR 49742) proposed rule 

entitled ‘‘Health Insurance Reform; 

Modifications to the Health Insurance 

Portability and Accountability Act 

(HIPAA) Electronic Transaction 

Standards’’. 

1. The Health Insurance Portability and 

Accountability Act of 1996 (HIPAA) 

Congress addressed the need for a 

consistent framework for electronic 

health care transactions and other 

administrative simplification issues 

through the Health Insurance Portability 

and Accountability Act of 1996 

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

August 21, 1996. HIPAA amended the 

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 (DHHS) (hereinafter referred to 

as the Secretary) to adopt standards for 

certain transactions to enable health 

information to be exchanged more 

efficiently and to achieve greater 

uniformity in the transmission of health 

information. 

In the August 17, 2000 Federal 

Register (65 FR 50312), we published a 

final rule entitled ‘‘Health Insurance 

Reform: Standards for Electronic 

Transactions’’ (hereinafter referred to as 

the Transactions and Code Sets final 

rule). That rule implemented some of 

the HIPAA Administrative 

Simplification requirements by adopting 

standards for electronic health care 

transactions developed by standard 

setting organizations (SSOs) and 

medical code sets to be used in those 

transactions. We adopted Accredited 

Standards Committee (ASC) X12 

Version 4010 standards and the 

National Council for Prescription Drug 

Programs (NCPDP) Telecommunication 

Version 5.1 standard, which are 

specified at 45 CFR part 162, subparts 

K through R. Section 1172(a) of the Act 

states that ‘‘[a]ny standard adopted 

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Federal Register / Vol. 77, No. 6 / Tuesday, January 10, 2012 / Rules and Regulations 1557 

under [HIPAA] shall apply, in whole or 

in part, to * * * (1) A health plan. (2) 

A health care clearinghouse. (3) A 

health care provider who transmits any 

health information in electronic form in 

connection with a [HIPAA 

transaction].’’ These entities are referred 

to as covered entities. 

In the January 16, 2009 Federal 

Register, 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 

Telecommunication Standard 

Implementation Guide Version D.0 

(hereinafter referred to as Version D.0) 

and equivalent Batch Standard 

Implementation Guide, Version 1, 

Release 2 (hereinafter referred to as 

Version 1.2) for the electronic health 

care transactions originally adopted in 

the Transactions and Code Sets final 

rule. Covered entities are required to 

comply with Version 5010 and Version 

D.0 on January 1, 2012. 

Table 1 summarizes the full set of 

transaction standards adopted in the 

Transactions and Code Sets final rule 

and as modified in the Modifications 

final rule. The table uses abbreviations 

of the standards and the names by 

which the transactions are commonly 

referred as a point of reference for the 

reader. The official nomenclature and 

titles of the standards and transactions 

related to the provisions of this interim 

final rule with comment period are 

provided later in the narrative of this 

preamble. 

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 and Version 1.2 ................................................... Health care claims—Retail pharmacy drugs (telecommunication and batch standards). 

ASC X12 837 P, NCPDP D.0 and Version 1.2 (batch) ........... Health care claims—Retail pharmacy supplies and professional services. 

NCPDP D.0 and Version 1.2 (batch) ....................................... Coordination of Benefits—Retail pharmacy drugs. 

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 and Version 1.2 (batch) ....................................... 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 and Version 1.2 (batch) ....................................... Referral certification and authorization (request and response)—Retail pharmacy 

drugs. 

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

In the July 8, 2011 Federal Register 

(76 FR 40458), we published an interim 

final rule with comment period, 

‘‘Administrative Simplification: 

Adoption of Operating Rules for 

Eligibility for a Health Plan and Health 

Care Claim Status Transactions’’ 

(hereinafter referred to as the Eligibility 

and Claim Status Operating Rules IFC). 

That rule adopted operating rules for 

two HIPAA transactions: (1) Eligibility 

for a health plan; and (2) health care 

claim status. The Eligibility and Claim 

Status Operating Rules IFC also defined 

operating rules and described their 

relationship to standards. 

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. 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 which remains an 

obstacle to achieving greater health care 

industry administrative simplification. 

Section 1173(a) of the Act requires the 

Secretary to adopt standards for a 

number of financial and administrative 

transactions, as well as data elements 

for those transactions, to enable health 

information to be exchanged 

electronically. Section 1172(b) of the 

Act requires that a standard adopted 

under HIPAA ‘‘be consistent with the 

objective of reducing the administrative 

costs of providing and paying for health 

care.’’ 

Under section 1172(c)(2)(B) of the 

Act, if no standard setting organization 

(SSO) has developed, adopted, or 

modified any standard relating to a 

standard that the Secretary is authorized 

or required to adopt, then the Secretary 

may adopt a standard relying upon 

recommendations of the National 

Committee on Vital and Health 

Statistics (NCVHS), in consultation with 

the organizations referred to in section 

1172(c)(3)(B) of the Act, and appropriate 

Federal and State agencies and private 

organizations. 

2. Electronic Funds Transfers (EFT) and 

the Affordable Care Act 

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

Protection and Affordable Care Act 

(Pub. L. 111–148) (hereinafter referred 

to as the Affordable Care Act) amended 

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

the electronic funds transfers 

(hereinafter referred to as EFT) 

transaction to the list of electronic 

health care transactions for which the 

Secretary must adopt a standard under 

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

Affordable Care Act requires the 

Secretary to promulgate a final rule to 

establish an EFT standard, and 

authorizes the Secretary to do so by an 

interim final rule. That section further 

requires the standard to be adopted by 

January 1, 2012, in a manner ensuring 

that it is effective by January 1, 2014. 

Sections 1104(b)(2)(B) and 

10109(a)(1)(B) of the Affordable Care 

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1558 Federal Register / Vol. 77, No. 6 / Tuesday, January 10, 2012 / Rules and Regulations 

Act also amended section 1173 of the 

Act by adding sections 1173(a)(4) and 

(5), respectively, to provide for new 

financial and administrative 

transactions requirements. Section 

1173(a)(4) guides us in adopting 

standards in this interim final rule with 

comment period and associated 

operating rules (which we will adopt in 

future rulemaking) for the EFT 

transaction, particularly the following 

requirements: First, such standards and 

associated operating rules must ‘‘be 

comprehensive, requiring minimal 

augmentation by paper or other 

communications;’’ second, the 

standards and associated operating rules 

must ‘‘describe all data elements 

(including reason and remark codes) in 

unambiguous terms [and] 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);’’ and 

third, the Secretary must ‘‘seek to 

reduce the number and complexity of 

forms (including paper and electronic) 

and data entry required by patients and 

providers.’’ 

B. Electronic Funds Transfers (EFT): 

General Background 

While industry and consumers use 

the term EFT in a number of different 

ways, the definition of EFT in section 

31001(x) of the Debt Collection 

Improvement Act of 1996 (Pub. L. 104– 

134) is particularly useful in this general 

background discussion because it 

includes a broad spectrum of 

transmission vehicles and terms that are 

relevant to our discussion of EFT in this 

interim final rule with comment period. 

The Debt Collection Improvement Act 

defines an EFT as ‘‘any transfer of 

funds, other than a transaction 

originated by cash, check, or similar 

paper instrument that is initiated 

through an electronic terminal, 

telephone, computer, or magnetic tape, 

for the purpose of ordering, instructing, 

or authorizing a financial institution to 

debit or credit an account. The term 

includes Automated Clearing House 

(ACH) transfers, Fedwire transfers, 

transfers made at automatic teller 

machines (ATMs), and point-of-sale 

terminals.’’ 

Because we are adopting standards in 

this interim final rule with comment 

period that apply only to transmissions 

of data over the ACH Network, we focus 

our discussion on EFT that are 

transmitted over the ACH Network. 

1. The Automated Clearing House 

(ACH) Network 

The ACH Network is the ‘‘pipeline’’ 

through which many EFT travel; it is a 

processing and delivery system for EFT 

that uses nationwide 

telecommunications networks. 

Consumers use the ACH Network when, 

for example, they have paychecks 

directly deposited in their accounts, or 

pay bills electronically by having funds 

withdrawn automatically from their 

accounts. 

In the majority of cases, when an EFT 

is used by a health plan to pay health 

care claims, it is transmitted through the 

ACH Network. However, payments and 

debits through the ACH Network 

represent only one category of EFT; 

some EFT, including some health care 

claim payments, can be made outside of 

the ACH Network. One example of an 

EFT made outside of the ACH Network 

is a transfer of funds made through the 

Federal Reserve Wire Network, 

hereinafter referred to as Fedwire. This 

is akin in the consumer universe to a 

wire transfer of funds made via Western 

Union, for example, except that the 

Fedwire is an electronic transfer system 

developed and maintained by the 

Federal Reserve System. Fedwire 

transfers on behalf of bank customers 

include funds used in the purchase or 

sale of government securities, deposits, 

and other large, time-sensitive 

payments. 

The ACH initiative began in the early 

1970s to explore payment alternatives to 

paper checks in response to the rapid 

growth in paper check volume. The 

establishment of the first ACH Network, 

Calwestern Automated Clearing House 

Association in California, led to the 

formation of similar groups around the 

country. Agreements were made 

between these ACH associations and 

regional Federal Reserve Banks to 

provide facilities, equipment, and staff 

to operate regional automatic clearing 

house networks. The National 

Automated Clearing House Association 

(NACHA) was founded in 1974 to 

centrally coordinate the local ACH 

associations and to administer, develop, 

and enforce operating rules and 

management practices for the ACH 

Network. In 1978, in a joint effort 

between NACHA and the Federal 

Reserve System, regional ACHs were 

linked electronically, with NACHA 

serving as the national ACH Network’s 

administrator. 

NACHA develops rules, published in 

NACHA Operating Rules & Guidelines— 

A Complete Guide to the Rules 

Governing the ACH Network (hereinafter 

referred to as the NACHA Operating 

Rules & Guidelines, available at 

https://www.nacha.org), that govern the 

ACH Network. The NACHA Operating 

Rules & Guidelines is an annual 

publication divided into two sections, 

the NACHA Operating Rules and the 

NACHA Operating Guidelines. The 

NACHA Operating Rules describes 

NACHA’s legal framework for the ACH 

Network and provides NACHA’s 

specifications for electronic 

transmissions conducted through the 

ACH Network. Electronic transmissions 

conducted through the ACH Network 

include money transfers, money 

withdrawals, and non-monetary 

transactions, and are sent in electronic 

formats called ACH Files, sometimes 

referred to as ACH formats, NACHA 

formats, ACH Entry Classes, or ACH 

payment applications. In the 2011 

NACHA Operating Rules, there are 

implementation specifications for 

sixteen different types or ‘‘classes’’ of 

ACH Files that can be used for business 

and consumer transactions over the 

ACH Network. 

The NACHA Operating Guidelines 

provides guidance on implementing the 

NACHA Operating Rules through 

narrative, diagrams, illustrations, and 

examples. The NACHA Operating 

Guidelines is organized by chapter 

according to the responsibilities of each 

of the participants in an ACH 

transaction and includes an overview of 

the different classes of ACH Files. 

The Federal government is the single 

largest user of the ACH Network. The 

Debt Collection Improvement Act 

requires that all Federal payments made 

after January 1, 1999, other than 

payments required under the Internal 

Revenue Code of 1986, be made by EFT. 

Subsequent regulations implementing 

this act allowed for waivers and 

exceptions. In 31 CFR 210, the United 

States Department of the Treasury 

formally adopted the NACHA Operating 

Rules & Guidelines for the Federal 

government’s EFT payments made 

through the ACH Network, including 

Federal tax collections, tax refund 

payments, and Social Security and other 

benefit payments made by direct 

deposit. 

2. The Payment Flow Through the ACH 

Network 

To give context to how EFT are used 

in the health care industry, we consider 

here how businesses pay one another by 

transferring funds and sending related 

payment information through the ACH 

Network. We can simplify 

understanding of the ACH Network 

payment process by dividing the 

transaction flow of the EFT into three 

chronological stages, each of which 

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Federal Register / Vol. 77, No. 6 / Tuesday, January 10, 2012 / Rules and Regulations 1559 

includes a separate electronic 

transmission of information (see 

Illustration A and Table 2). 

a. Stage 1 Payment Initiation 

In the first stage, the business or 

entity that is making the payment 

orders, instructs or authorizes its 

financial institution to make an EFT 

payment through the ACH Network on 

its behalf. This electronic transmission 

from a business to its financial 

institution is sometimes referred to as 

‘‘payment initiation,’’ ‘‘payment 

instructions,’’ ‘‘payment authorization,’’ 

or ‘‘originating an entry.’’ 

To order, instruct or authorize a 

financial institution to make an EFT 

payment through the ACH Network, the 

business or entity that is making the 

payment, designated as an ‘‘Originator’’ 

in the NACHA Operating Rules & 

Guidelines, must provide its financial 

institution, called the ‘‘Originating 

Depository Financial Institution’’ or 

ODFI, with payment information similar 

to information that one would find on 

a paper check. This payment 

information includes the amount being 

paid, identification of the payer and 

payee, bank accounts of the payer and 

payee, routing information, and the date 

of the payment. 

An Originator may send this payment 

information formatted in an ACH File in 

accordance with the NACHA Operating 

Rules & Guidelines. The Originator may 

also send the data in a non-ACH File, 

such as an ASC X12 820, an ASC X12 

835, a proprietary file, or a flat file, and 

the ODFI will format the data into an 

ACH File as a service to the Originator 

(Table 2). Regardless of the format that 

an Originator uses to transmit payment 

information to the ODFI, we hereinafter 

refer to the transmission in this stage in 

the ACH payment flow as the Stage 1 

Payment Initiation. 

b. Stage 2 Transfer of Funds 

In this stage, a number of separate 

interactions take place, but the end 

result is that funds from one account are 

moved to another account. First, the 

payment information that was sent from 

the Originator to the ODFI in the Stage 

1 Payment Initiation travels from the 

ODFI to one or both of two ACH 

Operators: The Federal Reserve, run by 

the Federal government, or The Clearing 

House, a private company. These ACH 

Operators then conduct the actual funds 

transfer. They sort and batch ACH 

Network transactions and, on the 

payment date, debit the ODFI and credit 

the financial institution of the business 

that is being paid. The financial 

institution of the business that is being 

paid is called the ‘‘Receiving Depository 

Financial Institution’’ or RDFI. The final 

step in this stage is that the RDFI credits 

the account of the business or entity that 

is being paid, called the Receiver. 

In Stage 2, the actual transfer of funds 

or ‘‘settlement,’’ is governed by the 

NACHA Operating Rules & Guidelines, 

as well as Federal statutes and 

regulations. In contrast to the Stage 1 

Payment Initiation which allows for a 

variety of non-ACH File options, the 

ODFI must transmit the payment and 

payment information through the ACH 

Network using an ACH File. 

We hereinafter refer to the 

transmission in this stage of the EFT 

transaction as the Stage 2 Transfer of 

Funds. 

c. Stage 3 Deposit Notification 

In this final stage, the RDFI transmits 

information to the Receiver that 

indicates that the payment has been 

deposited in the Receiver’s account. The 

RDFI can do this proactively by 

notifying the Receiver at the time the 

funds are deposited, or the RDFI can 

simply post the payment to the 

Receiver’s account and it will appear on 

the Receiver’s account summary. The 

NACHA Operating Rules & Guidelines 

does not require an RDFI to notify a 

Receiver that the RDFI has received the 

ACH File at the time of receipt, unless 

the RDFI has an agreement with the 

Receiver that contains a request to do so 

either automatically when a Receiver 

receives any deposit via EFT, or 

episodically if the Receiver specifically 

requests such notification on a case-bycase basis for any given EFT deposit. 

The notification data can be 

transmitted to the Receiver in any 

format the RDFI and Receiver agree 

upon (Table 2). We hereinafter refer to 

the transmission in this stage of the EFT 

transaction as the Stage 3 Deposit 

Notification. 

3. Addenda Records 

Two types of ACH Files can be used 

for domestic business-to-business 

payments in the Stage 2 Transfer of 

Funds: The Corporate Credit or Debit 

Entry (CCD), sometimes referred to as 

the Cash Concentration/Disbursement 

format, and the Corporate Trade 

Exchange Entry (CTX) (Table 2, Column 

2). The difference between the two is 

that the CCD is capable of including an 

‘‘Addenda Record’’ that holds up to 80 

characters of remittance or additional 

payment information supplied by an 

Originator, while the CTX has multiple 

Addenda Records that together can hold 

nearly 800,000 characters of remittance 

or additional payment information 

supplied by an Originator. 

An Originator has the option of 

conveying remittance or additional 

payment information in the Addenda 

Records of the CCD or the CTX so that 

payment and remittance or additional 

payment information can move together 

electronically through the ACH 

Network. This remittance or additional 

payment information can be any data 

that the Originator thinks the Receiver 

may need to know, such as a tracking 

or invoice number, as long as the data 

relates to the associated EFT payment 

and the data stays within formatting 

limitations described in the NACHA 

Operating Rules & Guidelines. 

In the Stage 1 Payment Initiation, the 

remittance or additional payment 

information can be transmitted to the 

ODFI by the Originator in the same file 

and in the same formats that can be 

used to transmit the payment 

information; that is, in a flat file, an X12 

file (using an ASC X12 835 or 820 

standard), a proprietary file (most often 

proprietary to the financial institution), 

or an ACH File (CCD or CTX), for which 

implementation and standards are 

developed and maintained by NACHA 

(see Table 2). Because it is ‘‘enveloped’’ 

in an ACH File, ideally the remittance 

or additional payment information in 

the Addenda Record is transmitted from 

the Originator to the ODFI in the Stage 

1 Payment Initiation, through the ACH 

Network to the RDFI in the Stage 2 

Transfer of Funds, then finally to the 

Receiver in the Stage 3 Deposit 

Notification. 

Before the ODFI enters the ACH File 

into the ACH Network to initiate the 

Stage 2 Transfer of Funds, NACHA 

Operating Rules & Guidelines requires 

that the data in the Addenda Record of 

an ACH File be formatted according to 

any ASC X12 transaction set (the data 

envelope that consists of a header, detail 

and summary areas) or ASC X12 data 

segment (a grouping of data elements 

which may be mandatory, optional or 

relational), or in a NACHA-endorsed 

banking convention. The Originator may 

format the Addenda Record according to 

ASC X12 requirements and transmit it 

as part of the Stage 1 Payment Initiation, 

or the Originator may send the ODFI 

unformatted data in the Stage 1 Payment 

Initiation and the ODFI will format the 

data into an ASC X12 format as a service 

to the Originator. The ODFI then 

transmits the data in either the CCD or 

the CTX through the ACH Network to 

the RDFI as a Stage 2 Funds Transfer. 

When a CCD includes an Addenda 

Record, it is referred to as a ‘‘CCD plus 

Addenda Record’’ or ‘‘CCD+.’’ 

Hereinafter, we refer to the CCD with 

Addenda Record as the CCD+Addenda. 

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1http://www.afponline.org/pub/res/topics/ 

topics_pay.htm. 

2 2010 AFP Electronic Payments: Report of 

Survey Results. 

We refer to the CTX with Addenda 

Records simply as the CTX. 

For the Stage 3 Deposit Notification, 

the NACHA Operating Rules & 

Guidelines requires that, upon request 

of the Receiver, an RDFI provide the 

Receiver all payment-related 

information contained within the 

Addenda Records transmitted with a 

CCD or CTX. If so requested, the data 

contained in the Addenda Record(s) are 

provided by the RDFI to the Receiver in 

a format agreed to by the Receiver and 

the RDFI (See Table 2). 

TABLE 2—EFT FORMATS FOR BUSINESS-TO-BUSINESS PAYMENTS THROUGH THE ACH NETWORK

Transmission stage Electronic format used in transmission 

Stage 1 Payment Initiation.

Payment Information transmission from Originator to ODFI. • Non-ACH file such as a proprietary file, a flat file, an ASC X12 835 

or 820 format, or 

• ACH File (CCD or CTX). 

Remittance or additional payment information for Addenda Record(s) 

can be transmitted in any of the formats listed in the two bullets 

above. 

Stage 2 Transfer of Funds.

Payment Information transmission from ODFI to RDFI. • Standard required by NACHA: ACH File (CCD or CTX). 

Addenda Record(s) must be in ANSI ASC X12 transaction set or data 

segment format or NACHA-endorsed banking convention. 

Stage 3 Deposit Notification.

Payment Information transmission from RDFI to Receiver. • Format to be agreed upon by Receiver and RDFI (but RDFI is not 

obligated to proactively provide payment information unless requested by the Receiver). 

4. Advantages and Disadvantages of EFT 

According to the 2010 AFP Electronic 

Payments: Report of Survey Results, 

produced by the Association for 

Financial Professionals (AFP) and 

underwritten by J.P. Morgan,1

businesses that use EFT cite three main 

benefits: 

• Cost savings: Savings derive from 

cost avoidance of printing checks, 

purchasing and stuffing envelopes, and 

manually depositing checks; 

• Fraud control: The above-cited AFP 

survey found that 90 percent of 

organizations that experienced payment 

fraud in 2008 were victims of paper 

check fraud, while only 7 percent of 

organizations that experienced payment 

fraud were victims of EFT fraud; and 

• Improved cash flow and cash 

forecasting: Forty percent of the AFP’s 

500 survey respondents reported 

improved cash forecasting as a result of 

EFT payments. 

In terms of disadvantages, some 

businesses find it expensive or 

inefficient to overlay the ACH Network 

payment process onto existing 

technology, business systems, and 

processes originally designed to process 

paper checks. For instance, for many 

businesses, the payment system and 

process is separate from the accounts 

payable/receivable system and 

electronic data interchange (EDI) 

systems, and the business cannot send 

or receive automated remittance 

information together with electronic 

payments without significant 

investment and organizational change.2

C. Payment of Health Care Claims via 

EFT 

To understand the context in which 

an EFT is used to pay for health care 

claims, it is necessary to look at the 

closely-related transmission of health 

care remittance advice. 

A health plan rarely pays a provider 

the exact amount a provider bills the 

health plan for health care claims. A 

health plan adjusts the claim charges 

based on contract agreements, 

secondary payers, benefit coverage, 

expected co-pays and co-insurance, and 


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so on. These adjustments are described 

in the remittance advice. The health 

care remittance advice is somewhat 

analogous to an employee’s salary 

paystub which describes the amount the 

employee is being paid, the hours 

worked, and an explanation of any 

adjustments or deductions that are being 

made to an employee’s salary payment. 

The remittance advice has 

traditionally been in paper form, sent by 

mail to the provider. However, the use 

of electronic remittance advice (ERA) is 

growing. 

The Transactions and Code Sets final 

rule adopted a definition for the health 

care payment and remittance advice 

transaction. The definition, found in 45 

CFR 162.1601, includes descriptions for 

both health care payment and ERA. 

The transmission described in 

§ 162.1601(a), hereinafter referred to as 

the transmission of ‘‘health care 

payment/processing information,’’ is 

primarily a financial transmission. The 

transmission described in § 162.1601(b) 

is the ERA—an explanation of the 

health care payment or an explanation 

of why there is no payment for the 

claim. The ERA includes detailed 

identifiable health information. 

With few exceptions, the ERA and the 

health care payment/processing 

information are sent in different 

electronic formats through different 

networks, contain different data that 

have different business uses, and are 

often received by the health care 

provider at different times. 

The health care payment/processing 

information is transmitted via EFT from 

the health plan’s treasury system. It is 

then processed by financial institutions, 

and ultimately entered into the health 

care provider’s treasury system. 

Currently, the health care payment/ 

processing information is generally 

transmitted in a CCD through the ACH 

Network, though there are instances 

when other forms of EFT such as 

Fedwire are used. The path of the health 

care payment/processing information 

through the ACH Network from health 

plan to provider is represented in 

Illustration B by the solid arrow. 

In contrast, the ERA is traditionally 

sent from the health plan’s claims 

processing system and processed 

through the provider’s billing and 

collection system. The path of the ERA 

from health plan to provider is 

represented in Illustration B by the 

dashed arrow. 

When both the health care payment/ 

processing information and the ERA to 

which it corresponds arrive at the health 

care provider (often at different times), 

the two transmissions must be 

reassociated or matched back together 

by the provider; that is, the provider 

must associate the ERA with the 

payment that it describes. This process 

is referred to as ‘‘reassociation.’’ Ideally, 

reassociation of the ERA with the health 

care payment/processing information is 

automated through the provider’s 

practice management system. In 

practice, time-consuming manual 

reassociation by administrative staff is 

often required. 

It is technically possible for the health 

care payment/processing information 

and ERA to be combined and sent via 

EFT through the ACH Network using 

the CTX. Given the amount of data the 

CTX can hold in its Addenda Records, 

all of the ERA can be ‘‘enveloped’’ in a 

single ACH File and transmitted 

through the ACH Network. This allows 

both the health care payment/processing 

information and ERA to be transmitted 

as a ‘‘package’’ through the same 

network and to be received in the same 

‘‘package’’ by the health care provider. 

Theoretically, the provider can avoid 

the step of reassociating the ERA with 

the health care payment/processing 

information because the ERA and health 

care payment/processing information 

are transmitted together via EFT. 

However, to our knowledge, the CTX 

is infrequently, if ever, used by health 

plans for the transmission of both ERA 

and health care payment/processing 

information to pay for health care 

claims. It appears that there are at least 

two reasons why the CTX is not used: 

First, most health plans and health care 

providers are probably not technically 

capable of processing the CTX at this 

time. As noted in this section, the 

transmission of health care payment/ 

processing information and the ERA are 

historically sent by health plans and 

received by health care providers from 

two different systems through two 

different processes (Illustration B). It 

would entail a change in systems and 

workflow to integrate the two systems 

and processes, both for the health plans 

that send these two transmissions and 


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for the health care providers that receive 

them. 

Second, ERA contains protected 

health information (PHI), as defined at 

45 CFR 160.103, and some in the 

financial industry are reluctant to be 

subject to HIPAA’s privacy and security 

requirements with respect to such 

information. On the other side, 

providers and payers are reluctant to 

send PHI through the ACH network 

without assurances that the PHI is 

adequately protected under HIPAA. 

The Transactions and Code Sets final 

rule adopted the ASC X12 835 TR3 

(hereinafter referred to as the X12 835 

TR3) as the standard for the health care 

payment and remittance advice 

transaction. As noted, the health care 

payment and remittance advice 

transaction includes two transmissions, 

the transmission of health care 

payment/processing information, and 

ERA. The X12 835 TR3 includes 

comprehensive implementation 

specifications for the ERA, but has less 

comprehensive ‘‘data use’’ instructions 

for transmitting health care payment/ 

processing information. For example: 

• According to the X12 835 TR3, 

health care payment/processing 

information may be sent through the 

mail by paper check or via EFT. If 

transmitted via EFT, the health care 

payment/processing information can be 

transmitted by wire or through the ACH 

Network. 

• The X12 835 TR3 does not require 

a single standard format for Stage 1 

Payment Initiation. According to the 

X12 835 TR3, proprietary, ACH, or ASC 

X12 data formats can be used in the 

Stage 1 Payment Initiation (X12 835 

TR3, Table 1.1, http://www.x12.org). 

D. The National Committee on Vital and 

Health Statistics (NCVHS): December 

2010 Hearings on EFT 

The NCVHS was established by 

Congress to serve as an advisory body to 

the Secretary on health data, statistics, 

and national health information policy, 

and has been assigned a significant role 

in the Secretary’s adoption of standards, 

code sets, and operating rules under 

HIPAA. 

On December 3, 2010, the NCVHS 

Subcommittee on Standards held a 

hearing entitled ‘‘Administrative 

Simplification under the Patient 

Protection and Affordable Care Act 

Standards and Operating Rules for 

Electronic Funds Transfer (EFT) and 

Remittance Advice (RA)’’ (for agenda 

and testimony, see http:// 

www.ncvhs.hhs.gov). The NCVHS 

engaged in a comprehensive review of 

potential standards and operating rules 

for the EFT transaction, as well as a 

review of standard setting organizations 

and operating rule authoring entities, for 

purposes of making a recommendation 

to the Secretary as to whether such 

standards and operating rules should be 

adopted. The NCVHS hearing consisted 

of a full day of public testimony with 

participation by stakeholders 

representing a cross section of the 

health care industry, including health 

plans, health care provider 

organizations, health care 

clearinghouses, retail pharmacy 

industry representatives, standards 

developers, professional associations, 

representatives of Federal and State 

health plans, the Workgroup for 

Electronic Data Interchange (WEDI), the 

banking industry, and potential 

standard setting organizations (also 

known as standards development 

organizations or SDOs) for EFT 

standards and authoring entities for 

operating rules. These entities included 

the Council for Affordable Quality 

Healthcare (CAQH) Committee on 

Operating Rules for Information 

Exchange (CORE); the Accredited 

Standards Committee (ASC) X12; the 

National Automated Clearing House 

Association (NACHA); and the National 

Council for Prescription Drug Programs 

(NCPDP). 

The testimony, both written and 

verbal, described many aspects and 

issues of the health care payment and 

remittance advice transaction. Testifiers 

described the advantages to using EFT 

to pay health care claims, similar to the 

advantages that are outlined in section 

I.B.4. of this interim final rule with 

comment period. Chief among these 

advantages was the savings in time and 

money for health plans and health care 

providers that EFT affords. Testifiers 

presented a number of case studies to 

illustrate these benefits. Testifiers also 

presented a number of obstacles to 

greater EFT use in health care. We refer 

the reader to the testimonies posted to 

the NCVHS Web site at http:// 

www.ncvhs.hhs.gov for a more 

comprehensive discussion of the issues. 

We summarize here a number of 

major obstacles for health care providers 

to adopt EFT, as identified by NCVHS 

testifiers and subsequent research, 

including: the administratively difficult 

enrollment process to accept EFT for 

health care claim payments; the time lag 

between receipt of the health care 

payment/processing information and 

the arrival of the ERA to the provider; 

and the problems regarding 

reassociation of the ERA with the EFT. 

1. Enrollment 

Health care providers must undertake 

a labor- and paper-intensive enrollment 

process in order to receive health care 

claim payments via EFT through the 

ACH Network from each of the health 

plans whom they bill. Each health plan 

has a different enrollment process. The 

health care provider must access the 

enrollment form and the form’s 

instructions, which is sometimes 

difficult to find on a health plan’s web 

site. Each health plan requires a 

different form to be filled out that is 

unique to that health plan. In the 

majority of cases, these forms are 3 to 

18 pages that must be filled out 

manually, and each health plan requires 

different information (in some cases, a 

voided check or bank note) and 

signature requirements on the form. The 

health care provider must also discuss 

the options in accepting EFT and the 

arrangement for deposit notification 

with its financial institution. The health 

plans’ enrollment forms must be 

resubmitted when a health care provider 

changes bank accounts or financial 

institutions, as is reportedly done 

regularly, or when there is a change in 

a provider’s staff such that an 

authorizing signature on the EFT 

enrollment form must be changed. 

Finally, the avenues of submission of 

the enrollment forms differ from health 

plan to health plan: Some health plans 

may require a telephone call to an 

account representative in order to 

complete enrollment, while others may 

require the forms to be emailed, faxed, 

or mailed. 

If a health care provider submits 

claims to twenty or more health plans, 

then the enrollment and maintenance of 

the enrollment data for EFT payments 

with the health plans reportedly 

becomes onerous for the provider. If a 

health care provider decides to pursue 

EFT at all, it is likely the provider will 

enroll only with those health plans that 

process significant numbers of the 

provider’s claims to make the EFT 

worth the provider’s time and effort to 

enroll. 

2. Synchronization of EFT With ERA 

According to testimony, another 

barrier for health care providers to the 

use of EFT for health care claim 

payments is that the ERA arrives at a 

different time than the associated health 

care payment/processing information 

that is transmitted via EFT. This is 

because, as described in section I.C. of 

this interim final rule with comment 

period, with few exceptions, the ERA is 

transmitted separately from the health 

care payment/processing information, 

and the two transmissions often arrive 

on different days or even different 

weeks. Consequently, if the ERA arrives 

first, it will describe a deposit that will 

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be made in a health care provider’s 

account sometime in the future, so the 

provider cannot process the ERA until 

the health care payment/processing 

information is transmitted. Or, if the 

transmission of payment/processing 

information arrives first, multiple 

deposits may be made into the health 

care provider’s account without the 

provider having the corresponding ERA 

that describes the claims for which the 

payments are being made. Both of these 

circumstances create a situation where 

the accounts receivable process for the 

provider requires costly manual 

intervention and oversight. 

3. Reassociation and the Transmission 

of the Trace Number Segment (TRN) 

Another barrier for health care 

providers to the use of EFT for health 

care claim payments is the difficulty in 

matching the health care payment/ 

processing information with its 

associated ERA so that providers can 

post payments properly in their 

accounting systems. Because the two 

transmissions usually travel separately, 

the ERA must ultimately be reassociated 

with the health care payment/ 

processing information transmitted via 

EFT when the two separate 

transmissions are received by the health 

care provider. 

The trace number segment, 

hereinafter referred to as the TRN 

Segment, is a type of tracking code for 

ERA and the health care payment/ 

processing information transmitted via 

EFT. The TRN Segment’s 

implementation specifications are 

included in the X12 835 TR3. Ideally, 

the TRN Segment within a specific ERA 

is duplicated in the health care 

payment/processing information 

transmitted via EFT. Specifically, the 

TRN Segment should be duplicated in 

the Addenda Record of the 

CCD+Addenda. After the health care 

payment/processing information is 

transmitted with the TRN Segment to a 

health care provider, the provider’s 

practice management system can use the 

TRN Segment to automatically 

reassociate the health care payment/ 

processing information with its 

corresponding ERA and post the 

payment in the provider’s accounts 

receivable system. 

At the December 2010 NCVHS 

hearing, industry testifiers noted that a 

duplicate of the TRN Segment in the 

ERA is not always conveyed to the 

health care provider within the 

Addenda Record of the CCD+Addenda 

as a part of normal business operations. 

Therefore, automatic reassociation 

becomes difficult if not impossible for 

the health care provider receiving the 

transaction. Testifiers gave a number of 

reasons why the TRN Segment is not 

conveyed to the health care provider, as 

follows: 

• In the Stage 1 Payment Initiation, a 

health plan may not include an 

Addenda Record with the CCD or may 

not authorize its financial institution to 

include an Addenda Record with the 

CCD. 

• A health plan may include an 

Addenda Record with the CCD, or 

instruct its financial institution to 

include an Addenda Record with the 

CCD, but may not transmit the proper 

data elements, may fail to place the data 

elements in the order specified in the 

X12 835 TR3, or may include its own 

proprietary trace number that is 

different from the TRN Segment 

included in the associated ERA. 

• A health plan may leave out a 

particular data element, such as the 

Originating Company Identifier 

(TRN03), which is part of the TRN 

Segment specified in the X12 835 TR3, 

or use a different data element than that 

used in the associated ERA. 

• A health plan may include a TRN 

Segment in its Stage 1 Payment 

Initiation but the format that the health 

plan uses to transmit this data does not 

make it clear to the financial institution 

where the TRN Segment must be placed 

in the CCD+Addenda. The financial 

institution then puts the TRN Segment 

in the wrong field or removes it 

altogether. 

• Per NACHA Operating Rules & 

Guidelines, financial institutions must 

put their own ACH ‘‘trace number,’’ 

which is different from the TRN 

Segment, in a CCD in a field outside of 

the Addenda Record, and there may be 

confusion among the parties between 

the financial institution’s trace number 

and the TRN Segment in the Addenda 

Record that needs to match its 

associated ERA. 

• The TRN Segment is included in 

the Addenda Record of the 

CCD+Addenda that a health plan’s 

financial institution transmits through 

the ACH Network to a health care 

provider’s financial institution, but the 

provider’s financial institution may not 

communicate the TRN Segment to the 

provider through the Stage 3 Deposit 

Notification. This is because, according 

to the NACHA Operating Rules & 

Guidelines, the Receiver must 

proactively request that the information 

in the Addenda Record be transmitted 

(NACHA Guidelines, Section III, 

Chapter 24). Also, a financial institution 

may translate the data (the TRN 

Segment) contained in the Addenda 

Record of the CCD+Addenda into its 

own proprietary format to transmit to 

the health care provider. When it is 

reformatted, the TRN Segment may be 

altered such that it no longer matches 

the TRN Segment in the ERA or cannot 

be automatically reassociated by the 

provider’s practice management system. 

In summary, the obstacles to having a 

TRN Segment in the CCD+Addenda 

delivered to the health care provider 

may be categorized as to their 

occurrence in two stages of the EFT 

transmission. First, in the Stage 1 

Payment Initiation transmission 

between the health plan and the health 

plan’s financial institution, the TRN 

Segment may be entered in the wrong 

field, contain sequence errors, or be left 

out or removed. Second, the TRN 

Segment may travel successfully 

through the ACH Network in the 

Addenda Record of the CCD+Addenda 

but, in the Stage 3 Deposit Notification, 

the health care provider may not receive 

the TRN Segment from the financial 

institution in a format that allows for 

automated reassociation by the health 

care provider’s practice management 

system. 

E. The NCVHS Recommendation to the 

Secretary 

On February 17, 2011, following the 

December 2010 NCVHS Subcommittee 

on Standards hearing, the NCVHS sent 

a letter to the Secretary with its 

recommendations for, among other 

things, adoption of a ‘‘health care EFT’’ 

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

From that letter, we reference the 

specific recommendations of the 

NCVHS for the identification and 

adoption of a standard to be used for 

payment of health care claims via EFT: 

1.1 Define health care EFT transaction as 

the electronic message used by health plans 

to order, instruct or authorize a depository 

financial institution (DFI) to electronically 

transfer funds through the ACH network from 

one account to another. 

1.2 Define health care EFT standard as 

the format and content required for health 

plans to perform an EFT transaction. 

1.3 Adopt as the standard format for the 

health care EFT standard the NACHA CCD+ 

format, in conformance with the NACHA 

Operating Rules. 

1.4 Identify NACHA as the standards 

development organization for maintenance of 

the health care EFT standard. 

1.5 Adopt as the implementation 

specification for the content for the addenda 

in the CCD+ the content requirements 

specified in the X12 835 TR3 REPORT (ASC 

X12/005010X221) particular to the CCD+. 

1.6 Consider the implications of the fact 

that, as the result of the adoption of the 

healthcare EFT standard, some banks may 

become de facto healthcare clearinghouses as 

defined by HIPAA. 

We agree with the spirit and intent of 

the NCVHS’ recommendations to the 

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Secretary as relayed in the February 17, 

2011 letter. In this interim final rule 

with comment period, we are adopting 

standards that reflect the NCVHS’ 

recommendations, with some minor 

departures. In section II. of this interim 

final rule with comment period, we 

explain the reasons for the differences 

between the standards we are adopting 

and the NCVHS’ recommendations for a 

standard for payment of health care 

claims via EFT. 

II. Provisions of the Interim Final Rule 

With Comment Period 

A. The Health Care Electronic Funds 

Transfers (EFT) and Remittance Advice 

Transaction 

As previously described in section 

I.C. of this interim final rule with 

comment period, the health care 

payment and remittance advice 

transaction is defined at 45 CFR 

162.1601 as either or both of two 

different types of information 

transmissions. We refer to the first 

transmission type, in § 162.1601(a), as 

the health care payment/processing 

information, and the second type of 

transmission, in § 162.1601(b), as the 

ERA. 

As we have discussed, an EFT is an 

electronic transmission of payment/ 

processing information. For example, in 

the CCD+Addenda file format, the EFT 

includes information about the transfer 

of funds such as the amount being paid, 

the name and identification of the payer 

and payee, bank accounts of the payer 

and payee, routing numbers, and the 

date of the payment. Using health care 

claims payments as an example, the 

CCD+Addenda may also include 

payment processing information such as 

a duplicate of the TRN Segment that is 

in the associated ERA. So, the EFT 

transaction is described already by part 

of the definition of a health care 

payment and remittance advice 

transaction at § 162.1601(a)—it is the 

transmission of health care payment, 

information about the transfer of funds, 

and payment processing information. 

We considered creating a new subpart 

in 45 CFR that would define the EFT 

transaction separately from the 

transmission of ERA. However, we 

believe that dividing the health care 

payment and remittance advice 

transaction into two separate 

transactions, one that defines and 

adopts standards for the use of EFT to 

transmit payment/processing 

information for health care claims, and 

another that defines and adopts 

standards for ERA, could create the 

perception that the two are potentially 

unrelated transactions. Thus, we believe 

it is important that the transmission of 

health care payment/processing 

information, as described in 

§ 162.1601(a) and the transmission of 

health care remittance advice as 

described in § 162.1601(b) be addressed 

as a set. In accordance with our decision 

to link the payment of health care 

claims via EFT and the ERA 

transactions by defining them and 

identifying the standards for them in the 

same regulatory provisions, we are 

changing the title of the health care 

payment and remittance advice 

transaction to the ‘‘health care 

electronic funds transfers (EFT) and 

remittance advice’’ transaction in 

§ 162.1601 and § 162.1602. For the 

remainder of this interim final rule with 

comment period, we refer to the 

transmission of health care payment/ 

processing information as described in 

§ 162.1601(a) as the ‘‘health care EFT.’’ 

Next, the transaction at § 162.1601(a) 

is defined as a transmission ‘‘from a 

health plan to a health care provider’s 

financial institution.’’ This interim final 

rule with comment period amends 

§ 162.1601(a) to revise the recipient of 

the transmission of a health care EFT to 

be ‘‘a health care provider’’ instead of ‘‘a 

health care provider’s financial 

institution.’’ We are making this change 

in the definition for the purpose of 

clarifying that the ultimate recipient of 

the health care EFT is not the financial 

institution, but the provider who 

requires the health care claim payment/ 

processing information and in whose 

account the funds are deposited. 

While the definition of the transaction 

at § 162.1601(a) is amended to reflect all 

stages of the transmission of a health 

care EFT from health plan to health care 

provider, we are not adopting standards 

in this interim final rule with comment 

period for every stage of the health care 

EFT transmission. 

B. Definition of Stage 1 Payment 

Initiation 

We are adding the definition of Stage 

1 Payment Initiation to § 162.103. The 

Stage 1 Payment Initiation ‘‘means a 

health plan’s order, instruction, or 

authorization to its financial institution 

to make a health care claims payment 

using an electronic funds transfer (EFT) 

through the ACH Network.’’ We have 

described the Stage 1 Payment Initiation 

broadly in section I.B.2. of this 

preamble, and define it specific to 

health care claim payments in 

regulation text. The definition clarifies 

that the health plan is the sender of the 

Stage 1 Payment Initiation, and the 

health plan’s financial institution is the 

recipient of the Stage 1 Payment 

Initiation. 

As we discuss later in this interim 

final rule with comment period, the 

standards we are adopting in this 

interim final rule with comment period 

are only for Stage 1 Payment Initiation 

of the health care EFT. We are not 

adopting standards for Stages 2 and 3 of 

the health care EFT. 

C. Adoption of Standard for Stage 1 

Payment Initiation: The NACHA 

Corporate Credit or Deposit Entry With 

Addenda Record (CCD+Addenda) 

We are adopting the NACHA 

Corporate Credit or Deposit Entry with 

Addenda Record (CCD+Addenda) 

implementation specifications, as 

contained in the 2011 NACHA 

Operating Rules & Guidelines, as the 

standard for Stage 1 Payment Initiation. 

We are adopting only the specific 

chapter and appendices of the NACHA 

Operating Rules that include 

implementation specifications for the 

CCD+Addenda, and we are adopting 

this standard only for the Stage 1 

Payment Initiation of the health care 

EFT (Table 3). 

D. Adoption of Standard for the Data 

Content of the Addenda Record of the 

CCD+Addenda: The ASC X12 835 TRN 

Segment 

In its February 17, 2011 letter, the 

NCVHS recommended that the 

Secretary ‘‘adopt as the implementation 

specification for the content for the 

addenda in the CCD+, the content 

requirements specified in the X12 835 

TR3 REPORT (ASCX12/005010X221) 

particular to the CCD+.’’ In § 162.1602, 

we are adopting the X12 835 TR3 TRN 

Segment as the standard for the data 

content of the Addenda Record of the 

CCD. 

The CCD Addenda Record can hold 

up to 80 characters. The NACHA 

Operating Rules & Guidelines requires 

that the data in the Addenda Record be 

formatted according to any ASC X12 

transaction set or data segment, or in a 

NACHA endorsed banking convention. 

In order to standardize the data content 

of the CCD+, in § 162.1602, we are 

requiring health plans to input the X12 

835 TRN Segment into the Addenda 

Record of the CCD+Addenda; 

specifically, the X12 835 TRN Segment 

must be placed in Field 3 of the 

Addenda Entry Record (‘‘7 Record’’) of 

a CCD. The TRN Segment 

implementation specifications are 

described in the X12 835 TR3: ‘‘Section 

2.4: Segment Detail, TRN Reassociation 

Trace Number.’’ The TRN Segment 

includes, consecutively, the Trace Type 

Code (TRN01), the Reference 

Identification (TRN02), the Originating 

Company Identifier (TRN03), and, if 

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situationally required, the Reference 

Identification (TRN04). 

In order to most efficiently and 

effectively achieve reassociation, the 

TRN Segment in the Addenda Record of 

the CCD+Addenda should be the same 

as the TRN Segment that is included in 

the associated ERA that describes the 

payment. However, this is not a 

requirement under this interim final 

rule with comment period. We believe 

that the details of any such requirement 

are best addressed through operating 

rules for the health care EFT and 

remittance advice transaction. 

In summary, we are adopting two 

standards for the health care EFT: the 

CCD+Addenda implementation 

specifications in the 2011 NACHA 

Operating Rules & Guidance for the 

Stage 1 Payment Initiation, and the TRN 

Segment implementation specifications 

in the X12 835 TR3 for the data content 

of the Addenda Record of the 

CCD+Addenda. Hereinafter, when we 

refer to the ‘‘health care EFT standards,’’ 

we are referring to these two standards. 

The two standards of the health care 

EFT, together with the current standard 

for the ERA, the X12 835 TR3, are the 

three standards for the health care 

electronic funds transfers (EFT) and 

remittance advice transaction. Table 3 

summarizes these standards and the 

transmissions to which they apply. 

TABLE 3—THE HEALTH CARE ELECTRONIC FUNDS TRANSFERS (EFT) AND REMITTANCE ADVICE TRANSACTION FROM

HEALTH PLAN TO HEALTH CARE PROVIDER

Transmission Data in the transmission Participants and direction of 

transmission 

Electronic format and 

implementation specifications 

Stage 1 Payment Initiation ............

(A health plan’s order, instruction 

or authorization to its financial 

institution to make a health care 

claims payment using electronic 

funds transfer through the ACH 

Network.).

Information about the transfer of 

funds and payment processing 

information.

From the health plan (Originator) 

to the health plan’s financial institution (ODFI).

• CCD+Addenda as contained in 

2011 NACHA Operating Rules 

& Guidelines.* 

• For the Addenda Record (‘‘7’’), 

field 3: X12 835 TR3 TRN Segment implementation specification.* 

Stage 2 Transfer of Funds ............. Payment, information about the 

transfer of funds, and payment 

processing information.

From the health plan’s financial 

institution (ODFI) to the provider’s financial institution 

(RDFI).

Standard required by NACHA 

(non-HIPAA): ACH File (CCD). 

Stage 3 Deposit Notification .......... Information about the transfer of 

funds and payment processing 

information.

From the provider’s financial institution (RDFI) to the provider 

(Receiver).

Format to be agreed upon by the 

provider and its financial institution. 

Remittance Advice ......................... Explanation of benefits and/or remittance advice.From the health plan to the provider.X12 835 TR3. 

* Beginning January 1, 2014. 

The goal of the adoption of these 

standards is to ensure that the TRN 

Segment is inputted into the 

CCD+Addenda and is received without 

error by the health care provider. We 

believe this can be best achieved by 

requiring that a single electronic file 

format, the CCD+Addenda, be used by 

all health plans that transmit health care 

EFT to their financial institutions and 

by requiring that consistent data 

elements be ordered according to clear 

implementation specifications found in 

the X12 835 TR3 and the 2011 NACHA 

Operating Rules & Guidelines. By using 

the same standard in the Stage 1 

Payment Initiation as is used by 

financial institutions in the Stage 2 

Transfer of Funds (CCD+Addenda), 

there will be one less step in formatting/ 

translating of the data in the overall 

transmission and, therefore, a decrease 

in the risk that an error will be made in 

that translation. Consistent format and 

data elements in the file format used by 

health plans for Stage 1 Payment 

Initiation of an EFT will make it more 

likely that the TRN Segment is received 

by the health care provider and that it 

will match the TRN Segment sent with 

the associated ERA. 

Section 1173(g)(4)(B)(ii)(I) of the Act 

requires that the set of operating rules 

for EFT and health care payment and 

remittance advice transactions ‘‘allow 

for automated reconciliation of the 

electronic payment with the remittance 

advice.’’ We believe the adoption of 

these standards, eventually in 

coordination with complementary 

operating rules, will allow for 

automated reassociation of health care 

EFT with ERA, which will ultimately 

create considerable time savings for 

health care providers’ accounts 

receivable processes. We believe that 

the time savings that will be realized 

from the use of these standards will 

increase provider migration from paper 

checks to EFT for health care claim 

payments. As well, the savings to health 

plans in transmitting EFT in place of the 

time and material cost of sending paper 

checks will be realized as more health 

care providers migrate to EFT. 

To implement the health care EFT 

standards, a health plan must comply 

with two different standards developed 

and maintained by two different 

organizations, ASC X12 and NACHA. 

One of the differences is that the 

nomenclature used by the two 

organizations is different as to how their 

respective electronic formats and data 

content are organized and labeled (files, 

records, loops, segments, fields, etc.) In 

order to achieve successful reassociation 

of a health care EFT with the associated 

ERA, the data elements common to both 

transmissions must be correctly 

harmonized between the CCD+Addenda 

and the X12 835 TR3. We anticipate that 

operating rules for the health care 

electronic funds transfers (EFT) and 

remittance advice transaction will create 

further business rules and guidelines 

that promote consistent application of 

these data elements across both 

standards and will better enable 

reassociation. 

E. X12 835 TR3 Remains the Standard 

for All Transmissions of ERA 

In our new text in § 162.1602, we are 

clarifying that the X12 835 TR3, which 

is the standard originally adopted for 

ERA in the Transactions and Codes Sets 

final rule, remains the standard for ERA 

transmissions (as defined in 

§ 162.1601(b)), including when an ERA 

accompanies, is transmitted with, or is 

contained (enveloped) within a health 

care EFT. For example, the X12 835 TR3 

must be used for ERA that travels 

through the ACH Network, the Federal 

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Reserve Wire Network, a payment card 

network, or any system through which 

an EFT may travel. The new text in 

§ 162.1602(d)(2) clarifies this by stating 

that the X12 835 TR3 must be used 

‘‘[f]or transmissions described in 

§ 162.1601(a), including when 

transmissions as described in 

§ 162.1601(a) and (b) are contained 

within the same transmission.’’ 

F. Other Factors in the Reassociation of 

the EFT With the ERA 

A number of implementation 

specifications in the X12 835 TR3 and 

in the 2011 NACHA Operating Rules & 

Guidelines are pertinent to successful 

reassociation and are worth reemphasizing here: 

• According to the X12 835 TR3, the 

total amount of payment transmitted in 

the health care EFT must equal the total 

amount of payment indicated on an 

associated ERA. If a health plan does 

not comply with this implementation 

specification, then reassociation will be 

difficult. 

• The 2011 NACHA Operating Rules 

& Guidelines requires that all financial 

institutions that participate in the ACH 

Network must accept CCD+Addenda. 

Nearly all financial institutions 

participate in the ACH Network, so 

nearly all financial institutions accept 

the CCD+Addenda. 

• The 2011 NACHA Operating Rules 

& Guidelines requires that a Receiver (a 

health care provider) must request a 

deposit notification from its RDFI in 

order to receive payment information. In 

the context of health care EFT made 

through the ACH Network, health care 

providers should work with their banks 

or financial institutions to ensure that 

the data in the Addenda Record of the 

CCD+Addenda (the TRN Segment) is 

transmitted to them in a format that 

allows for automated reassociation of 

the health care EFT with the associated 

ERA. 

G. Additional Considerations 

1. The NACHA Standard 

We are adopting the CCD+Addenda 

implementation specifications as 

contained in the 2011 NACHA 

Operating Rules & Guidelines as one of 

the standards for the health care EFT 

Stage 1 Payment Initiation. The 

implementation specifications for the 

CCD+Addenda in the NACHA 

Operating Rules & Guidelines are not 

the ‘‘operating rules’’ for the health care 

EFT as that term is used under HIPAA. 

Rather, as per this interim final rule 

with comment period, the 

implementation specifications in the 

NACHA Operating Rules & Guidelines 

are one of the standards for the health 

care EFT. The inclusion of ‘‘Operating 

Rules’’ in the title of the document that 

includes the implementation 

specifications should not be confused 

with the Affordable Care Act’s 

definition and requirement for the 

adoption of ‘‘operating rules’’ for the 

transactions as described in section 

1104(b) of the Affordable Care Act. The 

operating rules in the NACHA 

Operating Rules & Guidelines are not 

synonymous with those specified in the 

Affordable Care Act. The NACHA 

Operating Rules are implementation 

specifications regarding financial 

transactions that were developed and 

adopted by ACH participants more than 

three decades before the Affordable Care 

Act amended HIPAA to mandate the 

adoption of operating rules for each of 

the transactions listed in the Act. 

2. The Secretary’s Authority To Adopt 

a Non-ANSI Accredited Standard 

The NCVHS, in its February 17, 2011 

letter to the Secretary, recommended 

NACHA as the standards development 

organization for the development and 

maintenance of the CCD+Addenda, and 

in this interim final rule with comment 

period, we are adopting a NACHA ACH 

File format. However, NACHA is not a 

standard setting organization (SSO), as 

the term is defined by HIPAA, because 

NACHA is not accredited by the 

American National Standards Institute 

(ANSI). As previously discussed in this 

interim final rule with comment period, 

under section 1172(c)(2)(B) of the Act, if 

no SSO has developed, adopted, or 

modified any standard relating to a 

standard that the Secretary is authorized 

or required to adopt under HIPAA, then 

the Secretary may adopt a standard, 

relying upon recommendations of the 

NCVHS, and after consultation with the 

National Uniform Billing Committee 

(NUBC), National Uniform Claim 

Committee (NUCC), WEDI, and 

American Dental Association (ADA), 

and appropriate federal and State 

agencies and private organizations. 

These consultations have taken place 

through various communication 

avenues such as the NCVHS hearings, 

letters and other public meetings. 

3. Clarification Regarding Application of 

Standards to EFT Stages 2 and 3 

We note that the definition of the 

health care electronic funds transfers 

(EFT) and remittance advice transaction 

at § 162.1601, as newly defined in this 

interim final rule with comment period, 

includes all three of the ACH payment 

stages, as discussed in section I.B.2. of 

this interim final rule with comment 

period and illustrated in Table 2. 

However, the standards adopted herein 

are required to be used only for the 

electronic file that a health plan 

transmits in conducting the health care 

EFT Stage 1 Payment Initiation (see 

Table 2 and Illustrations A and B). 

The health care EFT standards 

adopted herein are not required to be 

used for the Stage 2 Transfer of Funds 

from the health plan’s financial 

institution (ODFI) to the health care 

provider’s financial institution (RDFI). 

The health care EFT standards meet the 

NACHA ACH standards used in Stage 2 

Transfer of Funds: The Stage 1 Payment 

Initiation transmitted according to the 

health care EFT standards adopted 

herein (CCD+Addenda) will indicate to 

the ODFI that the health care EFT 

remain in the form of the CCD+Addenda 

for Stage 2 Transfer of Funds. 

We are also not requiring that the 

standards adopted herein be used for 

the Stage 3 Deposit Notification 

transmission from the health care 

provider’s financial institution (RDFI) to 

the health care provider. The format by 

which the deposit notification is 

rendered from the RDFI to the provider 

remains, at this time, dependent on the 

business agreement between the 

provider and the provider’s financial 

institution. 

4. The Corporate Trade Exchange Entry 

(CTX) 

Our amendments to § 162.1602(d)(1) 

clarify that the health care EFT 

standards adopted in this interim final 

rule with comment period are not 

required to be used when health care 

EFT, as described in § 162.1601(a), and 

ERA, as described in § 162.1601(b), are 

transmitted together in the same 

transmission. 

This interim final rule with comment 

period does not prohibit the voluntary 

use of EFT formats in which an EFT and 

ERA travel together in a single 

transmission using, for example, the 

CTX ACH File. Some in the financial 

sector and in the health care industry 

see the single transmission of EFT and 

ERA together as a promising approach 

for seamlessly automating reassociation, 

and it is hoped that industry initiatives 

to use and/or test formats that combine 

the transmission of health care EFT and 

ERA into one transmission will 

continue. 

While this interim final rule with 

comment period does not adopt a 

specific standard for transmitting the 

ERA together with a health care EFT in 

a single transmission, compliance with 

the X12 835 TR3 is required for 

transmitting the ERA regardless of how 

the ERA is transmitted. As well, the X12 

835 TR3 provides some implementation 

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specifications for transmittal of the CTX, 

and nothing in this interim final rule 

with comment period alters or amends 

the implementation specifications 

related to transmitting the CTX within 

that standard. It is possible that a 

standard or standards for transmitting 

the ERA together with the health care 

EFT in a single transmission could be 

adopted in future regulations. 

5. EFT Conducted Outside the ACH 

Network 

The health care EFT standards 

adopted in this interim final rule with 

comment period do not apply to health 

care claim payments made via EFT 

outside of the ACH Network. Health 

plans are not required to send health 

care EFT through the ACH Network. 

They may decide, for instance, to 

transmit a health care EFT via Fedwire 

or via a payment card network . This 

interim final rule with comment period 

neither prohibits nor adopts any 

standards for health care EFT (as 

defined in § 162.1601(a)) transmitted 

outside of the ACH Network. When 

health plans do, however, send health 

care EFT through the ACH Network, 

they must do so using the health care 

EFT standards adopted herein. 

We emphasize that the new regulation 

text at § 162.1602 specifies that the X12 

835 TR3 continues to be the standard 

whenever the ERA (as defined in 

§ 162.1601(b)) is transmitted, including 

when an ERA is transmitted together 

with a health care EFT either through 

the ACH Network or outside of the ACH 

Network. 

6. International Payments 

The CCD+Addenda standard adopted 

in this interim final rule with comment 

period cannot be used for Stage 1 

Payment Initiation health care EFT 

made to or from countries outside of the 

United States. The NACHA Operating 

Rules & Guidelines requires that all 

international payment transactions 

transmitted via the ACH Network use 

the IAT ACH File. According to NACHA 

Operating Rules & Guidelines (Section 

V, Chapter 43), ‘‘IAT transactions 

include specific data elements defined 

within the Bank Secrecy Act’s (BSA) 

‘Travel Rule’ so that all parties to the 

transaction have the information 

necessary to comply with U.S. law, 

which includes the programs 

administered by the Office of Foreign 

Assets Control (OFAC).’’ Because the 

Stage 2 Transfer of Funds must be in the 

IAT ACH File, the Stage 1 Payment 

cannot be in the CCD+Addenda. 

H. Applicability 

1. Covered Entities: Health Plans, Health 

Care Clearinghouses, and Health Care 

Providers 

The health care EFT standards 

adopted in this interim final rule with 

comment period apply to transactions 

that originate with health plans. We 

note that some health care providers 

choose not to conduct transactions 

electronically. In practice, health plans 

will only have to use the health care 

EFT standards adopted herein if the 

provider wants to receive health care 

claim payments via EFT through the 

ACH Network. 

If an entity sends payment/processing 

information to another entity for the 

purpose of having that receiving entity 

format the information so that it is 

compliant with the EFT standards in 

order to transmit it to the ODFI, then 

that receiving entity would meet the 

definition of a health care clearinghouse 

under HIPAA. The receiving entity 

would be required to use the health care 

EFT standards adopted in this interim 

final rule with comment period. 

2. Financial Institutions 

The February 17, 2011, NCVHS 

recommendations on the EFT standard 

included a recommendation for the 

Secretary to ‘‘consider the implications 

of the fact that, as the result of the 

adoption of the health care EFT 

standard, some banks may become de 

facto health care clearinghouses as 

defined by HIPAA.’’ 

In Stage 1 Payment Initiation, some 

health plans currently transmit a flat 

file, an ASC X12 formatted file, or a 

proprietary formatted file containing 

payment/processing information to their 

financial institutions. The financial 

institutions then translate the data into 

the CCD format to transmit it through 

the ACH Network. In this interim final 

rule with comment period, we have 

adopted standards that apply to the 

Stage 1 Payment Initiation. Therefore, 

were financial institutions to continue 

to provide this service after the effective 

date of the health care EFT standards 

adopted herein, such financial 

institutions would be accepting 

information from health plans in a 

nonstandard format and translating it 

into the standard format consistent with 

the activities of a health care 

clearinghouse as defined at § 160.103. 

Under section 1179 of the Act, the 

HIPAA Administrative Simplification 

standards do not apply to entities to the 

extent they are engaged in the activities 

of a financial institution. Section 1179 

of the Act provides as follows: 

To the extent that an entity is engaged in 

activities of a financial institution (as defined 

in section 1101 of the Right to Financial 

Privacy Act of 1978), or is engaged in 

authorizing, processing, clearing, settling, 

billing, transferring, reconciling, or collecting 

payments, for a financial institution, this 

part, and any standard adopted under this 

part, shall not apply to the entity with 

respect to such activities, including the 

following: 

(1) The use or disclosure of information by 

the entity for authorizing, processing, 

clearing, settling, billing, transferring, 

reconciling or collecting, a payment for, or 

related to, health plan premiums or health 

care, where such payment is made by any 

means, including a credit, debit, or other 

payment card, an account, check or 

electronic funds transfer. 

Section 1179(1) of the Act expressly 

refers to the use or disclosure of 

‘‘information * * * for processing 

* * * a payment for * * * health care, 

where such payment is made by any 

means, including * * * electronic 

funds transfer’’ as an activity of a 

financial institution. Financial 

institutions that process or facilitate the 

processing of health information from a 

nonstandard format or containing 

nonstandard data content into health 

care EFT standards are engaging in 

‘‘activities of a financial institution’’ as 

set forth in section 1179 of the Act in 

performing the processes inherent in the 

health care EFT standards adopted 

herein and will continue to be 

considered doing so after their effective 

date. Therefore, we have determined 

that, upon the effective date of these 

health care EFT standards, when 

financial institutions receive payment/ 

processing information for these 

transactions and translate it into the 

CCD+Addenda format, they will not be 

required to comply with the health care 

EFT standards adopted herein. 

The health care EFT standards 

adopted herein are the only HIPAA 

transaction standards adopted to date 

that do not contain individually 

identifiable health information (though, 

like all HIPAA transactions, they 

contain health information as defined 

by HIPAA at § 160.103). The 

information that is required or optional 

in the health care EFT standards 

adopted herein is payment/processing 

information that is necessary for a 

financial institution to process an EFT 

through the ACH Network. In fact, the 

inclusion of protected health 

information in a Stage 1 Payment 

Initiation would be inconsistent with 

the adopted health care EFT standards. 

As we stated in the preamble to the 

December 28, 2000, HIPAA Privacy final 

rule (65 FR 82615): 

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* * * the ASC X12N 835 we adopted as the 

‘Health Care Payment and Remittance 

Advice’ standard in the Transactions Rule 

has two parts. They are the electronic funds 

transfer (EFT) and the electronic remittance 

advice (ERA). The EFT part is optional and 

is the mechanism that payors use to 

electronically instruct one financial 

institution to move money from one account 

to another at the same or at another financial 

institution. The EFT includes information 

about the payor, the payee, the amount, the 

payment method, and a reassociation trace 

number. Since the EFT is used to initiate the 

transfer of funds between the accounts of two 

organizations, typically a payor to a provider, 

it includes no individually identifiable 

health information, not even the names of the 

patients whose claims are being paid. 

Thus, even absent section 1179 of the 

Act, the HIPAA Privacy and Security 

rules would not apply to the 

transmission of the health care EFT 

standards adopted herein. 

In summary, we anticipate that after 

the adoption of the health care EFT 

standards, some financial institutions 

will continue to translate nonstandard 

payment/processing information 

received from health plans into the CCD 

format. With the adoption of the health 

care EFT standards, these financial 

institutions will, by virtue of performing 

these activities, become de facto health 

care clearinghouses as defined by 

HIPAA. To the extent, however, those 

entities engage in activities of a 

financial institution, as defined in 

section 1101 of the Right to Financial 

Privacy Act of 1978, (Pub. L. 95–630; 

effective March 10, 1979), they will be 

exempt from having to comply with 

these HIPAA standards with respect to 

those activities. 

The health care EFT standards 

adopted herein apply to health plans, 

and health plans are ultimately 

responsible for ensuring compliance 

with the standards regardless of whether 

a health plan puts the data into standard 

format itself or uses a financial 

institution to do so. This means that, 

with regard to the health care EFT 

standards adopted herein, upon their 

effective date, if a health plan has an 

arrangement with a financial institution 

for the financial institution to format the 

health plan’s nonstandard payment/ 

processing information into the 

standard CCD+Addenda format for a 

Stage 1 Payment Initiation and, for 

whatever reason, the bank does so in a 

way that is noncompliant with the 

standards, where the financial 

institution is the agent of the health 

plan, the health plan may be responsible 

for the noncompliance. We expect that 

some health plans will need to educate 

their financial institutions about the 

health care EFT standards adopted 

herein in order to ensure compliance. 

I. Effective and Compliance Dates 

Section 1104(c)(2) of the Affordable 

Care Act states that ‘‘[t]he Secretary 

shall promulgate a final rule to establish 

a standard for electronic funds transfers 

(as described in section 1173(a)(2)(J) of 

the [Act], as added by subsection 

[1104](b)(2)(A) [of the Affordable Care 

Act].’’ The Secretary may do so on an 

interim final basis and shall adopt such 

standard not later than January 1, 2012, 

in a manner ensuring that such standard 

is effective not later than January 1, 

2014.’’ 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 standard for 

electronic funds transfers be effective 

not later than January 1, 2014. This 

means that covered entities must be in 

compliance with the standards by 

January 1, 2014. 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 to 

allow sufficient time for industry 

preparation for compliance. 

III. 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 (NPRM) in the 

Federal Register. Section 553(b) of the 

APA provides for an exception from this 

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

the APA authorizes an agency to waive 

normal rulemaking requirements if the 

Department for good cause finds that 

notice and comment procedures are 

impracticable, unnecessary, or contrary 

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

of the APA allows the agency to waive 

the 30-day delay in effective date where 

the agency finds good cause to do so 

and includes a statement of support. 

Section 1104 of the Affordable Care 

Act amended section 1173 of the Act to 

require the Secretary to adopt standards 

and a set of operating rules for certain 

electronic health care transactions 

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

Affordable Care Act requires the 

Secretary to ‘‘promulgate a final rule to 

establish a standard for electronic funds 

transfers * * *. The Secretary shall 

adopt such standard not later than 

January 1, 2012, in a manner ensuring 

that such standard is effective not later 

than January1, 2014.’’ Given the 

statutory requirement to promulgate a 

final rule by January 1, 2012, there is a 

highly compressed window of time 

before the statutory adoption date of the 

EFT standards. We believe Congress 

may have had this in mind when it 

expressly authorized the adoption of the 

EFT standard by an interim final rule. 

For the reasons detailed below, we have 

concluded that there is good cause to 

waive normal rulemaking notice and 

comment procedures, as they are 

impracticable. We believe the rationale 

provided here supports our exercise of 

the option provided by Congress to 

promulgate the final rule on an interim 

final basis. 

Section 1172(f) of the Act requires the 

Secretary to ‘‘rely on the 

recommendations of the National 

Committee on Vital and Health 

Statistics * * * and [to] consult with 

appropriate Federal and State agencies 

and private organizations’’ before 

adopting a standard under HIPAA. 

Furthermore, the Secretary is required 

to consult four organizations named in 

section 1172(c)(3)(B) of the Act before 

adopting a standard that has not been 

developed, adopted or modified by a 

standard setting organization, which is 

the case with one of the EFT standards 

adopted herein. 

Upon passage of the Affordable Care 

Act in March 2010, the NCVHS 

immediately scheduled hearings in 

order to gather industry and government 

input on the new transaction standards 

and operating rules mandated by the 

Affordable Care Act. The order in which 

the hearings were scheduled was 

established by the NCVHS based on the 

statutory effective dates of the new 

standards and operating rules. Thus, a 

hearing on operating rules for the 

eligibility for a health plan and health 

care claim status transactions was 

scheduled for July 20, 2010, as those 

operating rules were required to be 

adopted by July 1, 2011. Between July 

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and December of 2010, the NCVHS 

solicited testifiers for a hearing on EFT 

standard and operating rules for EFT 

and ERA, and the NCVHS held a 

hearing on December 3, 2010. 

Based on the December 3, 2010 

NCVHS hearing, the NCVHS issued a 

letter to the Secretary on February 17, 

2011 detailing its recommendations for 

EFT standards. As per the consultation 

requirements in the Act, we could not 

proceed with developing a rule for the 

EFT standard until we received and 

considered the NCVHS recommendation 

as well as consulted with appropriate 

Federal and State agencies and private 

organizations. Given that the Affordable 

Care Acts mandates that the EFT 

standard be adopted by January 1, 2012, 

the agency had only until November 30, 

2011 to consult with the required 

agencies and organizations and to 

publish a final rule on the standard— 

approximately 8 months from the week 

the Secretary received the NCVHS 

recommendations. 

The December 3, 2010 NCVHS 

hearing on an EFT standard and 

operating rules triggered a wave of 

discussions within industry on the use 

of EFT in the health care industry. An 

ASC X12 workgroup began work on an 

‘‘ASC X12 Type 2 Technical Report’’ 

entitled Health Care Claim Payment/ 

Advice Reference Model. The 

Workgroup for Electronic Data 

Interchange (WEDI) initiated the EFT 

Sub Work Group that began drafting an 

educational document for health care 

entities called Creating and 

Implementing an EFT Process for Payers 

and Providers. A number of 

representatives from various federal 

government agencies began meeting on 

the use of EFT in medical payments 

from government agencies under the 

auspices of the Department of Treasury. 

After March 2011, CAQH CORE began a 

number of meetings with industry on 

operating rules for EFT and ERA. 

It was crucial for us to participate in 

these meetings, conduct in-depth 

research on the payment systems of the 

health care industry, and continue 

industry discussions on the EFT 

transaction. All of these actions were 

particularly critical because the health 

care EFT standards are the first 

standards to be adopted under HIPAA 

in which the standards and business 

practices of the financial industry 

would be considered and a new 

standards development organization 

would be part of the process. Not only 

did this require extensive discussion 

with the financial industry, it also 

required the Department to participate 

in meetings coordinated between the 

financial industry, representatives of 

covered entities, and government 

agencies. These meetings and 

discussion included issues such as the 

NCVHS recommendation (in 

comparison to other options), the 

relationship between the EFT 

transaction and the ERA transmission in 

the health care payment and remittance 

advice standard transaction, and the 

implications to the health care and 

financial industries of an EFT standard 

in terms of privacy and security issues. 

The development of the provisions of 

this interim final rule with comment 

period required a thorough 

understanding of EFT as a tool of the 

financial industry and how it intersects 

and works within the health care 

industry. Based on these discussions 

from March to July 2011, we developed 

and drafted the provisions for the health 

care EFT standards. As detailed in the 

preamble, the health care EFT standards 

are a unique combination of a standard 

from the financial industry and a 

standard from the health care industry. 

Without these discussions and research 

over the past several months, it would 

not have been feasible to adopt 

standards for health care EFT that met 

both industry needs and fulfilled the 

intentions of HIPAA administrative 

simplification. 

After the research and drafting phase 

of the rule was completed in July 2011, 

we were left with four months to 

publish the rule to meet the statutory 

deadline of January 1, 2012. Given the 

minimum practical time it takes to 

promulgate a rule, we determined there 

was insufficient time to publish both a 

proposed and final rule before 

November 30, 2011. 

We also note that the operating rules 

for EFT and ERA cannot be adopted 

until a standard for the EFT is adopted. 

Any delay in adopting the EFT standard 

would delay adoption of EFT and ERA 

operating rules, which are required by 

section 1173(g)(4)(B)(ii)(II) of the Act to 

be adopted by July 1, 2012, and which 

must be effective by January 1, 2014. 

Most importantly, the operating rules 

benefit industry in significant ways for 

the processing of claims payments; any 

delay in the adoption of EFT and ERA 

operating rules delays industry 

opportunity for efficiency and cost 

savings. 

Therefore, we conclude that there is 

good cause to waive normal rulemaking 

requirements as they are impracticable, 

and we avail ourselves of the interim 

final rule option provided by Congress 

in the Affordable Care Act. 

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 standards until January 1, 2014, 

nearly two 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. That 30-day time 

period is in fact inconsequential here to 

covered entities—their statutorily 

prescribed date of compliance remains 

January 1, 2014. Because we believe the 

30-day delay is unnecessary, we find 

good cause to waive it. We are providing 

a 60-day comment period. 

IV. Collection of Information 

Requirements 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 60- 

day notice in the Federal Register and 

solicit public comment before a 

collection of information is submitted to 

the Office of Management and Budget 

(OMB) for review and approval. In order 

to fairly evaluate whether an 

information collection should be 

approved by OMB, section 3506(c)(2)(A) 

of the Paperwork Reduction Act of 1995 

requires that we solicit comment on the 

following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

We are soliciting public comment on 

the information collection requirements 

(ICRs) regarding third party health care 

EFT enrollment forms. 

The health care EFT standards are the 

implementation specifications for the 

electronic format that a health plan is 

required to use for the Stage 1 Payment 

Initiation. The standards adopted herein 

do not affect how a provider’s financial 

institution transmits the TRN segment 

to the provider. Therefore, the provider 

is not required to change or amend 

systems or processes. There will be no 

direct systems costs to physician 

practices and hospitals to implement 

the health care EFT standards adopted 

herein. 

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1570 Federal Register / Vol. 77, No. 6 / Tuesday, January 10, 2012 / Rules and Regulations 

3American Medical Association, ‘‘Competition in 

Health Insurance: A Comprehensive Study of U.S. 

Markets,’’ 2008 and 2009. 

However, we do assume that, in part 

due to this regulation, physician 

practices, and hospitals will increase 

their usage of EFT, or in some cases will 

begin accepting EFT for health care 

claim payments for the first time. As we 

relay in section V.A.2. of this interim 

final rule with comment period, in the 

savings for health plans, the high range 

of estimated increase in EFT usage 

attributable to implementation of the 

health care EFT standards makes up a 

percentage of the total increase. The rest 

will be due to an increased number of 

insured patients, business culture 

acceptance of EFT, and statutory and 

other regulatory initiatives. 

We have included both physician 

practices and hospitals in our 

calculation (Table 4). Data have 

demonstrated that hospitals have a 

much higher usage of EDI than 

physician practices and, by extension, 

we assume that hospitals have a higher 

usage of EFT than physician practices. 

However, there is no valid data on EFT 

usage among hospitals and so we will 

include them with physician practices, 

knowing that cost estimates are likely 

conservative. 

Many physician practices and 

hospitals already accept EFT for health 

care claim payments from the health 

plans that pay them the most (as a 

percentage of total payments to the 

provider), pay them most often, or 

transmit payment/processing 

information that works most 

successfully with the particular 

provider’s practice management system. 

While some physician practices and 

hospitals do not accept any payments 

via EFT, we assume that all physician 

practices and hospitals, or their trading 

partners, are technically capable of 

receiving payment via EFT. This 

assumption is based on the fact that no 

infrastructure is necessary because the 

provider’s financial institution is 

responsible for the necessary technology 

required to receive a health care EFT 

through the ACH Network, and there are 

few, if any, ‘‘financial institutions’’ that 

do not participate in the ACH Network. 

Therefore, we assume no systems costs 

or infrastructure requirements for 

providers relative to enrolling for health 

care EFT. 

The burden associated with the 

requirements of this interim final rule 

with comment period, which is subject 

to the PRA, is the completion of the 

health care EFT enrollment, which is 

accomplished by filling out and 

submitting what is generally a 3- to 18- 

page form, obtaining signatures, and 

transmitting the completed document. 

In order to quantify the average cost 

per physician practice or hospital, we 

have outlined the following 

assumptions in the form of a model 

physician practice that we will use to 

project enrollment costs: 

• For the model physician practice, 

the time burden of an EFT enrollment 

with a single health plan is 2 hours. We 

base this time burden on the estimated 

length of time it would take an average 

consumer to complete and submit a 3- 

to 18-page form, including obtaining 

bank account, bank routing, and 

necessary signatures to allow an 

employer to Direct Deposit an 

employee’s salary into the employee’s 

account (a common consumer EFT 

enrollment). 

• The majority of the enrollment will 

be done by billing and posting clerk, at 

that position’s average salary rate of 

approximately $17.5 per hour in 2014 

based on Bureau of Labor Statistics. We 

factored labor costs to increase at the 

rate of 3 percent per year. 

• The model physician practice 

receives the vast majority of its 

payments from 25 or less plans. From 

the beginning of 2014 through 2018, we 

assume that the number of health plans 

with whom the model physician 

practice does business will remain 

constant because industry trends 

indicate that the number of health plans 

will remain constant, or even decrease.3

• The model physician practice will 

receive 34 percent of its health care 

claim payments via EFT at the 

beginning of 2014, and this will increase 

to 56 percent by the end of 2018 

(reflecting our calculation in V.A.2. of 

this interim final rule with comment 

period for the whole industry). 

• Using these factors, we can 

calculate that the model physician 

practice is already enrolled in an EFT 

program with approximately eight of the 

25 health plans with whom it does 

business (34 percent) at the beginning of 

2014. 

• We predict that the model 

physician practice would be expected to 

add six new EFT enrollments from 2014 

through 2018. Any updates to the 

enrollments would be in conduct of the 

normal course of business. 

TABLE 4—COSTS AND NUMBER OF ENROLLMENTS IN HEALTH CARE EFT BY PHYSICIANS AND HOSPITALS FOR 2014 

THROUGH 2018 

Time (in hours) per 

enrollment form 

Base hourly rate (in 

dollars) for billing and 

posting clerks * 

Number of physician 

practices/hospitals 

Total number of 

increased EFT 

enrollments (Column 

3 * 

6 enrollments) 

Total number of EFT 

enrollments attributable to health care 

EFT standards at 

18% of total 

Number of annual 

enrollments in health 

care EFT attributable 

to adoption of 

standards 

(Column 1) (Column 2) (Column 3) (Column 4) (Column 5) (Column 6) 

2 $17.5 240,727 1,444,362 259,985 52,000 

* Department of Labor statistics, based on average hourly salary for billing and posting clerks for NAIC Sector 62, May, 2010 with 3 percent 

annual increase between 2010 and 2014. 

The total increase in the number of 

health care EFT enrollments from 2014 

through 2018 is projected to be 

1,444,362 of which approximately 18 

percent or 259,985 will be attributable 

to the implementation of the health care 

EFT standards. Distributed over 5 years 

and factoring a 3 percent increase in 

labor costs for each of the 5 years 

produces a total burden to industry of 

nearly $10 million over 5 years. 

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Federal Register / Vol. 77, No. 6 / Tuesday, January 10, 2012 / Rules and Regulations 1571 

TABLE 5—PAPERWORK REDUCTION ACT ESTIMATED ANNUALIZED BURDEN

Year 

Total 

2014 2015 2016 2017 2018 

Cost (Burden Hours for total hospitals & providers) (in 

millions) ........................................................................ $1.8 $1.9 $1.9 $2.0 $2.1 $9.7 

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 with comment period; or 

2. Submit your comments to the 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, Attention: CMS Desk Officer, 

CMS–0024–IFC 

Fax: (202) 395–6974; or 

Email: 

OIRA_submission@omb.eop.gov. 

V. Regulatory Impact Analysis 

We have examined the impacts of this 

interim final rule with comment period 

as required by Executive Order 12866 

on Regulatory Planning and Review 

(September 30, 1993, as further 

amended), Executive Order 13563 on 

Improving Regulation and Regulatory 

Review (January 18, 2011), the 

Regulatory Flexibility Act (RFA) 

(September 19, 1980, Pub. L. 96–354) (as 

amended by the Small Business 

Regulatory Enforcement Fairness Act of 

1996, Pub. L. 104–121), section 1102(b) 

of the Social Security Act, section 202 

of the Unfunded Mandates Reform Act 

of 1995 (March 22, 1995; Pub. L. 104– 

4), Executive Order 13132 on 

Federalism (August 4, 1999), and the 

Congressional Review Act (5 U.S.C. 

804(2)). 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. Executive 

Order 13563 also directs agencies to not 

only engage public comment on all 

regulations, but also calls for greater 

communication across all agencies to 

eliminate redundancy, inconsistency 

and overlapping, as well as outlines 

processes for improving regulation and 

regulatory review. 

A Regulatory Impact Analysis (RIA) 

must be prepared for major rules with 

economically significant effects ($100 

million in 1995 dollars or more in any 

1 year). We estimate that this 

rulemaking is ‘‘economically 

significant,’’ under section 3(f)(1) of 

Executive Order 12866 as it will have an 

impact of over $100 million on the 

economy in any 1 year. Accordingly, we 

have prepared an RIA that, to the best 

of our ability, presents the costs and 

benefits of this interim final rule with 

comment period, and the rule has been 

reviewed by the Office of Management 

and Budget. We anticipate that the 

adoption of the health care EFT 

standards would result in benefits that 

outweigh the costs to health care 

providers and health plans. 

The Regulatory Flexibility Act (RFA) 

requires agencies to analyze options for 

regulatory relief of small businesses if a 

rule has a significant impact on a 

substantial number of small entities. For 

purposes of the RFA, small entities 

include small businesses, nonprofit 

organizations, and small government 

jurisdictions. Small businesses are those 

with sizes below thresholds established 

by the Small Business Administration 

(SBA). 

We have determined, and certify, that 

this rule will not have a significant 

economic impact on a substantial 

number of small entities, and that a 

regulatory flexibility analysis is not 

required. Our reasoning follows: 

Most physician practices, hospitals 

and other health care providers are 

small entities, either by nonprofit status 

or by having revenues of $7 to $34.5 

million in any one year. However, the 

only costs to providers are the possible 

costs of filling out EFT enrollment forms 

with health plans, detailed in the 

Collection of Information section herein. 

Those costs are approximately $35 per 

health care provider per year. Numbers 

of this magnitude do not remotely 

approach the amounts necessary to be a 

‘‘significant impact’’ on an individual 

provider. 

The health insurance industry was 

examined in depth in the Regulatory 

Impact Analysis prepared for the 

proposed rule on establishment of the 

Medicare Advantage program (69 FR 

46866), published on August 3, 2004. In 

that analysis, it was determined that 

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

including health maintenance 

organizations (HMOs), that fell below 

the size thresholds for ’’small’’ business 

established by the SBA. Then and even 

more so now, the market for health 

insurance is dominated by a relative 

handful of firms with substantial market 

shares. We assume that the ‘‘insurance 

firms’’ are synonymous, for the most 

part, with health plans that make health 

care claims payments to health care 

providers and are, therefore, the entities 

that will have costs associated with 

implementing health care EFT 

standards. 

There are, however, a number of 

HMOs that are small entities by virtue 

of their nonprofit status even though 

few if any of them are small by SBA size 

standards. There are approximately one 

hundred such HMOs. These HMOs and 

health plans that are non-profit 

organizations, like the other firms 

affected by this interim final rule, will 

be required to implement the health 

care EFT standards for Stage 1 Payment 

Initiation for health care claims to 

health care providers. Accordingly, this 

interim final rule will affect a 

‘‘substantial number’’ of small entities. 

However, we estimate, that the costs of 

this interim final rule with comment 

period are, at most, approximately 

$12,000 per health plan (regardless of 

size or non-profit status). Again, 

numbers of this magnitude do not 

remotely approach the amounts 

necessary to be a ‘‘significant economic 

impact’’ on firms with revenues of tens 

of millions of dollars (usually hundreds 

of millions or billions of dollars 

annually). 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant economic impact on the 

operations of a substantial number of 

small rural hospitals. This analysis must 

conform to the provisions of section 604 

of the RFA. This interim final rule 

would not affect small rural hospitals, 

under the same reasoning previously 

given with regard to health care 

providers. Therefore, the Secretary has 

determined that this rule would not 

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1572 Federal Register / Vol. 77, No. 6 / Tuesday, January 10, 2012 / Rules and Regulations 

4http://stats.oecd.org/index.aspx. 5 Keehan, S.P.; Sisko, A.M.; Truffer, C.J.; Poisal, 

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

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

Through 2020: Economic Recovery and Reform 

drive faster Spending Growth,’’ Health Affairs 

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

6 ‘‘Technological Change and the Growth of 

Health Care Spending,’’ A CBO Paper, 

Congressional Budget Office, January 2008, http:// 

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

TechHealth.pdf. 7Morra, D., Nicholson, S., Levinson, W., Gans, D. 

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

Practices versus Canadians: Spending Nearly Four 

Times as Much Money Interacting with Payers,’’ 

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

8 Kahn, J.G., Kronick, R., Kreger, M., & Gans, D.N., 

‘‘The cost of health insurance administration in 

California: Estimates for insurers, physicians, and 

hospitals,’’ Health Affairs: 24(6):1629–1639, 2005. 

9Sakowski, J.A., Kahn, J.G., Kronick, R.G., 

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

box: Billing and insurance activities in a medical 

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

10 ‘‘Health Care Administrative Expense Analysis, 

Blue Ribbon Commission Recommendation #6: 

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

the Insurance Commissioner. 

11Akscin J., Barr T., & Towle E.; ‘‘Key Practice 

Indicators in Office-based oncology practices: 2007 

Report on 2006 data. J Oncol Pract 3:200–203, 2007, 

and Mulvey, T.: ‘‘The Time has Come for National 

Insurance Cards,’’ J. Oncol Pract, 4:161, 2008. 

have a significant impact on the 

operations of a substantial number of 

small rural hospitals. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

also requires that agencies assess 

anticipated costs and benefits before 

issuing any rule whose mandates 

require spending in any 1 year of $100 

million in 1995 dollars, updated 

annually for inflation. In 2011, that 

threshold is approximately $136 

million. This interim final rule with 

comment period does not impose 

spending costs on State, local or tribal 

government in the aggregate, or by the 

private sector, of $136 million. As is 

reflected in the RIA, costs on all entities 

are estimated to be not more than $20 

million. 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule (and subsequent final 

rule) that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 

This interim final rule does not have a 

substantial direct effect on State or local 

governments, preempt States, or 

otherwise have a Federalism 

implication. 

A. Current State, Need for Mandated 

EFT Standards, and General Impact of 

Implementation 

1. Billing and Insurance Related (BIR) 

Costs 

Health care spending in the United 

States makes up an estimated 17 percent 

of the U.S. Gross Domestic Product 

(GDP) 4 and costs over $8,000 per person 

annually.5 Many factors contribute to 

the high cost of health care in the 

United States, but studies point to 

administrative costs as having a 

substantial impact on the growth of 

spending 6 and an area of costs that 

could likely be reduced.7

A significant portion of administrative 

costs for physician practices and 

hospitals are billing and insurancerelated (or BIR) costs (See Illustration 

C). It is estimated that half of 

administrative costs for physician 

practices are BIR costs 8—or between 10 

to 12 percent of a physician practice’s 

annual revenue.9 In contrast, the U.S. 

retail sector spends about 5 percent of 

annual revenue on accounts receivable. 

Along with estimated increases in all 

health care administrative costs, we can 

expect BIR costs to grow as well: In a 

study by the Washington State Office of 

the Insurance Commissioner, BIR costs 

grew between 1997 and 2005 at an 

average pace of 20 percent per year for 

hospitals in Washington State and 10 

percent per year for physicians.10 In 

some cases, the increasing 

administrative cost of processing claims 

threatens the survival of small and midsize physicians’ offices.11

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Federal Register / Vol. 77, No. 6 / Tuesday, January 10, 2012 / Rules and Regulations 1573 

12Casalino, L.P., Nicholson, S., Gans, D.N., 

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

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

interact with health insurance plans?’’ Health 

Affairs, 28(4) (2009):w533–w543. 

13http://data.bls.gov/cgi-bin/print.pl/oes/current/ 

oes433021.htm. 

14Casalino, et al., 2009. 15Sakowski et al., 2009. 

BIR tasks include patient billing, 

insurance verification, responding to 

patients’ cost questions, contracting 

with health plans, health care provider 

credentialing, processing payer requests 

for additional information, 

authorizations (procedures, referrals), 

payment for services provided outside 

the group, coding support, entering 

charges, claims review and edits, filing 

claims, creating and mailing patient 

statements, data entry and payment 

processing managements, collecting 

payments and posting to patient 

accounts, depositing checks and 

payments, account reconciliation, 

discrepancy research, follow-up, and 

write-offs, posting refunds, follow-up on 

denials, underpaid, nonresponsive 

claims, filing for shared risk-pool 

payments, and filing for contractual 

payments.12

BIR tasks are costly, in part, because 

physician practice staff must often 

manually customize transactions 

depending on the separate requirements 

of multiple health plans, insurance 

companies, clearinghouses, and third 

party administrators with whom the 

physician practice contracts. Because of 

the manual nature of BIR tasks, the 

majority of BIR costs are associated with 

staffing costs. Hospitals, physician 

offices and other health care providers 

employ more billing and posting clerks 

than any other industry, according to 

the U.S. Bureau of Labor Statistics.13

These costs include not just the labor 

costs of employing staff, but also the 

opportunity cost of providers whose 

time would otherwise be spent caring 

for patients. A 2009 study found that the 

average physician spent three hours a 

week interacting with health plans— 

nearly three weeks a year—while 

physicians’ nursing and clerical staff 

spent much more time.14 Above and 

beyond the financial costs of manual 

BIR tasks, interruptions in the work of 

physician practices to deal with BIR 

tasks may interfere with patient care. 

Simply put, there are qualitative and 

quantitative savings to be gained by 

automating many BIR tasks. For 

example, 14 percent of administrative 

staff time on BIR tasks in a physician 

practice is spent simply receiving 

payments and posting the payments to 

accounts receivable.15 Automated 

electronic payment and posting, such as 

what is possible through use of EFT, 

would decrease this percentage. 

The August 2000 Transaction and 

Code Sets final rule was intended, 

among other things, to reflect the 

Congress’ intent in the 1996 HIPAA 

statute to decrease health care 

administrative costs for some of the 

electronic health care transactions that 

include BIR tasks. Standards for 

electronic transactions for claim 

submission, payment, and remittance 

advice were adopted in the Transaction 

and Code Sets final rule with the goal 

of making these transactions more 

consistent, and therefore less costly, for 

health care providers. 

A standard for EFT was not adopted 

at that time because section 

1173(a)(2)(E) of the Act stipulates the 

transaction for which the Secretary is 

required to adopt a standard as the 

‘‘health care payment and remittance 

advice,’’ with no explicit reference to 

EFT. At that time, we adopted the ASC 

X12 TR3 835 to support primarily the 

ERA. 

In general, the savings and benefits 

related to use of EFT for business-tobusiness transactions is well established 


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16http://www.afponline.org/pub/res/topics/

topics_pay.html. 

17Produced by the U.S. Healthcare Efficiency 

Index, http://www.ushealthcareindex.com. 18http://www.ncvhs.hhs.gov. 

19The Center for Medicare & Medicaid Services 

(CMS) ‘‘National Health Expenditure Data’’ (http:// 

www.cms.gov/NationalHealthExpendData/25_

NHE_Fact_Sheet.asp), 2011. 

20 ‘‘The 2011 Medicare Trustees Report: The Baby 

Boomer Tsunami,’’ presentation by the American 

(see section I.B.4. of this interim final 

rule with comment period) and 

demonstrates that a physician practice 

that accepts EFT payments for health 

claim payments could expect to 

decrease its BIR costs. Yet adoption and 

use of EFT by physician practices and 

hospitals has been slow when compared 

to U.S. consumer and other industry 

EFT use, and seemingly obvious BIR 

savings go unrealized in the health care 

industry. 

We have noted the reasons given by 

industry as to why there has not been 

greater adoption of EFT for health care 

claim payments among health care 

providers in Section I.D. The obstacles 

to greater adoption and use of EFT, and 

thus the possibility of staff time savings 

conducting BIR tasks throughout the 

health care industry, could be lessened 

by the adoption of health care EFT 

standards. 

This interim final rule with comment 

period aims to solve a collective action 

problem that currently leads to 

underutilization of EFT. Without health 

care EFT standards, the costs of 

adopting EFT by a particular physician 

often exceed the benefits. By creating 

EFT standards, this rule will result in 

benefits exceeding costs for most 

physicians. 

2. Current and Projected EFT Usage 

For an estimated current usage of EFT 

for health care claim payments, we 

considered numerous health care and 

other industry studies. All these studies 

vary, but all report that EFT is generally 

used for less than 40 percent of health 

care claim payments. 

According to the ‘‘2010 AFP 

Electronic Payments: Report of Survey 

Results,’’ produced by the Association 

for Financial Professionals and 

underwritten by J.P. Morgan,16 the 

typical U.S. business makes 43 percent 

of its business-to-business payments by 

EFT. There was general agreement 

among industry representatives who 

testified at the December 2010 NCVHS 

hearing that the usage of the EFT in the 

health care industry was considerably 

less than other industries (that is, less 

than 43 percent). The National Progress 

Report on Healthcare Efficiency, 2010, 

reports that only ten percent of all 

health care claim payments are 

conducted electronically.17 The 

National Progress Report calculated this 

based on data supplied by Emdeon, a 

national health care clearinghouse that 

sponsors the report. PNC Bank testified 

at the December 3, 2010 NCVHS hearing 

that 30 percent of health care claim 

payments it initiated on behalf of health 

industry clients in September 2010 were 

EFT payments.18 Seventy percent of 

Medicare payment to health care 

providers are made via EFT. The 

Medicare EFT payments to health care 

providers account for 20 percent of all 

industry health care claim payments. 

Based on this data and research, we 

estimate the entire health care industry 

combined, including Medicare, used 

EFT for approximately 32 percent of all 

health care claim payments in 2010 (see 

Table 6), approximately 26 percent less 

than the 43 percent U.S. business-tobusiness average as estimated in the J.P. 

Morgan study and 12 percentage points 

more than the number of Medicare 

health care claim payments transmitted 

via EFT(that is, only 12 percent of all 

health care claim payments via EFT 

were made by Medicaid, other 

government, and private payers.) We 

estimate that commercial health plans 

transmit health care claim payments via 

EFT for approximately 15 percent of 

their total health care claim payments. 

This approximates to Emdeon statistics, 

adjusted to account for the fact that data 

illustrates that Emdeon statistics are 

low. 

TABLE 6—EFT USAGE FOR MEDICARE, 

MEDICAID AND OTHER GOVERNMENT

HEALTH PLANS, AND COMMERCIAL

HEALTH PLANS IN 2010 

Health plan category 

EFT usage 

as a percentage of 

payments 

per category 

in 2010 

Medicare ................................... 70 

Medicaid, CHIP, VHA, and 

Other Federal, State, and 

Local Governmental Payers 19 

Commercial Health Plans ......... 15 

Entire Industry .......................... *32 

* Weighted average, based on proportion of 

payments per category. 

We will apply these estimates to our 

cost/benefit analysis, but will adjust 

them for 2013 levels, the year before the 

health care EFT standards will be 

implemented, to establish a baseline for 

EFT usage for health care claim 

payments. Our projected numbers of 

health care claim payments in 2013 and 

EFT health care claim payments in 2013 

are based on data and projections 

derived from a number of different 

sources: 

• The Center for Medicare & 

Medicaid Services (CMS) ‘‘National 

Health Expenditure Data’’ (http://www.

cms.gov/NationalHealthExpendData/

25_NHE_Fact_Sheet.asp). 

• CMS Electronic Data Interchange 

(EDI) Performance Statistics (http://

www.cms.gov/EDIPerformance

Statistics/) and CMS CROWD data. 

Medicare data is the most precise data 

we can use for our baseline because it 

tracks EFT usage among Medicare 

providers alone. With over 42 million 

participants, Medicare is the largest 

single payer of health care in the U.S. 

and accounts for 20 percent of total 

health care expenditures.19 Therefore, 

we have based many of our estimates 

and projections on Medicare data. 

• ‘‘The 2010 Annual Report of the 

Boards of Trustees of the Federal 

Hospital Insurance and Federal 

Supplementary Medical Insurance Trust 

Funds’’ (http://www.cms.gov/Reports

TrustFunds/downloads/tr2010.pdf ). 

• Financial Management Service, U.S. 

Department of Treasury, Payment 

Volume Charts Treasury-Disbursed 

Agencies, (www.fms.treas.gov/eft/ 

reports.html). 

• DeNavas-Walt, Carmen, Bernadette 

D. Proctor, and Jessica C. Smith, U.S. 

Census Bureau, Current Population 

Reports, P60–238, ‘‘Income, Poverty, 

and Health Insurance Coverage in the 

United States: 2009,’’ U.S. Government 

Printing Office, Washington, DC, 20010. 

• Veteran Health Administration 

Chief Business Office. 

A major assumption in our impact 

analysis is that the percentage of total 

health care claim payments that are 

transmitted via EFT will increase by 52 

percentage points from 2010 to 2023 

across the health care industry (Table 7). 

Another way of illustrating this increase 

is that we estimate that the average 

physician’s practice or hospital will 

begin receiving EFT health care claim 

payments from a little more than one 

additional health plan every year 

between 2013 and 2023. We base this 

estimated growth on three premises: 

First, the number of total health care 

claim payments are expected to increase 

considerably, due to the anticipated 

increase in the number of claims, and 

usage of EFT is expected to rise with it. 

Health care claims are expected to 

increase due to an aging population that 

will require an increasing number of 

health care services; for instance, aging 

baby boomers will double Medicare’s 

enrollment between 2011 and 2031.20

mstockstill on DSK4VPTVN1PROD with RULES2

Federal Register / Vol. 77, No. 6 / Tuesday, January 10, 2012 / Rules and Regulations 1575 

Enterprise Institute for public Policy Research, May 

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

21http://www.whitehouse.gov/healthreform/

relief-for-americans-and-businesses. 

22http://www.whitehouse.gov/healthreform/

timeline. 

23 ‘‘The 2010 Federal Reserve Payments Study: 

Noncash Payment Trends in the United States: 

2006–2009,’’ Research Sponsored by the Federal 

Reserve System, April 2011, http://www.frbservices

.org/files/communications/pdf/press/

2010_payments_study.pdf. 

24Sucharita Mulpuru, P.Hult, ‘‘U.S. Online Retail 

Forecast, 2009 to 2014: Online Retail Hangs Tough 

for 11% Growth in a Challenging Economy,’’ 

March, 2010, Forrester Research, http://www.

forrester.com/rb/Research/us_online_retail_

forecast,_2009_to_2014/q/id/56551/t/2. 

25Shy, Oz, ‘‘Person-to-Person Electronic Funds 

Transfers: Recent Developments and Policy Issues,’’ 

Public Policy Discussion Paper No. 10–1, Federal 

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

economic/ppdp/2010/ppdp1001.pdf. 

26http://www.osma.org/tools-resources/

reimbursement-payer-assistance/electronic-fundstransfers-eft. 

As well, the Affordable Care Act is 

expected to increase the number of 

insured adults by 32 million in 2014,21

though this anticipated rise in the 

number of health care claims may be 

countered somewhat by the Affordable 

Care Act’s initiatives to encourage the 

bundling of payments.22 Not only will 

more health care claims mean more 

payments, but the expected increase in 

claims will drive health care providers 

to seek more automated BIR processes 

in order to handle them all. 

Second, it is anticipated that the use 

of electronic payments is expected to 

become more widespread and 

acceptable for U.S. businesses and 

society at large. ACH payments 

increased 9.4 percent every year 

between 2006 and 2009.23 Business-tobusiness transactions have increasingly 

moved to EFT. E-commerce is expected 

to have a compound average growth rate 

of 11 percent each year from 2009 to 

2014.24 Growth of ACH payments is 

expected in sectors of the economy that 

have remained largely untapped by 

electronic payments; for instance, 

business-to-consumer transactions and 

person-to-person EFT transactions.25

Third, statutory and regulatory 

initiatives at the State and Federal level 

will drive or attract health care entities 

to increased usage of EFT. For example, 

in 2010, Ohio implemented a state law 

requiring that health care plans pay 

health care claims via EFT if the claims 

are submitted electronically.26 On the 

Federal level, regulatory initiatives 

include EFT requirements for Federal 

payments issued by the Department of 

the Treasury, and implementation of 

provisions in the Affordable Care Act, 

including the health care EFT standards 

and the anticipated operating rules on 

the health care and remittance advice 

standards. 

Table 7 illustrates the predicted 

increase in adoption by health plan 

sector, driven by the increased number 

of health care claims, business 

acceptance, and regulatory initiatives. 

Taken as a whole, we estimate EFT 

usage will increase by 52 percentage 

points, as a percentage of total 

payments, across the whole industry, 

from 32 percent in 2010 (Table 6) to 84 

percent in 2023 (Table 7). 

TABLE 7—PREDICTED EFT USAGE BY

2023 

Health plan category 

EFT Usage 

as a percentage of 

payments 

per category 

in 2023 

Medicare ................................... 98 

Medicaid, VHA, & Other Federal, State, and Local Government Payers ..................... 79 

Commercial ............................... 79 

Entire Industry .......................... *84 

* Weighted average, based on proportion of 

payments per sector. 

3. Projected Increase in EFT Usage 

Attributable to Implementation of the 

Health Care EFT Standards 

This impact analysis is based on the 

assumption that the health care EFT 

standards will make health care claim 

payments via EFT more cost effective 

and will therefore incentivize increased 

usage of EFT by physician practices and 

hospitals. We estimate a 6 to 8 

percentage point annual increase in the 

use of EFT for health care claim 

payments (as a percentage of total 

payments year over year) from 2014 

through 2018 attributable to 

implementation of the health care EFT 

standards. Thereafter, we estimate a 

4- to 6-percentage point increase in the 

use of EFT for health care claim 

payments (as a percentage of total 

payments year over year) from 2019 

through 2023 attributable to 

implementation of the health care EFT 

standards. We now look more carefully 

at the basis and dynamics of that 

assumption. 

The numbers illustrated in Table 6 

reflect the current total number of EFT 

transactions transmitted by all health 

plans and received by all health care 

providers. On the sending side, health 

plans find that they only transmit EFT 

to some of the health care providers 

with whom they do business, and, even 

to providers who receive health care 

claim payments from them via EFT, 

health plans may still sometimes send 

health care claim payments via paper 

checks. 

On the receiving end, all health care 

providers have the capability to receive 

EFT, just as all consumers with a bank 

account are able to receive Direct 

Deposit. However, many health care 

providers only receive EFT from only a 

subset of health plans from which they 

receive health care claim payments. For 

example, most physician practices and 

hospitals with Medicare patients receive 

their health care claim payments via 

EFT, but many do not receive EFT 

health care claim payments from the 

other health plans with which they do 

business, as the percentages in Table 6 

demonstrate. 

Although health plans are the entities 

that send EFT and that will be required 

to comply with the health care EFT 

standards, it is the physician practices 

and hospitals that drive overall 

adoption and usage of EFT. Most health 

plans give physician practices and 

hospitals a choice of payment between 

paper checks (sometimes accompanied 

by paper remittance advice) or EFT. Up 

until now, the numbers demonstrate 

that, while physician practices and 

hospitals may choose to accept EFT 

from some health plans, they are clearly 

choosing to continue to receive paper 

checks from the majority of the health 

plans with whom they do business. 

In general, physician practices and 

hospitals choose to receive EFT: (1) 

From health plans with whom they do 

the most business in terms of amounts 

or frequency of payments; and/or (2) 

from health plans that transmit 

payment/processing information via 

EFT that allows the physician practices’ 

and hospitals’ practice management 

systems to reassociate the payment with 

the ERA with the least amount of 

manual intervention. In terms of the 

first criteria, many physician practices 

and hospitals will not go to the trouble 

of enrolling with health plans with 

which they do not conduct much 

business. For these providers, the 

burden of enrollment outweighs the 

health care provider’s perceived benefits 

to accepting EFT. In terms of the second 

criteria, a health care provider may find 

that manually reassociating paper 

checks with remittance advice (paper or 

electronic) is easier, more efficient, and 

more familiar than attempting to 

manually reassociate an EFT with 

remittance advice. 

The reasons why automated 

reassociation may be more difficult or 

less efficient than manually 

reassociating paper checks with 

remittance advice were described in 

testimony at the December 3, 2010 

NCVHS hearing and fall into two 

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27 ‘‘Standardization of Electronic Funds Transfer 

Transaction and Process White Paper,’’ prepared by 

the American Medical Association Practice 

Management Center, December 2010, http:// 

www.ama-assn.org/ama1/pub/upload/mm/368/

electronic-funds-transfer-white-paper.pdf. 28 ‘‘Six Years of Marketplace ERA & EFT 

Learnings & Recommendations Regarding the Rules: 

Written Testimony to the National Committee on 

Vital and Health Statistics (NCVHS), the SubCommittee on the Rules for ERA/EFT per the 

Patient Protection and Affordable Care Act,’’ by Jim 

Ribelin, HERAE, LLC., submitted December, 2010. 

categories (see section I.D. of this 

interim final rule with comment period 

for a complete summary): (1) The time 

difference between the arrival of the 

EFT and the arrival of the ERA; and (2) 

the lack of a TRN Segment in the EFT 

needed for automated reassociation of 

the ERA with the associated ACH 

payment. The focus of the health care 

EFT standards adopted herein is to 

ameliorate the latter issue. 

According to the American Medical 

Association, ‘‘If a payer does not 

include the accurate TRN Segment, or 

the bank fails to maintain it without any 

change, there is no easy way for the 

physician practice to match the 

payment with the X12 835 * * * unless 

payers are required to use a tracking 

number, and complete the fields to 

determine accurate payment to the 

highest specificity, the value of the EFT 

transaction will be limited.’’27

A number of industry representatives 

stated their support for the use of the 

TRN Segment in increasing health care 

provider usage of EFT at the December 

3, 2010 NCVHS hearing: ‘‘The need for 

reconciled transactions is key,’’ a 

representative of HERAE, a health care 

payment and data automation company, 

stated in written testimony, ‘‘but 

without key elements of data being 

retained through the entire process, a 

significant quality breakdown occurs 

that can exasperate the industry and 

stifle innovation. Such is the case with 

EFT data elements being transmitted 

and received for provider use.’’ 28

In deciding to receive health care 

claim payments via EFT from any 

particular health plan, the health care 

provider is making a cost/benefit 

analysis, comparing the cost and benefit 

of processing paper checks with the 

costs and benefits of EFT. This is 

analogous to the payment decision 

consumers make every day between 

paper-based transactions and electronic 

payments when considering how to 

receive their paychecks, how to pay 

their bills, and how to manage their 

accounts. One reason for the current 

slow adoption rate of EFT among 

physician practices and hospitals is that 

the EFT transaction fails to win 

physicians’ and hospitals’ cost/benefit 

analysis. Many physician practices and 

hospitals conclude that, because of the 

difficulties in enrollment and 

reassociation, they will maintain their 

current processes based on paper 

checks. 

The health care EFT standards are 

intended to make the EFT a more 

efficient and economic method for 

receiving health care claim payments. 

The health care EFT standards require 

that the payment information needed for 

automated reassociation (the TRN 

segment) be sent with the EFT. By 

mandating use of an ACH File and 

holding the health plan accountable for 

including the X12 835 TRN Segment, 

the health care EFT standards give 

physician practices and hospitals 

assurance that intermediaries on the 

health plan’s side (clearinghouses, 

financial institutions, payment vendors) 

will not alter or omit payment/ 

processing information required for 

automated reassociation. In so doing, 

more of the benefits of EFT to physician 

practices and hospitals can be realized, 

and physicians and hospitals will be 

more likely to conclude that EFT is 

more cost effective than continued use 

of paper checks. 

For these reasons, we believe that an 

estimated range of 6 to 8 percent annual 

increase in the percentage of payments 

per year that are EFT from 2014 through 

2018 and a 4 to 6 percent increase from 

2019 through 2023 can be attributed to 

the implementation of the health care 

EFT standards. 

Table 8 illustrates the percentage of 

EFT usage by 2023 that is attributable to 

adoption and implementation of the 

health care EFT standards. The Table 

demonstrates that usage of EFT to pay 

claims by the health care industry 

would be an estimated 12 to 17 percent 

less in 2023 were the health care EFT 

standards not adopted. This projection 

is derived from the estimated number of 

payments that will shift from paper 

checks to EFT because providers 

recognize the time and cost savings 

produced by health plans use of the 

health care EFT standards. However, in 

order to have a comprehensive picture 

of the consequences of not adopting the 

health care EFT standards, we would 

have to consider other factors. 

For instance, because operating rules 

for the health care EFT and remittance 

advice transaction cannot be adopted 

before the adoption of health care EFT 

standards, the increased use of EFT by 

providers that might be attributable to 

EFT and ERA operating rules will not 

occur without adoption of the health 

care EFT standards. Considering that 

factor, if the health care EFT standards 

are not adopted, use of EFT by providers 

could be less than what is estimated in 

Table 8, Column 3. 

Another factor to consider when 

attempting to estimate the consequences 

of not adopting the health care EFT 

standards is the fact that payers realize 

savings in printing and mailing costs 

when they use EFT with or without the 

adoption of health care EFT standards. 

In contrast, as we have described in this 

preamble, without the data elements 

required by the health care EFT 

standards, the time and cost savings of 

EFT will not be realized by providers. 

If health care EFT standards are not 

adopted, it is possible that state laws 

and health plans would create laws and 

requirements that would force providers 

to accept EFT for health care claim 

payments, thus allowing savings for the 

payers but creating a possible burden for 

providers. The result would be that 

providers use of EFT might increase, 

even at the rate illustrated in Table 7, 

but the considerable time and cost 

savings possible through use of EFT 

transmission would not be realized. 

TABLE 8—PREDICTED USAGE OF EFT IN 2023 WITH AND WITHOUT THE HEALTH CARE EFT STANDARD

Health plan category 

EFT usage as a 

percentage of 

payments per category in 2023 

assuming adoption of health care 

EFT standards 

Increase in EFT 

usage as a 

percentage of 

payments if 

health care EFT 

standards are not 

adopted 

(Column 1) (Column 2) (Column 3) 

Medicare ....................................................................................................................................................... 98 98 

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29Co-chair Walter Suarez, NCVHS Subcommittee 

on Standards, Administrative Simplification under 

the Patient Protection and Affordable Care Act 

Standards and Operating Rules for Electronic Funds 

Transfer (EFT) and Remittance Advice (RA), 

December 3, 2010, hour 5:05 in audio recording: 

http://hhs.granicus.com/

MediaPlayer.php?publish_id=11. 

TABLE 8—PREDICTED USAGE OF EFT IN 2023 WITH AND WITHOUT THE HEALTH CARE EFT STANDARD—Continued 

Health plan category 

EFT usage as a 

percentage of 

payments per category in 2023 

assuming adoption of health care 

EFT standards 

Increase in EFT 

usage as a 

percentage of 

payments if 

health care EFT 

standards are not 

adopted 

(Column 1) (Column 2) (Column 3) 

Medicaid, VHA, & Other Federal, State, and Local Government Payers .................................................... 79 56 to 63. 

Commercial ................................................................................................................................................... 79 56 to 63. 

Entire Industry ............................................................................................................................................... *84 67 to 72. 

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

It should be noted that the health care 

payment is only one element of the 

payment process, and the sending and 

receiving of health care claim payments 

is only one part of the total BIR cost. As 

such, the health care EFT standards 

work in concert with other regulatory 

and industry-based initiatives that are 

intended to decrease overall costs 

associated with how a health care 

provider gets paid. For instance, we will 

be adopting operating rules for the 

health care EFT and remittance advice 

transaction by July, 2012, as per the 

Affordable Care Act, and operating rules 

will be adopted for four other HIPAA 

transactions before July 2014. By 

themselves, none of these initiatives 

will significantly decrease BIR costs. 

However, there is industry consensus 

that BIR costs can be reduced 

considerably, and the health care EFT 

standards are an important part of that 

overall effort. 

B. Alternatives Considered 

1. Alternative 1: Adopt A Standard for 

Stage 2 Transfer of Funds or Stage 3 

Deposit Notification Transmissions 

The CCD+Addenda is an ACH File 

that is used between financial 

institutions, the ODFI and the RDFI, in 

the Stage 2 Transfer of Funds. As this 

interim final rule with comment period 

demonstrates, the CCD+Addenda is also 

an electronic format that an Originator 

can use in the Stage 1 Payment 

Initiation to order, instruct, or authorize 

the ODFI the send a transaction through 

the ACH Network. In the December 

2010 NCVHS hearing, these two 

different uses of the CCD+Addenda—to 

initiate payment and to actually transfer 

funds through the ACH Network—were 

not consistently differentiated in 

testimony. However, the co-chair of the 

NCVHS Subcommittee on Standards 

made clear to testifiers what the aim of 

the health care EFT standard(s) was to 

be: ‘‘We’re not trying to standardize 

[transmissions] between two banks. 

That’s not our role; not our 

responsibility. Our responsibility and 

role is to identify the standard that a 

health plan will be submitting to a bank, 

and defining that as the standard, and 

operating rules that will go along with 

it. Between the banks there is no role, 

in many respects, for what we do.’’ 29

In this interim final rule with 

comment period, we did not adopt a 

standard for the Stage 2 Transfer of 

Funds for two reasons, and we believe 

these reasons reflect why the NCVHS 

did not perceive recommending the 

adoption of a standard ‘‘between two 

banks’’ as its ‘‘responsibility and role,’’ 

as follows: 

First, as the NCVHS pointed out, 

Stage 2 Transfer of Funds is a 

transaction between two financial 

institutions. As we describe in the 

Applicability section of this preamble, 

due to the nature of the contents of the 

health care EFT (payment/processing 

information with no PHI), the standards 

adopted herein would not be applicable 

to financial institutions. 

Second, there is no practical reason to 

adopt the CCD+Addenda as the 

standard for the Stage 2 Transfer of 

Funds. When a health plan’s financial 

institution receives the Stage 1 Payment 

Initiation in the form of a 

CCD+Addenda, there is no question that 

the Stage 2 Transfer of Funds should 

also be transmitted in CCD+Addenda by 

the health plan’s financial institution. 

The Stage 1 Payment Initiation 

transmitted according to the health care 

EFT standards will indicate to the 

health plan’s financial institution that 

the health care EFT remain in the form 

of the CCD+Addenda for Stage 2 

Transfer of funds. This is one of the 

main reasons for adoption of an ACH 

File as the health care EFT standard for 

Stage 1 Payment Initiation instead of 

other possible formats. We intend to 

reduce the number of places that data 

translations or reformatting occur in the 

transmittal of health care EFT from the 

health plan to the health care provider. 

Data can be lost or misplaced every time 

the payment/processing information is 

translated or reformatted. 

In this interim final rule with 

comment period, we did not adopt a 

standard for the Stage 3 Deposit 

Notification. Although the testimony at 

the NCVHS December 3, 2010 hearing 

referred to the loss of the TRN Segment 

in the translation or reformatting that a 

health care provider’s financial 

institution undertakes in the Stage 3 

Deposit Notification, there was no 

specific discussion or recommendations 

from those testifying regarding the 

adoption of a standard for Stage 3 

Deposit Notification. 

2. Alternative 2: Adopt the CTX as a 

Health Care EFT Standard 

At the December 3, 2010 NCVHS 

hearing, stakeholder testimony was 

given concerning the CTX. The CTX, as 

previously noted, is an ACH file that 

could include the health care payment/ 

processing information as well as the 

entire ERA. According to some 

testimony at the NCVHS December 3, 

2010 hearing, if both the health care 

EFT (payment/processing information) 

and the ERA were transmitted together 

in a single transmission, then 

reassociation by the health care provider 

would not be necessary. It would be the 

electronic version of a paper check sent 

through the mail together with paper 

remittance advice, but without the 

material and time costs associated with 

paper transactions. In testimony, a 

representative from the financial 

industry recommended the CTX and 

stated that ‘‘a significant opportunity 

will have been lost in this process if the 

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30 ‘‘How the Payment and Remittance Advice 

Process Works in Healthcare,’’ presented to 

National Committee on Vital and Health Statistics 

at the hearing on ‘‘Administrative Simplification 

under the Patient Protection and Affordable Care 

Act: Standards and Operating Rules for Electronic 

Funds Transfer (EFT) and Remittances Advice(RA), 

Presenter: Stuart Hanson, Fifth Third Bank, 

December 3, 2010, http://hhs.granicus.com/Media

Player.php?publish_id=11. 

31Co-chair Walter Suarez, NCVHS Subcommittee 

on Standards, Administrative Simplification under 

the Patient Protection and Affordable Care Act 

Standards and Operating Rules for Electronic Funds 

Transfer (EFT) and Remittance Advice (RA), 

December 3, 2010, hour 5:05:30 in audio recording: 

http://hhs.granicus.com/MediaPlayer.php?publish_

id=11. 

end result is a solution which does not 

tackle this reassociation challenge.’’ 30

We did not adopt the CTX for three 

reasons. First, as discussed in section 

I.C. of this interim final rule with 

comment period, the health care EFT is 

processed and transmitted from a 

different system in a health plan than 

the system that transmits the ERA. In 

essence, adoption of the CTX would be 

a mandate to dramatically change the 

processes and systems of health plans 

and health care providers. Second, there 

is little to no experience with the CTX 

in the health care industry, and it is 

therefore difficult to support 

assumptions that administrative 

simplification and its estimated benefits 

can be realized simply by the adoption 

of an untried electronic format. Third, 

although there was industry and 

stakeholder testimony supporting the 

adoption of the CTX, the great majority 

of testimony favored adoption of the 

CCD+Addenda. There was much 

interest in and support for the CTX, but 

the testimony, in general, urged further 

exploration of the use of the CTX before 

it is considered as a viable standard. 

As has been illustrated, EFT is used 

much less in the health care industry 

than it is in other industries. Our intent 

with the health care EFT standards is to 

attract more physician practices and 

hospitals to use the EFT for health care 

claim payments, and achieve some clear 

savings in a relatively short period of 

time. However, adoption of the CTX 

would require an overhaul of most 

health plans’, physician practices’, and 

hospitals’ payment/billing and claim 

adjudication systems, processes, and 

organizational structures. Given the low 

use of EFT by physician practices and 

hospitals, and the assumed cost of an 

overhaul of systems and processes to 

accommodate the CTX, it is possible 

that adoption of the CTX at this time as 

the health care EFT standard would 

actually reduce the number of 

physicians and hospitals willing to use 

EFT to receive health care claim 

payments in the short term. 

3. Alternative 3: Adopt the X12 835 TR3 

as the Health Care EFT Standard for 

Stage 1 Payment Initiation 

This interim final rule with comment 

period adopts two standards for the 

health care EFT: The CCD+Addenda as 

the standard for Stage 1 Payment 

Initiation and the X12 835 TR3 TRN 

Segment for the data content of the 

Addenda Record. ASC X12 is the SDO 

of the X12 835 TR3; NACHA has 

authority over the CCD+Addenda. 

It is possible for a data segment of X12 

835 TR3 to be utilized as a Stage 1 

Payment Initiation from a health plan to 

its financial institution. According to 

X12 835 TR3: ‘‘* * * the 835 can 

authorize a payee to have a DFI 

[(Depository Financial Institution)] take 

funds from the payer’s account and 

transfer funds to the payee’s account. 

The 835 can authorize a DFI to move 

funds. In this mode, the 835 is sent to 

the payer’s DFI.’’ (Section 1.10.1.1) 

Because a data segment of the ASC X12 

835 TR3 can be used by a health plan 

in a Stage 1 Payment Initiation to its 

financial institution, it was considered a 

possible candidate for the Stage 1 

Payment Initiation health care EFT 

standard. 

Along with the X12 835 TR3, other 

electronic formats were considered 

candidates for the standard for the Stage 

1 Payment Initiation health care EFT 

standard as well. Currently, a health 

plan can use proprietary files, the ASC 

X12 820, and other formats in a Stage 

1 Payment Initiation transmission to its 

financial institution. 

Our decision to adopt the 

CCD+Addenda instead of the X12 835 

TR3, or any other electronic format, for 

the Stage 1 Payment Initiation health 

care EFT standard was based mostly on 

written and verbal testimony given at 

the December 3, 2010 NCVHS hearing. 

At that hearing, there was 

overwhelming support for use of the 

CCD+Addenda. The reasons for support 

appeared to have two bases: First, the 

CCD+Addenda was seen by testifiers as 

a successful electronic format, 

reportedly used for nearly all health 

care claim payments transmitted via 

EFT in Stage 2 Transfer of Funds 

transmissions between financial 

institutions, and, to a lesser extent, used 

by many in Stage 1 Payment Initiation 

from a health plan to a health plan’s 

financial institution. 

While some industry representatives 

implied in testimony that other 

electronic formats were used in the 

Stage 1 Payment Initiation, including 

the ASC X12 820 and flat files, none of 

those that testified stated that an X12 

835 was ever used. Further, no one 

suggested in written or verbal testimony 

that an X12 820 or flat file be the 

standard. 

At one point during the testimony of 

December 3, 2011, NCVHS asked 

representatives from NACHA, ASC X12, 

and the Council for Affordable Quality 

Healthcare’s (CAQH) Committee on 

Operating Rules for Information (CORE), 

whether there was any consideration 

given to using the ASC X12 835 as the 

electronic format that transmits a health 

plan’s order, instruction, or 

authorization for a health care EFT to its 

financial institution. The 

representatives replied that no 

consideration had been given, and did 

not disagree with the co-chair when he 

stated that the apparent choice was only 

between an ACH File and proprietary 

formats.31

As well, at the NCVHS hearing and in 

written testimony, no proprietary 

formats were suggested as a possible 

standard for the Stage 1 Payment 

Initiation. 

The second basis for adopting the 

CCD+Addenda, as presented by 

testimony in the NCVHS hearing, was 

that NACHA is recognized as an 

organization that has been successful in 

the development of its implementation 

specifications and operating rules for 

ACH files. NACHA was perceived by 

testifiers to be a trusted developer and 

maintainer of implementation 

specifications and operating rules for 

electronic formats, although NACHA is 

not recognized as an SSO under HIPAA. 

In addition to basing our decision on 

the testimony, and the February 17, 

2011 NCVHS recommendation to the 

Secretary that resulted from the hearings 

and testimony, we adopt the 

CCD+Addenda as one of the health care 

EFT standards for Stage 1 Payment 

Initiation because many of the issues 

with regard to reassociation, discussed 

in section I.D. of this interim final rule 

with comment period, arise because of 

the multiple translations that occur as 

the health care EFT travels from the 

health plan, through the ACH Network, 

to the health care provider. By adopting 

the CCD+Addenda as one of the health 

care EFT standards, we are adopting the 

same electronic format for Stage 1 

Payment Initiation as is used in Stage 2 

Transfer of Funds between banks, thus 

eliminating one translation/reformatting 

of the data wherein the TRN segment 

might be omitted or transmitted 

erroneously. By transmitting the 

payment/payment information in a 

CCD+Addenda to its financial 

institution, a health plan will have more 

assurance that the Addenda Record 

holding the TRN Segment will not be 

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Federal Register / Vol. 77, No. 6 / Tuesday, January 10, 2012 / Rules and Regulations 1579 

altered or omitted by the financial 

institution before it arrives at the health 

care provider’s financial institution. 

C. Impacted Entities 

The health care EFT standards are 

expected to decrease BIR costs; 

therefore, the segments of the health 

care industry, non-health care industry, 

and society that will be affected by the 

implementation of the standards 

include the following: 

• Health Care Providers: 

++ Offices of Physicians 

++ Hospitals 

++ Nursing Homes and Residential 

Care facilities 

++ Dentists 

++ Suppliers of Durable Medical 

Equipment 

++ Pharmacies 

++ Other Providers (home health 

agencies, dialysis facilities, etc.) 

• Health Plans 

++ Commercial health plans 

++ Government health plans 

• Financial institutions 

• Clearinghouses and Vendors 

• Patients 

• Environment 

All HIPAA covered entities would be 

affected by the standards adopted in this 

interim final rule with comment period. 

HIPAA covered entities include all 

health plans, health care clearinghouses, 

and health care providers that transmit 

health information in electronic form in 

connection with a transaction for which 

the Secretary has adopted a standard. 

Table 9 outlines the number of 

entities that may be impacted by the 

health care EFT standards, along with 

the sources of those data. 

TABLE 9—TYPE AND NUMBER OF AFFECTED ENTITIES

Type Number Source 

Health Care Providers—Offices of Physicians (includes offices 

of mental health specialists).

234,222 Health Insurance Reform; Modifications to the Health Insurance 

Portability and Accountability Act (HIPAA) Electronic Transaction Standards; Proposed Rule http://edocket.access.gpo.

gov/2008/pdf/E8-19296.pdf (based on the AMA statistics). 

Health Care Providers—Hospitals ................................................ 5,764 Health Insurance Reform; Modifications to the Health Insurance 

Portability and Accountability Act (HIPAA) Electronic Transaction Standards; Proposed Rule http://edocket.access.gpo.

gov/2008/pdf/E8-19296.pdf. 

Health Care Providers—Nursing and Residential Care Facilities 

not associated with a hospital.

66,464 The number of providers was obtained from the 2007 Economic Census Data—Health Care and Social Assistance 

(sector 62) using the number of establishments: http:// 

factfinder.census.gov/servlet/IBQTable?_bm=y&-ds_name

=EC0762A1&-geo_id=01000US&-dataitem=* and http:// 

factfinder.census.gov/servlet/IBQTable?_bm=y&-fds_name

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

2007=62&-_lang=en. 

—NAICS code 623: Nursing Homes & Residential Care Facilities n = 76,395 × 87 percent (percent of nursing and residential care facilities not associated with a hospital) = 66,464. 

Other Health Care Providers—Offices of dentists, chiropractors, 

optometrists, mental health practitioners, speech and physical 

therapists, podiatrists, outpatient care centers, medical and diagnostic laboratories, home health care services, and other 

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

384,192 The number of providers was obtained from the 2007 Economic Census Data—Health Care and Social Assistance 

(sector 62) using the number of establishments: http:// 

factfinder.census.gov/servlet/IBQTable?_bm=y&-ds_name

=EC0762A1&-geo_id=01000US&-dataitem=* and http:// 

factfinder.census.gov/servlet/IBQTable?_bm=y&-fds_name

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

2007=62&-_lang=en. 

—NAICS code 621: All ambulatory health care services (excluding offices of physicians) = 313,339 (547,561 

total¥234,222 offices of physicians). 

—NAICS code 62–39600(product code): Durable medical 

equipment = 70,853. 

Health Care Providers—Independent Pharmacies ....................... 18,000 Health Insurance Reform; Modifications to the Health Insurance 

Portability and Accountability Act (HIPAA) Electronic Transaction Standards; Proposed Rule http://edocket.access.gpo.

gov/2008/pdf/E8–19296.pdf. 

Health Care Providers—Pharmacy chains ................................... 200 Health Insurance Reform; Modifications to the Health Insurance 

Portability and Accountability Act (HIPAA) Electronic Transaction Standards; Proposed Rule http://edocket.access.gpo.

gov/2008/pdf/E8-19296.pdf. 

Health Plans—Commercial ........................................................... 1,827 Impacted commercial health plans are health insurance 

issuers; that is, insurance companies, services, or organizations, including HMOs, that are required to be licensed to engage in the business of insurance in a State. Includes companies offering Medicaid managed care. This number represents the most recent number as referenced in ‘‘Patient 

Protection and Affordable Care Act; Standards Related to 

Reinsurance, Risk Corridors, and Risk Adjustment, 2011 

Federal Register (Vol. 76), July, 2011,’’ from 

www.healthcare.gov. 

Health Plans—Government .......................................................... 60 Represents the 56 Medicaid programs, Medicare, the Veteran’s 

Administration (VHA), Indian Health Service (IHS), and 

TRICARE. 

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1580 Federal Register / Vol. 77, No. 6 / Tuesday, January 10, 2012 / Rules and Regulations 

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

Imperative; Lowering Costs and Improving 

Outcomes: Workshop Series Summary, edited by 

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

National Academies Press: 2010. 

TABLE 9—TYPE AND NUMBER OF AFFECTED ENTITIES—Continued 

Type Number Source 

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

60). 

Clearinghouses and Vendors ........................................................ 162 Health Insurance Reform; Modifications to the Health Insurance 

Portability and Accountability Act (HIPAA) Electronic Transaction Standards; Proposed Rule http://edocket.access.gpo.

gov/2008/pdf/E8-19296.pdf, based on a study by Gartner. 

Third Party Administrators ............................................................ 750 Summary of Benefits and Coverage and the Uniform Glossary; 

Notice of Proposed Rulemaking http://www.gpo.gov/fdsys/

pkg/FR-2011-08-22/pdf/2011-21193.pdf. 

Financial Institutions that can transmit EFT through ACH Network.15,000 2010 ACH Rules: A Complete Guide to Rules & Regulations 

Governing the ACH Network, National Automated Clearing 

House Association, 2010. 

D. Scope and Methodology of the 

Regulatory Impact Analysis 

This impact analysis analyzes the 

costs and benefits to be realized by 

implementation of the ACH 

CCD+Addenda for the health care EFT 

Stage 1 Payment Initiation and the ASC 

X12 835 TRN Segment for the data 

content for the Addenda Record. It does 

not analyze the costs and benefits of the 

other provisions/changes that are made 

in this interim final rule with comment 

period. For instance, we do not provide 

an analysis of the cost or benefit of 

amending the definition of the health 

care payment and remittance advice 

transaction title or definition. While 

these amendments may have a positive 

impact in terms of clarifying policy, we 

do not believe that there are any costs 

or quantitative benefits directly 

associated with such provisions/ 

changes. 

While we assume that adoption of the 

health care EFT standards will impact a 

broad range of health care providers, as 

illustrated in Table 9, we will only be 

examining the costs and benefits of the 

health care EFT on two types of 

providers: hospitals and physician 

practices. We will not analyze the 

impact to pharmacies, nursing and 

residential care facilities, dentists, or 

suppliers of durable medical equipment. 

There are two reasons for narrowing 

the scope of this analysis to only two 

categories of health care providers; we: 

(1) Have very little data on the adoption 

rate or usage of EFT among pharmacies, 

dentists, suppliers of durable medical 

equipment, nursing homes, and 

residential care facilities. The lack of 

data for these types of health care 

providers has been noted in other 

studies on administrative 

simplification; 32 and (2) assume that the 

greatest benefits will be gained by 

hospitals and physician practices as 

they receive the majority of health care 

claim payments. For this reason, our 

estimates of savings to health care 

providers is conservative. We welcome 

comments from industry and the public 

as to our assumptions. 

We include health care 

clearinghouses and vendors as impacted 

entities in Table 9. However, we did not 

calculate costs and benefits in our 

impact analysis for these entities, 

although they are entities that may be 

required to make the most software and 

system changes in order to transmit the 

health care EFT to financial institutions 

on behalf of health plans. We did not 

calculate costs and benefits to health 

care clearinghouses and vendors in this 

cost analysis because we assume that 

any associated costs and benefits will be 

passed on to the health plans, and will 

be included in the costs and benefits we 

apply to health plans. 

We include financial institutions as 

impacted entities. The number of 

financial institutions reflected in Table 

9 are the number of NACHA member 

financial institutions, that is, the 

number of financial institutions that can 

transmit EFT through the ACH Network. 

We calculated the costs to financial 

institutions of this interim final rule 

with comment period based on the fee 

that financial institutions are assessed 

by NACHA for transmitting a single EFT 

and the estimated increase in EFT 

attributable to the implementation of the 

health care EFT standards. We 

calculated that, between 2013 and 2023, 

the sum cost to all financial institutions 

would be less than $4,000 dollars. 

Because of the negligible negative 

impact to financial institutions, we have 

not included the costs to financial 

institutions in our impact analysis. 

While we also assume that the increase 

in health care EFT will have benefits to 

financial institutions, we have not 

calculated those benefits in this impact 

analysis. The focus of this interim final 

rule with comment period is on the 

benefits to the health care industry. 

Although we acknowledge the impact 

to ERISA (Employee Retirement Income 

Security Act) and non-Federal 

government plans, we did not include 

the costs or benefits of such ‘‘health 

plans’’—or other employers who might 

be defined as ‘‘health plans’’—in our 

analysis due to the lack of data with 

regard to these types of health plans. 

Only a very small percentage of 

employers with self-insured health 

plans conduct their own health care 

transactions. The majority employ third 

party administrators (TPAs). For our 

analysis, we use the number of TPAs 

(750) estimated in the ‘‘Summary of 

Benefits and Coverage and the Uniform 

Glossary; Notice of Proposed Rule 

Making,’’ published in the August 22, 

2011 Federal Register. Self-funded and 

non-Federal government health plans 

meet the definition of covered entities 

under HIPAA, while TPAs, in general, 

do not. However, TPAs employed by 

self-funded and non-federal government 

health plans will ultimately be the party 

that implements the health care EFT 

standards. Ostensibly, these TPAs will 

pass on their costs and benefits to the 

self-funded and non-federal government 

health plans that they serve. Therefore, 

we will estimate the costs and benefits 

to TPAs in this analysis, and assume 

that TPAs will be impacted similarly to 

the 1,827 commercial health insurance 

issuers indicated in Table 9. In this RIA, 

we will not separate the analysis of the 

costs and benefits of TPAs and 

commercial health insurers, and, 

hereinafter, we will refer to both 

collectively as ‘‘commercial health 

plans’’ for purposes of this analysis. 

We use the total number of health 

insurance issuers as the number of 

commercial health plans that will be 

affected by this interim final rule with 

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33 42 CFR parts 405, 424, and 498, ‘‘Medicare 

Program; Appeals of CMS or CMS Contractor 

Determinations When a Provider or Supplier Fails 

to Meet the Requirements for Medicare Billing 

Privileges: Final rule,’’ published in Federal 

Register June 27, 2008. 

comment period, and will use this 

number—plus the number of TPAs—in 

our impact analysis. A health insurance 

issuer is an insurance company, 

insurance service, or insurance 

organization, including an HMO, that is 

required to be licensed to engage in the 

business of insurance in a State, and 

that is subject to State law that regulates 

insurance. While the category of ‘‘health 

insurance issuers’’ represents a larger 

number of health plans than those 

included in the NAICs codes for ‘‘Direct 

Health and Medical Insurance Carriers’’ 

(897 firms) we believe the category of 

health insurance issuers is a more 

accurate representation of companies 

conducting HIPAA transactions. 

We did not analyze the costs and 

benefits of the health care EFT 

standards on Medicare, as our research 

has demonstrated that there will be no 

substantive impact to this government 

health plan. Medicare already requires 

that their contracted payers use the 

CCD+Addenda as the Stage 1 Payment 

Initiation. As well, Medicare requires 

that all health care providers accept and 

enroll in EFT when they enroll as a 

participating provider in the Medicare 

program in order to receive payments.33

Therefore, health care providers who 

receive Medicare payments for health 

care claims are already benefiting from 

Medicare’s use of the CCD+Addenda. 

Because of existing policies, Medicare 

has high health care provider and health 

plan usage rates of EFT. 

For illustrative purposes, we will 

analyze the impact to Medicaid and 

other government health plans 

separately from commercial health 

plans, although the costs and benefits of 

the government health plans other than 

Medicare will be similar to those of the 

commercial health plans. Companies 

that provide Medicaid managed care 

plans are included in the category of 

commercial health plans. 

We estimate that, because of the time 

savings that will be quantified in the 

analysis of benefits, patients will benefit 

downstream from a health care delivery 

system that spends less time on 

administrative tasks. While we will 

detail this benefit to patients, we will 

not attempt to quantify it in monetary 

terms. Society at large will also be 

further impacted by the beneficial 

aspects the use of EFT will have on the 

environment, and we will quantify 

those benefits. 

Table 10 summarizes the sectors that 

will be analyzed in the impact analysis. 

TABLE 10—SECTORS THAT WILL BE

ANALYZED IN IMPACT ANALYSIS

Commercial Health Plans (includes TPAs 

and health insurance issuers) 

Government Health Plans (Medicaid, VHA, 

TRICARE, IHS) 

Physician Practices (includes offices of mental health specialists) 

Hospitals 

Health care patients 

Environment 

In general, the high and low range 

approach used in this impact analysis 

illustrates both the range of probable 

outcomes, based on our analysis, as well 

as the uncertainty germane to a 

mandated application of a standard on 

an industry with highly complex 

business needs and processes. 

E. Costs 

1. Costs for Health Plans (Health 

Insurance Issuers and TPAs) 

We know from the December 2010 

NCVHS testimony that some 

commercial health plans are currently 

using the CCD+Addenda in the Stage 1 

Payment Initiation, and that they are 

already inputting the TRN Segment in 

the Addenda Record. For lack of other 

data, we will assume that 85 percent of 

the estimated 2,637 (or approximately 

2,242) commercial health plans do not 

use the CCD+Addenda or do not input 

the TRN Segment in the Addenda 

Record. 

For the commercial health plans that 

do not use the CCD+Addenda or do not 

use it according to the implementation 

specifications detailed in this interim 

final rule with comment period, there 

will be system and business process 

changes required in order to originate 

the CCD+Addenda with a TRN Segment 

in the Addenda Record. 

Creating a CCD+Addenda and 

inputting or translating data into a 

CCD+Addenda is a comparatively 

simple and inexpensive technical 

process. A health plan that does not 

currently use the CCD+Addenda for the 

Stage 1 Payment Initiation transmits the 

data in some other form—flat file, an 

ASC X12 TR3 820, or a proprietary 

format. Translating the data into a 

CCD+Addenda can be done with 

commercial off-the-shelf (COTS) 

software for personal use that can be 

purchased for as little as $200, and set 

up in less than 15 minutes. However, it 

is more complicated and therefore more 

expensive to coordinate the treasury/ 

accounts payable systems and processes 

(which would transmit the 

CCD+Addenda) with the claims systems 

and processes (which would transmit 

the health care remittance advice) in 

order for a health plan to assure 

duplicate TRN Segments are included in 

both the health care EFT and ERA. As 

noted previously, duplicate TRN 

Segments in the Addenda Record of the 

CCD+Addenda and in the ERA are 

essential to allowing automated 

reassociation on the health care 

provider side. 

We have estimated that it will cost 

health plans, on average, $4,000 to 

$6,000 to implement the health care 

EFT standards. This is a one-time cost 

to health plans to install COTS software 

or amend systems, change processes, 

train staff, and/or communicate/contract 

for required implementation 

specifications for the CCD+Addenda 

(Table 11). The low range of costs was 

derived by considering the cost of high 

end, commercially available software 

that can originate a CCD+Addenda and 

can be integrated into most corporate 

accounts-payable systems. The high 

range of costs takes into consideration 

the possible difficulties associated with 

coordinating the health plan’s payment 

or treasury systems with the claims 

processing systems so that the TRN 

Segment is duplicated in both the ERA 

and the health care EFT. It is possible 

that some health plans may require 

customization of the software. 

There may be a number of commercial 

health plans that would have costs 

greater than the high range of costs we 

have estimated; for example, 

commercial health plans that currently 

send Stage 1 Payment Initiation in a 

proprietary format. As well, we assume 

that there are as many commercial 

health plans that will have minimal to 

no costs; for example, health plans that 

must simply update their vendor 

contracts to accommodate this change 

without any additional operational 

costs. 

We estimate the maintenance, update 

or subscriber fees to be $2,000 to $3,000 

annually for the 2 years after the first 

year of implementation. Subscriber fees 

are often assessed by software vendors 

that maintain and update the COTS 

software on the part of the health plan 

industry. From our research, we could 

not find any subscriber or update fees 

that were more than $500 a year, but we 

have estimated much higher 

maintenance and subscriber costs in 

order to account for costs that may be 

associated with adjustments in software 

or a health plan’s business processes in 

the first few years of the standards’ 

implementation. 

Although we assume health plans will 

start to transition to the health care EFT 

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34 ‘‘Medicaid Managed Care Trends,’’ Medicaid 

Managed Care Enrollment Report, Centers for 

Medicare and Medicaid Services, http://www.cms. gov/MedicaidDataSourcesGenInfo/downloads/

09Trends.pdf. 

standards before the formal 

implementation date of January 1, 2014, 

for simplicity we have included all onetime implementation costs in the year 

2014. Subscriber and maintenance costs 

will occur in 2015 and 2016. See 

Table 11. 

TABLE 11—COST TO COMMERCIAL HEALTH PLANS OF IMPLEMENTING THE HEALTH CARE EFT STANDARDS * 

Year 

LOW cost to 

implementing 

health care EFT 

standards 

HIGH cost to 

implementing 

health care EFT 

standards 

Number of health 

plans that will 

have to make 

changes to 

implement the 

health care EFT 

standards (85% 

of 1,827 health 

insurance issuers 

+ 750 TPAs) 

LOW 

annual cost 

(in millions) 

HIGH 

annual cost 

(in millions) 

2014 ................................................................. $4,000 $6,000 2,242 $9.2 $13.8 

2015 ................................................................. 2,000 3,000 2,242 4.6 6.9 

2016 ................................................................. 2,000 3,000 2,242 4.6 6.9 

Total (in millions) .............................................. ............................ ............................ ............................ 18.3 27.5 

* Based on 2010 dollars. 

For Medicaid, CHIP, and IHS, we 

have used similar cost factors with an 

identical range. Medicaid is actually 56 

different programs, each of which 

administers a number of health plans, 

and includes more than 600 managed 

care plans.34 We have included the 

Medicaid managed care plans in the 

commercial health plans category, the 

costs of which were previously 

calculated. For purposes of this cost 

estimate, we have counted each of the 

56 Medicaid programs as an individual 

health plan. 

As was the case with commercial 

health plans, we are aware that certain 

State Medicaid programs use the health 

care EFT standards already. However, it 

is difficult to obtain the exact number of 

programs that use it. Therefore, we have 

made the same assumption we made for 

commercial health plans: We estimate 

85 percent of Medicaid, CHIP, and IHS 

health plans will need to make software 

and/or system changes in order to 

implement the health care EFT 

standards (see Table 12). 

TABLE 12—COST TO MEDICAID, CHIP, AND INDIAN HEALTH SERVICES * 

Year 

LOW cost to 

implementing 

health care EFT 

standards 

HIGH cost to 

implementing 

health care EFT 

standards 

Number of health 

plans that will 

have to make 

changes to 

implement the 

health care EFT 

standards 

(85% of 60) 

LOW 

annual cost 

(in millions) 

HIGH 

annual cost 

(in millions) 

2014 ................................................................. $4,000 $6,000 51 $0.20 $0.31 

2015 ................................................................. 2,000 3,000 51 0.10 0.15 

2016 ................................................................. 2,000 3,000 51 0.10 0.15 

Total in millions ................................................ ............................ ............................ ............................ 0.41 0.61 

* Based on 2010 dollars. 

2. Cost for Physician Practices and 

Hospitals 

We estimate there will be no direct 

costs to physician practices and 

hospitals to implement the health care 

EFT standards. The health care EFT 

standards are required for the Stage 1 

Payment Initiation of the health care 

EFT between a health plan and its 

financial institution. While we assume 

in this impact analysis that the impact 

to physician practices and hospitals will 

be positive in terms of giving some 

assurance that the TRN Segment is 

transmitted to the health care provider’s 

financial institution, the standards 

adopted herein do not affect how a 

provider’s financial institution transmits 

the TRN Segment to the provider. 

Therefore, the health care provider is 

not required to change or amend 

systems or processes. 

However, the impact analysis assumes 

that physician practices and hospitals 

will increase their usage of EFT or, in 

some cases, will begin accepting EFT for 

health care claim payments for the first 

time on account of the adoption of the 

health care EFT standards. The cost for 

this enrollment—less than $200 per 

provider over 5 years—is included in 

section IV. of this interim final rule with 

comment period. This cost of 

enrollment will also be reflected in the 

RIA summary of costs and benefits and 

the accounting statement. 

F. Benefits 

Our analysis of benefits is similar to 

analyses included in other recent 

regulations that implement 

administrative simplification mandates 

under the Affordable Care Act. The 

implementation of the health care EFT 

standards, as well as other 

administrative simplification regulatory 

initiatives such as operating rules for 

the HIPAA standard transactions, are 

expected to streamline administrative 

health care transactions, make the 

standard transactions more consistent, 

and decrease dependence on manual 

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35 ‘‘Overhauling the US Healthcare Payment 

System,’’ conducted by McKinsey & Company, 

published in The McKinsey Quarterly, June 2007. 

(http://www.mckinseyquarterly.com/ 

OverhaulinglthelUSlhealthlcarelpaymentl

systeml2012). 

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

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

Lisi (United Healthcare), B.C. Mayerick 

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

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

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

Healthcare.pdf. 

37www.fms.treas.gov/eft/index.html. 

intervention in the transmission of 

health care and health care payment 

information. These improvements, in 

turn, will drive more physician 

practices, hospitals and health plans to 

utilize electronic transactions in their 

operations. Each move from a nonelectronic, manual exchange of 

information to an electronic transaction 

brings with it material savings in terms 

of less money spent on paper, postage, 

and equipment required for paper-based 

transactions, as well as cost avoidance 

in terms of time savings for staff. 

For health plans, we expect direct 

savings from the transition from a 

paper-based payment system (for 

example, paper checks) to EFT. These 

savings are found in the amount of staff 

time saved, as well as material savings 

such postage, paper, and printing. 

For physician practices and hospitals, 

we expect downstream savings from a 

decrease in the amount of time a 

physician practice or hospital staff 

spends in manually reassociating the 

ERA with health care EFT. Though we 

expect some direct savings as well in 

terms of paper savings, our analysis will 

concentrate on health care provider staff 

time savings. 

1. Savings for Health Plans 

We assume health plans will generate 

savings from increased usage by 

physician practices and hospitals of EFT 

for health care claim payments. As 

noted previously in this impact 

analysis, this estimated increase will be 

due to a number of factors; however, we 

will only calculate the savings derived 

from increased EFT usage attributable to 

implementation of the health care EFT 

standards. 

As noted in section III.A.2. of this 

interim final rule with comment period, 

we estimate a 6 to 8 percent annual 

increase in the use of EFT from 2014 

through 2018 and a 4 to 6 percent 

increase from 2019 through 2023 that 

will be attributable to implementation of 

the health care EFT standards. We have 

included these ranges in order to reflect 

the uncertainty inherent in making a 

causal claim in a complex, 

multifactorial environment such as the 

U.S. health care industry. 

There have been a number of different 

analyses and case studies with regard to 

the possible savings realized when a 

health plan switches from paper checks 

to EFT for health care claim payments. 

A 2007 analysis by McKinsey and 

Company concluded that the ‘‘system 

wide cost’’ of using paper checks for 

health care claim payments was $8.00 

per check.35 This included printing and 

mailing the checks from the payer side, 

and manually reconciling and 

depositing the check on the health care 

provider side. We have not used the 

McKinsey’s conclusion because we do 

not know what methodology was used 

and wanted to be specific about the 

difference between health care provider 

savings and health plan savings. 

In another example, United 

Healthcare reports that it costs the 

company $30.7 million to pay 145 

million health care claims with paper 

checks compared with the cost of $2.7 

million to pay the same amount of 

claims using EFT.36 This is a difference 

of about $0.19 a claim. We did not use 

United Healthcare’s savings estimate 

since, apparently, it is based on single 

claims, and the metric we used is based 

on health care claim payments. A single 

health care claim payment from a health 

plan covers payment for multiple claims 

submitted by a provider. 

For our calculations, we use data from 

the Financial Management Service 

(FMS), a bureau of the United States 

Department of Treasury. We use FMS 

data because they are the lowest 

estimates, and because we consider 

them the most valid. According to FMS, 

it costs the U.S. government $0.11 to 

issue an EFT payment compared to 

$1.03 to issue a check payment—a 

difference of $0.92 per check.37 This 

estimate includes the cost of material 

such as postage, envelopes, and checks, 

but does not include labor costs. FMS 

processes millions of transactions, and 

there are economies of scale that may 

not be experienced by health plans. As 

a result, the $0.92 estimate is probably 

less than the amount plans will 

experience. Table 12 summarizes the 

estimated increase and savings based on 

the Department of Treasury’s numbers. 

The ‘‘LOW’’ savings (Tables 13 and 

14, Column 4) are based on 4 to 6 

percent percentage point annual 

increases in EFT usage attributable to 

the health care EFT standards, while the 

‘‘HIGH’’ savings (Tables 13 and 14, 

Column 5) are based on 6 to 8 

percentage point annual increases in 

EFT usage attributable to 

implementation of the health care EFT 

standards. 

TABLE 13—SAVINGS BY MEDICAID, CHIP, AND INDIAN HEALTH SERVICE ATTRIBUTABLE TO IMPLEMENTATION OF HEALTH

CARE EFT STANDARDS * 

Year 

LOW number 

increase in EFT 

transactions from 

previous year 

attributable to implementation of 

health care EFT 

standards 

(in millions) 

HIGH number 

increase in EFT 

transactions from 

previous year 

attributable to implementation of 

health care EFT 

standards 

(in millions) 

LOW savings for 

health plans based 

on 6% (first 5 

years) to 4% increase in usage attributable to health 

care EFT standards 

($0.92 per transaction) (in millions) 

HIGH savings for 

health plans Based 

on 8% (first 5 

years) to 6% Increase in usage attributable to health 

care EFT standards 

($0.92 per transaction) (in millions) 

(Column 1) (Column 2) (Column 3) (Column 4) (Column 5) 

2013 ................................................................................. 0.00 0.0 $0.00 $0.00 

2014 ................................................................................. 0.86 1.15 0.79 1.06 

2015 ................................................................................. 1.12 1.49 1.03 1.37 

2016 ................................................................................. 1.46 1.94 1.34 1.79 

2017 ................................................................................. 1.89 2.53 1.74 2.32 

2018 ................................................................................. 2.46 3.28 2.27 3.02 

2019 ................................................................................. 2.13 3.20 1.96 2.95 

2020 ................................................................................. 2.56 3.84 2.36 3.53 

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1584 Federal Register / Vol. 77, No. 6 / Tuesday, January 10, 2012 / Rules and Regulations 

TABLE 13—SAVINGS BY MEDICAID, CHIP, AND INDIAN HEALTH SERVICE ATTRIBUTABLE TO IMPLEMENTATION OF HEALTH

CARE EFT STANDARDS *—Continued 

Year 

LOW number 

increase in EFT 

transactions from 

previous year 

attributable to implementation of 

health care EFT 

standards 

(in millions) 

HIGH number 

increase in EFT 

transactions from 

previous year 

attributable to implementation of 

health care EFT 

standards 

(in millions) 

LOW savings for 

health plans based 

on 6% (first 5 

years) to 4% increase in usage attributable to health 

care EFT standards 

($0.92 per transaction) (in millions) 

HIGH savings for 

health plans Based 

on 8% (first 5 

years) to 6% Increase in usage attributable to health 

care EFT standards 

($0.92 per transaction) (in millions) 

(Column 1) (Column 2) (Column 3) (Column 4) (Column 5) 

2021 ................................................................................. 3.07 4.61 2.83 4.24 

2022 ................................................................................. 3.69 5.53 3.39 5.09 

2023 ................................................................................. 4.43 6.64 4.07 6.11 

Total ................................................................................. 23.68 34.22 21.78 31.48 

* Based on 2010 dollars. 

TABLE 14—ESTIMATED SAVINGS BY COMMERCIAL HEALTH PLANS ATTRIBUTABLE TO IMPLEMENTATION OF HEALTH CARE

EFT STANDARDS* 

Year 

LOW number 

increase in EFT 

transactions from 

previous year 

attributable to implementation of 

health care EFT 

standards 

(in millions) 

HIGH number 

increase in EFT 

transactions from 

previous year 

attributable to implementation of 

health care EFT 

standards 

(in millions) 

LOW savings for 

health plans based 

on 6% (first 5 

years) to 4% increase in usage attributable to health 

care EFT standards 

($0.92 per 

transaction) 

(in millions) 

HIGH savings for 

health plans based 

on 8% (first 5 

years) to 6% increase in usage attributable to health 

care EFT standards 

($0.92 per 

transaction) 

(in millions) 

(Column 1) (Column 2) (Column 3) (Column 4) (Column 5) 

2013 ................................................................................. 0.00 0.0 $0.00 $0.00 

2014 ................................................................................. 1.11 1.48 1.02 1.36 

2015 ................................................................................. 1.44 1.93 1.33 1.77 

2016 ................................................................................. 1.88 2.50 1.73 2.30 

2017 ................................................................................. 2.44 3.25 2.25 2.99 

2018 ................................................................................. 3.17 4.23 2.92 3.89 

2019 ................................................................................. 2.75 4.12 2.53 3.79 

2020 ................................................................................. 3.30 4.95 3.04 4.55 

2021 ................................................................................. 3.96 5.94 3.64 5.46 

2022 ................................................................................. 4.75 7.13 4.37 6.56 

2023 ................................................................................. 5.70 8.55 5.25 7.87 

Total ................................................................................. 30.51 44.09 28.07 40.56 

* Based on 2010 dollars. 

Table 15 illustrates the total costs and 

savings for commercial and 

governmental health plans. 

TABLE 15—HEALTH PLANS’ LOW AND HIGH RANGE OF COSTS AND SAVINGS * 

LOW 

(in millions) 

HIGH 

(in millions) 

Commercial Health Plans: 

Savings ............................................................................................................................................................. $28.07 $40.56 

Costs ................................................................................................................................................................. 18.34 27.58 

Medicare and VHA 

Savings ............................................................................................................................................................. 0 0 

Costs ................................................................................................................................................................. 0 0 

Medicaid, CHIP, and IHS health plans: 

Savings ............................................................................................................................................................. 21.78 31.48 

Costs ................................................................................................................................................................. .41 .61 

TOTAL 

Savings ............................................................................................................................................................. 49.85 72.04 

Costs ................................................................................................................................................................. 18.75 28.13 

* Based on 2010 dollars. 

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Federal Register / Vol. 77, No. 6 / Tuesday, January 10, 2012 / Rules and Regulations 1585 

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

presentation, Barbara C. Mayerick, Department of 

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

admin.nacha.org/userfiles/File/Healthcare%20

Resource/Epayments%20Cures%20for%20

Healthcare.pdf and ‘‘Comments from VHA Health 

Care as Health Care Provider,’’ testimony by Barbara 

Mayerick for NCVHS December 3, 2010 hearing: 

http://hhs.granicus.com/MediaPlayer.

php?publish_id=11. 

39Sakowski, J.A., Kahn, J.G., Kronick, R.G., 

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

box: Billing and insurance activities in a medical 

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

2. Savings for Physician Practices and 

Hospitals 

For physician practices and hospitals, 

the greater savings to be garnered is the 

cost avoidance that comes from a 

decrease in health care provider 

administrative staff time dedicated to 

BIR tasks. These might be considered 

‘‘cost avoidance,’’ in contrast to direct 

savings, because the decrease in time 

needed for a staff member to manually 

conduct functions that can be done 

electronically does not necessarily mean 

that money is saved. Rather, it means 

that the staff time, previously deployed 

on BIR tasks, can instead be dedicated 

to other areas, such as customer service 

for an increasing number of patients. 

Calculating cost avoidance is more 

difficult than calculating material 

savings, because we must draw 

assumptions about the business 

processes a health care provider uses. 

Nevertheless, there has been research in 

the area of staff time spent on the 

administration of health care, 

specifically in the area of physician 

practices, from which we can draw 

some conclusions. 

As an example, the VHA did a study 

of cost avoidance after implementing an 

‘‘E-payment system’’ in 2003 with the 

1,675 health care ‘‘payers’’ from whom 

they collect health care claim payments. 

The new E-payment system 

implemented a number of different 

changes to how payers paid VHA 

claims, including: (1) Enabling the VHA 

to accept ERA (X12 835 TR3) and health 

care EFT, and urging health plans to 

transmit remittance advice and payment 

electronically; (2) routing the payment 

to a single lockbox bank; and (3) routing 

the health care EFT and ERA together 

for accounts receivable posting.38

Notably, in order to facilitate the 

reassociation of the health care EFT and 

ERA, the VHA required that payers use 

the CCD+Addenda to transmit the 

health care EFT with the same TRN 

Segment as that included in the 

associated ERA. 

In cases where health plans 

transmitted both the health care EFT 

and the ERA electronically, the VHA 

found two substantial consequences 

resulted from the new system. There 

was a: (1) 71 percent reduction in the 

time between when a claim was 

submitted and when the payment was 

received by the VHA, from 49 days 

down to 14 days; and (2) 64 percent 

time savings for accounts receivable and 

related tasks by 2010. The first result is 

especially important when applied to 

small physician practices for which 

cash-on-hand is crucial for continuity of 

operations. The second consequence 

resulted in $9.3 million in annual cost 

avoidance for the VHA. In a clear 

example of how cost avoidance can be 

of benefit, the 64 percent time saving 

resulted in the VHA being able to 

handle 2.5 times the number of claims 

that were processed before the Epayment system was implemented in 

2003 without adding additional staff. 

While the VHA found a 64 percent 

time savings for accounts receivable and 

related tasks after implementation of its 

E-payment system, we calculate that 

there will be a 10 to 15 percent time 

savings for the health care providers to 

receive and post payments after 

implementation of the health care EFT 

standards. We have estimated a much 

lower percentage of time savings 

because the VHA E-payment system was 

much more comprehensive in its 

approach to automating accounts 

receivable process compared to the 

health care EFT standards adopted in 

this interim final rule with comment 

period. However, some of the VHA 

savings can be attributed to the fact that 

the VHA E-payment system required 

payers to use the CCD+Addenda, and 

we therefore estimate that time savings 

can likewise be directly attributed to 

implementation of the health care EFT 

standards adopted herein. 

We estimate that implementation of 

the health care EFT standards will save 

a percentage of staff time for two 

reasons: First, as demonstrated above, 

there is a direct causal relationship 

between making payment by EFT more 

efficient and consistent and an increase 

in utilization of EFT by physician 

practices and hospitals. For every health 

care EFT a physician practice receives 

from a health plan, there will be time 

saved because staff will not have to 

manually open checks, fill out deposit 

slips and make deposits, create and 

update spreadsheets or other tools to 

track check payments, and manually file 

and organize the paperwork. Second, 

the standardization of the electronic 

format and implementation 

specifications of the Stage 1 Payment 

Initiation transmission will allow for 

some assurance that the health care 

provider will be able to receive a TRN 

Segment that matches an accompanying 

ERA. This will decrease staff time 

necessary to manually oversee the 

receipt of payment and manually 

reassociate the health care EFT with the 

associated ERA. This second benefit of 

the health care EFT standards will save 

time not only for health care providers 

that are increasing their EFT usage, but 

also for those that currently use EFT 

with some payers; that is, it will allow 

for automation of current EFT claim 

payments that may not be fully 

automated due to erroneous or missing 

TRN Segments in the EFT. 

Given these two elements of cost 

savings in receiving and posting 

payments, we estimate that there will be 

a 10 to 15 percent savings in the time 

spent receiving and posting payments in 

a physician practice every time a 

physician practice or hospital enroll to 

receive EFTs from a health plan (in 

comparison to when a physician 

practice receives paper checks). We 

believe this estimate to be low, as a 15 

percent savings in time might be 

achieved solely in terms of the time 

saved by not having a staff member 

manually transport and deposit paper 

checks. 

We expect that the forthcoming 

operating rules required to be adopted 

for the health care EFT and remittance 

advice transaction will provide further 

cost avoidance benefits in terms of time 

savings. 

For our calculations, data on the 

amount of time that is currently spent 

on ‘‘payment and posting’’ tasks is taken 

from Sakwoski, et al., 2009.39 Sakowski 

found that a total of 0.67 nonclinical full 

time employees (FTEs) were dedicated 

to BIR activities per physician in a 

sample of California physician 

practices. Of those BIR tasks, 14 percent 

included ‘‘payment receiving and 

posting’’ tasks, and we estimate there 

will be time savings in these specific 

tasks upon implementation of the health 

care EFT standards. The 14 percent does 

not include follow-up on payments and 

the reconciliation of payments received 

with payments pending. Although the 

health care EFT standards may 

streamline these tasks as well, more 

direct savings are found in receiving 

and posting payments. 

Based on Sakowski and 2010 statistics 

from the U.S. Bureau of Labor Statistics, 

we calculate the total time dedicated to 

receiving and posting payments for all 

physician practices and hospitals (Table 

16, Column 2). The calculation for the 

total time dedicated to receiving and 

posting payments for physician 

practices is: [percent of time full time 

employee is dedicated to BIR tasks per 

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1586 Federal Register / Vol. 77, No. 6 / Tuesday, January 10, 2012 / Rules and Regulations 

physician] X [total number of 

physicians in physician practices] X 

[percent of BIR time spent on ‘‘payment 

and posting’’]. For hospitals, we used a 

slightly different methodology based on 

the ratio of physicians to administrative 

staff conducting BIR tasks in physician 

practices. 

The total time dedicated to receiving 

and posting payments is then multiplied 

by 10 percent for the LOW time savings 

attributable to the health care EFT 

standards and 15 percent for the HIGH 

time savings, the products of which are 

illustrated in Table 16 and 17, Columns 

2 and 3. The 10 to 15 percent time 

savings occurs every time physician 

practices and hospitals, as a whole, 

moves from paper checks to EFT with 

one health plan. Given our assumptions 

of the increased use of EFT for health 

care claim payments, the average 

hospital and physician practice will 

begin receiving health care claim 

payments via EFT from 12 health plans 

(from whom they had previously 

received paper checks) between 2014 to 

2023 (Table 16 and 17, Col. 5). For 

simplicity sake, we have projected this 

movement from paper checks to EFT as 

spread evenly over ten years, and 

illustrated in Table 16 and 17 that 

physician practices and hospitals, as a 

whole, make the switch with 1.2 health 

plans a year. We then multiplied each 

year’s time savings by the average salary 

of a billing and posting clerk in 

physician practices (Table 16 and 17, 

Column 4), to arrive at the projected 

yearly cost savings attributable to 

implementation of the health care EFT 

standards. The range of 10 to 15 percent 

reflects the uncertainty inherent in the 

estimate of time savings. However, it 

should be noted that the VHA found a 

64 percent time savings across all 

accounts receivable and related tasks, 

while our estimate reflects a time 

savings in ‘‘receiving and posting 

payments’’ only. 

TABLE 16—PHYSICIAN PRACTICE SAVINGS/COST AVOIDANCE ATTRIBUTABLE TO IMPLEMENTATION OF HEALTH CARE EFT 

STANDARDS

LOW time 

savings (in 

FTEs) attributable to EFT 

standard (10% 

decrease in 

payment and 

posting time 

spent per EFT 

enrollment) 

HIGH time 

savings (in 

FTEs) attributable to 

health care 

EFT standard 

(15% decrease in payment and 

posting time 

spent per EFT 

enrollment) 

Salary per 

FTE (baseline 

2010 Bureau 

of Labor 

Statistics, plus 

benefits and 

3% annual 

increase 

Average 

number of new 

EFT 

enrollment per 

provider 

Low cost 

avoidance of 

projected EFT 

enrollments in 

millions 

High cost 

avoidance of 

projected EFT 

enrollments in 

millions 

(Col. 1) (Col. 2) (Col. 3) (Col. 4) (Col. 5) (Col. 6) (Col. 7) 

2013 ......................................................... 0 0 48,250 0 $.00 $.00 

2014 ......................................................... 3,143 4,715 49,698 1.2 187.47 281.20 

2015 ......................................................... 2,876 4,079 51,189 1.2 176.68 250.53 

2016 ......................................................... 2,950 4,245 52,725 1.2 186.65 268.57 

2017 ......................................................... 2,975 4,269 54,306 1.2 193.89 278.18 

2018 ......................................................... 3,005 4,314 55,935 1.2 201.72 289.55 

2019 ......................................................... 3,035 4,356 57,614 1.2 209.81 301.14 

2020 ......................................................... 3,064 4,398 59,342 1.2 218.21 313.20 

2021 ......................................................... 3,094 4,441 61,122 1.2 226.92 325.70 

2022 ......................................................... 3,129 4,491 62,956 1.2 236.38 339.31 

2023 ......................................................... 3,164 4,541 64,845 1.2 246.17 353.35 

Total .................................................. ........................ ........................ ........................ 12 2,084 3,001 

* From Sakowski, et al., 2009, and Bureau of Labor Statistics. 

TABLE 17—HOSPITAL SAVINGS/COST AVOIDANCE ATTRIBUTABLE TO IMPLEMENTATION OF HEALTH CARE EFT STANDARDS

LOW time 

savings (in 

FTEs) attributable to EFT 

standard (10% 

decrease in 

payment and 

posting time 

spent per EFT 

enrollment) 

HIGH time 

savings (in 

FTEs) attributable to 

health care 

EFT standard 

(15% decrease in payment and 

posting time 

spent per EFT 

enrollment) 

Salary per 

FTE (baseline 

2010 Bureau 

of Labor 

Statistics, plus 

benefits and 

3% annual 

increase 

Average 

number of new 

EFT 

enrollment per 

provider 

Low cost 

avoidance of 

projected EFT 

enrollments in 

millions 

High cost 

avoidance of 

projected EFT 

enrollments in 

millions 

(Col. 1) (Col. 2) (Col. 3) (Col. 4) (Col. 5) (Col. 6) (Col. 7) 

2013 ......................................................... 0 0 $48,250 0 $.00 $.00 

2014 ......................................................... 1,557 2,335 49,698 1.2 92.85 139.28 

2015 ......................................................... 1,425 2,020 51,189 1.2 87.51 124.09 

2016 ......................................................... 1,461 2,102 52,725 1.2 92.45 133.02 

2017 ......................................................... 1,474 2,114 54,306 1.2 96.03 137.78 

2018 ......................................................... 1,488 2,137 55,935 1.2 99.91 143.41 

2019 ......................................................... 1,503 2,157 57,614 1.2 103.92 149.15 

2020 ......................................................... 1,518 2,178 59,342 1.2 108.08 155.12 

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40 ‘‘Physician Shortages to Worsen Without 

Increases in Residency Training,’’ Association of 

American Medical Colleges fact sheet at https:// 

www.aamc.org/download/150584/data/physician

_shortages_factsheet.pdf, from AAMC Center for 

Workforce Studies, June 2010 Analysis. 

41Himmelstein, D. U. and Woolhandler, S., 

‘‘Taking care of Business: HMOs that spend more 

on administration deliver lower-quality care,’’ 

International Journal of Health Services, Volume 32, 

Number 4, 2002. 

42Himmelstein, et al. 

43Casalino, et al. 

44http://www.payitgreen.org/business/ 

dirDepCalculator.aspx. 

TABLE 17—HOSPITAL SAVINGS/COST AVOIDANCE ATTRIBUTABLE TO IMPLEMENTATION OF HEALTH CARE EFT 

STANDARDS—Continued 

LOW time 

savings (in 

FTEs) attributable to EFT 

standard (10% 

decrease in 

payment and 

posting time 

spent per EFT 

enrollment) 

HIGH time 

savings (in 

FTEs) attributable to 

health care 

EFT standard 

(15% decrease in payment and 

posting time 

spent per EFT 

enrollment) 

Salary per 

FTE (baseline 

2010 Bureau 

of Labor 

Statistics, plus 

benefits and 

3% annual 

increase 

Average 

number of new 

EFT 

enrollment per 

provider 

Low cost 

avoidance of 

projected EFT 

enrollments in 

millions 

High cost 

avoidance of 

projected EFT 

enrollments in 

millions 

(Col. 1) (Col. 2) (Col. 3) (Col. 4) (Col. 5) (Col. 6) (Col. 7) 

2021 ......................................................... 1,532 2,199 61,122 1.2 112.39 161.32 

2022 ......................................................... 1,550 2,225 62,956 1.2 117.08 168.06 

2023 ......................................................... 1,567 2,249 64,845 1.2 121.92 175.01 

Total .................................................. ........................ ........................ ........................ ........................ 1,032 1,486 

We note a number of assumptions 

built into the calculations illustrated in 

Tables 16 and 17: 

• The number of physicians in the 

United States will grow considerably 

between 2014 and 2023. Our estimates 

are based on projections of physician 

supply and demand by the Association 

of American Medical Colleges.40 In spite 

of the estimated time savings realized by 

implementation of the health care EFT 

standards, overall time spent on 

payment and posting tasks for 

physicians will remain constant or even 

increase due to the increase in 

physicians (which, in turn, is due to an 

increase in expected claims over the 

next twenty years). 

• The number of FTEs who spend 

time on BIR tasks per physician remains 

constant between 2014 and 2023. While 

we expect that efficiencies will be 

developed through administrative 

simplification and other federal, state 

and industry initiatives, the 

administrative complexity involved in 

the projected increase in the number of 

claims may counter balance any 

decreases in the ratio of administrative 

staff to clinical staff. 

• The salary of a billing and posting 

clerk FTE increases at a rate of 3% a 

year. 

We project the health care EFT 

standard and other statutory and 

regulatory requirements will save staff 

time by making it possible for health 

care providers to automate more and 

more of their BIR tasks. 

3. Benefits to Patients 

A 2002 study concluded that there is 

an inverse relationship between 

administrative complexity and quality 

of care.41 The study analyzed data from 

the National Committee for Quality 

Assurance’s (NCQA) Quality Compass 

1997, 1998, and 2000. In essence, the 

study compared administrative costs to 

quality indicators and found that 

‘‘Higher administrative costs were 

associated with worse quality for 

virtually every quality measure in each 

of the four years * * * The correlation 

coefficients were remarkably stable from 

year to year, suggesting that high 

administrative costs did not facilitate 

quality improvement over time.’’ 42

The study did not describe reasons for 

this correlation, beyond commentary on 

excess costs in the U.S. health care 

industry in general, nor will we attempt 

to draw any quantifiable patient benefits 

in our impact analysis. However, as we 

have illustrated, the average physician 

practice and hospital is spending an 

increasing amount of time (60 hours of 

staff time per week per physician 

interacting with health plans 43) and 

money (10 to 14 percent of physician 

practice revenue) on BIR tasks. We can 

conclude that, overall, the time and 

money spent on BIR tasks are 

increasingly encroaching on the time 

and money spent on delivering quality 

health care. 

4. Benefits to the Environment 

As an electronic, paperless exchange, 

the benefits of the use of EFT 

reverberate through our environment. 

Table 16 illustrates some of the 

environmental benefits to using EFT. 

The calculator was developed under a 

NACHA initiative entitled ‘‘Pay It 

Green’’ to persuade consumers to pay 

bills online and persuade companies to 

deposit salaries through EFT Direct 

Deposit based on its positive 

environmental impacts.44 The data 

entered into the calculator are our 

estimated number of increased EFT, 

year after year, attributable to 

implementation of the health care EFT 

standards. Table 18 illustrates the 

environmental savings or cost avoidance 

that is gained by an estimated increase 

in EFT usage, attributable to the 

implementation of the health care EFT 

standards, from 2014 to 2023. 

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45 ‘‘The Health Care Cost Containment—How 

Technology Can Cut Red Tape and Simplify Health 

Care Administration,’’ Unitedhealth Center for 

Health Reform & Modernization, Working Paper 2, 

June 2009, http://www.unitedhealthgroup.com/ 

hrm/UNH_Working Paper2.pdf. 

46 ‘‘The Health Care Cost Containment—How 

Technology Can Cut Red Tape and Simplify Health 

Care Administration,’’ UnitedHealth Center for 

Health Reform & Modernization, Working Paper 2, 

June 2009, http://www.unitedhealthgroup.com/ 

hrm/UNH_Working Paper2.pdf. 

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

Imperative; Lowering Costs and Improving 

Outcomes: Workshop Series Summary, edited by 

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

TABLE 18—BENEFITS TO THE ENVIRONMENT BASED ON INCREASED USAGE OF EFT ATTRIBUTABLE TO HEALTH CARE EFT 

STANDARDS * 

Number of payments 

that move from paper 

check to EFT attributable to health care 

EFT standards 

(in millions) 

(LOW estimate) 

Pounds of paper 

saved ** 

Pounds of 

greenhouse gas 

avoided 

Gallons of gasoline 

saved *** 

Gallons of wastewater 

prevented from discharging into rivers 

and lakes 

Pounds of waste 

prevented 

50.94 794,000 2,259,000 292,000 7,566,000 905,000 

* Taken from calculations derived from NACHA ‘‘Pay It Green’’ Organization, ‘‘Direct Deposit Financial Paper Footprint Calculator (http:// 

www.payitgreen.org/business/dirDepCalculator.aspx). 

** Data on the environmental impact of producing paper for checks was taken from Environmental Defense Fund’s Paper Calculator (available 

at www.edf.org/papercalculator/). 

*** Data on the greenhouse gas impact of printing and transporting paper checks and bills was provided by the ‘‘Life and Travels of a Paper 

Check’’ study done for NACHA. Additional greenhouse gas data related to transportation was calculated using the World Resources Institute’s 

Mobile Combustion Calculator (available at www.ghgprotocol.org). 

G. Summary 

Although we have calculated savings 

as a result of usage of the health care 

EFT standards, our calculations appear 

significantly lower than analogous 

calculations in other studies and 

reports. 

For example, the UnitedHealth Group 

reported in a 2009 working paper that 

$108 billion could be saved industry 

wide over the course of ten years if 

health care claim payments were 

required to be paid via EFT and 

remittance advice was required to be 

transmitted electronically.45 The 

UnitedHealth Group appeared to base 

the savings solely on industry-wide 

adoption of the EFT and the ERA, and 

not on any associated operating rules or 

consistent application of standard 

implementation specifications. 

The Healthcare Efficiency Index 

National Progress Report on Healthcare 

Efficiency, sponsored by Emdeon, a 

health care clearinghouse, estimates an 

annual savings of $11 billion if the 

industry were to use EFT for 100 

percent of health care claim payments.46

Our savings analysis is based on use of 

EFT for approximately 84 percent of 

health care claim payments by 2023, but 

our savings are significantly less than 

the Healthcare Efficiency reported. 

In one recent study, the estimated 

total BIR costs to the health care 

industry were estimated at $361 billion 

in 2009. From a survey of other studies, 

the study concludes that $65 to $70 

billion a year is ‘‘excess’’ cost to 

physicians. ‘‘Excess’’ was defined as 

spending above a benchmark 

comparison with Canadian 

physicians.47

None of these studies specifically 

examined the impact of the health care 

EFT standards adopted in this interim 

final rule with comment period, and the 

health care EFT standards will only 

decrease BIR costs by a small percent of 

total ‘‘excess.’’ However, the savings 

estimated in these studies reflect the 

extent to which the health care EFT 

standards, and all subsequent standards 

adopted under section 1104 of the ACA, 

may impact U.S. healthcare. 

Costs and savings of implementing 

the health care EFT standards for the 

health care industry are summarized in 

Table 19, and range of return on 

investment is illustrated in Table 20. 

TABLE 19—TOTAL COSTS AND SAVINGS OF IMPLEMENTING THE HEALTH CARE EFT STANDARDS FOR HEALTH CARE

INDUSTRY

Year 

LOW estimate 

total costs 

(in millions) * 

HIGH estimate 

total costs 

(in millions) * 

LOW estimate, 

total savings 

(in millions) 

HIGH estimate 

total savings 

(in millions) 

Cumulative total over 10 years ........................................................ $28 $38 $3,166 $4559 

* Includes cost of provider enrollment in EFT described in COI. 

TABLE 20—RANGE OF RETURN ON INVESTMENT

LOW 

(LOW savings— 

HIGH cost) 

(in millions) 

HIGH 

(HIGH savings— 

LOW cost) 

(in millions) 

Range of Return on Investment: Entire Industry ............................................................................................. $3,128 $4,531 

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Federal Register / Vol. 77, No. 6 / Tuesday, January 10, 2012 / Rules and Regulations 1589 

H. Accounting Statement 

As required by OMB Circular A–4 

(available at http:// 

www.whitehouse.gov/omb/ 

circulars_a004_a-4/), in Table 21 we 

have prepared an accounting statement 

showing the classification of the 

expenditures associated with the 

provisions of this interim final rule. 

This table provides our best estimate of 

the costs and benefits associated with 

the implementation of the health care 

EFT standards adopted herein. 

TABLE 21—ACCOUNTING STATEMENT: CLASSIFICATION OF ESTIMATED EXPENDITURES, FROM FY 2013 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 ...................................................... $271.5 $391.3 RIA. 

3% Discount .................................................. Not estimated ...................................................... 280.8 404.5 RIA. 

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

ability to re-associate EFT and RA; increased 

cost avoidance due to decrease in manual requirements.

Benefits generated from plans to physician practices and hospitals. It is probable that other providers will experience proportional benefits. 

COSTS 

Annualized Monetized costs: 

7% Discount .................................................. Not Estimated ...................................................... 3.0 4.1 RIA and COI. 

3% Discount .................................................. Not Estimated ...................................................... 2.8 3.7 RIA and COI. 

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

Physician practices and hospitals will have costs associated with enrollment in EFT, if they choose to enroll. Other categories of providers may 

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

TRANSFERS 

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

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

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

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 

subchapter C to read as follows: 

PART 160—GENERAL 

ADMINISTRATIVE REQUIREMENTS 

■ 1. The authority citation for part 160 

continues 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 

■ 2. Amend § 160.103 as follows: 

■ A. Redesignating paragraph (11) to the 

definition of ‘‘transaction’’ as paragraph 

(12). 

■ B. Adding a new paragraph (11) to the 

definition of ‘‘transaction’’. 

The addition read as follows: 

§ 160.103 Definitions. 

* * * * * 

Transaction * * * 

(11) Health care electronic funds 

transfers (EFT) and remittance advice. 

* * * * * 

PART 162—ADMINISTRATIVE 

REQUIREMENTS 

■ 3. The authority citation for part 162 

continues to read as follows: 

Authority: Secs. 1171 through 1180 of the 

Social Security Act (42 U.S.C. 1320d–1320d– 

9), as added by sec. 262 of Pub. L. 104–191, 

110 Stat. 2021–2031, sec. 105 of Pub. L. 110– 

233, 122 Stat. 881–922, and sec. 264 of Pub. 

L. 104–191, 110 Stat. 2033–2034 (42 U.S.C. 

1320d–2 (note), and secs. 1104 and 10109 of 

Pub. L.111–148, 124 Stat. 146–154 and 915– 

917. 

Subpart A—General Provisions 

■ 4. Amend § 162.103 by adding the 

definition of ‘‘Stage 1 payment 

initiation’’ to read as follows: 

§ 162.103 Definitions. 

* * * * * 

Stage 1 payment initiation means a 

health plan’s order, instruction or 

authorization to its financial institution 

to make a health care claims payment 

using an electronic funds transfer (EFT) 

through the ACH Network. 

* * * * * 

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1590 Federal Register / Vol. 77, No. 6 / Tuesday, January 10, 2012 / Rules and Regulations 

Subpart I—General Provisions for 

Transactions 

■ 5. Amend § 162.920 by adding a new 

paragraph (d) to read as follows: 

§ 162.920 Availability of implementation 

specifications and operating rules. 

* * * * * 

(d) The National Automated Clearing 

House Association (NACHA), The 

Electronic Payments Association, 1350 

Sunrise Valle Drive, Suite 100, 

Herndon, Virginia 20171 (Phone) (703) 

561–1100; (Fax) (703) 713–1641; Email: 

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

www.nacha.org. The implementation 

specifications are as follows: 

(1) 2011 NACHA Operating Rules & 

Guidelines, A Complete Guide to the 

Rules Governing the ACH Network, 

NACHA Operating Rules, Appendix 

One: ACH File Exchange Specifications 

(Operating Rule 59) as referenced in 

§ 162.1602. 

(2) 2011 NACHA Operating Rules & 

Guidelines, A Complete Guide to the 

Rules Governing the ACH Network, 

NACHA Operating Rules Appendix 

Three: ACH Record Format 

Specifications (Operating Rule 78), Part 

3.1, Subpart 3.1.8 Sequence of Records 

for CCD Entries as referenced in 

§ 162.1602. 

■ 6. Revise the heading of Subpart P to 

read as follows: 

Subpart P—Health Care Electronic 

Funds Transfers (EFT) and Remittance 

Advice 

§ 162.1601 [Amended] 

■ 7. In § 162.1601, paragraph (a) 

introductory text is amended by 

removing the phrase ‘‘provider’s 

financial institution’’ and adding the 

term ‘‘provider’’ in its place. 

■ 8. Section 162.1602 is revised to read 

as follows: 

§ 162.1602 Standards for health care 

electronic funds transfers (EFT) and 

remittance advice transaction. 

The Secretary adopts the following 

standards: 

(a) For the period from October 16, 

2003 through March 16, 2009: Health 

care claims and remittance advice. The 

ASC X12N 835—Health Care Claim 

Payment/Advice, Version 4010, May 

2000, Washington Publishing Company, 

004010X091, and Addenda to Health 

Care Claim Payment/Advice, Version 

4010, October 2002, Washington 

Publishing Company, 004010X091A1. 

(Incorporated by reference in § 162.920.) 

(b) For the period from March 17, 

2009 through December 31, 2011, both 

of the following standards: 

(1) The standard identified in 

paragraph (a) of this section. 

(2) The ASC X12 Standards for 

Electronic Data Interchange Technical 

Report Type 3—Health Care Claim 

Payment/Advice (835), April 2006, ASC 

X12N/005010X221. (Incorporated by 

reference in § 162.920.) 

(c) For the period from January 1, 

2012 through December 31, 2013, the 

standard identified in paragraph (b)(2) 

of this section. 

(d) For the period on and after January 

1, 2014, the following standards: 

(1) Except when transmissions as 

described in § 162.1601(a) and (b) are 

contained within the same transmission, 

for Stage 1 Payment Initiation 

transmissions described in 

§ 162.1601(a), all of the following 

standards: 

(i) The National Automated Clearing 

House Association (NACHA) Corporate 

Credit or Deposit Entry with Addenda 

Record (CCD+) implementation 

specifications as contained in the 2011 

NACHA Operating Rules & Guidelines, 

A Complete Guide to the Rules 

Governing the ACH Network as follows 

(incorporated by reference in 

§ 162.920)— 

(A) NACHA Operating Rules, 

Appendix One: ACH File Exchange 

Specifications; and 

(B) NACHA Operating Rules, 

Appendix Three: ACH Record Format 

Specifications, Subpart 3.1.8 Sequence 

of Records for CCD Entries. 

(ii) For the CCD Addenda Record 

(‘‘7’’), field 3, of the standard identified 

in 1602(d)(1)(i), the Accredited 

Standards Committee (ASC) X12 

Standards for Electronic Data 

Interchange Technical Report Type 3, 

‘‘Health Care Claim Payment/Advice 

(835), April 2006: Section 2.4: 835 

Segment Detail: ‘‘TRN Reassociation 

Trace Number,’’ Washington Publishing 

Company, 005010X221 (Incorporated by 

reference in § 162.920). 

(2) For transmissions described in 

§ 162.1601(b), including when 

transmissions as described in 

§ 162.1601(a) and (b) are contained 

within the same transmission, the ASC 

X12 Standards for Electronic Data 

Interchange Technical Report Type 3, 

‘‘Health Care Claim Payment/Advice 

(835), April 2006, ASC X12N/ 

005010X221. (Incorporated by reference 

in § 162.920). 

Dated: November 16, 2011. 

Donald M. Berwick, 

Administrator. Centers for Medicare & 

Medicaid Services. 

Dated: December 28, 2011. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2012–132 Filed 1–5–12; 8:45 am] 

BILLING CODE 4120–01–P 

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